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Benefits of flood control on Indian lands in British Columbia 1983

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BENEFITS OF FLOOD CONTROL ON INDIAN LANDS IN BRITISH COLUMBIA by RAUL D. ELUCHANS A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE i n THE FACULTY OF GRADUATE STUDIES (Department of A g r i c u l t u r a l Economics ) We a c cep t t h i s t h e s i s as c o n f o r m i n g to the r e q u i r e d s t a n d a r d The U n i v e r s i t y of B r i t i s h C o l u m b i a August 1983 © Raul D. E l u c h a n s , 1983 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the requirements f o r an advanced degree a t the U n i v e r s i t y o f B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study. I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head o f my department o r by h i s o r her r e p r e s e n t a t i v e s . I t i s understood t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a llowed without my w r i t t e n p e r m i s s i o n . R a u l D. E l u c h a n s Department of A g r i c u l t u r a l Economics The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5 D a t e S e p t e m b e r 30, 1983 A b s t r a c t A s e r i e s of d y k i n g p r o j e c t s on I nd i an l ands on the S i m i l k a m e e n R i v e r , B .C . has been r e c e n t l y s u b j e c t e d to an economic e v a l u a t i o n . The o b j e c t i v e of t h i s s t u d y i s to e v a l u a t e the p r o c e d u r e s of the A g r i c u l t u r e and R u r a l Deve lopment S u b s i d i a r y Agreement in a s s e s s i n g the b e n e f i t s of t hese p r o j e c t s and to r e - e v a l u a t e the c o s t - b e n e f i t r e s u l t s . The o r i g i n a l e s t i m a t i o n of b e n e f i t s made use of d a t a f o r y i e l d s and c o s t s of p r o d u c t i o n t h a t a re u n r e a l i s t i c . These d a t a a re r e v i s e d and new e s t i m a t e s of b e n e f i t s a r e made. A more s e r i o u s i s s u e however i s the i m p u t a t i o n of i n d i r e c t b e n e f i t s . Farmer r e s p o n s e i s c r i t i c a l f o r the ach ievement of i n d i r e c t b e n e f i t s . In t h i s s t u d y , d i r e c t and i n d i r e c t b e n e f i t s a r e i d e n t i f i e d and computed based upon the net v a l u e of the a g r i c u l t u r a l p r o d u c t i o n . D i f f e r e n t y i e l d s c e n a r i o s and a l t e r n a t i v e l and uses a re i n c o r p o r a t e d i n t o the a n a l y s i s c o n s i s t e n t w i t h d i f f e r e n t h y p o t h e s e s e x p l a i n i n g p r o d u c t i o n c h a r a c t e r i s t i c s and p r o b a b l e fa rmer r e s p o n s e in the a r e a . R e s u l t s show t h a t most of the b e n e f i t s a r e in the form of i n d i r e c t b e n e f i t s and t h a t the c o s t of the p r o t e c t i o n exceeds the d i r e c t b e n e f i t s f rom the p o i n t of v i ew of s o c i e t y . If i n d i r e c t b e n e f i t s c o u l d be o b t a i n e d f rom a c o m p l e t e deve lopment program to overcome i n s t i t u - t i o n a l p r o b l e m s , the f l o o d c o n t r o l may be e c o n o m i c a l l y f e a s i b l e . TABLE OF CONTENTS PAGE ABSTRACT i i TABLE OF CONTENTS i i i L IST OF TABLES v L IST OF FIGURES v i i ACKNOWLEDGEMENTS v i i i CHAPTER 1: INTRODUCTION 1 1.1 Gene ra l Background 1 1 .1 .1 The P r o j e c t A rea 3 1 . 1 . 2 I nd i an Bands in the A rea 4 1 . 