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<br />CHAPTER XI
<br />ECONOMIC ANALYSIS OF THE RECOMMElIDED PLAN
<br />
<br />4ifference, or re4uction in 4amages from the praject, of $440,000. A44ing
<br />approximately I percent of the estimated construction cost for emplayment
<br />benefits, ar $5,200, the total average annual benefit is $445,200.
<br />
<br />A. General
<br />
<br />For Reach 4, do~nstream of Kenosha Road past Westview Estates, the average
<br />annual damage is $56,000 and the resi4ual 4amages are $32,000. The reduction
<br />in damages is a difference of $24,000. Adding employment benefits of app.ox-
<br />imately 1 percent of project construction costs fo. this Reach, Or $9,100; the
<br />total average annual benefit amounts to $33,100,
<br />
<br />The economic analysis, for the alte.native plan selected for each reach
<br />by the Technical Cammittee as most promising, involves a determination of
<br />benefit/cost ratios. This ratio comp..es the annual benefits of a reduction
<br />in damages ~ith the annual cost of the proposed project. A ratio greatet
<br />than 1.0 indicates that the average annual benefits are expected to be greater
<br />rhan the average annual costs. It should be pointed out that the damage es-
<br />timates, and therefore the B/C ratioa, do not inClude losa of life Or injury
<br />to persons or to animals.
<br />
<br />TABLE 13
<br />SUMMARY OF AVERAGE ANNUAL BENEFITS
<br />
<br />B. Average Annual Benefits
<br />
<br /> Average Average
<br />Reach of Annual Reaidual Damage Employment Annual
<br />Coal Creek Damages Damages Reduction Benefits B"neflt
<br />, $467,500 $27,500 $440,000 $5,200 $445,200
<br />, $ 56,000 $32,000 , 24,000 S9,lOO , 33,100
<br />NOrE: '0 investi8,,~ion "as conducted <0' Reaches and ,.
<br />
<br />The recommended plan for each r~ach is based On a specific design to
<br />handle up ro a certain magnitude flood, also known as the design frequency.
<br />Fo. Reaches 2 and 4, the design frequency is the 100-year flood. Flaods with
<br />peak flows greater than the design frequency can be expected to cause some
<br />degree of flooding, thus resulting in flood damages. These damages are
<br />called residual damages,
<br />
<br />C. Ave.a~e Annual Project Costs
<br />
<br />From maps of residual flooded areas for floods equal to or greater than
<br />the design flood, these damages can be aasessed an4 plotted against frequency
<br />as on Figures -6 and -7. The 4iff~rence in the area under the two damage versus
<br />frequency curves is equal to the average annual reduction in damages. In
<br />determining the total annual benefits of s project, it is customary to sdd to
<br />this a~unt an employment benefit of 1 petcent of the constructio" cost.
<br />
<br />^verage annual co~ts include amorti7.afion of constructian costs for
<br />construction of the project plus applicable operation and maintenance costs.
<br />Amortization of capital costs for construction On an equal installment basis
<br />is" function of t"o \r,uiables: project life and th~ inter,,'t nth', The
<br />ran;:einuseful llfefor flood control projects is typically from 20 to 50
<br />yeats. The longer the period for a given interest rate, the la"er "ill be
<br />each annual payment.
<br />
<br />For &each 2, through the Town of Erie, the total damages (area under the
<br />d~age-f.equeney curve) are $467,500 and the residual damages are S21,5OO
<br />assu~ing full p{ptection from the 4eaign (lOa-year) flood. This yields a
<br />
<br />The interest r.:lte lS a funnion of the SOurce of money. In the private
<br />sector, thc interest rate can V'Hy consider~bly and "ill prob<lbly not he hd{\w
<br />
<br />-91-
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<br />-90-
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