Cost Benefit Analysis

Ankita Nalavade, 14th December 2017.

Cost – Benefit analysis of Big - U (Flood Protection System) in Lower Manhattan, NYC

Contents:

I.

Introduction

II.

Project Description

III.

Measuring Cost and Benefits and Cost benefit

Page No. 1- 4

5–7

8 – 12

analysis.

IV.

13

Excel Sheet.

1

I. Introduction: It is projected by scientist all over the world that, global warming is due to anthropocentric reasons. The climate change will cause sea levels to rise.

New York City is made up of five boroughs – Manhattan, Brooklyn, Staten Island, Bronx, and Queens. Every borough is surrounded at least on two sides by water bodies. According to FEMA (Federal Emergency Management Agency) floodplain maps, many New York residents and important infrastructures are vulnerable to flooding. The city has already seen the magnitude of economic and infrastructural destruction during super-storm Sandy. Under such circumstances, it has become extremely important to have reliable flood protection measures. In One NYC report, Mayor De Blasio has stressed the need for a resilient strategy for New York City.1

Intent and Scope: This paper will explore Cost-Benefit analysis of flood protection system in NYC. New York city has various neighborhoods and every waterfront conditions vary from neighborhood to neighborhood. It will not be feasible to cover the 520-mile long waterfront of NYC in the given amount of time. I will be focusing on the lower Manhattan area, which is covered by water on three sides and houses economically important structures like Wall Street and Battery Park City.

Rebuild By Design (RBD) in partnership with 100 resilient cities and BIG architects has released plans for the “BIG U” plan for Lower Manhattan.2 This paper will study Cost-Benefit Analysis of the BIG U master plan.

1 http://www.nyc.gov/html/onenyc/downloads/pdf/publications/OneNYC.pdf 2 http://www.rebuildbydesign.org/our-work/all-proposals/winning-projects/big-u

2

Figure 1:FEMA 100 yr. flood plain map (https://project.wnyc.org)

Site Specifications: The lower Manhattan area has low-lying topography. It extends from West 57th Street to The Battery Park and up to East 42nd Street. The BIG U project will protect 10 continuous miles of lower Manhattan with flood walls and berms (artificial embankments), from West 57thStreet south to the Battery and up the East side to 42nd Street.3 It is home to 220,000 residents. It also houses landmark business oriented street, the Wall Street that is the core of $500 billion business sector.

3 http://www.adaptationclearinghouse.org/resources/rebuild-by-design-big-u-transportationelements.html

3

Impacts Of Hurricane Sandy: Hurricane Sandy revealed the area’s vulnerability. Important institutions and infrastructure went out of service. Hurricane Sandy devastated the financial district and endangered 95,000 low-income, elderly, and disabled city residents. Infrastructure within the 10-mile perimeter was damaged or destroyed, transportation and communication were cut off, and thousands sat without power or running water. 4 The total infrastructural losses reached $19 billion.5

Figure 2: Destruction Caused by Hurricane Sandy (http://www.slate.com/)

4 http://www.rebuildbydesign.org/our-work/all-proposals/winning-projects/big-u 5 https://www.theguardian.com/cities/2015/mar/09/bjarke-ingels-new-york-dryline-park-floodhurricane-sandy

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II. Project Description: The BIG U proposal understands different neighborhoods and is planned in such a way that it corresponds to neighbor needs and provides flood protection. The project will provide protection up to 1 percent annual coastal flood event. The aim is to embed resiliency within the current infrastructure.

The proposal breaks the area into compartments: East River Park; Two Bridges and Chinatown; and Brooklyn Bridge to The Battery.

The project has proposed a Berm in East River Park, which will not only protect the area from storm surges and rising sea levels, but also provide waterfront access for relaxation, socializing, and enjoying river vistas by providing pleasant, accessible routes over the highway into the park. In Two Bridges and China town area, the BIG U has proposed deployable walls attached to the underside of an elevated highway that can be pulled down to mitigate flooding. In the third segment that is from the Brooklyn Bridge to the Battery Park, the project proposes a berm that connects elevated pathways that are landscaped.

