Coastal Services Center

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Federal Project Planning

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Introduction

In the Flood Control Act of 1936, Congress authorized federal cost participation for the restoration and protection of the shoreline of the United States. federal policies determine the methodology by which project cost sharing, based on an evaluation of project benefits, is calculated by the U.S. Army Corps of Engineers (USACE). Policy and procedures that describe the federal benefit calculation methodology can be found in USACE Engineering Regulation (ER) 1105-2-100. Current policy dictates that the USACE consider storm damage reduction benefits and recreation enhancement benefits. For hurricane and storm damage reduction analysis, the procedure evaluates the before and after nourishment probability of property damage and the resulting value of the property damage avoided.

Construction of a cost-shared federal project requires, among other things, a determination of federal interest (determined through a Feasibility Study) and support by state and local cost-sharing partners. federal shore protection projects must meet both national and local planning objectives. Local participation is strongly encouraged in the USACE's planning process.

Authorization for federal Participation in Civil Works Projects

Whenever a local or state government requests federal assistance to accomplish a shore protection project the USACE initiates a Reconnaissance Phase study, which is fully funded by the federal government. The purpose of this study is to determine whether federal participation in the shore protection problem is consistent with current USACE policies, and to eliminate from further consideration any project whose expected costs, benefits, and environmental impacts make it unlikely to be authorized and constructed. The Reconnaissance Phase is concluded with the development of a Project Management Plan and a determination of the non-federal entities interest in the solutions and the cost sharing for the Feasibility Phase and Construction Phase. This phase usually takes a year to complete. The successful completion of the Reconnaissance Phase is the signing of a Feasibility Cost Sharing Agreement (FCSA) by the USACE and the non-federal sponsor.

Feasibility Phase

Studies to determine the federal interest in a shore protection (beach nourishment) project focus on estimating the benefits for each alternative shore protection plan, which include storm damage reduction and recreational benefits. The Feasibility Phase of the Corps' planning process usually requires two to three years to complete and is cost shared equally with the non-federal sponsor. Non-federal sponsors are usually a state, county, or municipal governmental entity with jurisdiction over the project site. As described in a companion paper "The National Economic Development Plan for Beach Nourishment Projects," the USACE usually participates in single purpose projects, such as shore protection formulated exclusively for hurricane and storm damage reduction (HSDR); however, they also participate in multi-purpose projects formulated for both HSDR and ecosystem restoration. Procedures for formulation of multi-purpose projects whose purpose includes Ecosystem Restoration and HSDR or Navigation and HSDR follow the requirements outlined in paragraph 2-3g(3) and Appendix E of ER 1105-2-100. The USACE generally recommends the plan that results in the greatest net benefit, including both NED and environmental benefits.

Determination of Hurricane and Storm Damage Reduction Benefits

As described in ER 1105-2-100, "erosion control measures such as beach nourishment projects are considered as a means to the end of hurricane and storm damage reduction (HSDR), ecosystem restoration, or recreation similar to breakwaters or revetments." By protecting oceanfront property from losses or destruction due to hurricanes and storms, a widened beach provides measurable economic benefits to owners and users of upland property. In general, the HDSR benefits attributable to an oceanfront property are determined from the sum of anticipated costs to protect the property and the dollar value of land and buildings lost to erosion in the absence of beach nourishment. Categories of HDSR benefits include: land loss prevention, upland structure damage/loss prevention, shore protection structure construction costs avoided, shore protection structure maintenance costs avoided, public safety (that is, protection of roads), and benefits to downdrift properties. To estimate these benefits, economic and physical baseline data is compiled including site-specific characteristics such as erosion rates, distance from the shoreline to habitable structures, property attributes such as elevations and slopes, appraised and market values of land and buildings, existence and type of shoreline armoring, and the permissibility of using coastal structures to protect "at risk" property.

An economic "beach" model is developed to determine the value of losses and damage based on differing probabilities and severity of storms and erosion events. The storm protection received by an oceanfront property is computed as the expected loss due to erosion and storm damage in the absence of the project, or the loss due to erosion and the cost of an alternative erosion control project for storm protection – whichever is less. This methodology considers the discounted stream of future losses over the design life of the project, thereby allowing for direct comparison of the project's present worth costs to the project's present worth benefits (referred to as the BC ratio). The general principles and steps followed in evaluating HSDR benefits for a project begin with systems analysis, followed by evaluation procedures, risk analysis, and periodic project maintenance analysis. An overview and general description of these steps is given below.

