Economic Analysis Terms
Best Management Practices Terms


Avoided cost - A cost that would have been incurred under the without-project baseline, but is avoided by undertaking the proposed project option, can be counted as a benefit to the proposed project option. For source water protection options, common avoided costs are capital, and operations and maintenance costs associated with drinking water treatment.

Baseline (without-project baseline) - A baseline is the project or action would have been undertaken in order to accomplish the same primary goal as the proposed project option, if the proposed option was not pursued. For source water protection options, the baseline project is often an investment in expanded or new drinking water treatment facilities. After making sure that the baseline would truly have been undertaken if not for the source water protection project, the capital cost and operations and maintenance cost of the baseline option that is avoided can be counted as benefits for the source water protection project.

Benefit-cost analysis (BCA) - A technique that enables program evaluators to undertake structured comparative analyses of the benefits and costs of alternative approaches that achieve the same general outcome. It is widely used, and in some cases federally mandated, in evaluating complex projects that have substantial environmental and social impacts.

Benefits transfer - A method for placing a monetary value on a good or service that involves choosing appropriate value or range of values from the literature (i.e., from a peer reviewed journal article) where the resource being valued and the setting in the study are very similar to the resource and setting being considered in your project. With a good match between study sites, a dollar per unit (e.g. dollar per acre, or dollar per household) value from the transfer site can be used to value the same resource at the site in question.

Consumer surplus - The value from an economic good or an activity to a consumer beyond what must be paid to enjoy it. The value derived by a consumer (sometimes referred to as willingness to pay), above and beyond the price paid for a good or service.

Discount rate - The annual rate at which current-year values are preferred to future values is known as the discount rate. Discount rates are used to calculate the present value of future benefits and costs. Nominal discount rates generally correspond to interest rates observed markets. Real discount rates used in real analysis, subtracts out the expected long-term rate of inflation (which generally has been 3%).

Dollar year - In this tool, the space for entry of a Dollar Year is designed for entry of the year in which the estimate for the value of the benefit or cost was originally made. Enter the year the estimate was originally made in the Dollar Year space, and tool will automatically update the estimate’s value to current dollars using an index.

Environmental benefits and costs - Considers environmental impacts of a project. Examples of environmental benefits can include creation of new or improved wetlands, or improvement of habitat for aquatic species. An example of environmental cost is disruption to the environment during construction of the project.

Escalation rate - The rate at which a benefit or cost is expected to change into the future. Real escalation rates subtract out the expected rate of inflation (long-term average expected rate of inflation is often assumed to be approximately 3%). Nominal rates uses the full expected rate of change, including inflation.

Financial benefits and costs - Reflects the cash flow or avoided cash expenditures. An example of financial costs is the capital and operations and maintenance costs of the proposed source water protection project option. An example of a financial benefit is the avoided cost of alternative water treatment projects.

Life-cycle cost - The costs that occur over the full project lifetime. These can include capital costs, operations and maintenance costs, and periodic replacement costs that may occur during the useful life of a project.

Monetized benefit or cost - The assessment of a benefit or cost in dollar terms, either by applying a dollar value per physical unit of the benefit (e.g. dollars per acre of wetland) to multiply by the appropriate number of physical units of the resource being valued, or by simply providing a dollar value for the benefit or cost.

Net benefits - The benefits of a project option minus the costs. Often calculated as the present value of benefits minus the present value of costs.

Net present value - The sum over the planning horizon (project lifetime) of all net benefits (benefits minus costs) accruing to the project, calculated in present value terms. Net present value is the present value of benefits minus the present value of costs.

Nominal analysis - Economic analysis where inflation is included in the calculation (not subtracted out as in real analysis). Use a real discount rate and escalation rates when analyzing dollars in real terms, and a nominal discount rate and escalation rates when analyzing values in nominal terms.

Present value - The sum over the planning horizon (project lifetime) in today’s (discounted) dollars of a cost or benefit accruing to the project.

Project lifetime - The expected useful life of a project.

