Valuing Central Valley A Framework for Management Decisions

William eisenstein and louise mozingo Written by Dr. William Eisenstein, Executive Director, and Prof. Louise Mozingo, Director, Center for Resource Efficient Communities.

Layout and graphic design by Katrina Ortiz. Cover photograph of Yolo Bypass with Sacramento in background, courtesy of the Department of Water Resources.

Funding for this report provided by American under a grant from the California Water Foundation. CREC is especially grateful to John Cain, Director of Conservation for California Management at American Rivers for his support and guidance.

The following people generously provided valuable feedback on draft versions of this report:

Betty Andrews, ESA/PWA Katie Jagt, independent consultant Jeff Opperman, The Nature Conservancy Susan Tatayon, The Nature Conservancy Mark Tompkins, NewFields Basin Services Stu Townsley, U.S. Army Corps of Engineers Rich Walkling, Restoration Design Group Leo Winternitz, The Nature Conservancy

CREC would also like to thank the following people for assistance and encouragement:

Stacy Cepello, California Department of Water Resources Dave Feliz, California Department of Fish and Wildlife Paul Hames, California Department of Water Resources Mike Miller, California Department of Water Resources Ricardo Pineda, California Department of Water Resources Steve Rothert, American Rivers David Rumsey, Cartography Associates and The David Rumsey Map Collection Peter Vorster, The Bay Institute

Center for Resource Efficient Communities 390 Wurster Hall #1839 Berkeley, CA 94720 www.crec.berkeley.edu

Contents copyright of the Regents of the University of California, 2013. All rights reserved. May 15, 2013. table of Contents

Executive Summary 4

I. Introduction 6

Valuing floodplains 7

Back to the Valley 9

II. A framework for floodplain valuation 12

III. The policy context for floodplain valuation 16

Urban and suburban development in floodplains 17

California’s floodplain management policy structure 19

IV. Valuing Central Valley floodplains 22

Flood risk reduction value 22

Ecosystem service value 27

Land use value 39

System operations value 41

V. Conclusions and recommendations 46

References 49 Valuing Central Valley Floodplains Executive Summary

This report proposes a new general framework The current federal and state policy frameworks for assessing the economic value of hydrologically governing floodplain land use fail to account for connected floodplains, especially in the Central most of these benefit , leading to floodplain Valley of California. Hydrologically connected management decisions that ignore important floodplains are those in which rivers are permitted economic values that only connected floodplains to overflow onto floodplain lands periodically, can provide. By synthesizing existing literature on either under their own power or as a result of these values and discussing specific examples from deliberate management decisions. They may or the Central Valley, the report produces “order-of- may not be conserved as, or restored to, native magnitude” estimates for each major component floodplain ecosystems, but can also host profitable of the four value accounts. Many of these agriculture and other land uses, though generally estimates are highly context-dependent (hence the not urban development. Disconnection of use of dollar ranges to estimate them) and must floodplains by levees allows that development to be more rigorously assessed in any particular occur but also eradicates certain valuable flood situation. The table on the facing page summarizes management and ecosystem services detailed in these estimates. this report. Climate change and other trends are creating higher, more frequent and more The Center for Resource Efficient Communities destructive in many river basins, forcing (CREC) produced this report in association with flood managers into a stark choice between a larger American Rivers research initiative to heightening levees and dams, or increasing the quantify the benefits to flood management, water use of connected and managed floodplains that supply and ecosystems of expanded, multi-purpose produce multiple benefit streams. floodways in the Central Valley. This initiative was undertaken in recognition of the fact that The floodplain valuation framework presented encouragement of integrated water management here includes four “value accounts” that can be planning to achieve multiple objectives is the used to comprehensively assess the full economic official policy of the state of California. Despite value of connected floodplains within the context this, widely applicable tools and protocols to of both basin-wide and project-level planning systematically evaluate multiple benefits have yet processes: to be developed. • Flood risk reduction value (including flood The California Department of Water Resources stage reductions and avoided residual risk) (DWR) and the U.S. Army Corps of Engineers should incorporate full consideration of these • Ecosystem service value (including habitat, value accounts into ongoing and future basin- food web support, carbon sequestration, water wide planning processes, initiate new efforts to management and sediment services) systematically assess flood risk in the valley and • Land use value (including agriculture, the role that connected floodplains could play in recreation and aesthetic values) reducing it, continue existing efforts (by DWR) to identify opportunities for floodplain reconnection, • System operations value (including integrated and develop project evaluation criteria that take water management, option values, climate full account of the multiple economic benefit change accommodation, and maintenance and streams that connected floodplains provide, rather liability management) than the single-benefit methods that the Corps, in particular, relies upon currently.

Courtesy of CA Dept of Water Resources

4 Approximate Monetary Magnitudes of Services of Connected Central Valley Floodplains Flood plain Conceptual Annual value per Context Notes value accounts example floodplain acre sensitivity I. Flood risk reduction value Reduced flood Yolo Bypass $100s - $1,000s Depends on extent and Assumes 100-year project stage widening intensity of development lifetime and discount rate in affected areas of 3% Avoided residual Various sites in $0 - $1,000s Depends heavily on local Assumes suburban risk Valley topography development densities II. Ecosystem service value Habitat Central Valley $100s - $1,000s Depends on commercial Same range as findings (incl. food web salmon and recreational value of for habitat value of support) fishery wetlands generally Carbon Delta $10s - $100s Depends on soil types Delta has unusually good sequestration and price of carbon potential Water quality Valley-wide <$0 - $100s Depends upon intended Effects can be negative as maintenance uses of water well as positive Groundwater Gravelly Ford, $0 - $100s Requires suitable soils Value and recoverability recharge Yolo Bypass and aquifers of water varies by site Sediment Cosumnes $0 - $100s Depends on channel Avoided cost of channel morphology/hydrology dredging downstream III. Land use value Agriculture Yolo Bypass $100s - $1,000s Depends on crops Floodplain soils generally (net profits) and flow timing in the well suited to agriculture floodplains Recreation Delta $100s Depends on proximity to Care should be taken not population centers to double-count habitat values Visual and place Lower $0 - $100s Depends on visual “Place-branding” value values San Joaquin accessibility of highly indeterminate floodplain to homes IV. System operations value Integrated water Yolo Bypass $100s Depends on system Calculating potential management architecture and water supply gains is reservoir operations highly complex Option value Valley-wide $0 - $10s Depends on whether Assumes 50-year horizon (per $100m in floodplain connection at 7% discount rate; future savings) preserves lower-cost history of Yolo Bypass future management suggests that future options management options could vary by >$800m. Maintenance and Valley-wide Unknown Depends on local soils, Data insufficient to liability hydrology support generalizations

5 Valuing Central Valley Floodplains I. Introduction

When the federal government authorized the Mississippi River and Tributaries Project—the Flood Control Project in 1917 Bird’s Point-New Madrid Floodway in Missouri after decades of political wrangling, it included and the Atchafalaya, Morganza and Bonnet an innovative idea that had first been born in Carre Floodways in Louisiana.1 During the huge the mind of a Colusa newspaperman (and later Mississippi River flood of 2011, the Corps made California assemblyman) named Will Green 50 use of all three to reduce peak flows and protect years earlier. Realizing that the main channel of urban populations in Cairo, Illinois and New the Sacramento River was too small to carry the Orleans, Louisiana. As with the Yolo Bypass, peak flows that frequently roared out of the river’s they have been profitably farmed and inhabited steep and narrow watershed, Green proposed that for over 75 years, even as they provide important flood control projects in the valley make managed additional flood protection to major urban areas. use of the large natural basins that flanked the river to accommodate large flows. In particular, Now the nation most expert in flood engineering the Yolo Basin at the lower end of the valley —the Netherlands—is also making conserved could be used to divert high waters away from the floodplains a key part of its national river and city of Sacramento, which had already flooded flood management strategy. Titled “Room for disastrously several times in California’s short the River,” this strategy seeks to reduce growing history as a state (Kelley 1989). Later dubbed flood risks posed primarily by the Rhine, which bypasses, these conserved and managed floodplains flows into the Netherlands from Germany. Among have proven to be highly effective components of other measures, it will incorporate a flood bypass the state and federal flood management project on around the Veessen-Wapenveld metropolitan the Sacramento. area and dredge the Rhine’s floodplain to ensure necessary flood conveyance capacity. Notably, Almost 150 years after Green’s original the Dutch also identify the Room for the River inspiration, bypasses and hydrologically connected strategy as the best means of managing the higher floodplains have become an ever-more-critical peak flows expected as climate change unfolds, part of flood management worldwide. Learning and as a way of generating major environmental from the experience on the Sacramento, the benefits alongside public safety improvements U.S. Army Corps of Engineers designed and (Government of the Netherlands 2006). incorporated four floodways as part of the 1928

The Sutter Bypass. Courtesy of CA Dept of Water Resources.

1 Conserved and managed floodplain areas similar to a bypass, though used less frequently

6 Introduction

DISCONNECTED FLOODPLAIN

CONNECTED FLOODPLAIN

Figure 1. Levees built next to rivers disconnect floodplains. Image adapted from Water Education Foundation’s Layperson’s Guide to Flood Management.

Floodplains are also among the world’s most influenced rainfall patterns are generating higher, productive ecosystems, producing larger amounts more frequent and more destructive floods in many of biomass and species diversity per acre than river basins (Opperman et al 2009). Yet these other terrestrial ecosystem types in most regions basins are generally managed using flood projects of the world (Tockner and Stanford 2002). In the built decades ago and designed for hydrological Central Valley and elsewhere, many endangered conditions that are now irreversibly changing. species of fish also rely on the feeding, rearing and refuge opportunities that floodplains alone In many situations, flood managers now face can provide, and riverine ecosystems benefit a stark choice: double down on conventional enormously from the food web support provided approaches to flood management, such as by active floodplains, including production raising levees and dams, or increase the use of and export of organic carbon, plankton and managed floodplains for conveyance, detention invertebrates (Junk et al 1989). Floodplains are or infiltration of floodwaters. Finding the also important carbon sinks on a global level. appropriate balance among these various measures As such, floodplain ecosystem preservation and in any given river basin requires a full accounting restoration are critical to global efforts to conserve of the multiple costs and benefits of each. biodiversity and mitigate climate change. A pivotal distinction in this regard is between floodplains that are hydrologically connected to their rivers, and those that are not. Hydrologically Valuing floodplains connected floodplains are those in which rivers With these recent demonstrations of the critical are permitted to overflow onto floodplain lands role of floodplains in flood management, the periodically, either under their own power or assessment and quantification of the economic as a result of deliberate management decisions. value of floodplains is essential to understanding These floodplains may or may not be conserved the benefits of floodplain conservation and as (or restored to) a native floodplain ecosystem. reconnection. Continued urbanization of Profitable agriculture also can be carried out on watersheds, deforestation, compaction and hydrologically connected floodplains, as it is in the tiling of agricultural soils over large areas, Yolo Bypass. channelization of waterways and climate change-

7 Valuing Central Valley Floodplains

Bypass operating during flood of 1997. Courtesy of CA Dept of Water Resources.

