PHRC Report #14: Analysis of Direct and Indirect Impact Costs Attributed to the Wetlands Regulatory Programs of the Local, State and Federal Governments of the United States

Date: August 1991

Author(s): J. A. Angell, J. H. Willenbrock

BACKGROUND:

The Army Corps of Engineers Wetlands Regulatory Document lists 12 general policies that are investigated during the permit review process. The first of these policies considers Public Interest. The benefits of a certain project are compared to the detriments that could occur due to the loss of the wetlands. The benefits and detriments evaluation is almost always framed in social and ecological terms.

While these factors should be considered because of their effect on man and the environment, one issue related to Public Interest that is often overlooked is the magnitude of the Direct and Indirect Costs associated with complying with these regulations. Many subdivision developers who discover wetlands related to a project do not abandon the project. For a subdivision developer, all permitting fees, wetland relocation costs, and delay costs are typically transferred directly to each lot and each house sold. Thus, the ultimate burden for these additional costs is typically borne by the Members of the Public who purchase the lots.

Additionally, many developers do not currently estimate the costs and time associated with wetlands. On numerous occasions, unnecessary development delays are experienced as a result of inadequate prior planning. The permit review process is lengthy and the construction of new wetlands (should this be required) may take even longer.

The objectives of this research project, therefore, were to collect, organize and evaluate these wetlands related costs for 6 residential subdivision projects that had experienced wetlands difficulties. It was felt that a recognition of the anticipated "wetlands markup" and increased project duration would:

     

  1. Benefit developers during the "financial feasibility" stage of their projects.

Highlight a project's reduced "benefit" and increased "detriment" to the community due to increased costs/reduced services.

Result in more effective planning and the consideration of alternative strategies by the developer.

SUMMARY OF RESULTS

Subdivision developers will be interested in the definitions and terminology related to Wetlands that are provided. Flow chart representations of the roles of the Army Corps of Engineers and the Pennsylvania Department of Environmental Resources related to: (1) the typical township subdivision approval process and (2) the wetland permit application review process, also provide important information to a developer who anticipates a wetlands condition on one of his/her subdivision projects.

An analysis of the examined projects resulted in the creation of a "Common Cost Factor Framework" for Wetlands affected subdivision developments. This framework included the following cost factors: (1) Development of an "Identification and Delineation" report, (2) Redesign of the original project, (3) Processing of the permit (4) Development of a Mitigation Plan and Report, (5) Mitigation site construction, (5) The Developer's overhead expenses, (7) Loss of land use and (8) Extenuating circumstances. Each project was analyzed to determine the costs associated with each factor and the information was presented in a summarized fashion.

In addition to the above results it should be noted that:

     

  1. All of the projects examined experienced wetlands related expenditures. For five of the projects these expenditures were between 3% and 7% of the original project costs.

Permit processing periods of one year or more are not unusual.

The impacts on a particular subdivision development project vary according to the stage in the project during which the wetlands are discovered.

If the wetlands are discovered prior to the completion of design and assumption of the construction loan, or after the majority of the construction was completed, the costs were slightly smaller since additional interest was not paid on the construction loan.

Those projects that discovered wetlands during the construction stage experienced the largest increase in costs as a result of the higher interest payments made.

It would appear that developers would be better protected by more competent engineering firms that are knowledgeable in wetlands identification during the design phase rather than those that may only identify wetlands during the construction stage.

WHAT IT MEANS TO YOU:

A subdivision developer using the information presented in the report should be able to intelligently plan for wetland affected projects so that the financial security of his/her firm is not adversely affected.

WHAT'S NEXT?

The results in this report will be of assistance to the various parties involved in addressing the changes required in the current regulations and legislation so that a reasonable balance is created between the interests of land developers and the interest of environmentalists.