Who doesn’t love getting out on the water with a boat on a hot summer day? We’re lucky in Buffalo to live in a region where we can find water activities every direction we go. The U.S. Army Corps of Engineers (USACE) is the Nation’s number one federal provider of outdoor recreation and has a focus on public safety. As such, it is crucial that we work with our local partners to maintain the safety of our recreational harbors.
I was recently on the kickoff meeting for the Federal Interest Determination (FID) of the Sturgeon Point small boat harbor. This is the second small boat harbor project I have worked on this year, and USACE Buffalo District currently has another small boat harbor project that is finishing its feasibility study.
The primary role of an economist on civil works projects, as identified in the economic and environmental principles and guidelines, is to evaluate the benefits of the project. Evaluate, as defined by Marriam-Webster, is “to determine the significance, worth, or condition of usually by careful appraisal and study.” This definition differs from justify, which is “to prove or show to be just, right, reasonable.” As an economist, we must be unbiased when conducting an evaluation, so that the taxpayer’s dollar is used appropriately.
The problem with small boat harbor projects is that they are difficult to justify. The projects need to show that the goods and services at the harbor contribute to the national output. However, the goods and services at many small boat harbors, particularly recreational harbors, can be transferred to other harbors, which make the benefits regional, instead of national. Additionally, a policy compliant economically justified project must have sufficient non-recreational National Economic Development (NED) benefits. ER 1105-2-100 states: “Civil Works Funds may normally support recreational development where the level of commercial navigation benefits is equal to or exceeds 50 percent of the average annual project cost”. Steve Stalikas is an economist who recently worked on a CAP 107 project for Mentor Harbor. “Achieving the non-recreational NED benefit threshold is often a challenge for small boat harbors projects that do not handle commercial tonnage or have significant charter boat operations. Therefore, it’s very important to communicate planning policies with stakeholders early in the study process”.
These small boat harbors have a promising future. In January 2021, the Assistant Secretary of the Army (Civil Works) released a memorandum requiring all civil works projects to evaluate all four benefit accounts. The four benefit accounts are: National Economic Development (NED), Regional Economic Development (RED), Other Social Effects (OSE), and Environmental Quality (EQ).
- NED benefits are changes in the national output of goods and services. Historically, NED benefits are the primary evaluation for projects.
- RED benefits are changes in the regional output of income, employment and output.
- OSE benefits are effects that are not reflected in the other three accounts. Typical OSE benefits that are identified include life safety, emissions and social vulnerability.
- EQ benefits are non-monetary effects on natural and cultural resources.
Although there has not yet been any definitive guidance on how to use all four benefit accounts to justify the projects, there is anticipation that guidance will be released in the near future. Currently, teams that want to justify a project using comprehensive benefits must submit an NED waiver, which requires approval from Headquarters. While recreational harbors are difficult to justify on an NED basis, they often provide an abundance of recreational benefits, and often provide refuge for transient vessels during storms.
From an economic perspective, we are currently limited in our ability to justify, and therefore, implement projects at small-boat harbors. It would be unfair to the Nation’s taxpayers to utilize money on a project that could otherwise be used on a project that provides more output to the nation. However, in the near future, it is likely that we will be able to support our recreational harbors in a way that is policy compliant.