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Eugene -Springfield Area Natural Hazards Mitigation Plan 6. Appendices The approaches used to identify the costs and benefits associated with natural hazard mitigation strategies, measures, or projects fall into three general categories: benefit/cost analysis, cost-effectiveness analysis and the STAPLE/E approach. The distinction between the three methods is outlined below: Benefit/Cost Analysis Benefit/cost analysis is a key mechanism used by the state Office of Emergency Management (OEM), the Federal Emergency Management Agency (FEMA), and other state and federal agencies in evaluating hazard mitigation projects, and is required by the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Public Law 93- 288, as amended. Benefit/cost analysis is used in natural hazards mitigation to show if the benefits to life and property protected through mitigation efforts exceed the cost of the mitigation activity. Conducting benefit/cost analysis for a mitigation activity can assist communities in determining whether a project is worth undertaking now, in order to avoid disaster -related damages later. Benefit/cost analysis is based on calculating the frequency and severity of a hazard, avoiding future damages, and risk. In benefit/cost analysis, all costs and benefits are evaluated in terms of dollars, and a net benefit/cost ratio is computed to determine whether a project should be implemented. A project must have a benefit/cost ratio greater than 1 (i.e., the net benefits will exceed the net costs) to be eligible for FEMA funding. Cost -Effectiveness Analysis Cost-effectiveness analysis evaluates how best to spend a given amount of money to achieve a specific goal. This type of analysis, however, does not necessarily measure costs and benefits in terms of dollars. Determining the economic feasibility of mitigating natural hazards can also be organized according to the perspective of those with an economic interest in the outcome. Hence, economic analysis approaches are covered for both public and private sectors as follows. Investing in Public Sector Mitigation Activities Evaluating mitigation strategies in the public sector is complicated because it involves estimating all the economic benefits and costs regardless of who realizes them, and potentially to a large number of people and economic entities. Some benefits cannot be evaluated monetarily, but still affect the public in profound ways. Economists have developed methods to evaluate the economic feasibility of public decisions which involve a diverse set of beneficiaries and non -market benefits. Investing in Private Sector Mitigation Activities 6-120 January 2020