Community Economic Impacts, Recovery, and disaster preparedness

1. Community Economic Impacts, Recovery, and disaster preparedness Dave Swenson Department of Economics College of Agriculture and Life Sciences Iowa State University

2. Three sections • 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 Dave Swenson Department of Economics Iowa State University

3. 2008 Was Hard on Iowa 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) Dave Swenson Department of Economics Iowa State University

4. By september, 2008, the numbers were tempered – These are from the Rebuild Iowa Advisory Commission (RIAC) Dave Swenson Department of Economics Iowa State University

5. No matter what, bad estimates abounded and they stuck … • 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 Dave Swenson Department of Economics Iowa State University

6. Assessing the impacts: There are three dimensions – damages, losses & costs 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? Dave Swenson Department of Economics Iowa State University

7. Assessing the impacts: Losses • 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 Dave Swenson Department of Economics Iowa State University

8. Assessing the impacts: Costs • 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. Dave Swenson Department of Economics Iowa State University

9. Geography of Loss Dave Swenson Department of Economics Iowa State University

10. Declared uninsured losses (from all sources) Dave Swenson Department of Economics Iowa State University

11. Impacts Dave Swenson Department of Economics Iowa State University

12. Impacts: Unemployment Dave Swenson Department of Economics Iowa State University

13. Impacts: Unemployment rate Dave Swenson Department of Economics Iowa State University

14. Impacts: business establishments Dave Swenson Department of Economics Iowa State University

15. Impacts: Jobs Dave Swenson Department of Economics Iowa State University

16. Impacts: Jobs Dave Swenson Department of Economics Iowa State University

17. Economic impacts • 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 Dave Swenson Department of Economics Iowa State University

18. Economic impact Indices • 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. Dave Swenson Department of Economics Iowa State University

19. Oh, and those horrific ag impacts? Dave Swenson Department of Economics Iowa State University

20. The impacts of all public assistance • Considering all sources of assistance, Iowa realized • $3.346 billion in appropriations from all sources Remember 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

21. Dave Swenson Department of Economics Iowa State University

22. Dave Swenson Department of Economics Iowa State University

23. Changing gears to A changing Climate • 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. Dave Swenson Department of Economics Iowa State University

24. Further … 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. Dave Swenson Department of Economics Iowa State University

25. Finally … 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. Dave Swenson Department of Economics Iowa State University

26. So, … 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 Dave Swenson Department of Economics Iowa State University

27. Thank You dswenson@iastate.edu Dave Swenson Department of Economics Iowa State University

28. New Topic: Exploring Sustainable Development and creating resilient communities • 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 Dave Swenson Department of Economics Iowa State University

29. Regionalism has been the buzzword over the years • 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 Dave Swenson Department of Economics Iowa State University

30. Regionalism is fine and good, but …. • 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) Dave Swenson Department of Economics Iowa State University

31. Iowa’s RTCs

32. Cerro Gordo County Payroll Worker Flows

33. We begin with existing dominant trade territories • 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. Dave Swenson Department of Economics Iowa State University

34. Sustainability Sustainable Equitable Viable Bearable

35. Financial Indicator Categories

36. Growth Rates

37. Social Indicator Categories

38. Households

39. Environmental Indicator Categories

40. Natural Environment, continued

41. Built Environment