1 . 3 ARDSA F u n d i n g R o l e and E v a l u a t i o n P r o c e d u r e 7 1.2 O b j e c t i v e s of the S tudy 11 1.3 Me thodo logy 12 1.4 T h e s i s Gu ide 15 CHAPTER 2 : EVALUATION CRITERIA: A THEORETICAL FRAMEWORK 16 2.1 Some Approaches to E v a l u a t e F l o o d C o n t r o l . . P rograms 16 2 .2 W e l f a r e Economics B a s i s of B e n e f i t Cos t A n a l y s i s . . 19 2 .3 Measurement of B e n e f i t s and C o s t s of F l o o d C o n t r o l 27 2 . 3 . 1 R e n t a l R a t e s , C a p i t a l C o s t s , and F l o o d P r o t e c t i o n B e n e f i t s 28 2 . 3 . 2 Causes of Lack of Deve lopment and the Measure of I n d i r e c t B e n e f i t s 32 i V PAGE CHAPTER 3: ANALYSIS OF ARDSA PROCEDURES TO EVALUATE FLOOD CONTROL BENEFITS 52 3.1 F l o o d Haza rd and Cos t of F l o o d P r o t e c t i o n 52 3.2 B e n e f i t s Based Upon Land V a l u e s 55 3 .3 D i r e c t B e n e f i t s Based Upon Net V a l u e o f A g r i c u l t u r a l P r o d u c t i o n 58 3 .3 .1 WIAC E s t i m a t i o n of B e n e f i t s 58 3 . 3 . 2 M o d i f i c a t i o n of Da ta 62 3 .4 E s t i m a t i o n of I n d i r e c t B e n e f i t s 68 3 .4 .1 Induced Changes in Land U s e . . . . . 72 3 . 4 . 2 Induced Changes in Management: Y i e l d s and C o s t s 74 3 . 4 . 3 E v a l u a t i o n of B e n e f i t s 78 3.5 B e n e f i t s f rom a Deve lopment Program 84 CHAPTER 4 : CONCLUSIONS 87 4.1 S p e c i f i c to the P r o j e c t 87 4 . 2 Gene ra l Me thodo logy 89 4 . 3 F u r t h e r Resea r ch 91 REFERENCES 93 APPENDIX A 100 APPENDIX B 110 APPENDIX C 120 V L IST OF TABLES PAGE 1.1 Number and A rea of I nd i an R e s e r v e s by Band in the S im i l k ameen V a l l e y 5 2.1 Land Use i n A g r i c u l t u r a l A r eas of Skemeoskuak in I nd i an R e s e r v e S i m i l k a m e e n 39 2.2 Land Use P a t t e r n i n the Okanagan-S i mi I kameen 40 2.3 Average Y i e l d s in F l o o d f r e e A reas of the S i m i l k a m e e n Va l l e y , B.C 41 2 .4 i Y i e ld-Land Use H y p o t h e s i s 45 2 .5 F l o o d C o n t r o l B e n e f i t s 48 2 .6 T o t a l F l o o d C o n t r o l B e n e f i t s 50 2 .7 Deve lopment P rogram B e n e f i t s 51 3.1 Summary of C o n s t r u c t i o n C o s t s of S i m i l k a m e e n F l o o d and E r o s i o n C o n t r o l P r o j e c t s 54 3.2 Land V a l u e s i n the Okanagan-S i mi I kameen , B.C 57 3.3 E s t i m a t i o n o f Net B e n e f i t s of F l o o d P r o t e c t i o n as made by Wl AC 59 3.4 E x p e c t e d Ave rage Y i e l d s f rom I n d i a n Farmers in F l o o d / E r o s i o n A r e a s : C u r r e n t S i t u a t i o n 64 3.5 P r o f i t a b i l i t y of C u r r e n t P r o d u c t i o n A c t i v i t i e s f o r I nd i an Fa rmers w i t h o u t F l o o d P r o t e c t i o n 66 3.6 Summary of Average P r o d u c t i o n Cos t E s t i m a t e s f o r the S i m i l k a m e e n A r e a : C u r r e n t S i t u a t i o n 69 3.7 Net Economic V a l u e of C u r r e n t P r o d u c t i o n of I nd i an Fa rmers in the S i m i l k a m e e n Area w i t h o u t F l o o d P r o t e c t i o n . 70 3.8 E s t i m a t i o n of Net B e n e f i t s of F l o o d P r o t e c t i o n 71 3 .9 E x p e c t e d Y i e l d and Cos t S c e n a r i o s 75 3 .10 Economic V a l u e of P r o d u c t i o n f rom Farmer P l a n D i f f e r e n t P r o d u c t i o n S c e n a r i o s 76 3.11 Economic V a l u e of A l t e r n a t i v e P l a n s under D i f f e r e n t P r o d u c t i o n S c e n a r i o s 77 3 .12 I n d i r e c t B e n e f i t s to I n d i a n s 78 3.13 T o t a l B e n e f i t s of F l o o d C o n t r o l 80 V i PAGE 3.14 B e n e f i t s f rom a Development P rogram and F l o o d C o n t r o l . . . 