Investing in Community Resilience

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Last month someone asked me “How much should a community spend on resilience?” I answered with some somewhat disjointed thoughts based on CARRI’s work with communities. Let me stress that these are based on my own observations – I don’t want to tar the rest of CARRI with my thoughts!flooding 3

An important starting point toward an answer is that there are a lot of things a community can do to improve its resilience that don’t cost a lot of money. Things like planning for recovery, not just response; sponsoring community-building events; conducting exercises that involve the “Whole Community;” setting up mutual assistance agreements with other communities; strengthening small business, NGO and local government continuity planning; and enforcing building codes tuned to the hazards the community actually faces. These are relatively inexpensive with a high return on the small investment of time and money.

Assuming that a community has done the relatively inexpensive things it can do to be more resilient, it then has to decide how much to spend on resilience. At its most basic, spending for resilience is money spent on hedging risk. In other words, it’s a sort of insurance policy. That implies that if you know the likely consequences of the risk and the frequency of the risk, you can use an actuarial calculation to determine how much to spend (e.g., on average a major cyclone – hurricane, “Super Storm” – hits New York every 76 years. We have enough information to develop a spectrum of the impacts of these storms. From there, it’s easy to calculate how much should be spent.)  BUT – there are four problems with the insurance approach:

  1. It assumes that you have enough money (i.e., discretionary funds) to pay the “premium.”
  2. The risks the community faces – and the risk tolerance – likely will vary across the community even for the same shock (e.g., if I live high on a hill, I may not give a flip about flooding in my town’s low-lying areas; if I’m an electric company I likely will accept the risks associated with above ground power poles; but if I’m a small business owner I don’t want my power interrupted).Maze1
  3. One’s risk tolerance often depends on whose money is being spent – I may scream that the city needs to pay for upgrades to my town’s water system using taxpayers’ money while being unwilling to spend my own money to have a safe room installed in my home (This reflects my experience in Moore, OK.). This is why NYC is so gung-ho about resilience investments – they intend to pay for them largely with federal money.
  4. Not all investments are created equal. If NOLA had invested in its levees, much of the suffering from Katrina would not have occurred – pain still; but suffering, much less. In other words, targeted investments can drastically change the risk profile and dramatically reduce (and sometimes eliminate) the risk premium. The return on this kind of investment thus becomes the avoided cost of the original risk premium (of course, there’s always the wugga-wugga – technical term! – of the cost of money).

For many – probably most – communities, #1 is the major stumbling block. There are too many potential “investments” and too little funding. CARRI’s counsel to communities has been to find ways to piggyback resilience on other investments. For example, a town wants to attract a new manufacturing facility to the community. The favored location is just outside town but utility service has not been extended that far. Usually the town offers to extend the utilities to the location as an inducement to the new business. Add resilience to this by a) making the new utilities installed more robust; b) upgrading facilities as far upstream as possible. This will make the investment in resilience more marginal and more palatable to the community.

One other wild card. Resilience isn’t just about preventing or mitigating disaster – it’s also about developing the capability to seize or create opportunities. After Hurricane Hugo, Mayor Joe Riley acted on a plan developed before the storm. The Charleston, SC, city government seized land and houses on the site of an old creosote factory, cleaned it up and built the city’s beautiful aquarium, bringing in more tourists and more revenue to the city.

PredictPlanPerform PuzzleA more personal example. Twenty years ago I took over a research organization in Mississippi. I staffed, resourced and funded a safety program that ultimately led to multi-million dollar projects for the Army and the Department of Energy dealing with chemical weapons residues and radioactive materials. As my Daddy used to say, “Bread cast upon the waters sometimes comes back as ham sandwiches.” This type of “opportunistic” investment can strengthen a community and ultimately free up funding for other purposes.

Ultimately, a community’s spending on resilience reflects how much it has to spend, what it has to fear, and how well it can form a unified focus on mitigating those fears. A community should do the easy and inexpensive things first – besides the improvement in resilience they will build a consensus and confidence in the community. Capital outlays should be assessed in much the same way – will they make the community stronger even during normal conditions. We pay our communities’ leaders to make these decisions: our communities’ resilience reflects their success.

Posted with permission from The Community and Regional Resilience Institute

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