Hydrologically disconnected floodplains, by hydrologically connectable—they are too often contrast, are those that lie behind levees that viewed simply as land to be protected by flood prevent the periodic overflows of the river—at management infrastructure (i.e. levees), rather than least until water levels become so high that the as a flood management asset in their own right. levees fail or are overtopped, endangering human Beyond the ability of connected floodplains to life and causing serious property destruction contribute to flood risk reduction, these areas can in the floodplain.2 Thus, while disconnected support many other ecological and social values, floodplains can host higher-value land uses such as and these are often left unevaluated entirely. urbanization, they also typically have much higher levels of risk to people and property (see Figure 1). Comparison of the value of hydrologically connected and disconnected floodplains must Many flood management agencies have come look at the river system as a whole, not just one to realize that disconnection of floodplains has floodplain or one project at a time. Methods important, and often irreversible, consequences for assessing flood risk are well known among both for flood risk and for the unique social and floodplain managers, even if they are not yet ecological values that connected floodplains can widely enough used for system-wide long-term provide. Flood management is first and foremost a planning. Environmental economists, meanwhile, matter of ensuring public safety. But two projects have developed various methods for estimating that are designed to reduce risk to human life the ecosystem services that floodplains provide to against floods equally may differ greatly in their humanity, including the value of fish and wildlife economic consequences, environmental effects, and habitat, carbon sequestration, and sediment impact on the landscape. Nonetheless, floodplain transport, among others. The insights from managers generally lack methods for weighing the ecological economics about ecosystem services full system-wide costs and benefits of various flood should also inform the decisions that engineers management strategies. Even where floodplains and planners must make about the design of flood are still undeveloped—and therefore potentially management systems.

2 Throughout this report, floodplains are sometimes referred to as simply “connected” or “disconnected” for ease of reading.

8 Introduction

Wetlands and agriculture in the Yolo Bypass. Courtesy of CA Dept of Water Resources.

the Central Valley in the coming decades (see Back to the Valley Figures 2 and 3), and the expenditure of billions of dollars of bond funds already approved by This report summarizes these insights with regard California voters. The CVFPP (DWR 2012) to flood risk reduction, ecosystem services, land presents a State Systemwide Investment Approach use, and system operations. It also discusses (SSIA) that includes both structural and non- means of applying them in the context of the structural strategies for improving flood protection Central Valley of California, where the idea of in the valley, including providing a 200-year (0.5% using connected floodplains as flood management annual probability) level of protection for urban first appeared. It is produced in association with and urbanizing areas, as required by SB 5. Among a larger American Rivers research initiative to the measures included in the SSIA are creation quantify the benefits to flood management, water of new flood bypasses on the and supply and ecosystems of expanded, multi-purpose the Lower near Paradise Cut, floodways in the Central Valley. American and expansion of the existing Sacramento, Sutter Rivers undertook this initiative in recognition and Yolo Bypasses on the Sacramento River. of the fact that encouragement of integrated These bypasses will both restore hydrologically water management planning to achieve multiple connected floodplains and reduce flood stage and objectives is the official policy of the state of associated risk for urban areas. California. Despite this, widely applicable tools and protocols to systematically evaluate multiple In each case, the CVFPP calls for further studies in benefits have yet to be developed. the coming years to examine project feasibility (for the new bypasses) or to refine project details. Key The State of California has also recently finalized findings on the valuation of floodplains, as well as its first Central Valley Flood Protection Plan insights into effective methods for assessing these (CVFPP), as required by Senate Bill 5 (SB 5) passed values on a project level, will be useful to DWR in 2007. The CVFPP will guide the upgrading of and others as they pursue these studies. State Plan of Flood Control facilities throughout

9 Valuing Central Valley Floodplains

Figure 2. State Plan of Flood Control (SPFC) facilities in the . Courtesy of CA Dept of Water Resources.

10 Introduction

Figure 3. State Plan of Flood Control (SPFC) facilities in the . Courtesy of CA Dept of Water Resources.

11 Valuing Central Valley Floodplains II. A framework for floodplain valuation

The concepts of flood risk and residual risk are The risk from flooding as a result of greater-than- essential to this floodplain valuation. Flood risk design events is known as the residual risk of equals the probability of a flood multiplied by flooding, and it is substantial. Over the life of a its consequences. In hydrologically connected 30-year mortgage on a house behind an accredited floodplains, there is relatively high probability but 100-year levee, there is a 26% chance that a often relatively low monetary consequences from greater-than-100-year flood will occur (Eisenstein flooding, yielding a relatively low overall risk level. et al 2007). Moreover, when such floods do Though these floodplains may contain productive occur, they are likely to be more damaging to agriculture or recreation areas, such as those in the structures behind the levees, since there will the Yolo Bypass, these land uses are generally be deeper inundation in areas just behind levees much more resilient to periodic flood damage than there is farther from the river, given the than intensive urbanization or industry. Indeed, topography of the Central Valley (see Figure 4). periodic flooding generally enhances floodplain recreation and agriculture over the long term, The concept of residual risk is critical to the though this may not be helpful to landowners at valuation of floodplains. A flood protection any given point in time. strategy based on floodplain connection (i.e. bypasses or spillways) and one based on In hydrologically disconnected floodplains, by disconnection (i.e. levee construction) may be contrast, there is usually low probability of designed to protect against floods of the same flooding since levees are typically designed to probability, but produce drastically different levels protect against more frequent floods (such as of residual risk. Indeed, it is entirely possible for those with a 1% chance of occurring in any a given community’s overall flood-hazard risks given year). But less frequent floods will have to increase as a result of levee construction, if the very high consequences, since the presence of the construction of the levees results in widespread levees usually stimulates urbanization and other development in the areas protected by the levees. high-value land uses behind the levees. Because As discussed below, there is good reason to expect flows higher than those for which the levees were such development to happen. Thus, levees reduce designed will come eventually, these high-value the probability of a flood for the areas close to land uses will eventually be inundated—and unlike the river (compared to having no levee), but the in connected floodplains, these land uses are not development that accompanies the levees often adaptable or resilient to these floods. Serious means that the consequences of any flood larger economic losses, and possibly loss of life, are the than the 1% flood likely will be much higher. unfortunate result.

Figure 4. Residual risk typically rises as development fills in close to riverside levees. Adapted from Eisenstein et al (2007).

12 A Framework for Floodplain Valuation

Overlook of Yolo Bypass. Courtesy of CA Dept of Water Resources.

In addition, flood engineers and floodplain Neither of these methods incorporates any managers are increasingly considering projects that appraisal of the ecosystem service values of would either conserve hydrologically connected floodplains, nor do they allow for adequate floodplains or re-connect disconnected floodplains consideration of the basin-wide and system- by setting back levees. These may be very different wide context of any given floodplain or flood valuation situations. In the case of conservation, management project. By focusing analysis on one is asking what it would cost to replace or specific projects designed to protect specific sacrifice existing floodplain values and services, geographical areas, these methods tend to ignore including risk reduction services. In the case of costs and benefits that accrue to the system as a re-connection, one is asking what it would cost to whole. obtain a new flow of floodplain values and services by re-arranging the existing landscape. The What is needed is a framework to assess the economic psychology, financing needs, and politics value of connected floodplains at a full-system of these situations may be very different. planning level over multiple time scales. Flood managers should look at the system as a whole, Established methods exist for assessing the over its entire lifecycle, to assess the full value of financial costs and benefits of flood management hydrologically connected floodplains (or those plans and projects. The federal government’s with potential for reconnection) within their National Economic Development (NED) Benefit proper full-system context, then proceed to plan Evaluation Procedures for Urban Flood Damage and implement specific flood management projects (U.S. Water Resources Council 1983) establishes that optimize the various net benefits that these the official planning and decision process for floodplains uniquely can provide. federal flood management projects undertaken by the Army Corps of Engineers. The Federal To do that, flood managers should consider four Emergency Management Agency (2009) also has different value accounts for any given floodplain in a benefit-cost analysis procedure to determine the context of the system as a whole: eligibility for FEMA grants to mitigate small-scale flood risks, such as those pertaining to a single property or a small area. 13 Valuing Central Valley Floodplains

1. Flood risk reduction value 3. Land use value All flood management projects will prioritize Hydrologically connected floodplains can host protection of human life and property over other agriculture, recreation, and certain infrastructure benefits, and in practice U.S. flood management land uses that produce benefit streams to practice has generally focused on the 100-year the economy. Though these may not be as (1%) design flood. However, system-based risk lucrative to the landowners as selling the land reduction assessments may lead to very different for development, public entities may actually conclusions about appropriate flood management experience larger net economic benefits when strategies and floodplain land uses than localized floodplain lands remain undeveloped (see section II project-by-project assessments. In particular, below). floodplain connection or re-connection often creates additional risk reduction benefits for the system as a whole above the benefits from new 4. System operations value or heightened levee achieving the same nominal System managers should consider the value that level of local protection. These additional risk connected floodplains can provide for integrated reduction benefits—discussed in chapter IV of this water management, as well as the value of report as reduction in flood stage and avoided preserving future management options to deal with residual risk—can be quite valuable in certain the changing hydrology expected from climate situations. change and ongoing alteration of watershed land cover. These benefit streams may be especially 2. Ecosystem service value significant in systems where flood management and water supply operations are intermingled, While a wide variety of floodplain ecosystem as is the case in the Central Valley. In addition, services are not priced within any market, like any other piece of built infrastructure, levees nonetheless, they create tangible value for human are a depreciating asset that must be maintained, society. These include the provision of habitat for particularly around urban areas, where a single terrestrial and aquatic species, production and weak spot can lead to a major disaster. Flood transport of food web resources such as organic bypasses may also require periodic dredging carbon, carbon storage, sediment transport, or other forms of long-range management. regulation of water quality, and groundwater Selection of flood management strategies should recharge. These values are generally highly consider these long-term system maintenance contextual, but can be quite significant in responsibilities and the potential liabilities some situations. In addition, some services of associated with them. ecosystems—such as the continued existence of endangered species—may not be amenable to These four “value accounts” are discussed in pricing in all situations but are nonetheless worth greater detail in Section IV below. securing.