Systems Analysis. A systems analysis approach is applied to determine the components of the site, including physical, economic, and cost features that may be impacted by the alternatives proposed to resolve the shoreline problems. These data include:

• Physical Processes – development of the areas' sediment budget, shoreline and beach area, and volumetric change rates, and probability of occurrence of relevant storm events.
• Coastal Alterations – identification of human-induced changes to the shore including dredging, sand placement, or the implementation of seawalls or groins, and the contribution of these alterations on the sediment budget and littoral processes.
• Forecast Shoreline Changes – forecast shoreline changes and navigation dredging requirements, if appropriate, for the economic life of the proposed corrective measure (beach nourishment).
• Economic Benefits and Costs – inventory potential storm damage centers and assess the extent of damages to property through analysis of storm surge and wave damage, evaluate changes in recreational use (if any) and evaluate impacts to adjacent navigation features and coastal structures.

Evaluation Procedure. The evaluation procedure for determining benefits for hurricane and storm damage prevention projects, as shown in Figure 1 and detailed below, depends in part on the scope of the proposed beach nourishment or restoration project. For example, when coastal structures (breakwaters and/or groins) are included as a prospective "alternative" plan, the evaluation procedure will consider the net effect on the computation of expected annual damages and benefits.

Step 1 - Delineate the Study Area. This step defines the project area that is affected by erosion problems and for which shore protection alternatives will be evaluated. This is important because the USACE procedures only evaluate the storm damage reduction and recreational benefits within the beach nourishment area. As a result, the study area is that area affected by erosion problems and storms that are both economically justifiable and provide adequate public access to the beach. The project area is the shoreline segment where the beach nourishment project (that is, constructed berms and other features) will be located. While this area receives the greatest levels of benefit from a beach nourishment project, there can be significant benefits to the adjacent beaches shoreline as well. Study of impacts to adjacent shorelines for the Jupiter/Carlin Beach Nourishment Project (CPE 1994) and the 4-Mile Martin County Beach Nourishment Project (ATM 1990), for example, showed significant benefits and further economic justification for the project as the result of including downdrift sand spreading effects. Although benefits to adjacent shorelines can be predicted using numerical models, the present policies of federal project benefit computational analysis do not allow this additional benefit of beach nourishment. Additionally, the study area may include downdrift areas when navigation or coastal structures are potentially impacted by the project.

Step 2 – Define the Problem. Upon determining the boundaries of the study area, including projects outside the immediate project site (that is, beachfront that receives direct sand placement) that may be affected, the problems are defined and described in terms of the existing conditions, historic problems, and an assessment of the integrity of existing structures and the useful life of the project and maintenance requirements.

Step 3 – Select Planning Reaches. Reaches become the primary economic sub-unit of the analysis and are used to determine cost sharing based on project benefits to different categories of shoreline ownership for the project. Reaches are designated by alongshore differences in the types of land use, geomorphic conditions, and existing types or levels of shoreline protection (that is, beach widths or structural armoring such as seawalls and groins).

Step 4 - Establish Storm Tide Elevation and Erosion Frequency Relationships. Establishing frequency of occurrence for flood elevations, inundation, and erosion as the result of differing storm events is estimated for differing probabilities of hurricanes and storms to use in developing levels of damages (Step 6). Varying levels of storm surge inundation and storm induced erosion (including background erosion) due to different probabilities of storms are calculated using numerical models such as SBEACH.

Step 5 – Inventory Existing Conditions. This step requires the assembly of real estate values for properties fronting the project area including land values for different land use classifications, distance between the shoreline and major habitable structures, locations of roads and utilities, and the locations and characteristics of existing erosion control structures.

