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1 Airport stormwater management and its infrastructure are a critical component of safe avia- tion and landside operations. The prevention of flooding ensures that aircraft can safely taxi, take off, and land and that ground service equipment and other vehicles can support airside operations during all weather conditions. Flooding is managed for effective landside operations and passenger use of airport facilities. Properly designed and maintained stormwater manage- ment systems protect critical infrastructure from flood damage and prevent the degradation of downstream waters due to floods, erosion, and pollutant loadings. Given their unique opera- tional, regulatory, and safety requirements, airports have an opportunity to implement creative and effective stormwater control solutions. Because of the importance of stormwater infrastructure at airports, these projects are often necessary components of larger airport development projects. Frequently, stormwater infra- structure is needed for the airport to meet regulatory requirements. Airports may evaluate stormwater projects to identify the least-cost option to meet their regulatory needs and build those cost components into a larger cost analysis for the full project. This approach does not consider the full range of benefits that a stormwater project may have, and it may result in selec- tion of a stormwater project that does not provide the maximum possible value to the airport. Benefitâcost analysis (BCA, also sometimes referred to as costâbenefit analysis or CBA) can provide airport staff with a process they can use to evaluate potential stormwater infrastructure projects that are stand-alone projects or part of a larger project and identify the option that pro- vides the highest value in the long term. As airports expand, renovate, or replace their existing facilities, or invest in new infrastructure, facility managers need to systematically compare the benefits and costs over time of various alternative solutions. Ideally, a BCA evaluates the effect of a project on the triple bottom line (TBL), which includes the environmental and social impacts of a project in addition to the airportâs finances. Each new stormwater infrastructure project provides an opportunity for airports to select among design options and to incorporate additional stormwater considerations that may address long-term issues or improve the overall benefits realized for dollars expended. One consideration to note is sea level rise, which will mostly affect coastal airports rather than inland airports. Coastal airports should incorporate sea level rise into their analyses in addition to other stormwater considerations that may affect both inland and coastal airports (e.g., water quality). 1.1 Basics of BenefitâCost Analysis The basic approach to a BCA is relatively straightforward: benefits and costs are compared by year, and the projects with the highest net value (benefits minus costs) are compared (see Figure 1). The complexity of a BCA lies in the details of identifying and quantifying the benefits and costs and the choice of method for executing the analysis. C H A P T E R 1 Introduction
2 BenefitâCost Analyses Guidebook for Airport Stormwater The extent to which each airport can develop detailed and comprehensive inputs to a BCA will depend primarily on the airportâs available resources and access to data (e.g., monetary benefits and costs). A basic approach most likely will be used to anticipate approximate outcomes early in the planning process or when airports simply do not have access to the resources or data required for a rigorous analysis. Resources permitting, a complex analysis would incorporate well-researched and detailed inputs, and it is the preferred level of analysis for large-scale proj- ects that could have significant costs and wide-reaching benefits. BCA is most effective when the project objectives are clear and when the analysis can serve as a supplemental decision-making tool. Project objectives can include a wide range of goals such as: â¢ Increasing passenger safety and the safety of aircraft operations, â¢ Decreasing stormwater fees, â¢ Improving operations during inclement weather, and â¢ Improving the airportâs environmental stewardship. A BCA can be used to evaluate a single project to determine whether it is worth pursuing or to evaluate multiple projects at the same time to determine which best meets the project objectives. All the alternatives under consideration should be well defined to ensure that the BCA accurately assesses the relative merits of each in comparison to how well they can achieve the objectives. There are four basic steps for a BCA, and these are briefly explained in Figure 2. 1.1.1 Introduction to Basic BCA Concepts BCA is a common method used to compare the overall value of two or more alternative investments over time. There are three critical elements for a basic BCA: â¢ Costs: A typical project requires an up-front investment plus regularly recurring costs each year. These initial and recurring costs would divert funds from other potentially profitable projects or investments and therefore would be considered âopportunity costsâ of the project. 0 1 2 3 4 5 Year 1 Year 2 Year 3 Year 4 Project 1 Cost Benefits projects with the highest net valueâ benefits minus costsâare identified 0 1 2 3 4 5 Year 1 Year 2 Year 3 Year 4 Project 2 Cost Benefits project selected benefits and costs are compared by year Figure 1. Basic BCA approach.
Introduction 3 These opportunity costs should be included in a BCA. The monetary value of costs such as the cost of labor and capital can often be measured. Other costs (e.g., reduction in water quality) may be difficult to measure in monetary terms. â¢ Benefits: Each project may produce financial benefits (e.g., cost savings or increased income) that can be expressed in monetary terms; these benefits may result from project goals such as increased capacity or greater efficiency (e.g., energy efficiency, stormwater management efficiency, operational efficiency, and timing efficiency). Projects also may generate benefits that are difficult to monetize. A BCA takes into account both the immediate and future ben- efits of a project. These benefits may vary year by year and usually extend over the term of the analysis. â¢ Time: Costs are incurred and benefits are realized over the life of a project. Therefore, the BCA must account for the time value of money. Costs incurred and benefits received today are worth more than the same amount of money to be paid or received in the future, all else being equal. This is due, in part, to opportunities for investment. If the money is invested today, its value could be greater in the future. Future benefits and costs must be discounted to compare them to benefits and costs incurred in the present. Figure 2. BCA steps.