85 3.15 B e n e f i t s f rom a Development P rogram w i t h o u t F l o o d C o n t r o l 86 B . l Average P r o d u c t i o n Cos t E s t i m a t e s f o r n o n - I n d i a n Fa rmers in the S i m i l k a m e e n Area I l l B.2 C a p i t a l Investment Cos t f o r A l f a l f a Hay P r o d u c t i o n i n the S i m i l k a m e e n V a l l e y 112 B.3 Average P r o d u c t i o n C o s t s f o r A l f a l f a I r r i g a t e d i n the S i m i l k a m e e n V a l l e y 113 B.4 A p p l e P r o d u c t i o n C o s t s i n the S i m i l k a m e e n V a l l e y 114 B.5 Summary of Tomato P r o d u c t i o n Cos t in the S i m i l k a m e e n Va I I ey 117 B.6 Tomato P r o d u c t i o n in the S i m i l k a m e e n V a l l e y 117 B.7 C a p i t a l Investment f o r Tomato P r o d u c t i o n in the S i m i l k a m e e n V a l l e y 118 B. 8 Summary of N o r m a l i z e d Marke t P r i c e s f o r C u r r e n t C r o p s . . . 119 C l Land Use i n EU 1 121 C. 2 Land Use in EU 2 121 C .3 Land Use i n EU 3 122 C . 4 Land Use in EU 4 . 122 C . 5 Land Use in EU 5 123 C .6 Land Use in EU 6 123 C . 7 Land Use in EU 7 124 C .8 Land Use i n EU 8 125 C . 9 C u r r e n t Land Use i n the P r o j e c t A rea 126 V i i LIST OF FIGURES PAGE 1.1 D y k i n g P r o j e c t s L o c a t i o n on the S i m i l k a m e e n R i v e r , B . C . . . 2 1.2 The E v a l u a t i o n U n i t 13 2.1 Measurement of B e n e f i t s w i t h a Sma l l P r o j e c t and a La rge P r o j e c t . 24 2 .2 M a r g i n a l V a l u e P r o d u c t of Non-Land Input per U n i t of Land 29 2 .3 F l o w c h a r t of A g r i c u l t u r a l F l o o d w a t e r P r o c e d u r e s 34 2 .4 The Farm D e c i s i o n Mak ing P r o c e s s 36 3.1 R e l e v a n t F l o o d p l a i n and P r o b a b i l i t y of I n n u n d a t i o n 53 V I I I ACKNOWLEDGEMENTS My s i n c e r e a p p r e c i a t i o n a n d t h a n k s t o D r . C a m e r o n S h o r t f o r h i s e x c e l l e n t g u i d a n c e a n d c o n t i n u o u s e n c o u r a g e m e n t t h r o u g h o u t t h i s r e s e a r c h . My a p p r e c i a t i o n g o e s a l s o t o D r . G . K e n n e d y a n d D r . S . T . C h i e n g w h o s e c o m m e n t s a n d s u g g e s t i o n s c o n t r i b u t e d t o t h e i m p r o v e m e n t o f t h i s t h e s i s . I a l s o f e e l t h e n e e d t o e x p r e s s my g r a t i t u d e t o D r . J . G r a h a m , M r . A . P a l a c i o s , a n d o t h e r p a s t and p r e s e n t m e m b e r s o f t h e D e p t . o f A g r i c u l t u r a l E c o n o m i c s who i n o n e way o r a n o t h e r w e r e v e r y h e l p f u l f o r t h e c o m p l e t i o n o f t h i s s t u d y . 1 CHAPTER 1 INTRODUCTION T h i s t h e s i s i s an e v a l u a t i o n of A g r i c u l t u r e and R u r a l Deve lopment S u b s i d i a r y Agreement (ARDSA) p r o c e d u r e s of c o s t - b e n e f i t a n a l y s i s w i t h s p e c i f i c r e f e r e n c e to a s e r i e s of d y k i n g p r o j e c t s on the S i m i l k a m e e n R i v e r i n South C e n t r a l B .C . and a r e-as ses smen t of the c o s t - b e n e f i t r e s u I t s . 