This presentation was made to the Southern Ontario Municipal Stormwater Discussion Group on September 27, 2018 in Brantford, Ontario. It describes benefit-cost analysis to show the return on investment (ROI) of infrastructure improvements to reduce flood damages (insured and total), and to achieve other benefits including erosion mitigation and water quality improvements. Earlier benefit cost analyses for projects ranging from the Winnipeg floodway to the Stratford, Ontario storm system master plan are shown. The benefit-cost ratio of an Ontario flood control study is shown including a comparison of grey and green infrastructure cost effectiveness - analysis shows the grey infrastructure solution can meet the current Disaster Mitigation Adaptation Fund (DMAF) benefit/cost threshold of 2:1 required to be eligible for federal funding. In addition, city-wide analysis of grey infrastructure storm and sanitary system upgrades and green infrastructure / low impact development infrastructure strategies is summarized. Results show that the grey infrastructure solution can meet the DMAF benefit/cost threshold of 2:1 but that the benefit/cost of green infrastructure is substantially below it considering flood reduction benefits. When other benefits are considered, and targeted implementation of green infrastructure is considered (e.g., representing 25% of the urban area with limited overland drainage design standards) and considering additional benefits including a substantial 'willingness to pay' estimate for water quality improvements, costs continue to exceed benefits. The insurance industry and some affiliated research groups have suggested that natural infrastructure or green infrastructure should be considered to improve climate resilience and reduce flood damages - this analysis would suggest that approach is misguided and could misdirect scare resources to ineffective strategies.

1. Municipal Stormwater Discussion Group
Cost-Benefit /
Return on Investment Analysis for
Grey and Green Infrastructure
to Support Asset Management Strategies &
Disaster Mitigation Adaptation Funding
Robert J. Muir, M.A.Sc., P.Eng.
Manager, Stormwater, City of Markham
September 27, 2018 - Brantford, Ontario 1

2. OUTLINE
1) Regulations & Policies on Cost Efficient Infrastructure
2) Examples of Benefit/Cost : Canada, Ontario
3) Disaster Mitigation Adaptation Fund ROI Threshold
4) Flood Control Class EA Example (Don Mills Channel)
5) City-wide Flood Control Example (Grey vs. Green)
6) Triple Bottom Line Sensitivity Analysis (Erosion Mitigation,
Total Uninsured Losses, Water Quality Improvement)
2

3. Provincial Policy Statement (2014):
“Infrastructure … shall be provided in a coordinated, efficient and cost-effective
manner ….”
Infrastructure for Jobs and Prosperity Act (2015) O. Reg. 588/17 (2017) :
In asset management plans “For each asset category, the lifecycle activities that would need
to be undertaken … and the costs of providing those activities.”
Class Environmental Assessments (2015):
For wastewater projects “Economic Environment includes commercial and industrial land
uses and activities. It also includes the financial costs associated with the alternatives,
including construction, operation, maintenance, and property costs.”
Flooding problems may include: serious property damage, economic business loss, damage
or interruption of municipal services
Ontario Drivers for Assessing Cost Efficiency
3Provincial Policy Statement 2014 Infr. for Jobs and Prosperity O Reg 588/17 Municipal Class EAs

4. 4
• Ontario’s LTIP released November 2017
• Themes mentioned:
▫ Proactive asset management integrates climate change mitigation and
adaptation considerations to build resilience and ensure continuity and
quality of service levels
▫ Evidence-based decision making
▫ Ensuring that the best available evidence and analysis informs the
government’s decisions
▫ Make the right infrastructure investments in the right locations at the
right time
▫ Infrastructure investments require the application of a “risk lens”
▫ Infrastructure planning and investment based on the outcomes of this
risk assessment will allow for a more strategic approach to adaptation
by government, helping ensure that decisions are evidence-based and
resilient. This will save Ontarians and the Ontario government money
in the long term.
▫ If the consequences of [extreme] weather events are not understood,
it can be difficult to justify these investments.
A step in the right direction
(Good language, not perfect; execution is next)

5. Why Calculate ROI For Flood Mitigation?
• Consistent with principles for flood reduction
(Watt, 1984)
“It is therefore reasonable to require that all projects that
provide or improve flood protection be justified
economically before public funds are allocated” …
“expected benefits should exceed cost by a sufficient
margin and the level of protection should not be pushed
beyond the point where the additional costs exceed the
incremental benefit.”
https://files.onhttps://nparc.nrc-cnrc.gc.ca/eng/view/accepted/?id=7b18d8c9-6c5f-425f-8338-ac4a24f8170bario.ca/infrastructure_update_2017-_eng_0.pdf

6. 6
First Example in Canada?
• Need for comprehensive cost-
benefit analysis to guide flood
mitigation planning and policy
(1956 Manitoba Commission
on Flood Cost Benefit).

