Report: Counties with Levees Are Among the Nation’s Most Economically Sound

Hundreds of levees around the United States protect vulnerable areas and tens of millions of people from potentially devastating floods each year. Yet hardly anyone gives them a second thought until one is breached. The most glaring example, obviously, is the wreckage that occurred in the New Orleans area in 2005 when flooding from Hurricane Katrina wiped out entire neighborhoods.

The preponderance of levees throughout the country raises the question: The high cost to human lives notwithstanding, do the economic benefits provided to communities protected by flood protection systems outweigh the costs of potential flood losses in those areas?

One researcher from Louisiana State University who undertook to study the economic impact of flood control systems says the answer is yes. Ezra Boyd, a graduate student and geographer, describes how he came to the conclusion that the economic gains from development near bodies of water are ultimately greater than the losses associated with flood risks in “Assessing the Benefits of Levees: An Economic Assessment of U.S. Counties with Levees,” a report commissioned by a nonprofit group with an interest in the nation’s levees, Levees.org.

Data provided by the Federal Emergency Management Agency indicates there are 881 counties — or 28 percent of all counties in the United States — that contain levees or other kinds of flood control and protection systems. They account for only 37 percent of the total land area of the United States but as of 2004, 55 percent of the U.S. population, or more than 156 million people, resided in the 881 counties.

Boyd asserts that it’s not the levees themselves that make protected areas attractive for development. Instead, it’s the bodies of water and the flood plains they create — and that require flood protection measures — that provide the economic and geographic incentives for development.

“Rivers, lakes, and seas — along with their associated flood plains have long been an engine of economic development. These diverse and productive ecosystems provide a number of services crucial to maintaining populations and improving their wellbeing. Such services include maritime trade, municipal and industrial water supply, irrigation for farming, sustainable seafood harvests, and recreation,” according to Boyd.

“While flood losses are unfortunate and should be minimized, the economic benefits — including increased income and decreased poverty — of direct access to the most productive types of ecosystem may still outweigh the risk of flood losses,” the report suggests.

Data from 2000 Census

Relying on 2000 Census data, which reflects 1999 employment and income, Boyd compared two groups of communities — those with levees and those without — in regards to total productivity levels, personal income and poverty rates. The study recognized that while a county may contain a levee, its entire population may not necessarily reside in a levee protected area. However, the entire county generally benefits from the direct and secondary advantages of being located near a body of water. Those advantages include access to jobs and sources of water for the communities within the county, among other things.

It also noted that the 2000 Census information is the most complete source of employment and income data available until completion of the 2010 Census.

Using a statistical procedure that compared and assessed observed levels of the established criteria — productivity levels, personal income and poverty rates — between the two groups based on Census data, Boyd found that for each of the three measures, counties with levees fared better economically than those without levees.

The findings revealed that:

The levees report noted that data from the 2000 Census indicates that total personal income for all U.S. counties was $6.1 trillion in 1999. Personal income in counties with levees amounted to $3.4 trillion, or 55 percent of the total. In counties without levees personal income was $2.7 trillion, or 45 percent.

In addition, Boyd says, the total number of housing units in counties with levees was 56,604,148, or 53 percent of the total in all counties, compared with a total of 50,188,708 housing units in counties without levees. The total aggregate value of owner occupied housing in counties with levees was $6.1 trillion. The value of all residential real estate in counties with levees was roughly $11.1 trillion. An estimated 55 percent of residential units were owner occupied based on the rule of thumb: 55 percent homeowners, 45 percent renters.

“Total productivity for counties with levees is $700 billion greater than for counties without levees. … It is estimated that counties with levees contributed $70 billion more to the Federal treasury than counties without levees,” the report states. The estimate includes revenue from personal income taxes but not “corporate taxes, port fees, or other sources of government revenue.”

The excess Federal tax contribution of counties with levees far exceeds the cost of losses associated with floods, the report asserts. In 1999, flood losses in the United States totaled $5.3 billion, and $191 million in U.S. government aid was paid to flood victims. From in 1978 until 2008, the National Flood Insurance Program paid nearly $36 billion in total claims, “less than half of the one year excess tax revenue contributed by counties with levees,” according to Boyd’s report.

Southeast Louisiana

Boyd also conducted a case study of Southeast Louisiana, examining the population and economy of the state as well as “the costs associated with levee failures and storm surge flooding during Hurricane Katrina in the context of the economic benefits provided by the affected people and industries.”

According to Boyd, while in Louisiana as a whole income levels are generally low, Southeast Louisiana enjoys personal income levels close to the national average. The study also found that even with the “unprecedented flooding” that occurred in 2005 as a result of Hurricane Katrina and caused an estimated $100 billion in losses, “the public’s cost associated with this disaster is greatly outweighed by the benefits provided by the area’s numerous large and small ports, access to offshore oil and gas, and bountiful seafood harvests.” It cited the $149 billion in royalties from Federal OCS oil and gas leases in the area as just one example of how the nation benefits economically from the Mississippi Delta region.

The full report, “Assessing the Benefits of Levees: An Economic Assessment of U.S. Counties with Levees,” is available online at www.levees.org.