Step 6 – Develop Damage Relationships. The expected value of erosion and flood damage is estimated for differing storm probabilities (such as a 15-year or 20-year return interval storm event), which includes the effects of background erosion. Values of structural damage are usually site specific although the generalized values for similar geographic areas may be used. The result of this analysis is a damage frequency relationship that is based upon current values of losses for buildings, roads, infrastructure, and existing erosion control structures at the current price levels for existing development. The USACE (Dave Moser, and others) has developed some tools that are more complex than this, incorporating considerations of risk and uncertainty. In addition to the value of storm damage losses, the anticipated damage from land loss is calculated based on the market value of the annual area expected to be lost. In this type of analysis, the shoreline is assumed to erode at the predicted background erosion rate with damages calculated annually based on the impacts of a series of differing recurrence level storm events. For this reason, the background erosion rate applied in the analysis has a significant effect on the level of damages, including the value of land losses and storm related damage losses. As the existing erosion rate usually varies along the shoreline and may be represented as a different rate for each Reach, the selection of a shoreline erosion rate will significantly affect the benefits analysis and the interval for future maintenance (that is, beach renourishment) events.

Step 7 – Develop Damage Frequency Relationships. A damage frequency relationship is developed for each category of loss including long-term erosion, wave and erosion, and storm impacts; this damage-frequency relationship is developed representing expected property damages as a function of a given return interval storm event (storm waves, erosion, flood inundation, etc). Site-specific damages (waves, storm surge, and long-term erosion) can be calculated for individual properties based on their physical and economic characteristics. These damages are compared with actual damage values for past storm events when this information is available. Expected land loss damages are determined using market values of land as a function of land-use classification (single family residential, multi-family residential, condominium, time-share, commercial, etc) and calculated based on the site-specific background erosion rates.

Step 8 – Calculate Expected Annual Damages and Benefits. In the USACE evaluation process, the last step is to calculate the expected annual value of damages and benefits (net value of damages) in any given year (termed the damage frequency relationship). This type of analysis is similar to that conducted by state, local, and private entities in determining the net value of damages or economic benefits for the "without" project conditions versus the "with" project conditions. The net damage reduction, or the HSDR benefit, is the value of the damage prevented as the result of the widened beach created by the beach nourishment project.

Other types of benefits may be included in the estimates of the HSDR and recreation analysis and are associated with (a) the enhancement of property values following nourishment, (b) road, right-of-way, and infrastructure protection that is afforded by private properties, (c) emergency use of roads for essential services such as fire and hurricane evacuation, and (d) recreational beach use values and beach visitation following beach nourishment.

Beach Nourishment Along Public Lands. All benefits and thus costs associated with prevention of storm reduction damage losses to undeveloped private lands are considered 100 percent non-federal. All benefits and costs assigned to federally owned parks and shorefront properties are considered 100 percent federal whereas benefits and costs for non-federal public parks and conservation areas qualify for a maximum of 50 percent federal cost sharing. However, federal policy precludes such participation in projects that are not principally justified by hurricane and storm damage reduction benefits. As an example, in Martin County, Florida the federal project extends along a four mile length with numerous small beach accesses and two large, county-owned public parks with beach access areas located at either end of the project. Accordingly, the project would qualify for 50 percent federal cost share participation along these two approximately 1 and 0.5 mile segments of publicly owned lands.

Project Maintenance or Periodic Renourishment. Beach nourishment projects often include provisions for periodic maintenance, also called "periodic nourishment" or "beach renourishment," to prolong the life of the project beyond that provided by the initial construction. This future maintenance is included in the life-cycle costs and NED evaluation of the project. It is common for the renourishment or maintenance events to be planned to occur from 5 years to 12 years after the initial construction, based on the estimated "background" erosion rate. The actual post-project erosion rate and the renourishment intervals are determined by annual re-evaluations of sand losses from the project area, with the loss of a "specified" percent of the initial sand placement volume triggering the next maintenance event.

For new projects, the project's life cycle costs and planning horizon are dictated by engineering regulations and determined by (a) the project's economic life, (b) the physical life of the structural features, or if no additional analysis is performed, the project's life cycle and planning horizon are assumed to be (c) 50 years. A maximum period of 50 years is authorized for renewal of agreements with non-federal sponsors when existing projects expire and may be extended without congressional approval, although the current administrative policy is to reduce the level of federal cost participation when executing any extension agreements of the LCA (Local Cooperative Agreement). Accordingly, before future renourishment is undertaken, the USACE will conduct a General Reevaluation Study to determine the level of federal participation in cost sharing based on the current evaluation guidelines and policies. For new federal projects, a 50-year maintenance provision of the LCA is generally required by the USACE. In contrast, for non-federally sponsored projects a period of 30 years is generally formulated for project financing and planning purposes including the initial construction and maintenance.

