[CEUS-earthquake-hazards] The balance

Thu Jan 10 23:53:16 GMT 2008

Joe,

   Due to your efforts with Seth Stein, the building code in Memphis now 
allows for non-essential 10-story buildings to be built to a force level 
45% lower than that stipulated in the Standard Building Code that was used 
in Memphis up through 2005.  This newly allowed design level is 
substantially lower than the median ground motions expected for a repeat 
of the 1811-12 earthquakes and lower than the intensities reported in 
Memphis for the 1843 Marked Tree, Arkansas earthquake (magnitude 6). 

  So you succeeded in lowering seismic  building codes in Memphis. Perhaps 
you would like to make this fact clear to the people living in Memphis and 
see what their views on this are. 

-Art

Art Frankel
U.S. Geological Survey
MS 966, Box 25046
DFC
Denver, CO 80225
phone: 303-273-8556
fax: 303-273-8600
email: afrankel at usgs.gov

"Joe Tomasello" <JT at ReavesFirm.com> 
Sent by: ceus-earthquake-hazards-bounces at geohazards.cr.usgs.gov
01/09/2008 12:51 PM

To
<ceus-earthquake-hazards at geohazards.cr.usgs.gov>
cc
'Seth Stein' <seth at earth.northwestern.edu>
Subject
[CEUS-earthquake-hazards] The balance

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_______________________________________________
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