COMMUNITY ECONOMIC IMPACTS, RECOVERY, AND DISASTER PREPAREDNESS Dave Swenson Department of Economics...
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Transcript of COMMUNITY ECONOMIC IMPACTS, RECOVERY, AND DISASTER PREPAREDNESS Dave Swenson Department of Economics...
COMMUNITY ECONOMIC IMPACTS, RECOVERY, AND DISASTER PREPAREDNESS
Dave Swenson
Department of Economics
College of Agriculture and Life Sciences
Iowa State University
THREE SECTIONS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• The procedures and problems in determining the economic consequences of disasters
• A discussion of the economic impacts of the 2008 floods and the economic lessons we hope people learned
• Looking to the future: climate change, disasters, and emergency response
2008 WAS HARD ON IOWA
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
Tornadoes, continuous inundations interfered with planting, and floods
With just the floods of June, 2008, there were spectacular economic impact conclusions.
In mid-June, Using rudimentary extrapolations from very limited data, dire statewide economic outcomes were initially proclaimed:
The American Farm Bureau, as one example, announced there were $4 billion in agricultural crop damages in Iowa alone (Conlon, 2008; Matton, 2008).
Another $4 billion in commercial damages were estimated by Iowa state government officials by July, 2008, which when coupled with anticipated household losses put Iowa’s presumed losses in the neighborhood of $10 billion (Insurance Journal, 2008).
There also were extraordinary institutional responses: A separate state agency was created to deal with the administration of the recovery (Rebuild Iowa Office – RIO)
BY SEPTEMBER, 2008, THE NUMBERS WERE TEMPERED – THESE ARE FROM THE REBUILD IOWA ADVISORY COMMISSION (RIAC)
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
NO MATTER WHAT, BAD ESTIMATES ABOUNDED AND THEY STUCK …
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Farm Bureau numbers were way off – not even close
• State agencies compiled completely indefensible conclusions about commercial losses
• Cities imputed business losses into generalized reductions in regional productivity and started to manufacture job multipliers out of thin air
• And politicians lumped it all together into a mush to use to justify federal and state aid and assistance and, in some cases, to blatantly bolster re-election prospects
ASSESSING THE IMPACTS: THERE ARE THREE DIMENSIONS – DAMAGES, LOSSES & COSTS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
DAMAGES
Describe the physical outcomes of the events: houses destroyed, roads damaged, bridges washed out, crop land eroded, households affected materially, and businesses destroyed or disrupted, as examples. (see especially, Mutel, 2008, for an excellent survey of the scope of damages).
At this stage we are not insurance adjusters or disaster relief specialists, we are simply tallying up the physical consequences.
In a sense we are providing substance to the question: What happened, to whom, and where?
ASSESSING THE IMPACTS: LOSSES
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Losses are estimates of the financial value of the damages, to the extent that they can be determined. Losses are only known to the extent that individuals, businesses, or governments itemize those losses when seeking assistance. Many losses go undocumented. Plus, there are countless personal household items that have no tangible value. Similarly, degradation of public spaces cannot be quantified in the market readily.
• Two types:
• Direct – actual asset destruction and personal property loss
• Indirect – business sales, wages, and higher costs to households or firms
• For the most part, we focus on direct losses
ASSESSING THE IMPACTS: COSTS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Costs measure the payments by insurers, to the extent that the natural disaster losses were insured, and payments by the public at large to directly repair or compensate persons, firms, or public entities that had losses.
• Significant portions of costs are socialized across all U.S. taxpayers in the form of federal aid and assistance.
• Not all losses are compensated, however, so there ultimately is a gap between the declared value of the losses and the value of the payments to households, businesses, governments, and industries.
• The very nature of a natural disaster will leave victims, in the aggregate, worse off than before the disaster.
