New Directions in Water Resources Planning for the U.S. Army Corps of Engineers (1999)

Beyond considering the necessity for a major evaluation of the Principles and Guidelines, the committee's recommendations for improving the Corps' planning process must be considered in the context of larger, federal water policy issues. This chapter identifies shortcomings of federal water policy formulation and ways in which the P&G might be revised to enhance the Corps' and other federal agency planning procedures.

A useful approach to analyze the nation's water development and management policies is to compare them with principles of water resources planning and financing that have emerged from analyses of practices in the United States, including those of the Corps, other federal agencies, and state and local governments. Although those principles grew mainly from of an era in which water resources were developed to promote national economic development, many of them apply to the contemporary policy environment. Moreover, current Corps planning activities are often constrained by larger, national policies. Existing policies may be outdated and should be reviewed to ensure that they are based upon current problems, opportunities, values, and attitudes about the role of government. Given the current emphasis on reducing the federal role and greater reliance on cost-shared projects, it is important to compare practices with basic principles to judge the need for change.

As noted in Chapter 1, water management principles have been historically articulated by several water policy organizations, including the Inland Waterways Commission, the President's Water Resources Policy Commission, the Senate Select Committee on National Water Resources, the Water Resources Council, and the National Water Commission. Among the important water management principles identified by these groups include:

• Management should be informed by up-to-date assessments of current conditions of water, related land, and ecological resources.
• Plans should recognize inherent linkages in hydrologic systems that extend throughout watersheds, economic linkages, and other linkages that may extend across multiple basins within economic regions.
• Plans should address the full range of opportunities to use, protect, or restore water and related land and ecological resources of a watershed, resulting in multiple-purpose and integrated programs.
• Plans should be formulated and evaluated using well-developed criteria

• and procedures.
• Planning processes should encourage participation of a wide range of affected parties, particularly local and state governments and public and private interests.

Although water management in the United States has never been fully consistent with these principles, the failure to design appropriate policies and organizational arrangements to address current problems has tended to widen the gap between principles and practices since the 1970s. Basinwide and watershed planning by environmental agencies has tended to focus primarily on water quality, ignoring interrelationships among multiple uses. Capturing economies of scale of multi-objective projects has become more difficult. Planning for protection, restoration, and water uses frequently lacks regional or basinwide perspectives, and information about the state of water and related land resources is outdated.

A basic tenet of water resource planning throughout the 20th century has been that river basins or watersheds, from their headwaters to their mouths, are hydrologically interconnected systems and should be treated as such in water planning. That principle was articulated well in the Report of the Inland Waterways Commission (1908). In 1927, the Corps adopted the principle as a cornerstone of planning in support of the Federal Power Act, and it remained a basic principle throughout the period of comprehensive planning in the 1940s and 1950s. In the 1960s, the WRC recognized that in some parts of the country, notably New England, regional economic ties extended across several basins, and that proper water resource planning should recognize significant interdependencies among activities affecting demand for water-based services.

With the passing of that era, the dismantling of the federal WRC, and enactment of WRDA '86, the nature of Corps projects fell into several categories, two of which are relevant to this review. One is the single-purpose, relatively small-scale project with primarily local effects, funded through cost-sharing arrangements with a single local sponsor. For purposes of this discussion, this kind of project is referred to as type A. It represents the largest number of projects that require individual authorizations by Congress. Type B projects are watershed- or basinwide scale projects focused more toward water management than construction. In several of these projects, reallocation of storage in existing systems is emphasized; in others, environmental outputs are the primary objective. Examples include the Alabama-Coosa-Tallapoosa/Apalachicola-Chattahoochee-Flint (ACT/ACF) project in Georgia, Alabama, and Florida; the Everglades restoration project (Box 4.1); the Upper Mississippi Navigation Study; and the Missouri River Basin Operations Study. All of these involve a restudy of an existing Corps project or system of projects.

In type A projects, basinwide and regional perspectives within the Corps and the larger federal water apparatus have suffered. Gone are the days when generous funding was available to support basinwide analysis. The Corps now has the incentive to concentrate on individual projects of benefit to local interests who have

indicated an ability and willingness to shoulder a substantial portion of project costs. Little incentive exists for sponsors of those projects to be concerned about upstream and downstream effects of their projects, and they have little interest in supporting planning studies to investigate those effects.

