Coastal Services Center

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Types of Economic Benefits Associated with Beach Nourishment Projects

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Introduction

Types of benefits associated with beach nourishment include the protection of property (storm protection or storm damage reduction [SDR] benefits) and the maintenance and enhancement of the beach for recreational beach-goers (recreational benefits). A third category of "other economic benefits" considers the impact of a proposed action on business and tax revenues and property valuations. This category may also include environmental, aesthetic and/or unique site considerations.

Within the context of each of these three general categories, the questions it is necessary for planners to answer are:

• Who are the beneficiaries?
• What specific benefits will each beneficiary receive from the proposed project?
• What is the dollar value of the benefits received by each beneficiary?
• What is the total benefit-to-cost ratio of the proposed project?

Quantification of project benefits is essential in order for project planners to justify the need for and, therefore, the expense of a proposed beach nourishment project. In general, in order for a project to be economically justifiable the benefit-to-cost ratio must be greater than 1.0. That is, the dollar value of the benefits received from all categories must exceed the projected project costs. Typically, project planners seek to maximize the benefit-to-cost ratio, thus providing the greatest benefit for the least cost. Total project benefits are determined on an annual basis for the design life of the project. Benefits accrued in future years are discounted to present day dollars to give the total dollar benefit.

Federally funded projects must be justified using National Economic Development (NED) benefits. For U. S. Army Corpos of Engineers (USACE) formulation and evaluation of a project for federal cost participation, the methodology seeks to maximize the NED benefit-to-cost ratio. This ratio must be greater than one with the exception that approval may be granted for special circumstances such as projects with ecosystem restoration benefits only or combined ecosystem and SDR benefits. For a more detailed explanation of the planning and review process, refer to "Evaluation of Federally Cost-Shared Projects: The National Economic Development and Regional Economic Development Perspectives."

In addition to providing the basis for project justification, the identification and quantification of project benefits provides planners with a basis for allocating project costs among beneficiaries and, in many instances, for determining eligibility for project cost-sharing with state and federal governments. For example, at the present time, beach nourishment projects are eligible for federal cost sharing only if the SDR benefits comprise more than 50 percent of total project benefits.

This discussion focuses primarily on the identification and understanding of potential categories of benefits and beneficiaries. Specific methodologies for computation of the dollar value of benefits are reviewed in much greater detail in other papers included in the section.

Storm Damage Reduction (SDR) Benefits

Figure 1. Erosional impacts on a dune walkover structure.

A wide beach provides measurable economic benefits to owners and users of upland property, both public and private, by protecting the property from losses or destruction due to storms. In general, the total SDR benefit attributed to a particular property is determined by subtracting the expected value of damages with a project in place from the expected value of damages without that project in place. Damages considered include anticipated costs to protect the property and the dollar-value of land and buildings lost to erosion. Damage assessment is a risk-based analysis, where variables to be considered include land value, building value, and probability of storm occurrence. Storm damage and land loss reduction benefits accrue to individual properties, and hence to property owners. Where a property provides a public benefit, either through beach access, resource protection, or transportation, SDR benefits are deemed to accrue to the public entity which holds the property in trust because that entity ultimately has the financial responsibility for protecting and maintaining the resource or facility. For example, SDR benefits at a state park would accrue to the state, while SDR benefits along a federally owned highway would accrue to the federal government. Incidental recreation and other benefits accrue to tenants of rental properties as well as to users from all over the U.S. in the form of reduced recreation costs, enhanced quality of recreational, and in the case of roadway protection, improved public safety.

Figure 2. Upland damage caused by major storm event.

Specific categories of SDR benefits to be considered include:

• Land loss prevention
• Upland structure damage/loss prevention
• Shore protection structure construction costs prevented
• Shore protection structure maintenance costs prevented
• Public safety (for example, protection of roads)
• Benefits to downdrift properties

Each of these benefits depends upon site-specific characteristics that include local erosion rates, local sand transport characteristics, the assessed value of land and upland developments, the existence and type of shoreline armoring, and the permissibility of using shoreline armoring to protect endangered properties. In locations that prohibit shoreline hardening, for example, construction of seawalls for protection of structures, the only legally permissible alternative for property protection in the absence of a beach nourishment project may be to completely relocate the threatened structure. Thus, the SDR benefit can include avoidance of future costs for structure relocation. States that currently prohibit shoreline armoring along the Gulf and Atlantic Coasts include South Carolina, North Carolina, Maine, Rhode Island, and Texas.