7. 7
0.77
0.06
• Benefit-Cost Ratios
• Range:
▫ 0.06 to 0.77
• Establish priorities
• One size certainly
does not fit all!
Stratford
SWM Master Plan
2004
0.53
0.15
https://drive.google.com/open?id=1n7_s117YD9npoEhyyEVkB4UJRDi-eiqK
Invest $1 to
Defer 77 cents
of damage
Invest $1 to
Defer 6 cents
of damage

8. Why Calculate ROI For Flood Mitigation? (OSPE)
8
• OSPE comments on Long Term Infrastructure Plan “recommends that the
Government of Ontario:
– i. Critically apply the proposed ‘risk lens’ to infrastructure investments
related to extreme weather adaptation, recognizing variations in
observed and predicted trends across the province.
– ii. Evaluate adaptation measures such as green infrastructure for
stormwater management, often cited as key mitigation measure, using
the same ‘risk lens’ and consider the cost-effectiveness of those
infrastructure investments.
https://drive.google.com/open?id=1_ehoK0opvzeBFLv1Vrc6QFIbS9B5qFA8

9. Why Calculate ROI For Flood Mitigation? (OSPE)
9
– iii. Recognize that green
infrastructure must be viewed
through the same lens as
conventional infrastructure,
adhering to established asset
management principles and
full cost accounting—meaning
it must be addressed up-front
and directly, considering
system-wide costs.”
https://drive.google.com/open?id=1_ehoK0opvzeBFLv1Vrc6QFIbS9B5qFA8

10. Why Calculate ROI For Flood Mitigation?
10
• Disaster Mitigation Adaptation Fund Eligibility
“The ROI is measured by the projected climate and disaster related losses
avoided. An ROI ratio for the DMAF of 2:1 means that for every dollar
spent under DMAF at least two dollars are anticipated to be saved in
future natural disaster losses.”
https://www.infrastructure.gc.ca/alt-format/pdf/dmaf-faac/DMAF-Applicant's-Guide.pdf
• ROI often defined using net benefits i.e.,
(damages deferred – cost) / cost
*

11. To Not Be Reckless With Taxpayers Dollars
11

12. Don Mills Channel Flood Control ROI
12
• Recently completed Class EA included evaluated grey (culverts and
central storage) and green infrastructure (on-site LID) solutions.
https://goo.gl/4qCMQ3

13. Don Mills Channel Flood Control ROI
13
• Flood damage estimates at various return periods used to calculate
reduction in average annual damages (benefits for preferred solution).
https://goo.gl/rWuKLJ
Existing
Damages
$1.74M / yr
Net
Benefits =
$1.5M / yr

14. 14https://goo.gl/AosUjy
• Solutions compared in
terms of their
economic efficiency,
considering ‘payback
period’ to recover
costs with average
annual benefits of
damage reduction.

15. Don Mills Channel Flood Control ROI
15
• Application for DMAF funding must show benefit/cost of > 2
• Benefits
= 100 year service life x $1.5M deferred damages per year
= $150 M
• Costs
= $69 M
Benefit / Cost = 2.2 (slightly low with shorter service life of culverts)
Benefit / Cost = 0.6 for LID solution (distributed on-site storage)

16. Ontario-wide Evaluation of Green & Grey Infr. Benefit / Cost
• Approach:
– Step 1 – Average Annual Losses (IBC, CatIQ Data)
– Step 2 – Cumulative Losses over Service Life
– Step 3 – Lifecycle Costs of Mitigation Infrastructure
– Step 4 – Benefit / Cost = Deferred Losses / Costs
• Sensitivity Analysis (Erosion Mitigation Benefits, Total Loss
Benefits, Lost Work Hours Benefits)
• Green Infrastructure Surface Water Quality Benefits
16

17. Step 1 – Average Annual Losses
• IBC has identified yearly insured losses in
Ontario for catastrophic flood/storm events.
• Expected annual losses have been estimated by
fitting a probability distribution to recent losses
from 2000-2017 – the expected annual losses
are $292 M.
$292M

18. Step 2 - Cumulative Damages Prevented by Flood
Mitigation Efforts (Benefits)
18
• Cumulative damages prevented over the service life for
Ontario flood mitigation measures would be :
i) 25 Year Service Life Measures : $292 M x 25 = $7.3 B
ii) 50 Year Service Life Measures : $292 M x 50 = $14.6 B
iii) 100 Year Service Life Measures : $292 M x 100 = $29.2 B

19. Step 3 - Flood Risk Mitigation Lifecycle Costs Green Infrastructure
19
• Unit
capital,
O&M
costs:
Phil. Final
Report
and
Ontario
lifecycle
cost
model

20. Step 3 - Flood Risk Mitigation Lifecycle Costs Green Infrastructure
20
• Ontario
lifecycle:
Phil. Final
Report and
Ontario
lifecycle
cost model
• $15.8 B
annual cost
• Markham =
1.8% of
Ontario

21. Step 3 - Flood Risk Mitigation Lifecycle Costs
Grey Infrastructure
21
• Markham's flood reduction program costs:
i) $234 million (2014 dollars) for storm upgrades (see Council Rpt Item 7).
ii) Wastewater system upgrades to meet a 100-year level of service against
basement flooding, and further to prevent sewer surcharge during 25-year
storm events cost $26.1 M.

