Floodplain Buyouts and Municipal Finance

Abstract

Floodplain buyouts—the acquisition and removal of flood-damaged homes—have become increasingly important in federal disaster policy. However, there has been little research on how buyouts fiscally impact local governments. Buyouts can reduce future disaster-relief costs, create valuable open space, and reduce maintenance costs where urban infrastructure can be permanently removed. Conversely, buyouts can reduce property tax revenues and saddle municipalities with new buyout property maintenance costs. What are the range of potential fiscal impacts of buyouts on municipalities? This paper seeks to address this question while establishing a user-friendly process for estimating accurate impact ranges. The authors assessed the fiscal impacts of buyouts in eight North Carolina case-study communities, developing and testing a scenario-driven spreadsheet model to explore how community characteristics, policies, and strategies for buyout program design can affect the fiscal impacts of a buyout over time. It was discovered that fiscal impacts depend on at least three key factors, including (1) the spatial distribution of the acquired properties, (2) whether buyout participants relocate within their community, and (3) the management and maintenance regimes of acquired properties.