The shift from watershed level to project planning within the Corps comes at a time when many professionals within the water resources community are calling for a renewal of water management at the watershed level (Schad, 1998). A recent Water Science and Technology Board report (NRC, 1998) advocates and provides direction on management aspects of the watershed approach. The EPA has also promoted watershed management, encouraging states to use watersheds as the basis for their water-quality management plans. Several states have taken leadership roles in using this approach to formulate basinwide policies and coordinate issuance of discharge permits. However, they generally lack attention to other aspects of water management, including urban water supplies, navigation facilities, and electric power production facilities, that in many cases are affected by or constrain water quality.

The report of the Interagency Floodplain Management Review Committee (IFMRC, 1994), also known as "the Galloway report" (the committee was chaired by U.S. Army Brigadier General Gerald Galloway), recommended a shift away from what has been primarily a federal-local relationship in floodplain and flood damage reduction planning, toward state leadership. This, of course, has implications for federal agencies' relationships with the states. States have the ability to enact statues that can profoundly affect water management. They also have unique constitutional powers to guide local policies through incentives, regulations, and sanctions. They are therefore in a unique position to integrate project planning with land use planning and resource management programs.

The Association of State Floodplain Managers (ASFPM) has developed a library of cases and research that supports the tenet that states with strong floodplain management programs have better results in reducing flood-related damages. Programs established by the Clean Water Act and the Coastal Zone Management Act, too, indicate that the uses of federal resources to build state and local resources can be an efficient way to achieve federal objectives. Top-down planning and implementation of federal agency projects, the association notes, does not build standing

capability within a state and can help perpetuate a reliance upon the federal government for technical plans. The association recommends, for example, that the Corps, the NRCS, and the Tennessee Valley Authority develop grant programs to fund state mitigation initiatives (ASFPM, 1991). A new document published by the Western Governors Association (WGA, 1997) calls for joint state-federal efforts to make flood damage reduction programs more effective by funding community-based programs.

The movement toward greater lead roles for the states suggests that in the future the Corps will increasingly participate as a member of a team led by state agencies. The committee recommends that the Corps formulate a cost-sharing program with the states to provide technical assistance in preparing water management plans.

There are no particular incentives for the Corps to emphasize basinwide planning, which results in a lack of comprehensiveness in the Corps' planning processes for type A projects. The principle of comprehensiveness in water resource planning historically includes two important concepts: the first is that consideration should be given to all opportunities to develop, protect, or restore the water and related land and ecological resources; the second recognizes that substantial economies of scale can be achieved through the use of multiple-purpose projects or reservoirs. Water projects justified primarily by their ability to reduce flood damages could also be designed to provide public water supply, hydroelectric power, flat-water recreation, and low flow augmentation. In the present cost-sharing environment there is less emphasis on multipurpose projects, as local sponsors tend to promote investments that address a particular need and serve a single purpose. Given the trend toward small-scale projects, there may be limited opportunity or necessity for the Corps to consider more comprehensive alternatives to the plan preferred by nonfederal sponsors. The Corps should, however, give greater attention to multipurpose options when formulating and evaluating alternatives.

With the emergence of environmental protection and restoration as authorized project purposes, the Corps faces the challenge of manipulating ecological systems and integrating them with other management purposes. Presently, only conceptual models and general principles guide ecological system planning. Outcomes resulting from manipulation of ecosystems are generally considered to be highly uncertain. Suggestions for environmental protection and restoration planning are discussed in greater detail in Chapter 5.

Since World War II, considerable efforts have been made at the federal level to develop principles, standards, criteria, and procedures to guide investments in water resources. Most of the techniques of benefit-cost and multiple-objective analysis evolved in the realm of water project planning, and federal agencies have

arguably produced the most refined package of analytical techniques for public investment analysis currently available. The P&G and P&S both represented the state of the art when they were published. Unfortunately, the P&G have not been changed since 1983.

