Budgets, Benefits and Resiliency

by | Feb 12, 2015 | Economics

It is budget time for many. Cities are setting capital plans that will set a strategy for infrastructure spending. Not everyone is thinking green infrastructure in their capital plans but New York is. Three green infrastructure stormwater initiatives make up over $1 billion over the next 10 years. These programs are a small part of the $68 billion the city is planning to spend and seem to have make it in on a cost effectiveness basis rather than the resiliency and other benefits that green stormwater management infrastructure brings.


NYC Green Infrastructure

Image Source: NYC Green Infrastructure Program

The three green stormwater management line items in the Department of Environmental Protection’s (DEP) $12.3 billion dollar capital expense over the next ten years (2016-2025) are:

    ·The Green Infrastructure Program (in the Water Pollution Control area of DEP at $699.7 million, an average annual expenditure of $127 million).

    ·The Bluebelt Program[1] (in the Water Mains, Sources and Treatment area of DEP at $22.7, an average annual expenditure of $4 million).

    ·The Bluebelt Program (in the Sewers area of DEP at $362.3 million, an average annual expenditure of $66 million).

These three initiatives make up over $1 billion over 10 years and while only 2% of the overall City of New York capital budget it is almost 10% of the DEP capital budget. It is stated that the Bluebelt Program is “a cost effective stormwater management system”.

These three initiatives make up over $1 billion over 10 years and while only 2% of the overall City of New York capital budget it is almost 10% of the DEP capital budget. It is stated that the Bluebelt Program is “a cost effective stormwater management system”.

Budget capital plans and resiliency plans are at odds. They have different objectives, different measures of success, and hence are often seen as incompatible.

Budgeting is deciding on the best projects with limited funds. It is about reducing waste, being efficient, and getting the most bang for the buck. Budgeting is about setting priorities and deferring or denying projects that have a lesser payback. Cost effectiveness cannot compare budget initiative that have different benefits, timing, risks, or cost department or stakeholder effects.

Resiliency is about being able to bounce back from extreme events. The way to achieve resiliency is often to build-in redundancy, to use more expensive techniques or to pay more for maintenance.

Redundant infrastructure doesn’t get used (often) and so is not cost effective from a budget perspective. Further, through the budget lens, the investments are large for a city budget, the return uncertain and the payback is an avoided costs of the disaster that doesn’t materialize in a future budget. From the resiliency viewpoint budgeting is focused too much on the short term and is influenced unduly by stakeholders.

The incompatibility between budgets and resiliency planning comes from a lack of financial rigor by the latter and ignoring risks (and potential costs) and other benefits by the former.

By taking a broader (risk-based triple bottom line) perspective budgeting can encompass resiliency. It can also help make the case for capital programs that have benefits that go beyond the sponsoring departments’ goals. And by embracing financial discipline, sustainability planning can be done objectively and transparently. The key to linking budgeting and resiliency planning is that the risk needs to be recognized and its costs quantified as part of the budget process. Also critical is that resiliency priorities be set so using common and comparable measures of value for green bond financing.

AutoCASE provide this bi-directional link between sustainable return and risk. It gives sustainability the financial rigor and budgeting a risk-adjusted perspective. SROI is a decision support framework that:

  • Incorporates risk – for example the avoided costs of flooding and the uncertainty in the value of the co-benefits, such as the better water quality of green or low impact development stormwater infrastructure investments.
  • Monetizes the triple bottom line of environmental, social and economic costs and benefits – this means that lower impact but higher use benefits of storm defences, such as recreational use, can be included in the return analysis.
  • Allows for comparison across project of differing goals, horizons, and risk. Different projects can be assessed objectively for their sustainability and applicability for green bond financing. And small projects can be aggregated to meet minimum size for impact investors. In addition projects that have benefits accruing to different departments, sectors and stakeholders can be ranked and prioritized.

[1] a comprehensive stormwater management plan that “connects natural drainage corridors, such as streams and wetlands, to conventional storm sewers to reduce local flooding.”

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