Hereafter, East river project will be referred as Project 01, Two Bridges will be referred as Project 02 and Brooklyn bridge part will be referred as Project 02.

5

Figure 3 : Project Proposal (https://www.archdaily.com)

Benefit Cost Analysis Limitations: As this project is completed within limited time, the scope of benefit-cost analysis is kept limited. The components of Cost and Benefits to be analyzed will be mentioned, and broken down financially but not detailed further. The benefits

expected from the flood protection system are unique from typical infrastructure projects. In the proposed project, Benefits are of two types, first "resiliency value� (losses avoided), and Second “inherent, or programmed value� (benefits added). Costs involved are calculated by measuring project cost and maintenance cost.

Tenure and specifications for calculations: It is assumed that this project will definitely take care of sea level rise of next 50 years. The present value coefficient is considered as 13. Benefits and costs will

6

be calculated for the span of 10 years. The net present value will be calculated by subtracting the present valves of total net benefits from present value of total net costs.

The cost-effectiveness of the project is calculated by using the concept of Benefit Cost Ratio. The project’s total net benefit is divided by total net costs.

This study will be focused on the Benefit-Cost Ratio, such that this project can be evaluated against any other project proposal for the same area.

The costs include the project capital investment costs and the operationsmaintenance costs. According to FEMA standard values for infrastructural projects, a 50-year useful life provides the basis of the BCA for the coastal protection. The project area is within the100-year floodplain, which means that a flood event that has a 1% probability of occurring in any given year. In this exercise, we will assume that we will have flooding event in the 10th year. The annual operation and maintenance costs of coastal protection functions are anticipated to range from $1.6M to $2.2M for each coastal protection activity.

The estimated cost including maintenance-operation costs is $1billion and total benefits are over $18.5 Billion.

7

III. Calculations:

Benefits will be calculated are as follows: Resiliency value is comprised of avoided damages. They include direct physical, economic impacts, public assets and lifeline impacts, and human impacts, such as casualties and mental stress and anxiety. The Inherent value considers added environmental benefits, social benefits, and economic revitalization benefits.

Avoided losses: 1. Direct Physical Damages to buildings: Flooding causes Physical Damages to the buildings as well as infrastructure.

Once the structure is damaged the building becomes unfit for human inhabitation. Also, the debris of the devastated structures has to be cleared off which adds to the costs of post-hurricane work. The project will protect all the buildings and structures from the impact of flooding.

2. Displacement: Post-flood, citizens have to move to alternate locations because of the damages to buildings. When relocating families have to start building up their house and resources from scratch. Also, agencies and individuals who lease commercial spaces and apartments go through major economic loss.

3. Public and Essential facility service Loss: Losses caused due to lack of services. For example, if the trains are not functioning, people commuting will have to opt for another and costlier mode of

8

transport.

4. Economic Impact: The flooding had an indirect impact as well. Citizens who had their businesses or jobs in flood affected area, lost their employment.

5. Human Impacts: Flooding also caused Loss of Life and Injury, Mental stress and anxiety, and loss of productivity.

Added Benefits: 1. Social benefits: Social benefits are in terms of health benefits of recreation, recreational and aesthetic value 2. Economic Revitalization: Economic benefits in terms of Added Employment, Added Output and Housing benefits 3. Environmental Benefits: Green spaces provide multiple Environmental benefits in terms of Water Quality, Air Quality and, Climate regulation.

A gradual rise in benefits can be observed till year 6 as only 2 projects are in the

9

construction stage. A steeper rise is observed from year 6 to year 9 as all three projects are in their completion stage. The benefits take a high jump in year 10 when the flooding event is speculated.

Costs will be calculated are as follows: The cost will be calculated by adding Project cost and Annual Maintenance Cost. The costs will be measured through different stages of the project such as design, planning, Environmental Impact assessment, construction, and maintenance.

Survey and Planning: Various Surveys have to be conducted to understand the feasibility of the project. Also, various planning firms will be hired as consultants and will share their knowledge and expertise.