Although many sections in the P&G are still relevant, they need to be updated to reflect changes in project purposes and advances in evaluation techniques. As was the case when the P&G replaced the P&S, the president could either reconvene the WRC or take other executive action to institute changes. At least three reasons support the need to bring planning criteria and guidance up-to-date. First, the P&G are oriented toward evaluation of several types of projects in which federal agencies are no longer engaged. Of the four federal agencies affected by the P&G, the Corps is now the only one with an active construction program to which the P&G might apply. Second, the P&G are woefully out-of-date in providing guidance to the Corps for environmental protection and restoration projects. Language in the P&G is more relevant to assessing environmental impacts of resource development projects than evaluating outcomes of environmental restoration projects. Third, substantial advances have been made since 1983 in developing procedures for evaluating economic and environmental consequences of projects and assessing risk and uncertainty. Some of those techniques are being used (or being withheld from use) without the benefit of policy review by the nation's water planning community.

Of particular concern is the emergence of environmental restoration as a project purpose for the Corps. The P&G offer almost no guidance on this subject. The Corps provided a directive for project modifications to improve the environment and aquatic ecosystem restoration through its engineering circular series (EC 1105-2-214; USACE, 1997b), but it mainly describes procedural matters. It provides little instruction on assessing project outcomes and assigning benefits and costs, a deficiency which needs to be reduced or eliminated.

As discussed in Chapter 1, river basin commissions were established under the Water Resources Planning Act of 1965 to facilitate planning in the nation's large, interstate river basin systems. With virtual elimination of the WRC, however, only remnants of those commissions remain. A fundamental criticism of planning by the river basin commissions was that it was not meaningfully integrated into existing governmental decision making and budgeting processes. Nonetheless, ad hoc organizations have been created to address specific problems, as in the formulation of management plans for the Upper Mississippi River.

Renewed congressional interest in the Mississippi River after the 1993 floods resulted in legislative proposals for comprehensive planning through the Upper Mississippi River Environmental Management Program (EMP) and the establishment of an interstate basin management council for the Upper Mississippi River. As coordination is required between the Upper Mississippi River EMP, the U.S. Fish and Wildlife Service's ecosystem management and restoration efforts, and the Corps' navigation studies and floodplain management assessments, the governors of Illinois, Iowa, Minnesota, Missouri, and Wisconsin created the Upper Mississippi

River Basin Association (UMRBA) to fill the void left by the dissolution of the federal-state river basin commission in 1981. Following a conference to evaluate regional planning, the UMRBA released a report defining the strengths and weaknesses of the Corps' planning processes within a basin planning framework (UMRBA, n.d.).

UMBRA commented on the failure of prior efforts to connect plans to federal, state, and local budgeting and appropriation processes. It also criticized the use of comprehensive, basinwide planning, as it may have caused delays in funding high-priority projects which had strong consensus. It argued for greater flexibility in regional planning, citing as a success an approach that allowed 24 logical environmental mitigation projects to be planned and implemented while a larger, more time-demanding regional plan could be formulated

UMBRA commented that planning should be output oriented and address projects on a case-by-case basis when there was a general consensus on the needs for the project, thereby building credibility for broader coordination. The association also recommended that states take a more active leadership role in the process (Stoerker, 1998). UMBRA state members cautioned that collaboration called for a balance of power among its federal, state, and local members and that all relevant stakeholders need to be involved, including citizen groups. It recommended that a federal-interstate compact model, such as the Delaware River Basin Commission, has the advantage of providing for legally binding agreements that can act as a strong mechanism not only for plan formulation, but for implementation and enforcement. It also proposed limiting compacts on such a large geographic scale to focus on three or four of the more critical management issues.

For large scale regional programs involving multiple projects, the Corps should seek authorizations and appropriations for the program instead of individual projects. Examples to which this strategy could prove beneficial would be the Upper Mississippi River navigation study and the Everglades restoration project. Programmatic authorizations and appropriations would allow the Corps to reduce time between projects, schedule its resources and those of its contractors more effectively, and eliminate costly duplication of administrative processes. Because programs at this scale are likely to extend over several years, there will be ample time for corrections and adjustments to be made to schedules of activity as additional information becomes available.

