Benefits of the Construction of Flood Modification Measures
In general, the benefits of the construction of flood modification
measures are as follows:
increased flood immunity of properties protected by the measure
leading to ;
increased flood immunity of roads protected by the measure and thus
improved mobility of the community during flooding;
decreased cost of flood damage to properties protected by the
decreased potential for loss of life during a flood event within
the area protected by the measure;
decreased emotional, social and psychological trauma experienced by
residents in times of flooding.
The overall financial viability of an option is initially assessed by
calculating the monetary benefit / cost ratio (BCR).
A financial project life of 50 years was chosen for this study. This does
not imply that the projected structural life of the scheme is only 50
years. In fact, some measures should be effective in reducing the
frequency of flooding for centuries to come.
It is not correct to simply multiply a long term average annual benefit by
the financial project life of 50 years to derive a total worth of the
benefits. To do so would ignore the important point that the benefits from
this scheme (ie. reduced flood damages) will occur over time and in the
For example, a benefit of $2.3 million to be gained in 10 years time is
not worth $2.3 million now but only $1.2 million now. This is because $1.2
million could be invested now and appreciate at say 7 % p.a. over and
above inflation for 10 years. This would then be equivalent to $2.3
million in 10 years time.
This is called the Present Worth of the benefit. It is a universally
accepted economic theory and used in all major project economic analyses.
The adopted rate of 7 % is called the discount rate and is the middle of
the range 6 to 8 % recommended by the Queensland Government for assessing
Present worth of Annual
If the present worth benefits for each year are totalled for the 50 years,
the total present worth (or total benefit) of the benefits is $ 31.7
million. The calculation of the total benefit can be simplified through
the use of a Present Worth Factor.
Rather than calculating the present worth for each year
and summing to calculate the total benefit, a Present Worth Factor can be
used when the annual average benefit is identical in each year.
The Present Worth Factor
The Present Worth Factor is calculated using equation (1).
The Present Worth Factor is multiplied by the annual average benefit to
calculate the total benefit.
The Present Worth Factor is 13.8 for a 50 year period and a discount rate
It is interesting to note that if a longer financial project life of say,
100 years was chosen then the total present worth of the benefits is only
$1.1 million more at $32.8 million. This is due to the fact that the
present worth of the benefits to be accrued in the second 50 year period
is low because of the length of time until the benefits are realised.
Procedure for Calculating Benefit-cost Ratios
The procedure for calculating benefit-cost ratios is outlined below:
1. Calculate the average annual benefit associated with the option (i.e.
the reduction in annual
average damages) using the method described in Section 6.3,
2. Convert the average annual benefit to a total benefit by multiplying by
the present worth
3. Calculate the total cost of the option.
4. Calculate the monetary benefit-cost ratio:
Benefit + Cost Ratio = Total benefit/total cost
Impacts on flood response and evacuations
Impacts on riverbank stability;
Public utility impacts for example, sewer routes may need to be revised.
Visual impacts and blockage of views Levees can have a detrimental impact
on the visual aesthetics of an area. They can do this by blocking views or
by visually spoiling a formerly attractive area.
Heritage and archaeology impacts;
Impacts to traffic routes; and
Impacts to fauna passage and flora.