The land loss prevention benefit is quite simply the dollar value of land that is expected to be lost to erosion. For example, if the estimated average annual erosion rate at a 100-ft wide beachfront property is 2.5 feet per year, and land is valued at $15 per square foot, the annual land loss benefit is computed to be $3,750. For a 15-year project design, the dollar value of land lost in years 2 through 15 is discounted to present day dollars using an appropriate discount rate in order to determine the total land loss benefit over the life of the project.

Figure 3. Bellair Beach.

The upland structure damage and/or loss prevention benefit is determined from estimates of anticipated damages to buildings, including flood damage, in the absence of a project. Properties at greatest risk of suffering structural damage include those without shoreline armoring, with little or no protective beach, and/or with relatively low elevation. The actual dollar value of the expected loss depends upon the value of the property at risk and the percent of total loss that is estimated before the property owner takes action that is in his or her best economic interest to protect the property. In locations that permit shoreline armoring, remedial action may include construction of a seawall if such costs are economically justified. For example, it is probably not economically feasible to armor a shoreline to protect a bathhouse at a public beach. In this case, the structure loss benefit would be equal to the cost to replace the bathhouse. For those locales that prohibit shoreline hardening, the property owner may be faced with the expense of relocating the structure or, if relocation is not physically or economically feasible, with total building loss.

Where shoreline armoring is permitted one aspect of the SDR benefit may include shore protection structure construction and maintenance costs. If erosion modeling of the beach in the absence of beach nourishment demonstrates that an unarmored property will be undermined at some point within the design life of the project, it can be assumed that the property owner will act to protect the property provided it is economically justifiable to do so. In this case, the benefit includes present day costs for initial construction in the year in which armoring is needed, in addition to annual maintenance of the seawall or revetment. For properties that have armoring already in place, the planner must consider the condition of the existing seawall and make a judgment as to the degree of maintenance and repairs that will be needed over the design life of the project.

Figure 5. Nourishment project at Bellair Beach.

Benefits related to public safety include primarily cost savings associated with maintaining and keeping open public roadways used for disaster evacuation. Roadways that wash out during major storm events may result in additional evacuation costs to local governments, especially if the roadway is the only means of access to the area. An example of such a roadway is Highway A1A to the Florida Keys.

Finally, SDR benefits to downdrift properties may come in to play for open coast locations where beach nourishment is being considered. Over time, sand placed on a beach will spread to adjacent, un-nourished beaches unless the sand is contained between natural and/or man-made barriers (for example, inlets and groins). As the sand spreads, adjacent properties that received no initial benefit from nourishment may see additional protective beach width, thus gaining a benefit in future years. Numerical longshore sediment transport models that incorporate individual shoreline, wave climate, and sand characteristics are but one tool for estimating rates of sand spreading.

Recreational Benefits

Figure 6. Nourishment project at Bellair Beach.

Recreational benefits are based upon the premise that the beach has a measurable dollar value to the people who use it. Recreational benefits are difficult to calculate. Fortunately, a number of excellent studies have been conducted and methodologies have improved greatly over the past 30 years.

Categories of beach visitors, or beneficiaries, depend strongly upon the character of the community being surveyed, but typical classifications include day, overnight, local, and non-local visitors. Subcategories of beach users may be distinguished based on location of residence, length of stay, distance traveled, and type of accommodation utilized. Since user categories to which recreational benefits are allocated may ultimately be used to allocate project costs, the selection of recreational user categories should take into consideration the funding sources that can potentially be linked to each category. For example, communities that collect a hotel or tourist development tax may wish to distinguish between overnight guests who stay at hotels (and thus pay the hotel tax) and overnight guests who stay with friends or family. It is then easier to justify the use of money collected through the hotel tax to pay project costs allocated based on the recreation benefit realized by the hotel tourist.

A detailed discussion of the different ways economists assign a dollar value to ecosystems is found at EcosystemValuation.org. In the case of a nourishment project, the ecosystem being evaluated is the recreational beach. One method most often used in conjunction with determining recreational values of beach nourishment projects is the Contingent Valuation Method.