New cost-sharing policies involving more nonfederal investment in projects may have set the stage for more collaborative efforts between the Corps and its nonfederal partners. However, in discussions with project collaborators in navigation, port, flood damage reduction, and watershed management projects, the committee learned that Corps planning policies and methods still occasionally frustrate stakeholders. Representatives of port authorities identified two specific problems: (1) a Corps policy to design the optimum national economic development (NED) plan when the local sponsor had already informed the Corps that it neither could nor would pay for the plan, and; (2) Corps policies that have stifled innovative

methods for disposal of dredge materials that could be ecologically enhancing. Local sponsors of flood damage reduction projects cited instances where pre-1986 authorizations and cost-sharing arrangements presented barriers to more contemporary design options.

Many local government sponsors are accustomed to planning processes that are either far less constrained by specified procedures and criteria or simply guided by different criteria. Particular clashes have occurred as innovations in storm water management have been initiated by local governments, nongovernmental organizations, and consultants. In recent years, several Corps projects have been significantly influenced by or modified to accommodate designs advocated by local governments. Among them are:

• nonstructural flood damage reduction measures on the South Platte River in Littleton, Colorado, Mingo Creek in Tulsa, Oklahoma, and Indian Bend Wash in Scottdale, Arizona;
• Gila River relocations project at Allenville, Arizona;
• recent innovations in river and floodplain restoration and flood damage reduction projects in the Wildcat and San Pablo Creeks in Richmond, California; San Pedro Creek in Pacific, California; and Napa River in Napa, California (Box 4.2).

Current planning processes and funding arrangements have a tendency to force the Corps districts to view their constituencies narrowly, focusing upon the local sponsor. Efforts by local interests to include a broad range of participants in planning and to reach consensus on project plans require extra time, in some instances creating tensions between field level planners in the Corps and policy makers who are responding to the mandate to streamline the process.

The local sponsor is often the best organization to incorporate local interests in the planning process. The committee concluded that the local sponsor should be required to solicit the viewpoints of all interested stakeholders before asking the Corps to initiate a reconnaissance study.

One point made within the Galloway Report (IFMRC, 1994) was that those floodplain occupants affected by the Mississippi River floods of 1993 were disproportionately of lower income. Recent changes in cost-sharing policies may have made it more difficult to address such inequities. Since 1994, it has become more costly to obtain federal assistance for flood damage reduction projects, making it even more difficult for lower-income communities to avail themselves of federal resources. Cost-sharing provisions for conventional flood damage reduction projects prior to 1986 were 25 percent nonfederal and 75 percent federal. Projects authorized

after the WRDA '86 usually increased the nonfederal share to 35 percent, not to exceed 50 percent. Added to that change is the requirement that cost sharing with nonfederal entities now begins at the planning stages rather than in the construction stages.

Implications of these changes for the nation's poor who reside in high-hazard areas have not been adequately explored. Cost-sharing policies have not taken into account income levels of those most affected by flooding, and the nation may not be able realistically to address the issue of occupancy in hazardous areas without considering income, according to statute (WRDA '90, Section 305). Low-income communities can appeal to the Secretary of the Army for a reduction in their share of project costs, but in practice this is not occurring. Congressional staff (Spillan, 1990, personal communication) reports that only one project in the country, the Three Mile Creek in Mobile, Alabama, has ever been approved for waiver of standard cost-sharing policies. This waiver ultimately required the approval of both the OMB and the Secretary of the Army.

A review of cost-sharing provisions for some similar multiple-objective floodplain evacuation, river floodplain restoration, and flood damage reduction projects shows widely varying costs incurred by local entities, with some poorer communities paying substantially more than wealthier ones for similar project outputs. For example, the 45 percent-55 percent nonfederal-federal cost-sharing arrangement for a floodplain restoration project in the low-income community of North Richmond on Wildcat Creek, California, with a poverty rate of 64.5 percent (defined by average household income through the U.S. Census), can be compared to the 20 percent-80 percent cost-sharing arrangement in a similar floodplain restoration and acquisition project in the middle-income community of Littleton, Colorado (Shabman et al., 1997).

The National Wildlife Federation (1998) found that 1.6 percent of the communities enrolled in the National Flood Insurance Program (NFIP) account for "49.8 percent of all NFIP repetitive loss payments and 20 percent of all NFIP payments nationwide" (NWF, 1998. Emphasis in original quote). If the nation's flood damage reduction programs are to design responses which avoid the costs of future damages, it may make economic sense to directly address the issue of poverty in hazard-prone areas. Increasing cost-sharing for federally-assisted flood damage

reduction projects may have an unintended effect: preventing the Corps from setting the most cost-effective priorities of addressing chronic hazard issues in low-income areas, which may be responsible for the greatest portion of the national flood damages.