Recreational Benefits

Beaches reduce storm damages and provide excellent recreational opportunities to beach users. The benefits that accrue from enhanced beach recreation are an important economic incentive for non-federal proponents of beach nourishment projects. Beaches are a highly desirable amenity to the local and regional economy of the demographic area surrounding a nourishment project. However, the current budget policies of the USACE, which reflect the policies of the Clinton and subsequent Bush administration, do not permit federal cost participation in separable recreational project areas or separable recreation measures (public dune over-walks, roads, parking areas, bathhouses, etc), although their costs and economic impacts are considered in the Benefit to Cost Ratio (BCR) used to justify the project economically. The Economic and Policy Guidelines for Water and Related Land Resources Implementation Studies (P&G), adopted in 1983 by the Water Resources Council, describe three recommended procedures for evaluating recreational benefits: the contingent value method (CVM), the travel cost method (TCM), and the unit-day value method (UVM). Other methods may be used to estimate the recreational benefits of a project if they meet guidelines specified in the P&G.

The TCM estimates the demand for a recreational resource based on the users' willingness to spend time and money traveling to get to the beach. The TCM uses travel costs like the cost of fuel, food, lodging, and lost leisure time during transit as proxies for price to construct a demand curve for a recreational resource, such as a beach. Persons who incur the greatest costs in traveling to the beach demonstrate what the recreational experience is worth; benefits, in the form of consumer surplus, accrue to visitors who theoretically should have been willing to pay that higher travel cost, but because they live closer to the beach, did not have to.

The CVM estimates recreational benefits by directly asking individual households their willingness to pay for access and use of the beach, through the use of individual surveys of beach visitors, at the site-specific beach nourishment area. This method attempts to measure what a beach visit is worth based on asking beach users to place a value or willingness to pay amount on a "beach day." Beach visitors are also asked a series of questions that look at the socioeconomic and demographic characteristics of the visitor; these questions include inquiries as to why and how often they visit the beach, expenditure patterns, number of beach visitors in their party, and beach area or reach visited.

The third method recommended by the P&G is the UVM, which estimates the value of a recreational experience based on studies of other similar recreational resources. In the case of beach recreation, studies have been conducted to estimate the value of a day of recreation. These studies account for the difference in winter and summer use. By applying the net winter and summer daily beach user value(s) to the estimated number of users during these seasons, the estimated project benefits over the project design life can be estimated. Given the importance of the beach usage estimate, the recreational user estimates are usually determined by site-specific studies that count users and usage to capture the effects of seasonal variations in usage vis-à-vis a survey of people who actually use the beach area designated for nourishment. Methods to determine the beach user counts or usage estimates may use site-specific data including parking meter receipts, public access counts of users or number of automobiles, life guard surveys, survey counts of beach users, or a combination of these methods. Samples or surveys required are generally limited to site-specific (that is, project area) studies. This type of analysis is based on personal interviews by the surveyors and conducted on the beaches within the study area looking at who receives the benefits rather than a sum of total recreational benefits. The UVM is costly and time consuming to conduct, although this method has been widely used in economic studies of beach valuation by counties, local governments, and private entities in developing the non-federal project cost share allocations at the local level.

A flow chart describing the recreation benefit evaluation procedures is shown in Figure 2 (P&G, 1983, Figure 2.8.4 on page 71). The recreational benefits attributable to each project alternative are estimated as follows. First, a period of analysis is determined. This is generally the design life of the project alternatives, including periodic renourishment. Then the value of recreational use is estimated for each project alternative, or "with project" condition, over the entire period of analysis. This estimate should reflect anticipated changes in demand over time and the effects of use transfers—users who would have used another beach but have moved to the renourished beach. Such transfers cannot be counted as net increases in recreational benefits. The value of recreational use is also estimated for the period of analysis under "without project" conditions. The difference between the value of recreational use under each "with project" scenario and the value under the "without project" scenario represents the recreational benefits attributable to that "with project" alternative.

