Hazard mitigation can save money

An ounce of prevention may actually be worth a pound of cure, especially if the actions taken are to reduce losses from natural hazards, such as tornados, hurricanes or flooding, according to a Penn State researcher.

"Our analysis found that for each dollar spent by the Federal Emergency Management Agency for grants to mitigate the effects of natural hazards, approximately $4 was saved from what would have eventually been spent on correcting damages," says Dr. Adam Rose, professor of geography. "Currently, the grants we studied, if extrapolated to all FEMA grants over the 10-year period ending in mid-2003, would save over $14 billion."

Rose led a research team conducting the study component that focused on the Benefit-Cost Analysis of FEMA mitigation grants. The team was assembled by the Applied Technology Council for the Multihazard Mitigation Council of the National Institute of Building Sciences. The MMC was funded to conduct this work, "Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings from Mitigation Activities," by FEMA in response to a request from the U.S. House of Representatives Appropriations Committee.

In essence, for every dollar spent on mitigation, on average, four dollars would not need to be spent in the future to repair the damage and to compensate for death and injury caused by natural hazards. The report noted that grants to mitigate the damages done by floods, hurricanes, tornadoes and earthquakes from 1993 to 2003 are expected to save more than 220 lives and prevent nearly 4,700 injuries over about 50 years.

The researchers looked at two types of grants in this study. One type provided funding for physical measures intended to reduce damage directly – including reinforcement against wind and earthquakes and raising buildings subject to flooding, for example. The other type provided funding for activities leading to hazard mitigation policies, practices and projects – including risk assessment, education and building codes.

The researchers looked at both types of FEMA grants across the board to get a generalizable picture of the effects and at FEMA grants in a community context. The community studies included all grants received since 1988 by the selected communities. In both parts of the study, the researchers used cost-benefit analysis to evaluate the effects. Looking at benefits, from the point of view of losses to the society that were avoided by mitigation, they considered reductions in property damage, direct and indirect business interruption, loss of human life, cost of emergency response and environmental damage.

Another benefit was the reduction in tax revenue losses due to economic disruption caused by natural hazard damage. Reducing the cost of emergency response by FEMA and avoiding losses in tax revenues, frees up monies for other uses by other federal government agencies.

"The study found that hazard mitigation grants were cost-effective and reduced future losses from natural hazards," says Rose.

"This type of grant provides a significant net benefit to society and a significant net savings to the U.S. treasury."

An interesting side effect is that communities that benefited from FEMA mitigation grants also generally had additional, non-federally-funded mitigation activities. Also, communities that institutionalized mitigation programs showed the greatest benefit.

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Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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