Because recreational benefits of the beach are distributed to users at a zero or near zero cost, there is no market test of the value users place on a daily visit to the beach, and no direct means of deriving a demand curve. In order to determine the value of a "day at the beach," personal interviews are conducted, and beach-goers are asked how much they would be willing to pay to visit the beach. Respondents must be assured that their answers will not provide the basis for assessing a fee to use the beach; otherwise the dollar value placed on the beach experience will be artificially low. Survey questions are also designed to distinguish between different categories of recreational beneficiaries, for instance, resident vs. non-resident, day visitor vs. overnight visitor. Concurrently, beach counts at various times during the day measure actual beach utilization to provide an estimate of annual beach days. Statistics regarding beach use may also be available from lifeguards. Other methods appropriate for the analysis of recreational benefits are the Travel Cost Method and the Unit Day Value or Market Price Method.

Consideration should also be given to the differences in the characteristics of the beach users depending upon the season and the location along the beach itself. For example, it is expected that a greater percentage of winter beach users in much of Florida are either seasonal residents or tourists when compared with summer beach usage. That is, the most popular beach season for tourists and seasonal residents is during the winter, when people come to Florida seeking to escape cold climates, and beaches in other parts of the country are too cold to enjoy. This situation is reversed for beaches in the north where the height of tourist season is during the summer months. One might reasonably expect that winter beach users in Florida will place a higher value on the "beach experience," while beach-goers in North Carolina will place a higher value on a summer beach day. Alternatively, one could hold the value of a beach day constant, but the overall recreational value of a beach will be greater during the height of the tourist season because more people are using the beach. Similarly, one can expect to receive different responses for surveys conducted at a publicly accessible beach with plenty of parking than one would receive along a shoreline fronted with privately owned residences and no means of public access, or along a severely eroded shoreline with little to no usable beach area.

An example of an analysis of the recreational value of a beach is shown in Table 1. Beach use surveys were conducted at the Town of Longboat Key, Florida in the winter of 1989. Summer beach usage is extrapolated from the decline in summer sales compared with winter sales based upon surveys of local businesses. The decline in summer sales was assumed to parallel the decline in beach usage by tourists and seasonal residents. For purposes of later allocating project costs between residential and commercial properties, beach users were also separated into Residents, both permanent and seasonal, and Tourists. In the example shown in Table 1 the value of a beach day is held constant, and summer beach usage by residents, both seasonal and permanent, was estimated to decline by 69.1 percent. Use by permanent residents increased by 3.3 percent, while seasonal residents' use declined by 89.1 percent. Overall tourist use was estimated to decline by 3.8 percent in the summer.

The approach presented herein for estimating recreational benefits gives a snapshot picture of the recreational benefits as they exist immediately before beach nourishment, and does not account for the potential increase in recreational benefits resulting from the increase in usable beach area that nourishment provides. In essence, such studies assume that the eroding beach is "saved" by the beach nourishment project, and that recreational benefits will remain at least at their current levels throughout the life of the project.

Other Economic Benefits

Beach nourishment provides a host of other economic or community benefits that are neither storm protection nor recreational, although they are closely tied to both the storm protection and recreational values of the beach. Types of benefits in this category may include:

• Increased business and tax revenues
• Enhanced property values
• Increased property tax revenues
• Job creation
• Environmental benefits
• Aesthetic benefits

Beneficiaries include beach community residents and businesses and the constituencies that receive a portion of tax dollars generated by an economically thriving beach community. Environmental and aesthetic benefits are more subjective, but types of benefits in these categories may include enhanced wildlife habitat through the establishment of sandy beaches and vegetated dunes.

The economic benefits realized through increases to the tax base and job creation are not typically included in the initial stages of project planning and in the initial determination of the benefit-to-cost ratio. A study undertaken in Delaware, however, evaluated the economic impacts of an ongoing five-year beach maintenance program (Jack Faucett Associates, March 1998). The study took as its baseline the existing maintained project condition and estimated the economic losses that would result should the State of Delaware cease placement of beach sand and permit the shoreline to return to its previously eroding condition (erosion rates ranging from two to four feet per year). The study concluded that, while the State of Delaware would save $9 million dollars in beach nourishment costs over the five-year evaluation period, tourist related revenues would drop by more than $30.2 million, resulting in 625 jobs lost in the beach area, reduced wages and salaries of $11.5 million, profit reductions of $1.6 million, and $2.3 million in lost state and local revenues. It was also estimated that beach area properties would lose nearly $43.3 million in value.