22. Step 3 - Flood Risk Mitigation Lifecycle Costs
Grey Infrastructure
iii) Storm and wastewater system upgrade costs equate to 5.9% of storm and
wastewater system asset values based on the city's Asset Management Plan
($2,075 million in wastewater assets, $2,335 million in storm water assets).
iv) The cost is approximately $260 M, representing capital cost alone.
An average service life duration of 100 years would result in lifecycle
costs of $260 million for grey infrastructure implementation (assume
100% depreciation of investment over 100 years).

23. Step 4 – “ROI” Benefit/Cost Ratio
Green Infrastructure
23
• GI, LID benefit / cost ratios in Ontario can be evaluated considering:
i) average 50 year service life benefits (deferred flood damages) up to
$14.6 B (see Step 2)
ii) lifecycle cost over 50 years of $790 B (see Step 3)
iii) benefit / cost = 14.6 / 790 = 0.018
The benefit/cost ratio is less than 1.5% of the ratio of 1.3 that Watt
has recommended for publically funded flood control projects.

24. Step 4 – ‘ROI’ Benefit/Cost Ratio
Grey Infrastructure
24
• Grey infrastructure benefit/cost ratios in Markham can be evaluated
considering:
i) average 100 year service life benefits (deferred flood damages) up to
$29.2 B (see Step 2) prorated by Markham/Ontario population (2.4%) or
urban area (1.2%), say Markham represents 1.8% of Ontario losses,
i.e., $29.2 B x 1.8% = $526 M.
ii) lifecycle cost over 100 years of $260 M equivalent to capital costs (see
Step 3) assuming full asset depreciation over 100 years.

25. Step 4 – ‘ROI’ Benefit/Cost Ratio
Grey Infrastructure
25
iii) benefit / cost = 526 / 260 = 2.02, say 2.0
The benefit/cost ratio exceeds Watt’s recommended ratio for flood
mitigation and DMAF ROI threshold for federal funding of disaster
mitigation projects.

26. Step 4 – “ROI” Benefit/Cost Ratio - Markham
26
Scenario - Benefits
Grey
Benefit
Grey
Cost
Grey
B/C
Green
Benefit
Green
Cost
Green
B/C
A – Insured Flood Loss $526 M
$260 M
2.02
$263 M $8.76 B
100%
0.030
A’ – Insured Flood Loss $526 M 2.02 $263 M
$2.19 B
25%
0.12
B – Insured Flood + Erosion $526 M 2.02 $283 M 0.13
D – Total Flood Loss (2.7 x) $1.42 B 5.46 $710 M 0.32
F – Total Flood + Lost Time +
Willingness to Pay for Water
Quality Improvements
$1.46 B 5.61 $1.94 B 0.88

27. 0.1
1
10
100
1000
10000
Policies /
Standards
Downspout
Disconnection
(I&I)
Subsidize
Backwater
Valves Etc.
Sanitary Sewer
Upgrades
(Isolated)
Storm Sewer
Upgrades
(Isolated)
Green Infr.
Retrofit
Cost($M)
< $0.1 M
Do Deferred Flood Damage Benefits Justify Costs?
27
$1.3 M
$1.4 M +
$26.1M $234 M
$8.76 B
for
100%
$2.19
for
25%
Yes
Grey Infrastructure
Benefits / Cost
2.0 – 5.5
No
Green Infrastr.
Costs / Benefits
0.03 – 0.88
• Considering deferred insured flood damages,
erosion reduction, total losses, water quality

28. Conclusions
• Benefit/cost ratios can be used to evaluate the economic efficiency of
infrastructure investments and whether they are worthy of public funding – help
meet asset management goal of lifecycle cost assessment.
• B/C ratios vary by technology (grey vs. green), help prioritize solutions.
• Based on Markham Class EA, B/C of > 2 can be realized with proposed central
storage (green-ish) and grey infrastructure (culvert enlargement).
• Deferred losses (Benefits) can be based on many methods (% of MPAC value),
scaled provincial losses, considering insured and total damages.
• Benefits can include indirect benefits (deferred erosion damage), and intangible
benefits estimated using ‘willingness to pay’ methods for water quality upgrades.
28

29. Conclusions
• In a pair-wise comparison of grey and green solutions in Markham shows:
– Grey is 17 to 67 times more cost effective than green at reducing flood
damages
– Grey can achieve DMAF B/C minimum in city-wide storm & sanitary plan:
• 2 : 1 considering insured loss reduction (minimum allowable)
• 5 : 1 considering total loss reduction
– Green cannot achieve DMAF B/C minimum:
• 0.03 : 1 with insured loss reduction & 100 % LID implementation
• 0.32 : 1 with total loss reduction & 25 % LID implementation
• 0.88 : 1 adding $1.2B in water quality benefits (1.7x flood damage value)
Green infrastructure B/C is below 1 even assuming it achieves total loss
reduction and achieves significant willingness to pay for water quality
29https://drive.google.com/open?id=1IsMZOrMZaRf6HMs8ubbVsY866daPjkiV

30. Thank You
Questions ?
More Rob :
Blog: www.CityFloodMap.com
Podcast: Open During Construction on iTunes
Twitter: @RobertMuir_PEng
More City of Markham :
Web: www.markham.ca
Twitter: @CityofMarkham
30