4 BenefitâCost Analyses Guidebook for Airport Stormwater The monetary value of benefits and costs are estimated for each year of a project over a set time period known as the âterm of the analysis.â The term of the analysis usually corresponds to the expected useful life of an infrastructure improvement. The comparison of benefits and costs can be done with one of several metrics. The applicability and usefulness of these metrics to a storm- water BCA are addressed in Chapter 6 and Appendix A; see these sec- tions for additional discussion, examples, and formulas on how to use these metrics. â¢ Net present value (NPV) is the present value of the difference between benefits and costs over the life of the project. Benefits and costs are dis- counted to represent the value today of a given amount of money to be paid or received now and in the future. The project with the largest NPV has the highest value and is the one that should be selected when using this measure. â¢ Benefit/cost ratio (B/C) is calculated by dividing the present value of benefits by the present value of costs. This ratio provides a measure of the profitability of a project. The project with the highest B/C returns the most benefit per dollar of investment. Other similar ratios can be developed to measure the benefits against costs in terms of a desired outcome; this is sometimes referred to as âcost-effectiveness.â â¢ Payback period is the length of time it takes to recoup the initial investment as benefits accrue over time. There are many ways this can be measured, such as by the year in which the cumulative ben- efits exceed the costs. An airport may have a defined period (e.g., 1 year) in which costs must be recouped to meet cash-flow or financ- ing requirements. â¢ Internal rate of return (IRR) is a discount rate that would make the NPV of a project equal zero. As with the payback period, this dis- count rate assumes the project involves an up-front investment and that the costs are recovered over time. More valuable projects have higher IRRs, and a project with an IRR that is greater than the air- portâs cost of capital should be considered. The NPV is the best measure of the overall value of the project, but the other metrics often are useful for airports. Other measures can be used to compare alternatives when monetary measures of benefits are not available. An airport should consider its priorities and limitations when evaluating the results of a BCA. The different measures of cost- effectiveness will help the airport gain a deeper understanding of the proj- ect options. Nevertheless, NPV is the best measure of a projectâs value. Projects, specifically stormwater management projects, may involve benefits and costs that are difficult to measure in monetary terms. Qualitative descriptions of these benefits and costs may be included in the analysis to capture the full effect of a project. Additional detail on how to identify and evaluate qualitative elements for stormwater projects is included in Chapters 4 and 5 and Appendices D, E, and F. 1.1.2 Incorporating the Triple Bottom Line A traditional BCA of an airport stormwater project would typically assess only items that can be assigned a monetary value and are related to the financial aspects of the project (e.g., capital Term of the Analysis Example If a stormwater retrofit project has an expected 20-year life, then the term of the analysis would be 20 years. Cost-Effectiveness Example Two goals of a stormwater project may be to capture water for reuse and to reduce discharges to surface water. In this case, the ratio of cost to gallons of water retained (i.e., cost per million gallons of water retained) is a measure of cost-effectiveness. Using Different Metric Example If the project with the highest NPV has a payback period that is longer than the airport can accept, the airport may want to look into financing options to reduce the payback period of the project with the highest value.
Introduction 5 and operating costs). A more holistic approach to BCA also incorpo- rates social and environmental benefits and costs along with the finan- cial considerations to assess the projectâs impact on the TBL. The TBL typically consists of three âaccountsâ: financial, social, and environ- mental (see Figure 3). Incorporating the TBL into a BCA ensures that the total benefits and costs of a project to both the airport and society are included. Using this TBL approach may identify a project design with higher initial design or construction costs that has larger environmental and social benefits than an alternative design that is cheaper to construct. Although some of the environmental and social benefits may not directly affect the airport, they are real benefits and costs of the project and should be considered when comparing alternatives. In assessing the TBL, social and environmental benefits may have monetary values, but some can be difficult to quantify. In these cases, benefits and costs may need to be expressed qualitatively or through nonmonetary quantitative metrics. (These techniques are discussed in more detail in Chapter 6 and Appendix A.) Examples of Monetary and Nonmonetary Benefits A newly constructed stormwater management system may decrease site runoff, reducing the discharge of pollutants to receiving waters. This can produce a monetary benefit of reducing the risk of compliance-related fines. The project may also have less quantifiable but valuable social and environmental benefits, such as fostering better relationships with the surrounding community and protecting aquatic life in local streams. Externalities and the TBL Externalities are effects of a project (costs or benefits) that are not reflected in the airportâs financial account. For example, an airport expansion project may draw more travelers and increase traffic in the proximal community. More traffic can cost the community and local businesses in terms of lost time and fuel. The increased traffic also can lead to benefits in terms of increased business. While these are clear consequences of the project, the benefits and costs are borne by the community and environment, not the airport. These are referred to as âexternalities.â The fundamental advantage of using a TBL approach in a BCA is to account for these externalities and evaluate the project as it affects the airport, the environment, and the larger community. Figure 3. TBL accounts.