Poor communities are already at a relative disadvantage for federal flood protection projects because benefits of flood damage reduction are measured by property damage avoided. The same project controlling the same flood thus results in greater benefits if it protects a high-income neighborhood rather than a low-income neighborhood, even though damage to the poor area may be more devastating to affected residents. Charging a larger share of costs to local areas for such protection simply exacerbates the problem of alleviating flood damage in poor communities.

In order to eliminate any biases which may exist toward low-income people and areas, the Corps' cost-sharing criteria should be reviewed to determine how they affect a local sponsor's ability-to-pay. Close attention should be paid to identifying any systematic problems which may hamper the Corps' ability to help the poor address their water-related problems, especially floods.

As explained in Chapter 2, it is clear that federal cost-sharing criteria are intended to not only prevent biases against nonstructural projects, but also to provide incentives for their selection. To determine whether these federal arrangements are having their desired effects, they should be compared against local level results. Several case studies published between 1977 and 1997 identify a range of issues which describe barriers to the Corps' construction of nonstructural flood damage reduction projects (Field, 1977; Platt, 1979; U.S. Army Corps of Engineers, 1979; Chin, 1981; Kusler, 1982; Institute for Water Resources, 1983; Moore and Moore, 1989; Chao et al., 1997; Shabman et al., 1997). These case studies indicate that many of the barriers described in the 1970s and early 1980s seem to be present in the 1990s. These studies also demonstrate that nonstructural alternatives were considered in very different and complicated contexts, including differences in project costs, cost-sharing arrangements, benefit-cost analysis, planning methods, and technical biases of federal and local engineers.

The range of barriers to the selection of nonstructural alternatives identified by these authors included: project benefits were not adequately and fairly quantified and represented; problems in crediting fair values to project lands contributed by nonfederal sponsors; the counting of locally donated lands as federal project costs; fears of nonfederal sponsors over receiving timely reimbursements for land costs; confusion regarding which government program funding is considered a federal or nonfederal contribution; and difficulties of nonfederal sponsors in meeting land acquisition costs. While these were perceived to be problems by the authors of these reports, they would require closer examination to determine their relative merits.

Several of their concerns related to the calculation of benefits and costs, including inadequate benefits assigned to flood prone areas converted to urban parks, ecological protection afforded to threatened and endangered species, and other

objectives of federal programs. Furthermore, nonstructural (but not structural) projects must deduct the expenses of flood insurance premiums and deductibles from project benefits. A recent IWR study concluded that the benefits assigned to nonstructural flood damage projects which permanently remove structures from flood prone areas are inadequate: "The inability of the Corps to economically justify permanent evacuation projects under the P&G is due mainly to the guideline that the reduction of primary flood damages resulting from a permanent evacuation project is not to be counted as a project benefit" (Chao et al., 1997). This practice conflicts with FEMA's practice of determining benefits for acquisition and relocation projects (ibid.). Some cases point to the time period over which benefits and costs are annualized (50 years) as having favored the selection of structural over nonstructural measures. In some cases, it appeared that the calculation of benefits and costs for individual structures rather than on a community-wide basis was an impediment to relocating structures from flood prone areas.

This committee concluded that it was important to include the benefits of flood damages avoided in nonstructural project benefit-cost analysis, and that the risk of such damages was often not fully reflected in lower values of floodplain property. As Chao et al. (1997) concluded, "A general discount for floodplain location . . . does not exist". The committee recommends that these benefits be included in project benefit-cost analysis through a standardized framework and methods.

Regarding cost-sharing arrangements, these case studies revealed a class of older, authorized, and still active flood damage reduction projects that are not benefiting from several post-1986 legislative reforms. Box 2.1 described federal cost-sharing policies as representing a clear choice of project authorities, whether they are for structural, nonstructural, or restoration projects. However, Corps districts and nonfederal sponsors occasionally find they are compelled to abide by old authorities, rather than acquire project reauthorization (which is costly and time-consuming) under different planning categories that have better planning and funding policies for nonstructural projects. Under these circumstances, communities will tend to keep an existing, structural authority and minimize costs, keeping the nonfederal share to no more than 40%. The Napa River project (Box 4.2) represents an example of the design of a contemporary river and floodplain restoration project under an existing structural authority. In this case, the nonfederal sponsors are paying 50% of the costs for a mostly nonstructural project, and purchasing lands (without federal reimbursement) necessary to realize the project. If these land costs had been included in the project area and included in the benefit-cost analysis, the project would not have been economically justified.