GEOGRAPHY OF LOSS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
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Weighted Loss Index for All Categories
Number of Counties
Household Losses
Public Sector Losses
Business Losses
l Very High 6 77% 74% 93%l High 4 7% 5% 1%l Moderate 12 9% 9% 4%l Low 77 8% 11% 2%
Impact Group
Shares of Statewide Losses*
* As documented by selected federal disaster assistance programs
DECLARED UNINSURED LOSSES (FROM ALL SOURCES)
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
PALO
WATERLOO
IOWA CITY
CEDAR FALLS
CEDAR RAPIDS
VINTON
TIPTON
MARION
WAVERLY
WAPELLOOAKVILLE
MUSCATINE
DAVENPORT
MASON CITY
DES MOINES
CORALVILLE
BURLINGTON
PARKERSBURG
CLARKSVILLE
NEW HARTFORD
CHARLES CITY
COUNCIL BLUFFS
Casualty Losses $100,000 to $500,000 $500,000 to $1 million $1 million to $5 million $5 million or more
Declared Uninsured Losses by City, 2008
IMPACTS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
IMPACTS: UNEMPLOYMENT
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
-50%
0%
50%
100%
150%
Change in Number of Unemployment Insurance Recipients from One Year Ago:
High Impact Counties
Statewide Average
High Impact Counties
IMPACTS: UNEMPLOYMENT RATE
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
-1%
0%
1%
2%
3%Ju
n-07
Aug-
07
Oct
-07
Dec
-07
Feb-
08
Apr-
08
Jun-
08
Aug-
08
Oct
-08
Dec
-08
Feb-
09
Apr-
09
Jun-
09
Aug-
09
Oct
-09
Dec
-09
Feb-
10
Apr-
10
Jun-
10
Perc
enta
ge P
oint
s A
bove
or
Belo
w S
ame
Mon
th L
ast Y
ear
Difference in Unemployment Ratefrom Same Month in Prior Year:
Very High Impact Counties
IMPACTS: BUSINESS ESTABLISHMENTS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Percentage Change in Employer EstablishmentsCompared to Same Quarter in Prior Year:
High Impact Counties
High Impact Counties
Statewide Average
IMPACTS: JOBS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
4%
3%
2%
1%
0%
1%
2%
Perc
enta
ge C
hang
e in
Jobs
from
Sam
e M
onth
Las
t Ye
arEmployment Changes from 1 Year Ago:
Statewide
IMPACTS: JOBS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
4%
3%
2%
1%
0%
1%
2%
3%
Perc
enta
ge C
hang
e in
Jobs
from
Sam
e M
onth
Las
t Ye
arEmployment Changes from 1 Year Ago:
High Impact Counties
ECONOMIC IMPACTS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• We were unable to estimate net losses to regional productivity in most nonfarm situations• Sales shifted to other providers• Social insurance (unemployment, food stamps, initial assistance to
households) maintained household consumption• Businesses that could hurriedly got back on line• Lost housing resulted in increased rental costs in remaining area
housing (of which there was a surplus thanks to the housing boom)• And at the time we were walking into the worst recession in 70 years –
teasing natural disaster from the business cycle was not possible
ECONOMIC IMPACT INDICES
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Per $million of output loss tables were compiled for
• Retail trade
• Dining and drinking
• Lost rental sales
• For the Cedar Rapids area, a per-month economic impact of all value added ag processing was provided.
• Finally, a lost property tax revenues contingency table was compiled to assist in estimating local government impacts.
OH, AND THOSE HORRIFIC AG IMPACTS?
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
$474,404,963
$477,003,581
$145,340,243
Total Iowa 2008 Indemnity Payments by Broad Category
All other
Price decline
Flood, excess moisture, or planting delay
$46,973
$72,152
2007 2008
Per Farm Net Income
THE IMPACTS OF ALL PUBLIC ASSISTANCE
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Considering all sources of assistance, Iowa realized
• $3.346 billion in appropriations from all sourcesRemember the first table, total initial losses were put at $3.49 billion
• But not all of those appropriates had been utilized by the end of 2010 – RIO tables indicated that $2.34 billion had been accounted for and had been spent or would be spent in the following year. Accordingly, I estimated the statewide impact over three years of $2.34 billion in assistance
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
Direct Disaster Appropriated Assistance by Funding Category Recovery Activity Year 1 Year 2 Year 3
Construction: public infrastructure, businesses, homes, and maintenance and repair 806,882,644 806,882,644 454,376,340 Governments: payments to governments to directly provide government services or to administer disaster efforts 40,080,482 38,665,783 36,001,956 Medical: payments in support of general health care, counseling, and personal services for victims 9,969,005 3,733,187 - Rents: government supported rental payments for victims 136,330,160 13,926,307 - Wholesale: estimated inventory and business equipment purchased using government sponsored loans 3,802,999 3,802,999 3,802,999 Households: payments made directly to households to support household spending 46,548,128 - - Proprietors: primarily payments to ag land owners 25,497,221 - -
Total $1,069,110,640 $867,010,921 $494,181,294
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
Economic Impact Values of Appropriated
Disaster Assistance Funds
Year 1 Year 2 Year 3
Direct Values
Output $ 1,069,110,640 867,010,921 494,181,294
Labor Income $ 385,976,591 348,246,387 206,959,442
Jobs 8,573 6,813 3,958
All Indirect and Induced Values
Output $ 652,041,077 575,746,632 330,154,902
Labor Income $ 204,990,665 184,870,650 105,885,797
Jobs 8,118 7,532 4,299
Total Values
Output $ 1,721,151,717 1,442,757,553 824,336,196
Labor Income $ 590,967,256 533,117,037 312,845,239
Jobs 16,691 14,345 8,257
CHANGING GEARS TO A CHANGING CLIMATE
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• 2011 Report to the General Assembly and the Governor had several components – climate, flora and fauna, agriculture, public health …
• My contribution was Consequences for Iowa’s Economy, Infrastructure, and Emergency Services
The increased weather volatility that Iowa is now experiencing has been shown to be particularly damaging to public infrastructure (Takle 2010a, Swenson and Eathington 2010).
