Wildfire impact on business and economy

December 8, 2017

INTRODUCTION

As wildfires are growing in scale and duration, and increasing numbers of communities are affected, we need a clearer understanding of how wildfires affect economies and communities. Wildland fire impacts are often described in terms of lives threatened, structures and homes lost or damaged, overall suppression costs, and damage to the natural resource base on which many rural communities rely. This fact sheet shares results from two studies to illustrate economic impacts that reach beyond the primary indicators of suppression costs and homes lost. This information can help public officials, community leaders, and local citizens understand the larger wildfire impacts on economies and society

 

ECONOMIC IMPACTS OF WILDFIRE

Wildfires can have both positive and negative effects on local economies. Positive effects come from economic activity generated in the community during fire suppression and post-fire rebuilding. These may include forestry support work, such as building fire lines and performing other defenses, or providing firefighting teams with food, ice, and amenities such as temporary shelters and washing machines.

However, local economies only experience positive effects if fire suppression spending and contracting is done locally. In addition, future benefits are only possible if the fire stimulates, rather than stops, economic development efforts associated with recovery and forest restoration. Among other negative economic effects for communities, wildfires can burn timber, make recreation and tourism unappealing, and affect agricultural production. Local communities often become concerned about the effects of smoke on health and safety, as well. Depending on the severity and location of a wildfire, post-disaster recovery can come with a considerable price tag. Factors that affect state and local budgets in the long-term include:

 · Replacement of lost facilities and associated infrastructure

· Watershed and water quality mitigation

· Sensitive species and habitat restoration.

 

STATE BUDGET IMPACT

 States have the obligation to ensure public safety and fire protection—a task accomplished through the combined efforts of state, county, and local agencies. When budgets are cut, the government’s responsibilities for wildfire management generally remain the same. The short-term budget impact to the state includes costs for fire suppression, staff, equipment, supplies, transportation and mobilization of those fighting the fire. In response to large wildfires, the state often incurs additional costs in recovery bond measures, local assistance grants, and investments in additional equipment and fire response staff. For instance, the state can cover insurance claims for losses to infrastructure, facilities, and other resource obligations following a wildfire. Additional costs may be incurred by the state from unemployment insurance claims. The Florida study estimated that the state contributed over $6 million in disaster relief which did not include unemployment insurance. Federal aid was crucial in this case, as the region received more than $100 million after the fire season of 1998 to cover many of the suppression costs.

California incurred a total cost of fire suppression over $43 million, roughly 1.8% of the total economic loss estimated. California also created a Catastrophic Event Memorandum Fund, equaling $39.5 million, to take care of their responsibility toward covering losses to infrastructure, facilities, and other resource obligations. San Diego State estimated over 5,000 unemployment claims coded as either fire or disaster related.

 

BUSINESS ECONOMIC IMPACT

 Determining the total economic loss and impact of the wildfires to the region is challenging. While many of the local businesses experience impacts to facilities, shipping delays, and interruptions in employee productivity, few of them actually estimate this loss. In 1998, the counties in the SJRWMD that were affected by the fires lost $138 million in tourism but also experienced an increase of over $1 billion in total business sales, compared to the same period the previous year. Forest landowners with burned timber lost approximately $350 million in value. The lost economic activity in the San Diego region was calculated at a conservative 10% based on gross productivity. This was due to a loss of 24 commercial buildings, a $32.5 million drop in tourism, and almost 5,000 people out of work. As with the Florida fires, there was a significant increase in economic activity following the wildfire season associated with recovery and rehabilitation efforts. Economic growth after large wildfire events is not a result of true economic growth, but rather a response to large-scale economic and infrastructure losses.

 

CONCLUSION

The Florida and California studies quantified losses of $1,864 per acre and $6,516 per acre, respectively. These losses provide perspective for the costs that might be associated with fuels treatments and other hazard mitigation activities intended to reduce fire spread and effects. Catastrophic wildfires produce significant ecological and economic impacts that often go well beyond the traditional impact indicators. Both studies explored these impacts and point out the need for more intricate analyses after other fires. Economic assessment of wildfires can no longer focus only on the more obvious variables, such as acreage burned and number of personnel. Assessment must be comprehensive and include all economic impacts to gain a realistic perspective of the true impact of large wildfires

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