The potential influences of beach nourishment on the environment – both positive and negative – have been a topic of extensive discussion. The extent to which actual data exist to predict or determine impacts varies widely depending upon the resource being evaluated. While it would be impossible to cover every eventuality in this brief format, the types of issues with which the planner may be faced are presented below. Environmental issues are very site-specific, and what may be a very important environmental consideration in one location may not be a concern at another project site.

Impacts to the nearshore and beach area from beach nourishment occur basically within three zones – the supralittoral or dry portion of the beach, the intertidal zone between mean high water and mean low water, and the subtidal zone. A fourth area affected by the nourishment project is the sand source, or borrow, area.

Figure 7. Loggerhead turtle nesting.

Within the supralittoral zone the creation of a wide, sandy beach may enhance or create sea turtle nesting habitat, improve foraging and nesting habitat for shore birds, and create and/or protect habitat for shoreline vegetation. A potential negative effect of beach nourishment that can occur within the supralittoral and intertidal zones is disturbance by burial of fauna on which other species (for example, birds) feed. The extent to which the fauna are impacted depends upon the ability of individual species to recover from sudden burial after placement of beach fill. The temporary loss of these organisms from the beach may disturb the feeding habits of species that eat them.

Similar impacts to fauna may occur within the subtidal zone, although they typically occur more gradually as the project fill adjusts to its equilibrium shape. In addition, within this zone one tends to see more well developed hard-bottom reef communities. Potential impacts to reefs range from total burial to minor sedimentation as the project adjusts.

When an offshore borrow area is used, the potential impacts include disturbance of fauna, changes in the wave climate due to the change in bottom bathymetry, potential changes in water quality where the borrow area results in a deep hole, and increased turbidity during construction.

Some short-term impacts, such as burial of fauna at the project site, are unavoidable. Other impacts, both construction-related and long-term, can be minimized by appropriate project design and maintenance and/or mitigation. Impacts to sea turtles can be minimized in part by constructing outside of nesting season and tilling beach sand after construction to provide more natural compaction characteristics. It is common in Florida to mitigate impacts to hard-bottom communities by creation of additional hard-bottom areas of similar form and at like locations as those impacted. Site-specific conditions, including local regulations, provide guidance as to the relevant environmental issues and the actions necessary to mitigate potential negative impacts.

Discussion

Benefits applicable to a given project are based on site-specific physical and land use characteristics and beach utilization patterns. The benefits attributable to individual stretches of beach within a given project area can vary considerably, depending upon the upland land use and development patterns. Planners need to recognize these differences when designing the benefits analysis study for a proposed beach nourishment project.

It would be virtually impossible to identify and quantify every single benefit associated with a particular beach nourishment project. Clearly, there are financial limits to the level of detail that can be employed when delineating project benefits. Similarly, project planners need to realize that not everyone's perception is the same. For example, property owners may not consider an increase in their property value as a benefit if it results in increased property taxes. Non-beachfront residents who never use the beach may not be anxious to pay for a nourishment project that they perceive as benefiting an elite group of people at their expense. To that end, much of the science of determining and allocating project benefits and costs comes down not only to sound technical analyses that are legally defensible, but also to policies that are politically palatable. An important concept to remember, however, is that regardless of whether or not the non-oceanfront owner "uses" the beach, the beach is an amenity that becomes tied to that property and is sold with the property. In other words, even though the present owner does not use the beach, she can later sell the property to someone who perceives a wide, recreational beach as a desirable feature for which he is willing to pay more in comparison to a property that is not associated with a wide beach.

On the average, benefits to oceanfront property owners comprise 60 to 90 percent of the total project benefits, with the remaining benefits attributable to non-oceanfront properties. The relative benefits of four beach nourishment projects are summarized in Table 2. In allocating project costs, project planners may find greater acceptance of the proposed cost-sharing plan if funding from outside sources is first used to offset the costs attributable to non-oceanfront stakeholders. For example, a benefits analysis indicates that project costs should be allocated 70 percent to oceanfront owners and 30 percent to non-oceanfront owners. However, the project will likely not be approved if non-oceanfront owners are assessed more than 20 percent of the costs. Because of improved beach access, the state has indicated they will pay 10 percent of the total project costs. Rather than allocating these dollars proportionally on a 70-30 basis, the money provided by the state can be used to offset the costs to non-oceanfront owners such that they now will pay the acceptable amount of 20 percent.