14 A Framework for Floodplain Valuation

Central Valley landscape of river channel, remnant wetlands, levees, and agricultural fields. Above and opposite images courtesy of CA Dept of Water Resources.

15 Valuing Central Valley Floodplains III. The policy context for floodplain valuation

The National Flood Insurance Program (NFIP), The floodplain land use standards to which local created by the Congress in 1968, dominates governments must comply mostly involve site floodplain management policy in the United States. design and building construction standards, as Congress significantly amended the NFIP in 1969, opposed to direct prohibition of development 1973, and 1994, and re-authorized it for another in hazardous areas. In the regular phase of the five years in 2012. Under the NFIP, the Federal NFIP program, local governments must ensure Emergency Management Agency (FEMA) sets that the lowest floor of any new construction is flood insurance premium rates based on five basic at or above the elevation of the 100-year flood, hazard zones, maps flood hazard areas, and sets delineate a regulatory floodway, and prohibit any minimum criteria for construction in floodplains. development throughout the entire floodplain that Local governments must then adopt floodplain would raise flood levels by one foot or more. The land use standards that are consistent with FEMA 1994 amendments to the NFIP created an incentive guidelines if flood insurance (sold by private program called the Community Rating System insurers) is to be available in that area (Burby (CRS), which allows local governments to earn 2001). points toward community-wide flood insurance rate reductions through implementation of a The amendments to NFIP have gradually wide range of flood risk reduction efforts. These strengthened this framework. Property owners include measures such as floodplain open space within FEMA-delineated floodplains are now conservation and other development restrictions in required to purchase flood insurance in order to floodplains (FEMA 2007). obtain a mortgage from any federally regulated institution (such as a bank insured by the Federal There are many shortcomings to this policy Deposit Insurance Corporation, for instance). structure. NFIP does not accurately assess the They also cannot receive federal disaster relief aid true extent of flood hazards, since the hazard if their local government has failed to participate mapping process does not include areas with in NFIP (Burby 2001). Crucially, however, localized stormwater drainage problems, and lands behind federally accredited 100-year flood does not include any mechanism to account for protection levees are considered to be removed probable future hazards resulting from increased from the floodplain, and are therefore exempted watershed development, sea level rise, storm from the requirements of NFIP, including the surge heightening, or subsidence (Burby 2001). requirement to purchase flood insurance. This In addition, many have argued that the 100-year provision applies to the large majority of (1% per year) flood protection standard is too low, urbanized areas in regulatory floodplains in the and that it should be at least a 200-year (0.5% U.S., most of which are protected by accredited per year) standard as now adopted by the State of levees. California for urban areas in the Central Valley,

Housing development in floodplain. Courtesy of CA Dept of Water Resources.

16 The Policy Context for Floodplain Valuation

and perhaps as high as a 500-year (0.2% per year) the 1993 flood (Pinter 2005). Major flooding standard as recommended by the Association of in the Central Valley in 1997 did little to deter State Floodplain Managers (2000). Even more development in local floodplains, as at least important, the NFIP does not account for the 60,000 new homes were constructed or planned possible failure or overtopping of flood protection in floodplains in the Sacramento region in the levees. By exempting lands behind accredited ensuing years (Pinter 2005), and an 11,000-house 100-year levees from the requirement to purchase development was approved for construction on a insurance, NFIP effectively ignores the residual risk site near Manteca that was under at least 10 feet of larger floods (i.e. those with statistical return of water in 1997 (Eisenstein et al 2007). Only intervals greater than 100 years) to overwhelm the “housing bust” beginning in 2008 slowed flood defenses and damage property. additional floodplain development in these and other areas. Urban and suburban The desire to develop floodplain land originates from the fact that land eligible for residential, commercial or industrial development near development in floodplains cities is much more valuable than land eligible The practical effect of NFIP has been to incentivize only for agricultural use. Even in the highly disconnection and development of floodplains, productive Central Valley, irrigated farmland is irrespective of the potential for escalation of typically worth thousands or (at most) tens of overall flood risk. By exempting the land behind thousands of dollars per acre, whereas the same accredited 100-year levees from designation land with permission to develop houses is likely as a floodplain (and the attendant regulatory worth hundreds of thousands per acre. This requirements), NFIP has encouraged development value gradient creates a powerful incentive for to occur in floodplains throughout America landowners to sell land for development. without sufficient attention to flood hazards or to While landowners experience substantial net the multiple values of connected floodplains. financial benefits from the sale of farmland for Partially because of NFIP, the trend toward development, it is much less clear-cut from the floodplain development has continued unabated, perspective of public agencies. Local governments even after recent flood disasters. In the decade experience an increase in property tax revenues after the huge Mississippi River Flood of 1993, and sales tax revenue when land is developed, but for example, another $2.2 billion in development they also experience an increase in expenditures covering about 18,000 acres occurred in the St. on roads, police and fire protection, solid waste Louis region on land that was underwater in collection and other municipal services. When the

Houses on Levees. Courtesy of CA Dept of Water Resources.

17 Valuing Central Valley Floodplains

The Central Valley flood of 1997. Courtesy of CA Dept of Water Resources.

development takes the form of low-density sprawl, services when levees fail.3 A large proportion as it often does in newly developed floodplains, of these costs are borne by local government, these costs are much greater per household than though they may be passed onto the developers when growth is more compact. and homebuyers through exactions, fees or taxes to fund special assessment districts (Fulton and Surprisingly, over the long term, these public- Shigley 2005). State government increasingly sector costs of low-density development can experiences additional costs related to emergency outstrip benefits, leaving the municipality’s response and flood liability from floodplain balance sheet worse off than before. In the most development as well, yet reaps a relatively small robust study of the cost of sprawl in California, proportion of the tax revenue benefits. the American Farmland Trust (1995) found that accommodating the anticipated population growth The balance of these costs and benefits to public of the Central Valley by 2040 through low- agencies is especially important because they density sprawl would create a $1 billion annual persist in perpetuity. A floodplain landowner shortfall for the region’s municipal governments, profits once from the sale of any given piece of whereas growing more compactly would create a land, but the ensuing development is effectively net surplus of $200 million to municipal coffers. irreversible. Both tax revenues and public service When the development occurs in floodplains, expenses related to new development will be on there is the additional substantial public cost of municipal balance sheets for decades to come, so constructing and maintaining levees, as well as the full accounting of costs is essential to decision- potential need for expensive emergency response making.

3 These costs are distinct from residual risk, which refers to the financial risk to property in floodplains from floods that may exceed the design standards of the flood management system. These are direct costs that government must bear if growth is to occur in floodplains in the first place.

18 The Policy Context for Floodplain Valuation

meet current engineering design criteria at the California’s design water surface elevation” floodplain management • Approximately 60 percent of the roughly 1,230 miles of non-urban levees in the system policy structure “have a high potential for failure at the assessment water surface elevation” Within California, the state-federal flood management system for the Central Valley • Approximately 50 percent of the 1,016 miles officially began in 1917, though local levee of channels in the system “have a potentially construction had been going on for decades prior inadequate capacity to convey design flows” to that. From the 1910s to the present day, about (DWR 2011) 1,600 miles of levees have been constructed, Moreover, these assessments consider only current upgraded or maintained in hundreds of individual climatic and hydrological conditions. They do projects usually co-funded by local reclamation not incorporate any anticipation of the changes in districts and the state and federal governments rainfall, runoff, and river hydrology expected from (WEF 2005). The capabilities of the state-federal climate change. These are expected to place even system expanded through the construction of greater stress on the system by making the 1% and several multi-purpose reservoirs on the major 0.5%-probability flood flows higher, “with long- tributaries of the Sacramento and the San Joaquin term effects on National Flood Insurance Program from the 1940s through the 1970s, including those map ratings, flood insurance costs, floodplain behind Shasta, Oroville, Friant, and New Melones development, and the economic viability of dams, among others. The state-federal system floodplain communities” (DWR 2011). also includes the large Sutter and Yolo Bypasses in the Sacramento Valley, and the much smaller At the same time as the system has deteriorated, Chowchilla, Eastside, and Mariposa Bypasses the value of what it protects has grown. on the San Joaquin. It also contains the Butte Population and economic activity in the areas Overflow Basin on the upper Sacramento, which protected by levees have increased dramatically accommodates overflows when necessary and since the system was built (partly because it was drains into the Sutter Bypass (see Figures 2 and 3). built), and are expected to continue growing substantially in the coming decades (DOF 2012). The flood of 1997, along with improvements Because land use approval decisions are a local in flood risk assessment techniques, made clear government authority, little coordination happens that the existing state-federal system is no longer between development decisions in the floodplains adequate to protect public safety and property in and the needs of the state-federal system. The end the Central Valley (DWR 2011). The 1997 flood result is that cumulative flood risks in the Central caused more than 30 levee ruptures, inundated Valley—where risk is understood as probability 300 square miles of the valley, and caused over $5 multiplied by consequences—have been growing billion in direct and indirect economic costs (IRP rapidly (IRP 2007). Crucially, this is likely to 2007). Investigations conducted since then have continue, despite improvements to the state-federal revealed that: system, until much better coordination occurs • Approximately 50 percent of the roughly 300 between floodplain land use decisions and flood miles of urban levees in the system “do not management.

19 Valuing Central Valley Floodplains

Yolo Bypass during high flow. Courtesy of Dave Feliz, CA Dept of Fish and Wildlife.

The California Legislature in 2007 passed SB 5, in urban and urbanizing areas or the and amended it with SB 1278 in 2012, to begin national Federal Emergency Management addressing this disconnection, albeit tentatively. In Agency standard of flood protection in addition to requiring the creation of the Central nonurbanized areas.” Valley Flood Protection Plan (CVFPP), SB 5 as amended by SB 1278 imposed new requirements 2. “The city or county has imposed on local governments, including: conditions on the development agreement that will protect the property to the urban • Incorporation of the CVFPP data and analysis level of flood protection in urban and of flood hazards into city and county general urbanizing areas or the national Federal plans within 36 months of the formal adoption Emergency Management Agency standard of the CVFPP on July 1, 2012 and into zoning of flood protection in nonurbanized areas.” codes within 48 months; 3. “The local flood management agency • Identification of goals, policies, objectives, and has made adequate progress on the implementation measures “that will reduce the construction of a flood protection system risk of flood damage” based on the CVFPP’s which will result in flood protection data and analysis; equal or greater than the urban level of flood protection in urban or urbanizing • Prohibition against entering into development areas or the national Federal Emergency agreements, issuing discretionary permits or Management Agency standard of flood discretionary entitlements, or approving a protection in nonurbanized areas for subdivision map for new projects proposed property located within a flood hazard within flood hazard zones identified on FEMA zone, intended to be protected by the FIRM maps, unless the city or county finds, system.4 For urban and urbanizing areas based on “substantial evidence” one of the protected by project levees, the urban level following (CA Gov’t Code §65865.5; emphasis of flood protection shall be achieved by added): 2025.” 1. “The facilities of the State Plan of Flood 4. “The property in an undetermined risk Control or other flood management area has met the urban level of flood facilities protect the property to the urban protection based on substantial evidence in [i.e. 200-year] level of flood protection the record.”