Environmental Impact Assessment: Stage two will be preparing documents required to get Environmental Impact Assessment for the project.

Construction: Construction cost and labor costs Maintenance Cost: Most of the areas will have plants and trees, which will require proper maintenance.

10

The Costs are high in year 1 because all three projects are in their Planning and EIA phase. The next peak is seen in year 6 where all three projects are in their construction phase together. The Costs gradually go down from year 6 to year 8 and then remains constant in terms of maintenance costs.

Thus, we can see in the graph that benefits outweigh the costs exponentially.

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Time Frame for each project: Planning and Designing of the entire project are completed in the first year.

Thereafter for ease of execution, the project is divided into 3 segments. Each segment will require a span of 5 years for its completion. Construction for project one starts in the second year and continues until year 06. Project 02, will start in the third year and continue till 7th year. Project 03 will go on from 6th year to 10th year. According to the speculations, the 6th year will see maximum construction work, as all 3 project’s construction will be on simultaneously.

Funding: The approximate total cost of the entire project is $ 1billion.It is a big amount and the City of New York will need various findings to implement this project in reality. The BIG U project has been awarded $335 million funding from the federal government and New York City has committed an additional $305 million.

Please find attached the Excel Sheet for Benefit-Cost Analysis.

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Benefit Cost Analysis of flood protection for BiG U Year 01 Project 01

Planning

Project 02

Planning

Project 03

Planning

Types of Costs Surveys/Designing Policies/EIA Construction Maintenance total

Year 01 35000000 21000000

Year 02

Year 03

Year 04

Year 05

Year 06

Year 07

Year 08

Year 09

Year 10

Year 09

Year 10

Project 01 Project 02 Project 03

Costs Sr no

Name

Description

1

Project 01

East River Park

2

Project 02

3

Project 03

Two Bridges & China Town

Brooklyn Bridge to Battery Park

Surveys/Designing Policies/EIA Construction Maintenance total Surveys/Designing Policies/EIA Construction Maintenance total

TOTAL OF ALL 3 PROJECTS Present value Co efficient

Year 02

Year 03

59000000 56000000

59000000

Year 04

Year 05

Year 06

Year 07

Year 08

total

58000000 1000000 59000000

57000000 1000000 58000000

57000000 1500000 58500000

57000000 1500000 58500000

2200000 2200000

2200000 2200000

2200000 2200000

2200000 2200000

357,800,000

47000000

38000000 1000000 39000000

38000000 1000000 39000000

38000000 1500000 39500000

38000000 1500000 39500000

2000000 2000000

2200000 2200000

2200000 2200000

249,400,000

68000000

66000000 1000000 67000000

65000000 1000000 66000000

63000000 200000 63200000

63000000 200000 63200000

390,400,000

25000000 14000000

39000000

0

47000000

37000000 26000000

63000000

0

0

0

0

68000000

158000000

59000000

106000000

97000000

97500000

166000000

108700000

70200000

67600000

67600000

997,600,000

0.05 COSTS for year 01 COSTS for year 02 COSTS for year 03 COSTS for year 04 COSTS for year 05 COSTS for year 06 COSTS for year 07 COSTS for year 08 COSTS for year 09 COSTS for year 10 150476190 59000000 111300000 106942500 112868438 201774038 138731806 94074714 95119989 99875988

PRESENT VALUE CALCULATION

1,170,163,662

Benefits Sr no.

Name

Description

Avoided Loses 1

Project 01 Benefits added

Types of Benefits Physical damages Displacement Economic Impacts Human Impcts Public facility loss Social Economic Environmental

Year 01 0 0 0 0 0 0 0 0 0

Total Sr no.

