The Preparedness Payoff: Sacramento

A June 2024 report, The Preparedness Payoff: The Economic Benefits of Investing in Climate Resilience, from the U.S. Chamber of Commerce, Allstate, and the U.S. Chamber of Commerce Foundation showed that investments in resilience and preparedness can substantially reduce the economic costs associated with disasters. Through modeling 25 disaster scenarios in cities across the country, it found that on average each $1 of investment in resilience and disaster preparedness reduces a community's economic costs, damages, and cleanup costs after an event by $13.

The research prompts a deeper dive into the economic payoff for certain areas of the United States that are particularly disaster prone, such as Sacramento, California. Using the methodology from the report above, three different disaster scenarios were modeled for Sacramento (drought, major storm and mudslide, and wildfire) to determine the economic cost savings for the region from investments in resilience and preparedness.

The research that follows finds that in Sacramento, each $1 of investment in resilience and disaster preparedness reduces a community's economic costs alone by $4.80. This is the average ratio of the three scenarios modeled below. When also considering the cost savings from damages and cleanup (average of $6 in savings), each $1 invested saves $10.80 in economic savings, damages and cleanup.

• $4.80+$6=$10.80

  Amount saved in economic impact, damages, and cleanup costs for every $1 invested in resilience in Sacramento

It's important to note that the ratio depends on a variety of factors: size of the event, the investment needed to halve the damage from that event, and the resulting economic impact of the disaster. Given these various factors, different disasters in different locations will have differing ratios. Events in areas with larger economies will see larger economic costs and therefore higher ratios for a given amount of investment in sustainability.

The climate threat in Sacramento

Sacramento's unique geography contributes to the region's significant challenges from climate disasters like drought, mudslides, and wildfires. The region is experiencing more frequent and severe droughts, which strain water resources, agriculture, and the local economy.

Wildfires have become more intense and widespread due to higher temperatures and prolonged dry periods. Post-wildfire landscapes are particularly vulnerable to mudslides. The loss of vegetation from fires leaves soil exposed and more prone to erosion during heavy rains, leading to destructive mudslides.

The Sacramento region has faced steep costs due to the emerging cycle of drought, increased wildfires, and extreme rainfall. For example:

• California has endured five of the largest wildfires in state history over the past decade, resulting in $25 billion in annual damages.

• Sacramento ranks second in flood risk nationwide. Recent atmospheric rivers (narrow corridors of concentrated moisture in the atmosphere that can cause floods and mudslides) have caused hundreds of millions of dollars in damages.

• Extreme heat days in Sacramento have tripled since the 1980s. These events have stressed our power grid, affected public health, and disrupted critical operations.

• Persistent droughts have devastated California's agricultural output, leading to billions in economic losses statewide. For Sacramento, where agriculture employs over 20% of the regional workforce, the impacts are especially severe.

Each scenario modeled below highlights the jobs saved, workforce preserved, and economic savings that would come from investing up-front in resilience and disaster preparedness programs and resources.

There are myriad efforts underway to mitigate these impacts in the Sacramento region including improved water management, forest management practices, and urban planning to reduce heat exposure and flood risks. For example, the Sacramento District of the US Army Corps of Engineers (USACE) is working to improve the region's flood risk management with levee improvements and flood control projects along the Sacramento and American Rivers.

It is vital that community members, small business owners and decision makers at every level have a firm grasp of how such investments can substantially reduce the economic costs of disasters.

A drought in the Sacramento area

A drought hitting the Sacramento, California area causing $1 billion in damage would result in 9,700 job losses and about 2,300 workers leaving the labor force. Approximately 3,400 people would move away from the area. The costs would likely total over $1.2 billion in lost production and $722 million in lost income for residents while the area recovers.

Damage Inflicted: $1 billion

The same drought striking the area after $83 million was invested in resilience and preparedness would likely save almost 4,900 local jobs. That investment would also prevent over 1,950 people from leaving the area and almost 1,300 from leaving the labor force. It would also preserve almost $619 million of local GDP and approximately $369 million of locally generated income.

For this type of drought scenario in Sacramento, each $1 invested in disaster preparation saves $7.50 in economic costs in addition to the $6 of known savings for damages and cleanup.

A major storm with subsequent mudslides in the Sacramento area

A major storm striking the Sacramento, California area causing $1 billion in damage would result in 5,300 job losses and about 1,200 workers leaving the labor force. Approximately 1,900 people would move away from the area. The costs would likely total about $659 million in lost production and $396 million in lost income for residents while the area recovers.

Damage Inflicted: $1 billion

The same storm striking the area after $83 million was invested in resilience and preparedness would likely save almost 2,700 local jobs. That investment would also prevent almost 1,200 people from leaving the area and over 760 from leaving the labor force. It would also preserve $343 million of local GDP and approximately $206 million of locally generated income.

For this type of major storm and mudslide scenario in Sacramento, each $1 invested in disaster preparation saves $4.10 in economic costs in addition to the $6 of known savings for damages and cleanup.

A wildfire in the Sacramento area

A wildfire hitting the Sacramento, California area causing $3.4 billion in damage would result in 12,000 job losses and about 2,800 workers leaving the labor force. Approximately 4,200 people would move away from the area. The costs would likely total nearly $1.5 million in lost production and $902,000 in lost income for residents while the area recovers.

Damage Inflicted: $3.4 billion

The same wildfire striking the area after $283 million was invested in resilience and preparedness (enough to cut the damages in half) would likely save over 6,000 local jobs. That investment would also prevent almost nearly 3,000 people from leaving the area and over 900 people from leaving the labor force. It would also preserve $794 million of local GDP and approximately $478 million of locally generated income.

For this wildfire scenario in Sacramento, each $1 invested in disaster preparation saves $2.80 in economic costs in addition to the $6 of known savings for damages and cleanup.

For a detailed methodology, download The Preparedness Payoff report found here.

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