4 What constitutes “adequate progress” was specifically defined in SB 1278 (see CA Gov. Code §65007) 20 The Policy Context for Floodplain Valuation

Should a local government fail to update its about their own potential actions may be reviewed general plan or zoning code appropriately, a or appealed. Even should the state Attorney companion bill, AB 70, stipulates that the city or General or other entity choose to initiate legal county “may be required to contribute its fair and action to enforce these provisions, it is unclear reasonable share of the property damage caused how the courts will interpret terms such as by a flood to the extent that the city or county “substantial evidence.” has increased the state’s exposure to liability for property damage by unreasonably approving new More fundamentally, SB 5 still allows new development in a previously undeveloped area that development to occur in floodplains regardless is protected by a state flood control project” (CA of its consequences for the overall levels of flood Water Code §8307). risk and the systemic functioning of the flood management system, as long as the individual The provisions of SB 5 are not as strong as they development project in question is protected first appear, however. Though AB 70 provides sufficiently. Indeed the distinct possibility exists some incentive for local government compliance that efforts to increase the level of flood protection with the general plan- and zoning code-update to meet these requirements may actually encourage process, SB 5 identifies no specific mechanism more development in the floodplains (since for the enforcement of the more important individual development projects will be more development restrictions, nor does it establish any robustly protected than before), and therefore process by which cities’ and counties’ findings elevate the overall risk to the region and the state.

Levee failure in the Central Valley flood of 1997. Courtesy of CA Dept of Water Resources.

21 Valuing Central Valley Floodplains IV. Valuing Central Valley floodplains

Assessing the value of Central Valley floodplains flood risk reduction benefits extend not only to involves examining the four “value accounts” the lands adjacent to the floodplain, but also to introduced in section two: the opposite bank of the river and to other reaches of the river (and perhaps some tributaries) both 1. Flood risk reduction value upstream and downstream. All else equal, this will 2. Ecosystem service value reduce flooding potential and failure probabilities of levees elsewhere, and thus avoid potentially 3. Land use value significant damages and recovery costs associated with levee failures in those more distant locations. 4. System operations value A 2008 report published by the Sacramento Area These are discussed in greater detail below and Flood Control Agency (SAFCA 2008) offers an summarized in Table 3. example of how significant these flood stage reductions can be. The report describes a plan to widen the Yolo Bypass by setting back its east 1. Flood risk levees and making other changes to the system to accommodate more flow through the bypass.5 reduction value The purpose of the report was to examine a non-structural alternative for protection of the The primary purpose of any flood management Natomas and Pocket areas of Sacramento as well project must be the protection of human life and as West Sacramento—all highly flood-prone, safety, and an important secondary purpose is heavily urbanized areas. Hydraulic modeling of the avoidance of catastrophic damage to people’s the bypass widening indeed showed that flood livelihoods and property. This is no less true for stages at the I Street Gage next to downtown flood bypasses than it is for levees and dams. Sacramento would be reduced by about 4 feet as a result of the project.6 As the report points out, this Both levees and floodplains clearly have significant is equivalent to reducing the probability of levee flood risk reduction value. The question is overtopping in these vulnerable locations from 1% whether there are flood risk reduction values that to 0.5%, effectively improving flood protection are unique to floodplains as a means of providing from a 100-year level to a 200-year level. This flood protection in any given location. And finding is also consistent with the geotechnical indeed, for any given level of flood protection, “probability of failure” curves for the relevant connected floodplains can generate two unique levee reaches in the Army Corps Comprehensive value streams that levees do not: reduced flood Study of the Sacramento and San Joaquin basins stages and avoided residual risk. (2002b). Reduced flood stages Critically, however, the modeling of the bypass widening also showed significant stage reductions Connected floodplains, unlike levees, reduce at other locations both upstream and downstream flood stages—the water surface elevation relative of the areas targeted for protection. In other to a reference point for a flood of a given return words, a bypass widening project intended to interval—in long stretches of the river. Thus, their improve flood protection in Natomas, the Pocket,

5 The plan calls for setting back the east levee by 1 mile from Fremont Weir to roughly Interstate 5, a distance of about 6.5 miles, and then by about 1500 feet from Interstate 5 to the point where the Sacramento Bypass flows in, a distance of about 5.5 miles. 6 This is not an isolated example. Preliminary results from modeling of floodplain expansion along the lower San Joaquin River between Vernalis and Old River have shown flood stage reductions of nearly 2 feet throughout the southern Delta and Stockton metropolitan region (American Rivers forthcoming). 22 Valuing Central Valley Floodplains

Fremont Weir in operation. Courtesy of CA Dept of Water Resources. and West Sacramento would also reduce flood a 0.6% decrease in the sale price of residential stages in places like Woodland (more than 10 homes. A less precise estimate by Braden and miles upstream) and Freeport (over 13 river miles Johnston (2004) places the value of upstream flood downstream). Several other communities along mitigation on property values in the same range— the Sacramento downstream of the city (e.g. Elk from 0 to 2% for properties that are still within Grove, Clarksburg, Walnut Grove, Locke, Isleton), the 100-year floodplain. as well as farms and infrastructure (including I-5 and I-80) both upstream and downstream The SAFCA (2008) study showed that Yolo of the city, would gain similar benefits. Levee Bypass widening reduces the probability of a heightening projects to achieve the same level levee-overtopping flood by a 0.5% increment in of protection of Natomas, the Pocket and West all locations downstream of Sacramento until the Sacramento would not have this beneficial side Yolo Bypass rejoins the Sacramento at Rio Vista. effect. Indeed, they would likely marginally The Daniel et al estimate suggests that house prices increase flood risks downstream by confining would therefore be roughly 0.3% higher than they 7 floodwaters into a narrower, faster, deeper-flowing otherwise would, all else equal. These property channel. value increases would then need to be assessed and totaled across the entire acreage protected by Can we roughly estimate the value of such the levees whose performance is improved by the secondary benefits? Daniel et al (2009) conducted reduced flood stages from bypass widening and a meta-analysis of 19 different studies of the divided by the total acreage of floodplain that is impact of flood risk on property values. They achieving these improvements (about 5,100 acres found that an increase in the probability of flood in the Yolo Bypass widening project). risk of 0.01 (or 1%) per year is associated with

7 This excludes the value commercial, industrial and multi-family residential properties (which were not included in the Daniel et al study), and the value of infrastructure that may be damaged by a flood.

23 Valuing Central Valley Floodplains

For example, the community of Elk Grove hundreds of dollars per floodplain acre per year in contains about 50,000 housing units worth an this particular example.9 Again, these significant average of about $440,000 each as of 2009.8 values are attributable only to the flood-stage Given continued housing price declines in the reduction benefits outside of the areas specifically region, the average housing unit value may be intended for protection by this project (Natomas, more like $300,000 today. Hence, the total the Pocket and West Sacramento), and therefore residential property value in Elk Grove may be are benefit streams achievable only by floodplain approximately $15 billion, 0.3% of which is $45 conservation or restoration, not by levee projects. million. Assuming a 100-year project lifetime (the useful lifetime of flood-management related land acquisitions; FEMA 2009) and a multi- Avoided residual risk generational discount rate of 3% (more realistic As noted, there is always a chance of experiencing for very long time horizons than the standard a larger flood than the one the flood management FEMA 7% rate and in keeping with practice in system was designed to handle. For the FEMA other countries; ASFPM 2008), the net present 100-year flood protection standard, for example, value of these benefits is about $2.3 million, or there is a 1% chance in any given year that a about $450 per floodplain acre in this example. larger flood will come along and exceed the flood management system’s capacity. Over the course However, this is just for residential housing values, of 30 years—the length of most house mortgages and only in Elk Grove. Extending this type of and a common time interval for local land use analysis to include the value of commercial, planning—there is a 26% chance a larger flood industrial and agricultural property, public will take place. The probability of such an event, infrastructure, and other communities experiencing multiplied by the consequences of that event, these benefits would likely place the magnitude forms the residual risk of flooding in a given of the net present value of these benefits in the location.

Sacramento Weir in operation. Courtesy of CA Dept of Water Resources.

8 Data obtained at http://www.city-data.com/city/Elk-Grove-California.html as of April 25, 2012 9 This estimate may be considerably higher or lower in another example depending upon how much urbanized land experiences enhanced protection in a given situation.