1.1 Gene ra l Background The S i m i l k a m e e n V a l l e y w i t h ove r 1 7 , 0 0 0 h e c t a r e s wh i ch a re a r a b l e and i r r i g a b l e ( T a l b o t 1979) i s l o c a t e d in B . C . ' s second most impo r t an t a g r i c u l t u r a l r e g i o n : the Okanagan R e g i o n . From Keremeos ( F i g u r e 1.1) to the C a n a d i a n - A m e r i c a n b o r d e r , the S i m i l k a m e e n R i v e r V a l l e y l i e s p a r a l l e l to the lower p a r t of the Okanagan , the two v a l l e y s b e i n g s e p a r a t e d by a r i d g e of moun ta inous land used m a i n l y f o r g r a z i n g . A g r i c u l t u r a l p r o d u c t i o n i s the main economic a c t i v i t y i n the v a l l e y . D e s p i t e the emphas i s in h o r t i c u l t u r e ( the Okanagan Reg ion r e p r e s e n t s 90 p e r c e n t of B . C . ' s t r e e f r u i t a c r eage a c c o r d i n g to the B .C . M i n i s t r y of A g r i c u l t u r e and F o o d ) , f a r m i n g i s e x t r e m e l y d i v e r s e : h i g h e r land i s used f o r g r a z i n g beef c a t t l e , and benches and v a l l e y bot toms a re used f o r f o r a g e , g r a i n s , t r e e f r u i t s , g rapes and v e g e t a b l e s , as d e t e r m i n e d by c l i m a t e and o t h e r l o c a l c o n d i t i o n s (Economic Development C o m m i s s i o n , Okanagan-S imi Ikameen, R e g i o n a l D i s t r i c t 1 9 7 8 ) . 2 PRINCETON PROJECT 1 PROJECT 2 ^ -^PROJECT 3 PRO JET 4 PROJECT KERENEOS PROJECT 6 C__A_NA_D_A __B.C. U S A PROJECT 7 ^ _PROJ_ECT^8 L I •Figure 1.1: D y k i n g P r o j e c t s L o c a t i o n on the S i m i l k a m e e n R i v e r , B .C . 3 The S i m i l k a m e e n R i v e r (170 km in l e n g t h in Canada) d r a i n s the e a s t e r l y f a c i n g s l o p e s of the C o a s t a l M o u n t a i n s in and to the n o r t h of Manning P a r k , and f l o w s s o u t h e a s t t h rough a deep s t e e p - s i d e v a l l e y empty ing i n t o the Okanagan and C o l u m b i a R i v e r s y s t em at O r o v i l l e , W a s h i n g t o n , j u s t s o u t h of the C a n a d i a n - A m e r i c a n b o r d e r . The r i v e r reg ime in the a r e a has been c l a s s i f i e d as u n s t a b l e . F l o o d i n g of the v a l l e y f l o o r downstream f rom Keremeos has been a major p r o b l e m wh i ch o c c u r s to some e x t e n t as f r e q u e n t l y as once in e ve r y f o u r y e a r s ( T a l b o t 1 9 7 9 ) . Ma jor f l o o d s o c c u r r e d i n 1948 and 1972 . F a rm lands and houses were under wa te r f o r about two weeks a l o n g the R i v e r between P r i n c e t o n and Cawston and the v i l l a g e of Keremeos was s e r i o u s l y t h r e a t e n e d w i t h b e i n g swamped (Department of I nd i an A f f a i r s 1979 ; P e n t i c t o n H e r a l d 1 9 7 9 ) . 1 .1 .1 The P r o j e c t A rea Upon r e q u e s t of I nd i an c o m m u n i t i e s in the a r e a , n e a r l y 1 ,620 h e c t a r e s of a g r i c u l t u r a l land on I nd i an R e s e r v e s b o r d e r i n g the S im i l k ameen R i v e r between P r i n c e t o n and the C a n a d i a n - A m e r i c a n b o r d e r have, been c o n s i d e r e d f o r . ' p r o t e c t i on-unde r a f l o o d - e r o s i o n c o n t r o l p r o g r a m . The p r o t e c t i o n scheme p r o p o s e d by the B .C . M i n i s t r y of Env i ronment c o n s i s t s of a s e r i e s of d y k i n g p r o j e c t s on v a r i o u s s e c t i o n s of the R i v e r ( F i g u r e 1 . 