6 BenefitâCost Analyses Guidebook for Airport Stormwater This approach can account for externalities (benefits and costs not borne by the airport) that the traditional BCA method does not. Although the results of a traditional BCA may account for social and environmental effects as part of an overall discussion, incorporating the TBL into a BCA makes the process explicit and systematic by assigning values and formally including them in the analysis. 1.2 Drivers for Airport Stormwater Projects Stormwater projects are an essential component of many airport infrastructure projects. Airport stormwater infrastructure projects may be prompted by a number of needs that may include drainage associated with expansion, compliance with National Pollutant Discharge Elimination System (NPDES) permits, and aging or failing stormwater system components. Stormwater projects may also be driven by the anticipation of stricter future federal, state, or local regulatory requirements. ACRP has developed guidance on stormwater best management practices (BMPs) entitled Green Stormwater Infrastructure (Jolley et al., 2017). The choice of the final stormwater project design will be influenced by several drivers, such as: â¢ Performance (to meet regulatory requirements or sustainability goals), â¢ FAA guidance and requirements, â¢ Planning for future development (e.g., drainage for future expansion), â¢ Sustainability goals, and â¢ Local regulations regarding low-impact development (LID) and general interest in good steward ship with the local community. A comprehensive BCA would incorporate an evaluation of how well the project addresses these drivers. 1.3 Guidebook Organization This guidebook is organized into this and six remaining chapters that broadly follow the BCA process introduced earlier in this section. The four steps (Figure 4) of a BCA include planning the analysis (Chapters 2 and 3), measuring the benefits and costs (Chapters 4 and 5), conducting an economic analysis (Chapter 6), and making the business case (Chapter 7). The icons in Figure 4 representing each step will be used to help orient the reader. Planning the analysis Measuring the benefits and costs Conducting an economic analysis Making the business case Figure 4. Document icons.
Introduction 7 Additional reference materials can be found in the reference section, which also includes citations for several tools airports may be able to use to identify and monetize costs in a BCA. Appendix A provides a more detailed primer on BCA methods and metrics. Appendix B summa- rizes FAA requirements for conducting a BCA. Appendix C summarizes stormwater regulations and FAA guidance pertaining to stormwater infrastructure at airports. Appendix D summarizes potential benefits and costs associated with green and conventional stormwater infrastructure BMPs. Appendix E identifies some factors that can affect costs associated with stormwater infra- structure at airports. And finally, Appendix F provides a list of tools and other BCA resources (such as software, checklists, templates, and guides) airports can use when organizing and con- ducting a BCA. 1.3.1 Decision Flowchart As previously identified, the four steps of a BCA are planning the analysis, measuring the ben- efits and costs, conducting the economic analysis, and making the business case. Figure 5 shows See Chapters 2 and 3 See Chapters 4 and 5 See Chapter 6 See Chapter 7 Figure 5. BCA checklist.
8 BenefitâCost Analyses Guidebook for Airport Stormwater a checklist for each step of the BCA process and a corresponding section of the guidebook where more information can be found regarding each step. 1.4 Introduction to Bayside Airport Our fictitious airport is Bayside Airport (BAY), which is a large U.S. hub airport in a metro- politan area in the mid-Atlantic. Its total land area is 750 acres, 250 of which are impervious, and it is situated on the sandy shore of a large bay. This shoreline is a regional attraction for beach- goers and coastal recreationists. The airport receives an average of 50 inches of rainfall each year. Due to concerns over excessive use of the regional aquifer, the City of Bayside now purchases its water from a regional supplier whose source water is in an area that is vulnerable to drought. A few large storm events occur each year. BAYâs existing stormwater infrastructure near the terminals includes one conventional dry detention basin and three conventional swales, all of which discharge to the bay. Stormwater management is driven primarily by BAYâs regulatory requirements, NPDES permit, and concern for discharge into the bay; the airport is aware of public concerns about increasing overall pollution of the bay, including the effects of copper and zinc in runoff on aquatic life. Currently, the airport is in compliance with its NPDES permit, but more frequent and larger storms are making it increasingly difficult to remain in compliance. BAY recently developed an airport-wide water stewardship and sustainability plan, with a focus on Leadership in Energy and Environmental Design (LEED) and other sustainable design goals, as well as minimizing runoff pollution to local streams and the bay. The sustainability plan was driven in part by BAYâs increased attention to the effects of climate change at the airport, particularly the change in storm intensity and more frequent and severe drought. Given BAYâs location, concern about the effects of sea level rise at the airport has increased in recent years. As a result of the rapidly growing nearby population, BAY has initiated plans to expand an existing terminal and adjacent parking lot to accommodate increased demand. (The airfield has sufficient capacity to handle the increase.) The new construction will add an additional 25 acres of impervious surface to the airportâs existing footprint; expanding the terminal will increase the building footprint by 15 acres, and parking areas will be increased by 10 acres.