Gays Mills Loss Avoidance Study
Statistical Results
A Loss Avoidance Study (LAS) was conducted in 2018 on the 5 Gays Mills flood events that occurred from 2001-2017. Using a FEMA Flood Acquisition Loss Avoidance Calculator, this study found an estimated 277% return on investment (ROI) with 6 million dollars in losses avoided. In October 2020, the study was updated to include the 2018 flood event. When combined with the results of the original study, return on investment totals 533%, with over 17 million dollars in losses avoided.
- Note: this study accounted for inflation in calculating dollar values. All dollar values discussed here have been adjusted to 2018, the year of the latest flood event studied.
A statistical analysis was conducted to identify variables that may have a significant relationship with a project’s return on investment.
Statistical Variables
The chart below lists the variables analyzed in this study.
Return on investment was the dependent variable in this analysis. The six independent variables were used to calculate losses avoided and included number of building stories, foundation type, total square footage, cost per square foot, first floor elevation, and distance from the Kickapoo river.
Property Type Findings
After calculating total return on investment separately between commercial and residential properties, commercial properties were found to have a much higher return on investment. This information could be useful in deciding which properties to prioritize for future acquisition projects in Gays Mills.
The map below compares return on investment between commercial and residential properties.
Ordinary Least Squares (OLS) Regression
The Ordinary Least Squares (OLS) linear regression model in ArcMap was used during the study update to analyze the combined results of all flood events. Only the 29 residential properties were included in this analysis because different variables were evaluated in the Loss Avoidance Calculator for commercial properties compared with residential properties. The following tables detail the OLS analysis.
Both number of stories (STORIES_1) and first floor elevation (FFE_1) and were statistically significant with p-values of 0.005745 and 0.000293 respectively.
The adjusted R-squared value of 0.62 indicates that 62% of the variation in return in investment is explained by the model.
The standardized regression coefficients for number of stories and first floor elevation were -0.41 and -0.57 respectively. This indicates a stronger relationship between first floor elevation and return on investment than the relationship between number of stories and return on investment.
This map further illustrates the statistically significant relationship between number of stories and return on investment. Properties with lower numbers of stories have the highest returns on investment while those with two stories have some of the lowest returns.
At left, properties with lower first floor elevations can generally be seen to have higher returns on investment. Properties with highest first floor elevation generally have the lowest returns. This may be because lower properties are likely to experience more flooding and damage than higher properties.
Property Breakdown
The graphic below displays the total return on investment values for each property after the August 2018 flood event. All but five properties have so far shown a positive return on investment. The commercial properties (shown in blue) in particular have extremely high returns.
Overall, these results show that the acquisition projects completed in Gays Mills were well worth the investment initially put into purchasing and demolishing these structures. The 533% return on investment accounts for the losses avoided by 6 major flood events. In the future, countless events equally or potentially more severe will result in even greater returns.
Due to their influence on return on investment, factors such as type of structure, first floor elevation, and number of stories may be helpful to consider when choosing properties for future acquisition projects.