Serious flooding in 1993, 2008, and 2010, as notorious examples, resulted in extensive damage to water supply and waste treatment systems in Des Moines, Mason City, and Cedar Rapids and massive damage to state university property in both Iowa City and Ames. Serious weather events have washed out roadways and bridges, disrupted freshwater supplies, and interfered with multimodal transportation systems.
FURTHER …
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
If indeed “the dice have been loaded toward a higher probability of extreme flooding events,” it could become increasingly important for Iowa to take broad and proactive measures to “enhance Iowa’s flood resistance (Takle 2010),” to protect its cities and to reduce future losses.
Local and state governments will increasingly require civil engineering innovations to deal with greater ranges of infrastructure-damaging occurrences, as well as withstand increased occurrence frequencies.
In response, governments will likely begin to implement more stringent design standards for critical infrastructure, to include hardening that infrastructure to withstand previously unthought-of occurrences.
All of these actions will increase taxpayer costs or shift costs away from other public service areas.
Because, as well all know, there is no free lunch.
FINALLY …
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
A changing Iowa climate will create greater demands for disaster-response services. These services include monitoring disaster potentials, identifying vulnerabilities, and procuring governmental resources for recovery and humanitarian assistance, as well as disaster preparedness and training and disaster response and coordination.
If climate change yields greater consequences for households and communities [which this report predicts], those services will expand, and local and state government emergency services costs will necessarily increase to adequately fund these changes.
The big question is whether those costs will increase before the occurrences or after.
SO, …
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
What are our challenges?
• Sharp erosion in local and state public service capacity
• Shifting federal funding emphases and definitions of what constitutes federal responsibility
• Broad-based equivocation regarding the potential consequences of climate change on the nation’s disaster preparedness
• Crisis amnesia
NEW TOPIC: EXPLORING SUSTAINABLE DEVELOPMENT AND CREATING RESILIENT COMMUNITIES
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• For the past 30 years we have focused overwhelmingly on economic factors
• While other important considerations were addressed at times, our security, i.e., paycheck, interests have tended to guide policy development
• Our overall demographics, however, and the obvious consequences of our actions on the landscape and on our water ways cannot be ignored indefinitely
REGIONALISM HAS BEEN THE BUZZWORD OVER THE YEARS
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Communities and counties have been told that they cannot plan and grow in isolation; that they needed to form functional alliances with their neighbors.
• We have many regions: Counties, AEAs, COGs, Human Services Districts, Crop Reporting Districts, etc.
• The practice in terms of state funding and assistance for development has been to let areas choose their own partners – to work out cooperative arrangements themselves
REGIONALISM IS FINE AND GOOD, BUT ….
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• It is an empty concept on the ground.
• It rarely fosters cooperation (except for funding)
• Communities and counties within a “region” will still fight tooth and nail with each other for business prospects
• And often the region is, for lack of a better term, dysfunctional
• Hence, our efforts to divine sets of logically ordered regional trade centers (originally called functional trade territories)
IOWA’S RTCS
CERRO GORDO COUNTY PAYROLL WORKER FLOWS
WE BEGIN WITH EXISTING DOMINANT TRADE TERRITORIES
DAVE SWENSON DEPARTMENT OF ECONOMICS IOWA STATE UNIVERSITY
• Then we explore labor force linkages, regional industrial structures, occupational compositions, and the area’s overall competitive position.
• In short, we tell them what their economy is, how it has been performing, and what their strengths and weaknesses are.
SUSTAINABILITY
Equitable Viable
Bear
able
Sustainable
FINANCIAL INDICATOR CATEGORIES
GROWTH RATES
Long-Term Population Trend wNatural Population Change wInternational Net Migration vDomestic Net Migration vPre-Recession Employment Trend wRecent Employment Change w
Population
Jobs
SOCIAL INDICATOR CATEGORIES
HOUSEHOLDS
Hospital Access uNursing Home and Residential Care Access wPrimary Medical Care Access uDental Care Access uUninsured Population vTeen Mothers vLow Birthweight Births xYoung Children Living With a Single Parent xJuvenile Delinquency xChild Maltreatment xLead Poisoning - Confirmed Cases v
Access toHealth Care
Child & FamilyWell-Being
ENVIRONMENTAL INDICATOR CATEGORIES
NATURAL ENVIRONMENT, CONTINUED
Daily Water Use wImpaired Rivers and Streams vManure Spill Incidence wContaminated Sites xLeaking Underground Storage Tanks xAgricultural Fertilizer Usage xAgricultural Chemical Usage x
Water & Soil
BUILT ENVIRONMENT
Aging Housing Stock uHousing Unit Vacancy Rate xUnsewered Communities uBroadband Availability wDensity of Major Road Systems uRoad Utilization uDeficient Bridges v
Housing
Transportation & Communications