FLOOD07547

• County: Statewide
• Community: Statewide
• Stream Name: All
• Basin: Statewide
• Title: Economic Analysis of Floodproofing Analysis of a Small Commercial Buiding
• Date: 1/1/1979
• Prepared For: State of Colorado
• Prepared By: FEMA
• Floodplain - Doc Type: Educational/Technical/Reference Information

Analysis of Building Costs and Benefits

The relative costs and benefits for each design alterna-
tive were analyzed from three perspectives: 1) construc-
tion requirements, and associated costs and benefits; 2)
insurance premium costs; and 3) potential flood losses,
Benefits are calculated both as (1) reductions in flood
insurance premiums and (2) as reductions in or avoid-
ance of flood losses, Thus, two distinct benefit! cost
ratios were calculated, One reflects feasibility in terms of
reduction in insurance costs, The other reflects feasibility
in terms of reduced average annual flood losses, The
insurance costs are costs that are incurred each year
and any reductions constitute hard dollar savings, The
flood losses, on the other hand, mayor may not be in,
curred in any given year and any reductions in average
annual losses for a given year constitute soft dollars, In
this light, a decision was made to not sum the benefits
but rather to maintain separate benefit!cost ratios for
flood insurance and flood loss benefrts, Flood proofing
decisions frequently are independent of a flood insur,
ance program, Thus, it is logical to keep the feasibility
analyses in terms of flood loss reduction independent of
the feasibility analyses in terms of insurance premium
reductions,

The building with conventional construction was used as
the basic building for purposes of companson, and the
costs and benefits for all other alternatives were defined
in relation to the CDst and periormance characteristics of
the basic building, To facilitate comparisons among all
aspects of cost and benefit, all quantifiable costs and
benefits were calculated on a present value basis
assuming a 20 year amortization period and an interest
rate of 7 percent.

8

Construction cost estimates were prepared by
Construction Economists Collaborative and were based
on outline sketches and engineering specifications for
the proposed buildings prepared by Sheaffer & Roland,
lnc.10 Costs were based on the measurement and pric-
ing of approximate quanitities for major portions of the
work wherever possible and the provision of reasonable
allowances for the remainder. The reasonableness of
the specific cost elements for local application was veri-
fied through contacts with both large and small builders
in the Williamsport and Jersey Shore areas,

Several cost items which were not included in the calcu-
lations (but which would not differ significantly because
of the selection of an alternative) were:
. construction related intangibles such as architectural
and engineering costs;
. optional costs such as special fire protection devices,
standby generators, mail chutes, etc,;
. intangible costs of a building in-place such as legal
costs, interest costs, real estate taxes, leasing ex-
penses, etc,

Such costs would be uniform in each building type and
their inclusion or non-inclusion would not affect the
analysis of relative costs and benefits of the five build,
ings, For each building type other than the basic build,
ing, the costs added or averted by flood proofing were
separately identified and highlighted, The cost of the
total structure and the square foot costs were ,dentified,