THE ECONOMICS OF FEDERAL NAVIGATION PROJECTS: TWO CASES IN SOUTHERN COASTAL MAINE

Economic, engineering, and political factors jointly determine the success or failure of publicly funded inlet stabilization projects. Of these three factors, economics are critical in determining whether projects are undertaken at all, and therefore deserve special consideration. Federal authorization requires that the predicted economic benefit of a project exceed its cost, meaning a benefit to cost ratio greater than one. Once a project has begun, it is difficult to stop, so accurate economic projections are very important. Projects authorized with a benefit to cost ratio close to one risk generating economic losses over their lifetime due to the uncertainty of dynamic coastal settings. Case study analysis detailing the economic histories of the Webhannet River Project in Wells, Maine, and the Saco River Project in Saco, Maine, highlights common patterns responsible for problems faced by these types of projects. Both cases were based on low net-benefit projections. A comparison of historical U.S. Army Corps benefit and cost projections with current numbers reveals that those benefits were never realized. Unanticipated engineering problems required several alterations to the project designs, driving up costs. Attempts to generate greater benefits by increasing the size and scope of the projects resulted in even greater expense. Indirect costs accrued over time from loss of homes and habitat on adjacent land due to the presence of jetties. The full projected benefits of these projects were never realized due to unanticipated socioeconomic factors and failures to deliver functioning structures as originally designed. In the short term, these case studies reinforce the need for accurate economic data, including non-market values of natural resources, on which to base informed decisions. They also reveal that a benefit to cost requirement of just greater than one leaves little room for error; a higher threshold is needed. In the long term, planners need to address the limitations of traditional cost-benefit analyses that assume a “now or never” approach that may not accurately reflect the reality of the situation. Factors that deserve consideration include potential loss of natural assets, the uncertainty of benefits and costs, and the irreversible nature of these projects.