Qualitative benefits and costs - The assessment of costs and benefits without monetization. The rating scale in the tool is "+" for a positive effect on net benefits for the project, or "+ +" for a very significant positive effect on net benefits for the project. For costs, the rating scale is "- " when likely to decrease net benefits, or "- - " when likely to decrease net benefits significantly. U is used as a rating when the impact is uncertain. These ratings are included along with monetized benefits and costs in the result summary of benefits and costs for a project option.

Real analysis - Real analysis refers to economic analysis in constant (i.e., not inflated) dollars. Real analysis subtracts out the general rate of inflation. Use a real discount rate and escalation rates when analyzing the present value of future dollars in real terms, and a nominal discount rate and escalation rates when analyzing future values in nominal terms.

Social benefits and costs - Reflects the "social" impacts of a project. Examples of social benefits include the improved protection of public health, improved water supply reliability, or improved recreation opportunities. An example of a social cost is the loss of recreation opportunity associated with protecting a water supply.

Stakeholders - Stakeholders are an integral part of a project. They are the end-users or clients, the people from whom requirements will be drawn, the people who will influence the design and, ultimately, the people who will share the benefits and potentially the costs of your completed project.

Triple-bottom-line - An organizing framework from the literature on sustainability of organizations that recognizes that utilities and their communities have a responsibility not only to account for the financial bottom line, but also to evaluate environmental and social impact on the community. Thus, there are three bottom lines to evaluate - financial, environmental and social.

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Best management practice (BMP) - Methods that have been determined to be the most effective, practical means of preventing or reducing pollution from point and non-point sources.

Emergency response planning - Emergency response planning or contingency planning is the process of identifying potential threats to watersheds and formulating response scenarios. Emergency Response Plans include a set of "what ifs" scenarios about unforeseen events (failures of protective measures, accidents, or natural disasters) that can adversely impact source waters and how local agencies and government officials would respond to mitigate these adverse effects in a watershed.

Erosion control - Erosion control involves measures to prevent mobilization of sediments and associated contaminants into source waters. These events could potentially occur during construction activities or stormwater events. Land under development is particularly vulnerable to erosion during removal of vegetation, and excavation of soil leaves soil particles exposed and susceptible to transport by wind and water.

Good housekeeping practices - Good housekeeping practices involves promotion of efficient and safe handling of potentially hazardous materials (such as pesticides, fertilizers, cleaning solutions, paint products, automotive products, and swimming pool chemicals). Good housekeeping practices may also include using porous or modular paving for parking lots, storing of materials and equipment inside or under cover to eliminate or minimize exposure to precipitation, using dry cleaning techniques as opposed to wet techniques, minimizing landscape chemicals (e.g., pesticides, herbicide, and fertilizers), limiting equipment wash water discharges to stormwater drains, and limiting direct discharge of roof runoff to storm drains.

Grassed swales - Grassed (vegetated) swales are broad, shallow channels covered with dense vegetation on the bottom and side slopes. Grassed swales reduce runoff velocities and promote sedimentation of contaminants attached to particulates as well as infiltration.

Green roofs - Green roofs, also known as vegetative roof covers, eco-roofs, or nature roofs, are living, breathing, vegetative roof systems that help mitigate the effects of urbanization on water quality by filtering, absorbing, or detaining rainfall.

Infiltration basins - Infiltration basins are shallow impoundments that are designed to capture a specific volume of stormwater runoff, retain it, and allow it to infiltrate into the ground. They reduce the volume of runoff and associated contaminants from reaching surface waters. Infiltration basins provide removal of contaminants through filtration, adsorption, and biodegradation as water percolates through the underlying soil.

Infiltration trenches - Infiltration trenches are subsurface basins lined with filter fabric and filled with a rock matrix that capture, filter, and infiltrate stormwater runoff. Infiltration trenches remove stormwater contaminants through adsorption, precipitation, filtering, and biodegradation.

Land acquisition - Land acquisition involves the purchase of land, or of conservation easement, for preservation of the watershed. Land acquisition provides open space and precludes development of sensitive land in surface water source protection areas and groundwater protection areas.