There are few after-the-fact studies to assess accuracy of pre-project benefit analyses. The U.S. Army Corps of Engineers undertook two studies to look at the "actual benefits" of project implementation. In the first study, district offices of the Corps were asked to provide subjective assessments of both the erosion rates and benefits for the projects in their districts. Ratings were received for 26 of 56 projects. Results are shown in Table 3. No conclusions have been drawn from these results, but it is noted that the perception of the project planners and engineers is that both benefits and erosion rates tend to be underestimated.

In the second study, a more detailed analysis of 11 U.S. Army Corps of Engineers shore protection projects was conducted. Projects were selected based on availability of data and models to estimate the "actual" benefits. Results of the analysis of actual benefits are summarized in Table 4. The "actual" SDR benefits shown in Table 4 are developed using models and do not represent actual measurement of damage. While pre-project analyses of SDR benefits looked at the expected storm environment based on historical weather and storm data, the analyses of "actual" benefits uses the storm events that have actually occurred since project construction. Therefore, if an area was less stormy than normal, "actual" benefits are less than predicted. If the weather was stormier than predicted, SDR benefits are greater than predicted. A good example of this is the Manatee County, Florida project. This project was completed about two weeks before the March 1993 "Storm of the Century" hit the west coast of Florida. Accordingly, the anticipated SDR benefits for this project were exceeded before the project was one month old. Five projects have yet to reach the level of SDR benefits predicted, but this may be because they have not yet experienced storms as severe as those used in the analyses. Also, it is noted that both projects in which recreational benefits were re-evaluated had actual recreational benefits that were greater than anticipated. So, even though the Carolina Beach, North Carolina project had lower than expected SDR benefits, the recreational benefits exceeded expectations.

Summary

Feasibility of beach nourishment projects, like any major capital improvement project, rests upon the ability of project proponents to demonstrate that benefits sufficiently exceed costs to justify the expenditures required over the design life of the project. Historically, beach nourishment projects have been justified based upon the total value of the storm damage reduction and recreational benefits. Determination of project benefits and project beneficiaries is absolutely essential in order to make legally defensible decisions about the equitable allocation of project costs and to seek funding from federal, state, and local authorities. SDR benefits accrue to individual properties and the proportional costs for beach nourishment can appropriately be assessed to the property owner. Recreational benefits accrue to the people who use the beach and are more difficult to quantify. Recreational beneficiary categories can (and should) be linked to potential funding sources such that allocation and use of funds is appropriate and defensible. Examples of this are the use of ad valorem taxes to pay the residents' share of recreational costs, while the tourist share of costs is paid through collection of a tourist development tax.

Current federal policy requires that storm damage reduction benefits account for at least one-half of the total project benefits in order for a project to be eligible for federal funding. There is movement afoot, however, to revise the law to give recreational benefits the same weight as SDR benefits. Until that time, costs for projects that are not eligible for federal funding must be distributed to project beneficiaries in accordance with funding policies at the state and local level. These policies vary widely throughout the Atlantic and Gulf coastal states.

References

Applied Technology and Management, Inc. and T. D. Curtis. 1989. "Tentative Economic Apportionment Plan, Longboat Key Beach Restoration Program."

Ecosystem Valuation.org - web site: http://www.ecosystemevaluation.org/dollar_based.html

Ecosystem Valuation.org - web site: http://www.ecosystemevaluation.org/contingent_valuation.html

Ecosystem Valuation.org - web site: http://www.ecosystemevaluation.org/travel_costs.htm

Ecosystem Valuation.org - web site: http://www.ecosystemevaluation.org/market_price.htm

Jack Faucett Associates, Inc. March 1998. "The Economic Effects of a Five Year Nourishment Program for the Ocean Beaches of Delaware. Prepared for Shoreline Management Branch, Division of Soil and Water Conservation, Dept. of Natural Resources and Environmental Control, Dover, Delaware."