Determining the federal and Non-Federal Cost Participation

In determining who may qualify as the local, or non-federal project sponsor, the current USACE policy is to require that the sponsor be a municipality or public agency authorized under state laws to give such assurances and demonstrate financial capability of fulfilling all measures of project cooperation. The details of these requirements are provided in Engineering Policy 1165-2-1 (30 July 1999).

As described above and elsewhere, recreational benefits have not been considered a priority by the recent administrations and hence the USACE. Thus, the recreational benefits that occur when a beach nourishment project provides additional space (as created by the placement of sand) for beach use and prevents erosion of existing space for recreation use are considered incidental to the HSDR project. These types of recreational benefits only occur if there is sufficient demand and if either pubic parking and/or public beach access to the nourishment area do not limit the demand.

Recreational benefits are considered a National Economic Development (NED) benefit and are included in the justification for the project, but they may account for no more than 50 percent of the total benefit required to justify federal interest in a project. For the same reason, separable recreation elements for a beach nourishment project, such as shoreline reaches modified solely for recreational purposes, do not qualify for federal cost sharing. All costs of single-purpose recreational beaches are paid by the non-federal project partner. This is also true of private beaches or beaches without adequate public access or parking. The level of federal cost share is determined for each shorelines reach where the federal cost share for the entire project reflects the federal cost share for each shoreline reach and the relative length of the reach in proportion to the total length of the project. As a result, the total federal cost share for many new USACE projects is significantly less than the maximum 65 percent federal cost share.

Summary

Federal methods followed in evaluating the economics of beach nourishment projects are based on policy and procedures dictated by the administration, the Office of Management and Budget, and the U.S. Army Corps of Engineers. The current federal policy is to formulate beach nourishment projects (shore protection projects) based solely on benefits derived from hurricane and storm damage reduction. Recreational benefits are counted, but are treated as incidental and are not used to formulate projects, for example, to determine the volume of sand to be placed on the beach. Accordingly, additional sand needed to satisfy recreational demand is considered a separable feature and cost shared at maximum of 50 percent. Changes to the current USACE policy on eligibility limits (that is, 50 percent) for federal cost participation, have been challenged by proponents of beach nourishment through organizations such as the American Coastal Coalition, various state chapters of the Shore and Beach Association, and the Coalition of Coastal States. However, into the foreseeable future the current USACE policy, which has been supported by the last three administrations, is not expected to change.

The USACE methods of evaluating project benefits may underestimate or exclude other important incidental benefits associated with a beach nourishment project due to current and past administration policies on the treatment of recreational benefits in the formulation of federal projects. Based on post-construction economic studies of the effects of nourishment conducted for the State of Florida and the State of Delaware, Strong (1993) and Houston (2002) determined that the economic output associated with beaches greatly exceeds the economic projections of federal, state and local governmental entities performing impact analysis on specific projects.

References

Applied Technology and Management. 1990. "Martin County 4-Mile Beach Nourishment Project, Economic Analysis of Project Costs and Storm Protection Benefits."

Water Resources Council. 1983. Economic and Environmental Principles and Guidelines for Water Resources and Land Conservation Implementation Studies.

Strong, W. 1992. Regional Research Associates, Inc. Impact of Captiva's Beaches on Property Values and Taxes. Report to the CEPD.

Strong, W. 1993. "The Economic Analysis of Beach Restoration: The State of the Art." Proceedings of the 1993 National Conference on Beach Preservation Technology. Florida Shore and Beach Association, Tallahassee, Florida.

U.S. Army Corps of Engineers. June 1989. Headquarters, Washington D.C. Engineering Regulation 1165-2-130, 15 p.

U.S. Army Corps of Engineers. July 1999. Headquarters, Washington D.C. Engineering Pamphlet 1165-2-1. 30 p.

U.S. Army Corps of Engineers. April 2000. Headquarters, Washington D.C. Engineering Regulation 1105-2-100. 22 p.

U.S. Congress. November 17, 1986. Water Resources Development Act of 1986, PL99-662.