While beyond the scope of this report to evaluate the validity and policy implications for all these issues described, the committee recommends a study be conducted (by the Corps or an independent group) to determine if any systematic biases exist within the Corps analysis against nonstructural flood damage reduction projects. A 1983 Corps symposium on nonstructural measures allowed Corps district-level personnel to present their views on similar issues (IWR, 1983). This symposium could be used as a model in which to investigate a representative sample of the Corps flood damage reduction projects. Reducing or removing any biases that may exist could ultimately lead to enhanced ecological processes in the nation's floodplains and a reduction of increasingly expensive disaster assistance payouts.

Damages from floods were estimated to have risen to more than $4 billion annually in the 1990s (NWF, 1998).

Although Congress failed to enact a Water Resources Development Act (WRDA) in 1998, it appears likely that a WRDA will be passed during the 106th Congress in 1999 or 2000. The centerpiece of this legislation (from the administration's position) is the "Riverine Ecosystem Restoration and Flood Hazard Mitigation Initiative", also known as "Challenge 21". As proposed, this initiative would expand the use of nonstructural flood hazard mitigation options to simultaneously achieve the purposes of flood damage reduction and restoration of the functions and values of riverine ecosystems. Challenge 21 is expected to build on existing programs and initiatives, using a watershed approach and including partnerships with other federal agencies. It is thus essential that the Corps address its inability to justify and recommend more nonstructural options. This may require changes to the Corps' planning guidance that relates to the computation of benefits of nonstructural flood damage reduction alternatives.

An assessment of the adequacy of the nation's water supply and demand under present and future conditions is needed to establish priorities for action in water planning, development, and conservation. Several water and related resource issues—such as floods, sedimentation, and navigation in the Upper Mississippi River, investments in ports in Gulf coast areas, public water supplies in California and the Northeast, Everglades restoration, protection of endangered species in the West, and protection and restoration of water quality in the Great Lakes, the Chesapeake Bay and other sensitive water bodies—continue to present management challenges. The last comprehensive assessment of resource conditions and needs was prepared by the WRC in 1978. The U.S. Geological Survey has provided useful information through its National Water Quality Assessment (NAWQA) program and the National Water Summary program (until it ceased publication several years ago), but neither of these sources would be considered a comprehensive assessment. The nation desperately needs a comprehensive assessment of its water resource systems to provide guidelines for present and future actions.

Some of the better information on current water resource conditions is now compiled from data collected after water-related disasters. For instance, the Interagency Floodplain Management Review Committee was established in January 1994 to investigate the causes and consequences of the 1993 Mississippi river floods. Disaster declarations under the 1988 Stafford Disaster Relief and Emergency Assistance Act offer another source of information about floods. Such information is useful but it comes only after disasters have occurred. In fact, not even the Stafford Act provides information about current vulnerabilities to drought, as droughts have not been the subject of disaster declarations. Following the national drought of 1988, the Corps conducted the National Study of Water Management During Drought (USACE, 1994), in which state governments were surveyed to identify the types of impacts experienced in each state. That effort provided scant assessment of national and regional risks of drought and few strategies for coping with drought.

The committee recommends that the Corps, in cooperation with state and other federal agencies, periodically prepare an overview of the status and trends of the nation's water and related land and ecological resources. Cooperation with other federal agencies is especially important. Emphasis should be upon those purposes for which the Corps and cooperating agencies are responsible, namely, flood damage reduction, hurricane damage protection, beach nourishment, aquatic ecological restoration, and navigation. The committee is mindful that national assessments under the auspices of the WRC were rich in detail, expensive to produce, and did not play a prominent role in the establishment of national water policies. The committee suggests development of reconnaissance-level assessments that focus on national and interstate needs relevant to federal policy making processes.