24 Valuing Central Valley Floodplains

Connected and disconnected floodplains using the Table 1. same design flood may differ significantly in their ability to avoid residual risk to adjacent developed U.S. Army Corps of Engineers areas. Although the probability of a larger-than- Structural Depth-Damage function capacity flood is the same (say 1% per year), the consequences can be quite different. This is (One Story Residence with No Basement) because, in the Central Valley at least, developed Depth Structural depth-damage locations adjacent to connected floodplains are (feet) (mean percentage) often at higher elevation than developed locations directly adjacent to rivers. Both developed -2 0 locations will be protected by levees (a landward -1 2.5 levee at the edge of a connected floodplain, or 0 13.4 a riverside levee disconnecting the floodplain entirely), but the inundation of property resulting 1 23.3 from the failure of these levees may be of different 2 32.1 depths, and therefore inflict different levels 3 40.1 of damage. Figure 4 illustrates this situation, 4 47.1 simplified for ease of understanding. 5 53.2 The deeper the inundation, the greater is the threat 6 58.6 to human safety and the damage to property. 7 63.2 The U.S. Army Corps of Engineers (2002a) uses standard tables that relate inundation depth 8 67.2 to structural property damage in order to help 9 70.5 estimate economic risks in various floodplains. A 10 73.2 portion of the table used for single-story residences is reproduced below as Table 1. It shows that structural damage rises rapidly as a percentage land), there would be about $1 million worth of of overall property value in the lower inundation houses per acre. Other things equal, the numbers depths. For example, average damage at five feet just cited indicate that ten feet of inundation of inundation (53.2% of overall value) is over would cause about $732,000 per acre of damage, twice as great as that resulting from one foot of while five feet of inundation would cause about inundation (23.3% of overall value), and average $532,000 per acre of damage, a difference damage at ten feet of inundation is another twenty of $200,000 per acre in residual risk for this percentage points higher (73.2%). particular flood event, due only to the differing elevations of the two developments. How does this contribute to assessing avoided residual risk? For the sake of illustration, suppose According to Table 1, each additional foot of that a proposed subdivision could be sited either inundation would cause tens of thousands of behind riverside levees within a disconnected dollars of additional damage per acre, even at floodplain or behind levees that have been set back these low residential densities. In deep floodplains from the river to create a connected floodplain. such as the lower San Joaquin or the Natomas The subdivision would be protected by 100- Basin, inundation depths can easily reach to year levees in either case, but suppose that the well more than ten feet (IRP 2007). However, inundation depth resulting from the 150-year much larger floods (e.g. a 500-year flood) might flood is ten feet within the floodplain but only inundate both properties in our example so deeply five feet adjacent to it. At a typical net density of that there is no meaningful difference in expected about five houses per acre, and at a typical house damages, so in most cases the benefits of avoided value of about $200,000 (excluding the value of residual risks only accrue in flood scenarios that

25 Valuing Central Valley Floodplains

are moderately larger than the certified level Inundation can also occur much more quickly of protection, but not so large that they deeply when riverside levees fail, reducing evacuation inundate everything within or adjacent to the times and placing human lives at greater risk. floodplain. Though public safety issues transcend economic valuation, FEMA (2009) uses an estimate of about In addition, avoided residual risk benefits are not $7 million per fatality in assessing flood damage universal to all floodplains, but depend heavily costs. on local topography. In some areas, there may be very little elevation difference between the interior These avoided residual risk value streams are not and the edge of the floodplain. Also, setback easily captured within the federal NED benefits levees that reconnect floodplains are not always set evaluation process (U.S. Water Resources Council back all the way to the floodplain edge, meaning 1983). This method tends to build in assumptions that the lands on either side of the setback about future development within floodplains as levee may be at very similar elevation. Local areas to be protected, rather than viewing the topography must always be assessed carefully to floodplain itself as a potential source of flood determine whether floodplain reconnection could protection. In addition, although the method avoid residual risk in any given situation. calls for reporting on “remaining flood damages” that are “expected to occur even with a flood With this caveat in mind, this conceptual management plan in operation” (i.e. residual risk), illustration shows that the potential value of avoided residual risks and associated costs are not avoided residual risk can be quite high—hundreds included among the benefits to be summed as part of thousands of dollars per acre on a cumulative of the comparison of different flood management 10 basis at suburban development densities. With project alternatives (U.S. Water Resources Council a slightly less than 1% chance of occurrence in 1983, 40). These methodological limitations are any given year, this is equivalent to thousands one reason why floodplain conservation has been of dollars per acre per year in potential annual under-utilized as a potential flood management avoided residual risk if a floodplain is conserved strategy in the U.S. rather than developed at suburban densities.

Neighborhood flooding. Courtesy of U.S. Geological Survey After levee failure. Courtesy of CA Dept Water Resources.

10 This number can only be thought of as a theoretical potential, not an actual assessment to be used in any specific situation. Though an entire floodplain may not be built out at suburban densities, there are also other costs not considered in the example that tend to rise proportionally with inundation depth, such as evacuation and emergency response costs, and lost economic productivity due to extended recovery time. In addition, in a real project evaluation process, the time value of money and the project lifetime would have to be considered in order to calculate the net present value of avoided costs over the project lifetime. 26 Valuing Central Valley Floodplains

2. Ecosystem service value Table 2. Estimated value of global Floodplains are among the world’s most productive ecosystems. The episodic deposition “swamp/floodplain” ecosystem services of nutrient-rich sediment by the parent river From Costanza et al (1997) enriches soils to a highly fertile condition, and the capacity of these soils to grow plants and animals $ per hectare $ per acre is correspondingly high. Riparian forests are Water supply 7,600 3,076 estimated to support as much as 3.5 times more Disturbance regulation 7,240 2,930 animal mass per acre than terrestrial ecosystems Cultural 1,761 713 as a whole, and “more species of plants and animals by far occur on floodplains than in any Waste treatment 1,659 671 other landscape unit in most regions of the world” Recreation 491 199 (Tockner and Stanford 2002; 309). In addition, Habitat 439 178 floodplains often also provide important seasonal Gas regulation 265 107 habitat for fish and other aquatic species. Raw materials 49 20 Environmental economics is a relatively new Food production 47 19 discipline that focuses on accounting for the full range of benefits that humans derive from Water regulation 30 12 ecosystems and devising methods of incorporating Total 19,581 7,924 those benefit estimations into financial and policy decisions (Turner et al 2008). These benefits are Valuing these services comprehensively is typically produced by various ecosystem services, challenging for a variety of reasons, but their which “consist of flows of materials, energy, and economic value is nonetheless very real. Without information from natural capital stocks which floodplain habitats, for example, certain combine with manufactured and human capital commercially valuable species of fish cannot to produce human welfare” (Costanza et al survive in large numbers, and hence the economic 1997, 254). Among these ecosystem services are productivity of the fishing industry is diminished. the production of basic resources such as food, Or if additional water quality treatment costs are water, and timber; provision of resources through necessary due to alterations in a floodplain, then processes such as pollination, soil formation, and this can be used as the basis for an estimate of the nutrient cycling; maintenance of life-supporting value of the floodplain’s water quality regulation (or life-enhancing) conditions through climate services. Many techniques in environmental regulation, atmospheric gas regulation, or water economics involve imputing ecosystem service quality regulation; and even provision of aesthetic values from other economic data in this manner, or recreational benefits to humanity. With respect but other ecosystem services can be measured more to lowland floodplains specifically, a variety of directly. Greenhouse gas regulation values, for ecosystem services have been identified (Posthumus 11 example, are now priced through regulatory cap- et al 2010). and-trade mechanisms within California, meaning

11 Scientific taxonomies of ecosystem functions and services, such as the one presented by Posthumus et al (2010), can be unwieldy for project-level applications. Some of the services listed, such as agricultural production, are priced within real-world market economies; others are not. Some attributes of floodplains are listed as services just because they provide space for human economic activity, such as transportation and development,whereas others are services that are actually integral to the functioning of ecosystems. In addition, the functions into which the services are grouped are meaningful in a scientific context but do not lend themselves well to categories or accounts that can be considered and managed within a project implementation context. For these reasons, such taxonomies are not used in this report. 27 Valuing Central Valley Floodplains

that the net carbon balance of a floodplain the variability of wetlands themselves (ranging ecosystem could be expressed in dollars per ton of from isolated seasonal wetlands to large marshes, carbon stored or emitted.12 swamps and floodplains), and to the variety of services that different studies may be measuring. Ecosystem service values for different ecosystem types have been computed at a variety of scales. These generalized estimates are of limited utility A landmark paper by Costanza et al (1997) in the valuation of any particular floodplain, estimated the total value of the world’s ecosystem however. The physical landscape context of services at $33 trillion per year, about twice the a floodplain is likely to be very important in size of the global economy. Among ecosystem determining its ecosystem service value. As Mitsch types used in their analysis, “swamps/floodplains” and Gosselink (2000) point out with respect to produced $19,580 worth of ecosystem services per wetlands, the value of each remaining example hectare (about $7,924 per acre), second only to of an ecosystem type tends to increase as they estuaries in productivity. The services included in diminish in number—until there are so few that this study and their estimated values are shown in certain ecosystem services they provide collectively Table 2. (such as wildlife habitat) may be lost. In addition, for both floodplains and wetlands generally, the Most studies consider floodplains as a subset overall prevalence and spatial distribution within of wetlands, and per-acre estimates of the a watershed make a great deal of difference in value of wetlands have ranged from less than assessing their ecosystem service value. For $100 per acre to as much as $22,050 per acre example, multiple studies (Hey and Philippi 1995, (Heimlich et al 1998). The Costanza et al (1997) Mitsch et al 1999) have found that, in a temperate study estimated wetlands as a class (including zone climate, approximately three to seven floodplains) to be worth $14,785 per hectare (or percent of a watershed should be wetlands to about $5,983 per acre). However, a meta-analysis optimize the landscape for their ecosystem service of 39 wetland valuation studies found that the values, including flood control and water quality average value within methodologically “strong” enhancement (Mitsch and Gosselink 2000). In studies was $915 per acre (Woodward and Wui watersheds with a significantly smaller or larger 2001). Another meta-analysis of 33 wetland proportion of wetland coverage than that, each valuation studies found a valuation range from individual wetland might be making a less valuable $93 to $1,935 per acre for different regions of contribution to overall ecosystem services. The the United States (Borisova-Kidder 2006). Much same general principle may be true for floodplains. of this variability in valuation may be due to

Vic Fazio wetlands in Yolo Bypass. Courtesy of CA Dept of Water Resources.

12 Some environmental economists use a technique called “willingness to pay” (WTP) to estimate more abstract values of ecosystem, such as the value that people place on knowing that a rare species or ecosystem is continuing to exist. WTP surveys usually involve structured scenarios that inquire how much people would pay to secure “existence values,” then extrapolate them over the population. Due to their hypothetical nature, however, WTP-derived findings are mostly not included in this report.

