Thompson Creek Flood Study Report - City of Peterborough

Thompson Creek Detailed Flood Reduction Study
City of Peterborough
4.7 FLOOD DAMAGE ESTIMATION
One of the factors considered in deciding whether to proceed with flood protection
measures for flood vulnerable areas is the economics of the project. Generally, a
benefit-cost analysis is completed to evaluate whether the dollar value flood damages
prevented by flood protection exceeds the capital and operating costs of the project.
Many other factors must be considered such as environmental issues and social issues
but the benefit-cost relationship is generally an important decision factor.
To estimate the benefit side of the “equation,” a method of assessing the dollar value of
flood damages must be identified and applied. The result is generally a value known as
the Present Value (PV) of the average annual flood damages (AAFD). It can be
directly compared with the sum of the capital cost and present worth of
operation/maintenance of any protection works. The approach used to estimate the PV
of the AAFD is generally as follows:
1. The extent of flooding is identified for different return periods (e.g. 1 in 2 year,
1 in 5 year, 1 in 10 year, 1 in 25 year, 1 in 50 year and 1 in 100 year).
2. Any assets affected by the flooding are identified for each return period and an
estimate of the $ damages which each would suffer under those conditions is
assessed. Generally more assets will be affected by larger events. Hence the $
damages will increase with the return period of the event.
3. The AAFD is calculated by weighting the estimated damage for each return
period by its probability of occurrence, e.g. using the six return periods noted
above, the AAFD would be:
AAFD = 0.5 * D2 + 0.2 * D5 + 0.1 * D10 + 0.04 * D25 + 0.02 * D50 + 0.01 * D100
where Dn is the $ damage associated with the return period n
and the weighting factors 0.5, 0.2, etc. are the inverse of the return
period, e.g. 1/2, 1/5, 1/10, etc.
4. The present value is calculated using an accounting formula which converts an
infinite stream of annual values to a present worth using a discount factor.
It is worth noting that in calculating the AAFD, less frequent events have relatively
little impact on the total since their weighting is so small compared to more frequent
events. For example, any damages occurring for a 100 year storm have one 50 th of the
weight for damages from a 2 year event. This means that it is not necessary to evaluate
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