Name

Description

Avoided Loses 2

Project 02 Benefits added

Types of Benefits Physical damages Displacement Economic Impacts Human Impcts Public facility loss Social Economic Environmental

Year 01

Name

Description

0 0 0 0

0 0 0 0 Year 03

78000000 78000000 78000000 234000000

Year 05

13550000 13550000 13550000 40650000 Year 04

Year 06

27100000 27100000 27100000 81300000

Year 07

40650000 40650000 40650000 121950000

Year 05

136500000 136500000 136500000 409500000

Year 06

54200000 54200000 54200000 162600000 Year 07

Year 08

Year 09

136500000 136500000 136500000 409500000 Year 08

136500000 136500000 136500000 409500000 Year 09

143500000 143500000 143500000 430500000 Year 08

Year of Flooding Year 10 864000000 864000000 864000000 864000000 864000000 136500000 136500000 136500000 4729500000

143500000 143500000 143500000 430500000 Year 09

total

6660000000

Year 10 600000000 600000000 600000000 600000000 600000000 143500000 143500000 143500000 3430500000

total

total

Total

0 0 0 0

0 0 0 0

0 0 0 0

84500000 84500000 84500000 253500000

169000000 169000000 169000000 507000000

253500000 253500000 253500000 760500000

TOTAL OF ALL 3 PROJECTS

0

46800000

93600000

181050000

268500000

355950000

825600000

1347000000

1600500000

13854000000

4698000000

7215000000 18573000000

0.05

PRESENT VALUE CALCULATION

PV OF TOTAL COST BENFITS for year 01 BENFITS for year 02 BENFITS for year 03 BENFITS for year 04 BENFITS for year 05 BENFITS for year 06 BENFITS for year 07 BENFITS for year 08 BENFITS for year 09 BENFITS for year 10 1,170,163,662 0 46800000 98280000 199607625 310822313 432659450 1053698058 1805108828 2252064226 20468667718

PRESENT VALUE FOR 10 YEARS

Project Project 01 Project 02 Project 03 Total

Year 02

Year 04

62400000 62400000 62400000 187200000

Year 07

0 0 0 0

Present value Co efficient

1 2 3 4

Year 03

46800000 46800000 46800000 140400000

Year 06

0 0 0 0

Benefits added

Year 01

31200000 31200000 31200000 93600000

Year 05

Year 10 936000000 936000000 936000000 936000000 936000000 338000000 338000000 338000000 5694000000

Project 03

Sr. no.

Year 02

Year 04

0 0 0 0 0 0 0 0 0

Avoided Loses 3

Types of Benefits Physical damages Displacement Economic Impacts Human Impcts Public facility loss Social Economic Environmental

Year 03

15600000 15600000 15600000 46800000

0 0 0 0 0 0 0 0 0

Total Sr no.

Year 02

Cost

19298504056

benefit 357,800,000 249,400,000 390,400,000 997,600,000

6660000000 4698000000 7215000000 18573000000

Benefit Cost ratio 18.6 18.8 18.5 18.6 GRAPHS

YEAR BENEFITS

Year 01

Year 03 93600000

Year 04 181050000

Year 05 268500000

Year 06 355950000

Year 07 825600000

Year 08 1347000000

Year 09 1600500000

Year 10 13854000000

total

0

Year 02 46800000

YEAR COST BENEFITS

Year 01 158000000 0

Year 02 59000000 46800000

Year 03 106000000 93600000

Year 04 97000000 181050000

Year 05 97500000 268500000

Year 06 166000000 355950000

Year 07 108700000 825600000

Year 08 70200000 1347000000

Year 09 67600000 1600500000

Year 10 67600000 13854000000

total 997600000 18573000000

COST 180000000 160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0

BENEFITS

1.6E+10

1.6E+10

1.4E+10

1.4E+10 1.2E+10

1.2E+10

1E+10 COST

8E+09

BENEFITS

6E+09 4E+09

1E+10 COST

8E+09

2E+09 Year Year Year Year Year Year Year Year Year Year 01 02 03 04 05 06 07 08 09 10

BENEFITS

0 Year Year Year Year Year Year Year Year Year Year 01 02 03 04 05 06 07 08 09 10

6E+09 4E+09 2E+09 0 Year 01 Year 02 Year 03 Year 04 Year 05 Year 06 Year 07 Year 08 Year 09 Year 10