28 Valuing Central Valley Floodplains

Physically, the Central Valley essentially is two antelope and grizzly bears, not to mention even large floodplains. Despite radical alteration of larger populations of smaller animals that relied the physical environment, the Sacramento and on localized habitat niches (Bay Institute 1998). San Joaquin floodplains still provide important Vast numbers of birds migrating along the Pacific habitat to mammals, birds and fish. Before Flyway relied on the wetlands throughout the Euro-American settlement of California, both Valley floor, especially in the winter. And the rivers the San Joaquin and Sacramento Rivers regularly themselves provided habitat for both anadromous distributed floodwaters over much of the Valley and resident fish, some of which relied on the floor, inundating huge areas. American inhabitants periodic seasonal inundation of the floodplains for of the new state of California discovered this the additional breeding and rearing habitat. hard way as floods raged down the Sacramento River in 1850, 1853, 1861, 1867, 1868, 1872, The vast majority of these wetland and floodplain 1873, 1875, and 1881 (Kelley 1989). In the lands have now been disconnected from their winter of 1861-1862, governor-elect Leland source rivers and converted to agriculture or other Stanford had to travel to his inauguration in the land uses (see figures 6 and 8). Levee construction capital city of Sacramento in a rowboat. and conversion of floodplain lands (including wetlands) to agriculture drastically curtailed Maps reconstructing the pre-Gold Rush landscape all of these habitats and the species that relied of the Central Valley reveal where floodwaters on them. Losses of wetland and riparian forest once commonly flowed. As figures 5 and 7 habitats are estimated at 95%, and the area of show, very large areas of both valley floors were periodically inundated floodplain is thought to comprised of wetlands and other floodplain be approximately 85% smaller than before the habitat, particularly on the San Joaquin upstream Gold Rush (Bay Institute 1998). Nonetheless, of the Merced River confluence, and throughout these lands will always be flood-prone and retain the entire region between the Feather River and the capacity to provide certain ecosystem services the Sacramento. These lowland floodplains were that cannot be obtained elsewhere. Indeed, these the heart of the native Central Valley ecosystem. floodplain ecosystems still provide important The riparian forests, wetlands, and adjacent ecosystem services to the state of California, valley oak woodlands and native grasslands including habitat for valuable fish species, carbon together “provided essential habitat support to storage, nutrient transport, sediment storage, and enormous populations of large, wide-ranging water storage and filtration. mammals” that visited the rivers, including elk,

Wetted floodplains provide excellent temporary fish habitat. Courtesy of U.S. Geological Survey.

29 Valuing Central Valley Floodplains

Figure 5. Historical Sacramento Valley floodplain habitats. Courtesy of The Bay Institute (1998), Sierra to the Sea.

30 Valuing Central Valley Floodplains

Figure 6. Current Sacramento Valley floodplain habitats. Courtesy of The Bay Institute (1998), Sierra to the Sea.

31 Valuing Central Valley Floodplains

Figure 7. Historical San Joaquin Valley floodplain habitats. Courtesy of The Bay Institute (1998), Sierra to the Sea.

32 Valuing Central Valley Floodplains

Figure 8. Current San Joaquin Valley floodplain habitats. Courtesy of The Bay Institute (1998), Sierra to the Sea.

33 Valuing Central Valley Floodplains

Yolo Bypass bird habitat. Courtesy Dave Feliz, CA Dept of Fish and Wildlife.

predators” (Crain et al 2004). The Yolo Bypass Habitat “has a broad suite of habitat types, including seasonal floodplain, perennial ponds, wetlands, Numerous scientific investigations have found that and tidal channels, while the Sacramento River has hydrologically connected floodplains are critical a fairly homogenous, hydrologically stable channel to the breeding, rearing and growth of various with sparse riparian vegetation” (Sommer et al Central Valley fish species, including some that are 2004a), accounting for some of the productivity commercially valuable (such as striped bass and difference between the two. Chinook salmon), and some that are endangered (such as Delta smelt, splittail, and some salmon Floodplains are also known as “productivity runs). For example, Jeffres et al (2008) found that pumps” that export dissolved organic carbon, “ephemeral floodplains supported higher growth algal biomass, and leaf litter into the main river rates for juvenile salmon than more permanent channel (Ahearn et al 2006), to the benefit of habitats in either the floodplain or river,” while aquatic food chains there. They may also be Sommer et al (2004a) have found that “species important sources of invertebrates preyed upon diversity and richness were higher in the Yolo by fish (Sommer et al 2001). Indeed, major Bypass [than the Sacramento River channel]” studies have found that “increased inundation for native fishes such as Delta smelt and splittail, of floodplain habitat probably offers the greatest among others. Indeed, on a global level, the fish potential for enhancement of high-quality organic yield of watersheds is positively associated with matter to the food web of the the water surface area of the floodplains in that estuary” (Sommer et al 2004b; Jassby and Cloern watershed (Bayley 1991). 2000). Direct relationships between this nutrient transport and fish population increases in the One reason why high Sacramento River outflows Delta have not yet been quantified. are associated with strong annual yields of certain fish is because high flows inundate floodplains The value of fish habitat can only be imputed such as the Yolo Bypass (Sommer et al 1997). from its effects on the economy. California’s These floodplains “are important nursery habitats salmon fishery was worth approximately $1.4 because they provide abundant invertebrates for billion and supported almost 23,000 jobs in 2005 food, sanctuary from unfavorable temperatures (i.e. before recent severe population declines; and high velocity river currents, and cover from Southwick Associates 2009). In that year,

34 Valuing Central Valley Floodplains

fishermen caught roughly 400,000 Sacramento recreational fishing, for a total of $1,135 per acre. River fall run salmon, traditionally the backbone Costanza et al (1997) found the average combined of the California salmon fishery. That catch had habitat, food and recreation value of swamps dropped to about 125,000 by 2010 (GGSA 2011). and floodplains worldwide to be about $400 per Although pumping activities in the Delta are said acre per year, but there is good reason to believe to be primarily responsible for these declines that the prized salmon fisheries of a first-world (GGSA 2011), large-scale floodplain re-connection economy like California would be considerably and restoration may still be able to contribute more valuable than the global average. significantly to recovery (Jeffres et al 2008). Moreover, this back-of-the-envelope analysis is Southwick Associates (2009) notes that recovery based only on salmon. There are other important to historic peak annual salmon catches of roughly habitat values at stake, including the continued 25 million pounds would be worth almost $5.7 survival of endangered species such as Delta smelt billion per year to the California economy. Even and splittail (Sommer et al 2004a; Sommer et if re-connecting another floodplain the size of the al 1997). Though the existence value of these Yolo Bypass (60,000 acres), without any changes species is arguably not quantifiable, it is also the to Delta pumping, brought back only 1% of this case that legally mandatory efforts to recover historic fishery (or about 4% of the 2005 fishery), these species (including Delta pumping reductions that would still be worth approximately $950 and major planning efforts) have cost hundreds per acre per year in commercial and recreational of millions of dollars to date. Though valuations fishing. This order of magnitude is roughly would certainly vary based on the specific habitat consistent with research findings. Woodward and potential of any given floodplain area, it appears Wui’s meta-analysis of the ecosystem service values safe to estimate that the fish habitat values of of single-service wetlands found per-acre averages Central Valley floodplains are, at the very least, in of $778 for commercial fishing and $357 for the hundreds of dollars per acre.

Meandering river channel. Courtesy of CA Dept of Water Resources.

35 Valuing Central Valley Floodplains

acre. Carbon has recently been trading for just Carbon sequestration over 3 Euro per ton (about $4 U.S. as of mid- 2013) in European carbon markets, though prices Floodplains play a critical role in the regulation of above 20 Euro per ton (about $27 U.S. as of mid- atmospheric gases, particularly carbon dioxide that 2013) have been more typical since carbon trading contributes to global warming. On a global level, began in Europe. This suggests that Delta carbon recent research has documented that floodplain sequestration services could be worth as much soils are important carbon sinks because “sediment as $100 per acre per year under good market deposition and erosion on riverine floodplains conditions, roughly consistent with the estimate of continually reset soil formation to early phases, Costanza et al (1997) that swamp and floodplain in which organic carbon accumulates at high lands globally provide about $106 per acre in “gas rates,” though agricultural activity on these soils regulation” services.13 Typical floodplain lands can entirely eliminate these sequestration benefits throughout the Central Valley will not have the (Zehetner et al 2009). These sequestration rates same carbon sequestration capacity as subsided can exceed 100 grams (0.22 lbs) of carbon per Delta soils, but this data nonetheless suggests square meter per year (Zehetner et al 2009). that carbon sequestration value of floodplain Locally, subsidence reversal experiments in the lands is likely worth (at least) tens of dollars per Delta have shown that typical soil accretion rates acre. The forthcoming cap-and-trade system for of 3-5 centimeters per year in test wetlands on managing greenhouse gases in California may Twitchell Island “can represent storage of more provide an opportunity for Central Valley farmers than 1 kilogram [2.2 lbs] of carbon per square to take advantage of this market, particularly in meter” (Miller et al 2008), or almost 4.5 tons per coordination with rice farming.

Central Valley floodplain wetlands are important habitat for migratory and resident birds. Courtesy of CA Dept of Water Resources.

13 This includes not only greenhouse gases, but also atmospheric regulation of gases such as ozone, sulfur oxides, and others.

36 Valuing Central Valley Floodplains

values may be zero. In areas where infiltration Other ecosystem services rates are high, water is valuable (hundreds of dollars per acre-foot), and groundwater is Floodplains provide a variety of other ecosystem efficiently recoverable, these services could be services beyond habitats. Water quality worth hundreds of dollars per acre per year. considerations are highly complex, given that various human uses of water (agricultural Floodplains also accept large amounts of sediment irrigation, drinking water, industrial use) have deposition as river flows enter and slow down very different, and sometimes conflicting, quality due to high surface roughness from vegetation standards. Floodplains can cleanse waters (Ahearn et al 2006). In modern regulated and through direct vegetative uptake and filtration of managed rivers, these sediments might otherwise pollutants, nutrient leaching, chemical processes have to be dredged out of the low-gradient reaches often associated with wetlands, and settlement of rivers downstream at considerable expense to of solids (Posthumus et al 2010). For example, ensure navigability, though this depends upon floodplain wetlands can remove significant channel geometry and other factors. Florsheim amounts of nitrogen, a service that has been and Mount (2003) have estimated pre-Gold estimated to be worth over $500 per acre per Rush deposition rates on the year in the lower Mississippi Valley (Opperman floodplain at 3mm per year, and post-Gold Rush et al 2010). However, floodplain processes deposition rates at 25mm per year. These figures often increase levels of dissolved organic carbon imply an accumulation rate ranging from about in the water, which is harmless to agricultural 16 cubic yards of sediment per acre per year purposes but interacts harmfully with chemicals under natural conditions to about 132 cubic yards used to treat water for human consumption. In per acre per year in a watershed disturbed by the Central Valley, floodplain wetlands may agriculture, mining, and altered river channels. also methylize mercury still in the system from Dredging costs in northern California vary around 19th century gold mining activities, creating a a median of about $10 per cubic yard (BCDC significant hazard for fish, wildlife and humans. 2012), suggesting that even if only a minority Any given floodplain planning process would have fraction of the 132 cubic yards per acre per year to study and assess these issues carefully. eventually needed to be dredged from channels lower down in the system, the sediment deposition Many floodplains also provide significant water on the Cosumnes River floodplain could be worth management services, including the recharge of hundreds of dollars per acre per year in avoided groundwater basins. In the Central Valley, several dredging costs. In addition, these floodplain important groundwater recharge sites exist in sediment deposits often work to the long-term floodplains, including the Cache-Putah Basin in the benefit of floodplain agriculture by introducing Sacramento system and the Gravelly Ford-Madera rich new stores of nutrients into the local soils Ranch area in the San Joaquin system (Purkey (Posthumus et al 2010). Indeed, that is why et al 1998). Given that infiltration rates vary floodplains have always been among the most dramatically between sites, and that the value of desirable and heavily cultivated agricultural soils water also varies across the state, the value of these in the world. services will vary dramatically from site to site. In locations where soils are impermeable, recharge

37 Valuing Central Valley Floodplains

Map of the Sacramento, San Joaquin and Tulare Valleys, State of California, 1873. Note riparian wetlands in grey. Courtesy of David Rumsey Map Collection, www.davidrumsey.com.

