[CEUS-earthquake-hazards] The balance

[jacob at ldeo.columbia.edu]

Sure, if you are not counting lifes and livelihoods or other "indirect costs" as
costs, mitigation is not necessarily cost effective.
But: I would like the writer of this narrow approach to take note of the
following:

http://www.nibs.org/MMC/MitigationSavingsReport/natural_hazard_mitigation_saves.htm

Best
Klaus Jacob
====================



Quoting Joe Tomasello <JT at reavesfirm.com>:

> Buddy:
>
>
>
> I'd like to offer the following for your e-mail discussion group:
>
>
>
>
>
> Natural disasters such as earthquakes create complex situations for policy
> makers. The difficulty lies in the balance between the costs of mitigation
> and the actual risk. Failing this, policy makers could find themselves
> dealing with unintended consequences such as those experienced by the
> hospital industry in California.  If it's worth the expense in any one
> region it would be California; but looking at the hospital industry in
> California we don't see it.
>
>
>
> Earthquake risks in California are, to some degree, statistically
> predictable; being a near certainty that a moderate to strong earthquake
> will occur somewhere on the west coast during a single generation of the
> built environment. California attempted to balance public safety with
> mandated seismic mitigation in a knee jerk reaction to the 1994 Northridge
> earthquake California's Legislature passed Senate Bill 1953 (SB 1953). The
> bill was an unfunded mandate to retrofit, rebuild, or close; a free lunch
> for California taxpayer. However, over the past decade the consequences of
> the mandate caused a once sound hospital system transform into one of the
> nation's foremost financial basket cases.
>
>
>
> As in California, policy makers in the New Madrid Seismic Zone are led to
> believe that earthquake mitigation costs are small, having little effect on
> the built environment. California's mitigation program entails retrofitting
> all acute care hospitals or re-building nearly 70 million square feet. The
> pace of construction is limited to approximately 1.5 million to 2 million
> square feet per year due in large part to the ability of regulatory agencies
> to keep up. Furthermore it takes upward of 10 years to design and build a
> new hospital.  "The lengthy process for review and approval of hospital
> construction and retrofitting projects is far too long. Economic growth is
> being thwarted; jobs are being lost; and patient safety is being
> compromised."[i]  The result is that it will take nearly 30 years to
> complete all the construction required by SB 1953. [ii] The extended
> deadline is 2013.
>
>
>
> The size and scope of most of these projects are very large and expensive.
> Compliance could cost California hospitals as much as $110 billion dollars.
> The original estimate assumed that the number of patients and the number of
> beds would generally remain the same.  However, modern design standards are
> most effective with facilities 35% to 60% larger[iii]. Thus, the scope of
> each construction project will increase as will the overall cost; perhaps as
> much as 20%.  [iv] In California construction costs are rising at an annual
> rate of more than 14 percent above the Consumer Price Index resulting in
> construction costs more than 40 percent higher for comparable facilities in
> other states.[v] In my view this increase is likely to continue do to
> regulatory oversight, the limited number of qualified contractors, as well
> as the annual inflation of material costs. In California, a fully furnished
> and equipped acute care facility (labor and materials) costs $1,000 per
> square foot.  Since the SB 1953 mandates affect for-profit, non-profit and
> publicly owned organizations most all projects will be financed.  Depending
> on the terms of the loan the cost in current dollars for an acute care
> facility the square foot cost can exceed $2,800; comparatively normal office
> construction in Tennessee is roughly a third the cost per square foot.
>
>
>
> Looking at FEMA's annualized earthquake losses[vi] we find the relationship
> of Cost vs. Benefit even more lopsided. FEMA reports that California will
> experience a loss of approximately $3,167.5/$Million of infrastructure each
> year as a result of earthquakes. Looking at the same 50 year period,
> California can expect to lose approximately 15.8% of the present value of
> hospitals. Thus, California's acute care infrastructure, worth approximately
> $48 Billion [my estimate - C. Duane Dauner, President and Chief Executive
> Officer, California Healthcare Association, Statement "Heath Care Scene in
> California," May 10, 2001, suggested 24 Billion.], should expect a loss of
> approximately $7.6 Billion due to earthquake. We find that California is
> spending $110 Billion to offset a loss of $7.6 Billion; a cost benefit
> relationship greater than 14.  Over the past 10 years, we've asked FEMA for
> a Cost vs. Benefit analysis for the New Madrid Seismic Zone.  So far we
> haven't seen anything that would come close to suggesting that the public
> would benefit spending limited resources.
>
>
>
> There are a more subtle negative consequences resulting from forcing acute
> care facilities to close because they don't meet mandated requirements.
> California is experiencing a critical closure of hospitals with the closure
> of over 50 hospitals in the 10 year period between 1995 and 2005. More than
> 3,000 acute care beds have been removed from service between 2001 and 2005.
> In the five year period prior (1995 to 1999) 23 hospitals closed. Unfunded
> mandated seismic requirements are creating a stampede for funding, usually
> in the form of bonds.  The median credit ratio of California hospitals had
> nosed dived to the junk-bond status.  The money needed to retro fit
> California hospitals is drying up. [vii] "Nobody can bear the burden [of SB
> 1953 unfunded mandate]"[viii]  Here in the New Madrid Seismic Zone we're
> told that the cost is minimal.
>
>
>
> "Seismic upgrades are important. But mandating them during the worst
> economic time in the history of California hospitals is like ordering a
> homeowner to fix a dilapidated porch on a house that's on fire. Right idea.
> Wrong time."[ix] How many doctors and nurses could have been hired in lieu
> of spending the money on hospital infrastructure? Just how many lives will
> be saved? How many lives will be lost because of the loss of acute care
> facilities? Who pays, the bottomless pocket of the taxpayer? Each of the 35
> million people in California will need to pay $3,143 (per capita state and
> local taxes were roughly $1,600 in 1996).  Are the people of California
> going to be willing to forfeit three times their current tax burden?
>
>
>
> If the benefits (reduction of earthquake related economic loss or lives
> lost) don't outweigh the costs in California, how can they be justified in
> the New Madrid Seismic Zone?
>
>
>
>
>
> Joseph Tomasello, PE
>
> 5880 Ridge Bend Rd.
>
> Memphis, TN 38120
>
>
>
> Phone:
>
> (901) 761-2016 office
>
> (901) 821-4968 direct
>
> (901) 412-8217 mobile
>
>
>
>
>   _____
>
>
>
>
>   _____
>
>
>   _____
>
> [i] California Heathcare Association Statement on the Hospital Construction
> Plan Review and Area Compliance Process before the California Performance
> Review Commission, U.C. Riverside, August 13, 2004.
>
> [ii] Ibid., 4
>
> [iii] Ibid., 41
>
> [iv] Ibid., 8
>
> [v] Ibid., 30
>
> [vi]  FEMA 366  Hazus 99 Estimated Annualized Earthquake Losses for the
> United States, February 2001, 16
>
> [vii] California HealthCare Foundation, The Financial Health of California
> Hospitals, June 2007, 2-13
>
> [viii] Ibid., (interviews with key unnamed health care leaders), B-6
>
> [ix] The Press Democrat, Another hospital falls, what killed Sutter Medical
> Center - and what will it mean to families like mine, January 14, 2007
>
>




----------------------------------------------------------------
This message was sent using IMP, the Internet Messaging Program.