The Economic Value of Water: Providing Confidence and Context to FEMA’s Methodology

As municipalities, utilities and communities place more emphasis on security, resilience and disaster planning, it is increasingly more important to have an accurate dollar value to assess the economic importance of water for a community. This allows community level decision makers to accurately plan and implement pre-disaster mitigation strategies and effectively allocate resources post-disaster. This decision-making is based in part on a benefit cost analysis framework established by FEMA that establishes several per capita, per day (pcpd) dollar values that capture the total economic impact of the loss of potable water service. A primary motivation of this work is to acknowledge some of the uncertainties and data parameters in the FEMA model so that water utilities can downscale loss projections to the appropriate level of analysis. This study recommends using population weighted state level data and finds an estimated range of economic losses per capita per day between $67 and $457. This research allows utilities to better understand and estimate supply disruption valuations for their own service areas and choose the appropriate risk level for their benefit-cost decisions with regards to security preparedness infrastructure improvements.