38 Valuing Central Valley Floodplains

on average about $500 per year for each acre in 3. Land use value the bypass. Floodplains can host a very wide variety of land Agriculture also complements the Bypass’s flood uses. The historical use of rivers for shipping, management functions effectively. Agricultural water extraction, and wastewater disposal has operations control the growth of vegetation meant that human populations have always been within the Bypass, preserving its flow capacity and concentrated in floodplains. To this day, most relieving state flood managers of the need to clear major cities worldwide are located in floodplains, vegetation periodically. Rice fields also provide usually near the mouths or confluences of major key foraging opportunities for migratory birds rivers. This means that the outward sprawl of when flooded in the winter (Howitt et al 2012). these same cities continues to exert pressure for floodplain development, at the expense of the The Yolo Bypass contains several thousand acres values that connected floodplains can provide. of seasonal wetlands, perennial wetlands, riparian But far from being “sacrifice zones,” connected forests, and other important habitat types which floodplains can host land uses, including collectively support hundreds of thousands of agriculture, recreation, and open space, that ducks and other birds (Sommer et al 2001). increasingly valuable within urbanized regions. Birdwatching, hunting and fishing are major recreational activities associated with these land uses, and their economic impact is surprisingly Agriculture and recreation large. The US Fish and Wildlife Service (2006) has found that approximately 21% of Californians Hydrologically connected floodplains still have participate in wildlife watching and spend almost considerable land use value for agriculture and $4.2 billion per year to do so, while about seven recreation. For example, approximately half of the percent of the state’s residents engage in hunting Yolo Bypass’s 59,000 acres are in cropland in any and fishing, spending almost $3.8 billion (USFWS given year, growing processing tomatoes, rice and 2006). several other crops, primarily in the late spring and summer (Sommer et al 2001). Another fifteen to Within the Sacramento-San Joaquin Delta, which twenty percent of the bypass is usually in pasture includes about half the Yolo Bypass and parts of (Marchand 2012). Though a comprehensive study other floodplains, there are about 500,000 visitor of this Yolo Bypass agriculture has not yet been days per year for hunting alone, generating about published, a conservative estimate of its gross $38 million annually in statewide expenditures value based on known facts is about $30 million (DPC 2011). Adding fishing, birdwatching, per year (Yolo County 2010; Marchand 2012), or hiking, and biking likely at least doubles that total

Dairy and stock farm of S.A. Bentley, Sacramento River, Yolo County. From the Illustrated Atlas and History of Yolo County, California, 1879. Courtesy of David Rumsey Map Collection, www.davidrumsey.com. 39 Valuing Central Valley Floodplains

Courtesy of Dave Feliz, CA Dept of Fish and Wildlife.

to about $76 million.14 Even if that economic more thickly forested and have more immediate activity were distributed evenly across all of visual access to water than surrounding lands, the Delta’s 738,000 acres of land, it would still both of which are attractive features for many average over $100 per acre per year. In reality, homebuyers. however, these recreational uses are concentrated more within the floodplain areas of the Delta Depending upon the specific situation, these (such as the Yolo Bypass) than they are in the property value enhancements could easily rise agricultural and dry upland areas that make up into the hundreds of dollars per acre of conserved 15 a large fraction of the Delta’s land area. For floodplain. However, it should also be noted that floodplains, these land uses are certainly worth in predominantly rural areas where open space hundreds of dollars per acre per year, and perhaps and naturalistic views are abundant, these property much more in certain locations. value enhancements are likely considerably smaller than they are in suburban contexts. Visual and An emerging body of research has also explored the value of large conserved open space and “sense of place” values outdoor recreation for regional “place branding” In addition to active recreational values, to attract new industries, workers and residents. floodplains can also provide passive aesthetic Though there are few quantitative findings in values. Large areas of conserved open space this area yet, some studies have shown significant and agricultural land are well known to enhance positive associations between the quality of the value of neighboring properties (Nichols outdoor environments and recruitment of and Crompton 2005; Riddel 2001), because industries and homebuyers (Deller at al 2001). they usually provide good views and also ensure Actual achievement of these benefits likely that neighboring homeowners will not have to requires a high degree of regional coordination experience any negative spillovers from future in municipal planning and sustained efforts development of that land. These property value at marketing, among other things. Whether benefits have generally been estimated in the conserved floodplains could play a role in such range from about 3% (Riddel 2001) to as high regional branding has yet to be conclusively as 8% (Dekkers and Koomen 2008). Though demonstrated, though enhancement and this potential is not unique to floodplains, in restoration of urban rivers has certainly played a regions like the Central Valley and other parts of part in some big city revivals in recent years. the American West, historic floodplains are often

14 More precise estimates are not available from DPC (2011) because these items are aggregated with other recreational activities—notably boating—that are very popular in the Delta but are not attributable to floodplains per se. 15 For example, if a 6,000-acre flood bypass on the lower San Joaquin improved the property value of only 100 adjacent houses worth an average of $250,000 by 3%, that would translate to $125 of property value improvement per floodplain acre. Whether or not such a bypass would actually have these effects would depend greatly on the specific design of the bypass and adjacent developments, particularly the character of the views between the two. 40 Valuing Central Valley Floodplains

make it possible to safely convey larger flood 4. System operations value flows through the river system, and hence reduce the need for flood reservation and allow storage The fate of floodplains can have important of more water. Modeling the actual water supply implications for the long-term operations, yield increases that may be available in any maintenance, and management flexibility of flood given reservoir as a result of such changes is a management systems. Moreover, in the American complex task that is only now being undertaken West, these systems are usually tightly integrated by researchers (American Rivers forthcoming), but with water supply systems that are crucial to local the value of these increased yields could be very and state economies. Management flexibility significant in certain situations. in these integrated systems could be of major importance in the coming decades, particularly as Looking at this issue in a slightly different way, climate change alters regional and watershed-scale Opperman et al (2013) have pointed out that the hydrological patterns. Yolo Bypass conveyed approximately 3.3 billion cubic meters (2.68 million acre-feet) of water Integrated water management during the three-day peak of the 50- to 80-year flood of 1986—approximately the same volume In multipurpose river systems such as those of as the combined flood storage capacity of the six the American West, hydrological reconnection of major Sacramento River reservoirs. Given that floodplains could also have important water supply the cost of new or enlarged surface storage ranges benefits. State and federal regulations require from about $300 to $3,000 per acre-foot (Purkey many major reservoirs in California to store water et al 1998), this suggests that the Yolo Bypass’s for economic uses and to retain space to capture conveyance capacity is allowing the state to avoid potential flood flows in the late winter and spring building $0.8 to $8 billion in additional storage (a.k.a. the “flood reservation”). Though seasonal infrastructure just to achieve the same levels of variations in precipitation and longstanding federal flood management without compromising water and state rules determine reservoir management, supply capacity. That amounts to $13,600 to the reduced need for flood reservation allows more $136,000 per acre of the Yolo Bypass. Amortizing water storage for economic uses (Opperman et al over a 100-year project lifetime suggests that this 2009). Hydrologically reconnected floodplains, value can be reckoned in the hundreds of if located at key downstream bottlenecks, can dollars per floodplain acre per year.

River channels with adjacent levees. Courtesy of CA Dept of Water Resources.

41 Valuing Central Valley Floodplains

special value above and beyond their present- Option value and day benefits. Management flexibility for future managers will allow them, in theory, to select climate change accommodation the flood management strategies with the highest This added flexibility in the water supply benefit-cost ratios, creating economic value system may become particularly valuable under in future years that is partially attributable to anticipated climate change scenarios (Warner decisions made today. et al 2011). Expansion of floodplains could Known as “option value” (Sunstein 2007), have significant long-term value as a strategy this concept is of particular relevance to flood to accommodate climate change and to provide management systems, which are generally management flexibility to respond to unexpected characterized by high dependence on inflexible changes to the system. Many watersheds such structural measures such as levees and dams. as the San Joaquin basin are likely to experience Because human development of floodplains behind significantly larger floods in the future (Dettinger levees is essentially irreversible once it occurs, 2011), meaning that additional flood management these structural measures tend to sacrifice option capacity will be required just to maintain value by committing future managers to levee existing levels of protection. But hydrological and dam heightening as the only practical flood forecasting contains substantial uncertainties, due management strategies. By contrast, conservation to the uncertainties inherent in climate change, and reconnection of undeveloped floodplains today a relatively short historical record, and evolving allows future managers the choice of multiple scientific understanding of major system drivers management paths (including higher dams and and dynamics (Dettinger 2011). All of this places levees) to cope with higher flood flows. a premium on retaining multiple options for future flood management. The potential magnitude of these option values can be significant in certain situations. Suppose, Given the long project lifetimes of flood for example, that 50 years from now the State management infrastructure (generally 30-100 of California will need to make another major years; FEMA 2009), investments made today must investment in flood management infrastructure start to consider these evolving conditions and similar to that of 2006’s Propositions 84 and uncertainties. In particular, flood management 1E, and that management decisions made today decisions that maintain flexibility for future preserve their options to choose between flood managers to adapt to changed conditions have

Levee maintenance and reinforcement. Courtesy of CA Dept of Water Resources.