Land management - Land management practices involve conducting activities in a responsible manner that reduces threats to watershed source waters. These practices potentially affect all land owners of agricultural, industrial, commercial, and private residential properties within a watershed.

Land use controls - Land use controls are local government measures (usually ordinances or zoning requirements) that define activities that are allowed in watersheds or their sub-basins. These controls are usually the result of local (e.g., county) land use planning efforts, and recognition by planners on how source waters within the watershed may be affected by various land uses.

Low impact development (LID) - Low Impact Development (LID) is a comprehensive land planning and engineering design approach with a goal of maintaining and/or enhancing the pre-development hydrologic regime of urban and developing watersheds. LID programs are usually governed by local regulations and permits requiring land owners in a watershed to implement LID practices in new development projects.

Landscape detention - Landscape detention (or bioretention) systems consist of low-lying vegetative areas underlain by sand reservoirs and underdrain systems. These systems use soils and plants to remove contaminants from stormwater runoff through physical and biodegradation processes.

Monitoring - Watershed water quality monitoring and assessment involves collecting and analyzing water quality data for the water source for characterization purposes. The complexity of the program will depend on the monitoring objectives, the number of sample points, the suite of constituents monitored, and the frequency of sample collection. In addition to water quality data, the utility may want to collect data on watershed hydrology (e.g., stream flow, lake level) and weather (precipitation, temperature).

Nonuctural BMPs - BMP options that do not require physical modifications. Nonuctural BMPs range from regulations and permits to public education.

Regulations and Permits - Regulations and permits issued under government regulatory programs can impose or mandate management practices that protect source waters in a watershed. Local regulations and permits can require owners of facilities in a watershed that can potentially endanger source waters to comply with standards for proper design, operation, or maintenance. State and federal regulatory programs may also impose management practices on potential sources of contamination in a watershed.

Road maintenance - Proper road maintenance includes measures that reduce the potential for sediments and associated chemicals to concentrate in runoff from roadways and be transported to source waters in a watershed. Target contaminants include sediments (turbidity) and attached inorganics and nutrients, and de-icing chemicals.

Porous pavement - Porous pavement is an infiltration system in which stormwater runoff infiltrates into the ground through a permeable layer of pavement, typically composed of concrete or brick blocks with porous openings or other stabilized permeable surface. Porous pavement systems direct runoff to an underground stone reservoir before gradually exfiltrating into the subsoil.

Public education - Public education programs involve the public and other watershed stakeholders to raise awareness of watershed protection concerns and to encourage everyday behavior that enhance watershed protection. A public education campaign can provide businesses, farmers, and households can help protect source waters in a watershed.

Sediment basins - Sedimentation basins (also called dry extended detention basins) are vegetated depressions that are dry except during and immediately after storm events. Sedimentation basins provide temporary storage of stormwater runoff, allowing particles and attached contaminants to settle.

Structural BMPs - BMP options that involve physical modifications that are generally designed to reduce water flow through an area and thus slow the movement of contaminants.

Stormwater ponds - Stormwater ponds are permanent pools of water, with excess capacity, that collects and treats a specified water volume. They are wet ponds that are typically deeper and contain less vegetation than stormwater wetlands. Contaminants are removed between storms through sedimentation, biodegradation, and chemical processes.

Stormwater wetlands - Stormwater wetlands are constructed wetland systems designed to mitigate stormwater quality and quantity impacts that occurs as the result of urbanization. They are shallow ponds that support growth of wetland vegetation such as rushes, willows, and reeds. Stormwater wetlands slow runoff flow, allowing sediments to settle, and provide uptake of nutrients. They are designed to drain within 48 hours.

Vegetated filter strips - Vegetated filter (or buffer) strips are bands of dense vegetation planted downstream of a runoff source, often bordering a surface water body. Filter strips reduce runoff velocities, thereby promoting settling of contaminants attached to sediments and allowing some subsurface infiltration. Contaminant removal occurs through adsorption and/or filtration by vegetation and soil, evapotranspiration, and infiltration.

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