42 Valuing Central Valley Floodplains

Levee maintenance near new suburban development. Courtesy of CA Dept of Water Resources. management alternatives that provide the same benefits but vary in cost by $100 million (a small Maintenance and liability variation in a multi-billion dollar bond measure). Few if any formal studies have been done of the That $100 million 50 years from now is worth typical maintenance costs of flood control systems. almost $3.4 million in today’s dollars, using The American Society of Civil Engineers (2009) FEMA’s very conservative 7% discount rate (and has estimated the total deferred maintenance on over $22 million using a 3% rate). the roughly 100,000 miles of levees in the U.S. at To the extent that such option value benefits are over $100 billion, an average of about $1 million attributable to specific floodplain conservation per mile. The Central Valley Flood Protection Plan and reconnection actions that expand flood (DWR 2011) considered an alternative devoted conveyance capacity and hence future management solely to “reconstructing [State Plan of Flood flexibility, they can be calculated on a per-acre Control] facilities to meet current engineering basis and added to the other floodplain values criteria without making major changes to the discussed above. For each $100 million in footprint or operation of those facilities.” This is long-term savings, these would be in the tens of a reasonable proxy for addressing all cumulative dollars per acre per year for plausible present-day deferred maintenance on the system. The plan floodplain reconnection actions such as a 6,000- estimated the alternative to cost $19-23 billion for acre floodplain reconnection by setting back levees the remediation of 170 miles of urban and 1,400 along the lower San Joaquin River (Tompkins miles of non-urban levees, an average of over $12 et al forthcoming), or a 5,100-acre Yolo Bypass million per mile. expansion from Fremont Weir to the Sacramento According to DWR (2011), “it is increasingly Bypass confluence (SAFCA 2008). Given the difficult for State and local agencies to maintain documented effectiveness of the Yolo Bypass over levees and channels” due to factors including the last 100 years in allowing the state to avoid “original system designs that do not meet existing constructing at least $0.8 billion in reservoir engineering standards, inadequate funding, storage (Opperman et al 2013; Purkey et al 1998), encroachments, inconsistent levee maintenance it is not unreasonable to suggest that floodplain practices among maintaining agencies, and conservation and re-connection actions taken challenges in complying with a variety of State and today could preserve future flood management federal environmental permitting and mitigation options that are several hundreds of millions of requirements.” Some of these challenges also dollars cheaper than competing alternatives.

43 Valuing Central Valley Floodplains

apply to maintenance of flood bypasses, which In a 2006 ruling in Paterno v. State of California, may need to be dredged periodically to maintain the California Supreme Court held that the State of original flood conveyance capacity. The levees California could be held liable for flood damages at the landward edge of bypasses and other resulting from the failure of State Plan of Flood connected floodplains also need to be maintained. Control facilities, even if those facilities were not originally constructed by the State but instead Flood management systems that integrate incorporated into the system later. This decision connected floodplains may be less expensive to instantaneously increased the State’s existing maintain than others, for two reasons. First, potential flood liability by billions of dollars, disconnection of floodplains by riverside levees and made avoiding potential future liability a confines the rivers into higher, faster, narrower major criterion in flood management decisions in flows that exert greater day-to-day stress on California. Because the failure of a riverside levee levees than would be the case for levees set back can be much more hazardous to public safety and from the river. In addition, because connected private property than the failure of a levee at the floodplains reduce stage for a flood of a given landward edge of a connected floodplain (see item recurrence interval (see item 1 of section IV), less 1 of section IV), such liability considerations may acute stress and wear on levees should result from make levees less attractive as a flood management an integrated and connected floodplain. Second, solution in many situations. Generating even maintenance operations on the dry levees at the speculative estimates of these operations, landward edge of connected floodplains are likely maintenance and liability costs will require easier (and therefore less expensive per mile) than better information on the general maintenance those on wet levees at the river’s edge. and failure histories of the levees and bypasses associated with connected floodplains.

Levee failure in the Central Valley flood of 1997. Courtesy of CA Dept of Water Resources.

44 Valuing Central Valley Floodplains

Levee under repair outside Sacramento, CA. Above and opposite images courtesy of CA Dept of Water Resources.

45 Valuing Central Valley Floodplains V. Conclusions and recommendations

The Central Valley Flood Protection Plan has related items such as habitat and recreation, or proposed major flood management initiatives integrated water management and option value). throughout the valley, including the study of Likewise, prospective floodplain conservation or creation or expansion of flood bypasses on both re-connection actions such as a levee set-back on the Sacramento and the San Joaquin. For those the lower San Joaquin must assess potential values bypass projects to be fairly and thoroughly across each of these line items for purposes of evaluated as alternatives to structural measures, comparison with other potential uses of the land however, the full dimensions of floodplain (e.g. housing development). valuation described in this report should be assessed. This more complete valuation must The estimates in Table 3 are based upon include not only the project-level flood protection conservative assumptions about plausible value benefits (which are adequately assessed by existing ranges in the Central Valley context. Notably evaluation protocols), but also the systemic these value ranges are generally lower than some benefits that floodplain re-connection uniquely other leading estimates of the value of floodplain can provide. Evaluation protocols that focus ecosystem services. As shown in Table 2, Costanza on the system-wide costs and benefits of specific et al (1997) found “swamp/floodplain” services project proposals should be developed as part of to be worth over $7,900 per acre per year, with this effort, ideally in a format that allows them water supply and disturbance regulation (i.e. flood to be used in other states and even other nations risk reduction) values each estimated at about that may be considering floodplain reconnection $3,000 per acre per year, and “cultural” and strategies. recreation values summing to over $900 per acre per year. Sheaffer et al (2002) estimated the one- The approximate monetary magnitudes of the time replacement cost of the goods and services services of connected Central Valley floodplains provided by U.S. floodplains to be over $60,000 discussed throughout this report are summarized per acre. Given these estimates, the value ranges in Table 3. Because many of these values are presented in Table 3 do not seem excessive. site-specific and can vary substantially, they are presented in order-of-magnitude ranges that allow basic comparisons between various value accounts, Recommendations and are normalized to express the potential To understand system-wide benefits more benefits stream obtainable per floodplain acre per comprehensively, more thorough investigations year. Ranges that include $0 indicate values that should be conducted into each of these “value might not be obtainable in all floodplain sites, lines” for the state-federal flood management depending upon context. projects in the Sacramento and San Joaquin basins. Only by viewing the system as a whole Table 3 shows that the three biggest “value lines” can the per-acre value of many of these services for connected floodplains are reduced flood come into sharp focus, in particular with respect to stage, habitat, and agriculture, each of which can integrated water management and ecosystem-level generate benefits valued in the thousands of dollars processes such as sediment transport. Moreover, per acre per year. Avoided residual risk could the realization of some benefits depends upon the achieve a similar level of importance in certain spatial scale of the habitat or process reaching situations, while most other line items top out in a minimum threshold (Opperman 2013; Mitsch the hundreds of dollars per acre per year under and Gosselink 2000), which implies the need for plausible conditions. Crucially, these values are system-wide assessment. generally additive upon one another. The Yolo Bypass, for instance, produces value in virtually all The California Department of Water Resources the line items summarized in Table 3, and hence (DWR) and the Army Corps also need to sponsor any estimation of its value must sum across all research into past, present, and anticipated of these (taking care not to double-count across future levels of flood risk in the Central Valley. 46 Table 3. Approximate Monetary Magnitudes of Services of Connected Central Valley Floodplains Flood plain Conceptual Annual value per Context Notes value accounts example floodplain acre sensitivity I. Flood risk reduction value Reduced flood Yolo Bypass $100s - $1,000s Depends on extent and Assumes 100-year project stage widening intensity of development lifetime and discount rate in affected areas of 3% Avoided residual Various sites in $0 - $1,000s Depends heavily on local Assumes suburban risk Valley topography development densities II. Ecosystem service value Habitat Central Valley $100s - $1,000s Depends on commercial Same range as findings (incl. food web salmon and recreational value of for habitat value of support) fishery wetlands generally Carbon Delta $10s - $100s Depends on soil types Delta has unusually good sequestration and price of carbon potential Water quality Valley-wide <$0 - $100s Depends upon intended Effects can be negative as maintenance uses of water well as positive Groundwater Gravelly Ford, $0 - $100s Requires suitable soils Value and recoverability recharge Yolo Bypass and aquifers of water varies by site Sediment Cosumnes $0 - $100s Depends on channel Avoided cost of channel deposition morphology/hydrology dredging downstream III. Land use value Agriculture Yolo Bypass $100s - $1,000s Depends on crops Floodplain soils generally (net profits) and flow timing in the well suited to agriculture floodplains Recreation Delta $100s Depends on proximity to Care should be taken not population centers to double-count habitat values Visual and place Lower $0 - $100s Depends on visual “Place-branding” value values San Joaquin accessibility of highly indeterminate floodplain to homes IV. System operations value Integrated water Yolo Bypass $100s Depends on system Calculating potential management architecture and water supply gains is reservoir operations highly complex Option value Valley-wide $0 - $10s Depends on whether Assumes 50-year horizon (per $100m in floodplain connection at 7% discount rate; future savings) preserves lower-cost history of Yolo Bypass future management suggests that future options management options could vary by >$800m. Maintenance and Valley-wide Unknown Depends on local soils, Data insufficient to liability hydrology support generalizations

47 Valuing Central Valley Floodplains

Courtesy of CA Dept of Water Resources.

As noted in section II above, SB 5 and AB 70 Finally, this research should result in changed are unlikely to significantly restrain continued basin-wide planning processes and project escalation in overall valley-wide flood risk, and evaluation criteria that take full account of the could in fact accelerate it by creating a false sense multiple values that connected floodplains provide, of security behind improved levees. Without a at both the basin and individual project scales. detailed understanding of the underlying flood Ultimately, the framework outlined here should be risk (including residual risk) and its dynamics over developed into a rigorous valuation methodology time, accurately assessing the most appropriate that allows flood managers in federal and state and cost-effective flood management strategies agencies to properly assess the value of connected will be difficult, particularly in light of changing floodplains (or potentially connected floodplains) climatic and watershed conditions in the coming as part of their flood management systems over decades. multi-decade time scales. At the project level, Army Corps methods for prioritizing projects for Third, DWR should continue its research to create federal funding should be reformed to allow multi- a valley-wide base map of frequently inundated purpose projects such as floodplain re-connections floodplains in order to systematically identify to be evaluated based on their full range of opportunity sites for floodplain reconnection. benefits, not just their most valuable single benefit This work should strive to classify potentially (Opperman et al 2013). inundated floodplains based on frequency, duration and timing of inundation for a variety These changes should be made quickly. With of ecosystem functions and land uses. The floodplain lands continuing to be developed, the bypass creation and expansion projects identified window of opportunity for floodplain conservation in the CVFPP are likely not the only plausible and re-connection is closing rapidly in the Central floodplain reconnection opportunities available Valley, even as impending climate change and in the valley, especially when considering the continuing ecosystem degradation increase the diversity of possible values and uses that any given value of these scarce lands. Future generations opportunity site could provide under different will not have the same opportunity to analyze and flow conditions. Additional reconnection options choose wisely among different flood management may exist as hydrological conditions on the rivers approaches, making it all the more critical that we change over time—this is a critical area for future assess the full value of connected floodplains while research and documentation. we still can.

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