1 ) . Each of them i s a s e p a r a t e s t u c t u r e ( s e p a r a t e p r o j e c t s ) , and c o v e r 70 km in l e n g t h , when c o n s i d e r e d a l l t o g e t h e r . P r o j e c t 1 i s t o p r o v i d e p r o t e c t i o n a g a i n s t r i v e r e r o s i o n 4 o n l y , a n d t h e r e m a i n i n g s t r u c t u r e s a r e d e s i g n e d t o p r o v i d e p r o t e c t i o n a g a i n s t f I o o d i n g . The p r o j e c t s d i r e c t l y a f f e c t 17 I n d i a n f a r m s — i n d i v i d u a l B a n d o p e r a t i o n s — i n v o l v i n g o v e r a h u n d r e d p e o p l e o f t h e I n d i a n c o m m u n i t y i n t h e a r e a a n d a b o u t 5 0 p e r c e n t o f t h e I n d i a n a g r i c u l t u r a l l a n d i n t h e V a l l e y ( W e s t e r n I n d i a n A g r i c u I t u r a I C o r p o r a t i o n 1 9 8 1 ) . 1 . 1 . 2 I n d i a n B a n d s i n t h e A r e a Two I n d i a n B a n d s w i t h a t o t a l p o p u l a t i o n o f 2 3 5 p e o p l e c o m p r i s e t h e I n d i a n c o m m u n i t y i n t h e V a l l e y : t h e U p p e r S i m i l k a m e e n Band a n d t h e L o w e r S i m i l k a m e e n B a n d . The B a n d s c o n t r o l 16 I n d i a n R e s e r v e s w h i c h c o v e r a n ' a r e a o f 1 7 , 8 7 7 h e c t a r e s ( T a b l e 1 . 1 . ) . In t h e e a r l y 1 9 t h C e n t u r y , I n d i a n s r a i s e d c a t t l e i n t h e v a l l e y , h o w e v e r t h e y h a v e p l a y e d a m o r e p a s s i v e r o l e i n a g r i c u l t u r e s i n c e m i g r a n t s moved i n t o t h e v a l l e y a n d a l a r g e p o r t i o n o f t h e l a n d was l e a s e d t o n o n - I n d i a n s ( S i m i l k a m e e n I n d i a n B a n d 1 9 8 0 ) . In t h e 1 9 7 2 - 77 p e r i o d , t h e Band a s s u m e d t h e a d m i n i s t r a t i v e f u n c t i o n s f r o m t h e D e p a r t m e n t o f I n d i a n A f f a i r s , a n d b e g a n t o p l a y a m o r e a c t i v e r o l e i n t h e d e v e l o p m e n t o f i t s r e s o u r c e b a s e . A Band f a r m , a 97 h e c t a r e c o w - c a l f o p e r a t i o n , was i n i t i a t e d and i n 1 9 7 9 - 8 0 a s m a l l o r c h a r d was e s t a b l i s h e d . A C o m m u n i t y D e v e l o p m e n t P l a n h a s b e e n p r e p a r e d by t h e B a n d s a n d Band member s a r e e n c o u r a g e d t o d e v e l o p t h e i r r e s o u r c e s f u r t h e r ( D e p a r t m e n t o f I n d i a n A f f a i r s 1 9 7 9 ; P e n t i c t o n H e r a l d J u n e 2 2 , 1 9 7 9 ) . H o w e v e r , m o s t o f t h e l a n d s a r e s t i l l u n u s e d . 5 T a b l e 1.1 Number and A rea of I nd i an R e s e r v e s by Band S i m i l k a m e e n V a l l e y , B .C . Band & R e s e r v e Rese r ve No. Land ( h e c t a r e s ) Upper S i m i l k a m e e n Band : Chuchuwayha 2 2,171 Chuchuwayha 2C 121 L u l u 5 20 Ni ne M i l e Creek 4 80 One M i l e 6 4 Vermi 1 ion F o r k s 1 3 Wolf C reek 3 202 TOTAL 2 ,601 Lower S i m i l k a m e e n Band : A l e x i s 9 168 Ashno1e 10 3,551 B l i nd Creek 6 162 B l i n d Creek 6A 4 Keremeos Fo rk 12-12A 954 Lower S imi1kameen 2 1,293 N a r c i s s e ' s Farm 4 750 Range 13 6 ,768 Skemeoskuank i n 7 & 8 1,625 TOTAL 1 5 , 2 7 6 . S o u r c e : I nd i an and E sk imos A f f a i r s P rog ram, S t a t i s t i c D i v i s i o n , Canada , 1 9 7 6 , Department of I nd i an Af f a i r s . I nd i an Bands i n the S i m i l k a m e e n V a l l e y c o n t r o l l and c a p a b l e of p r o d u c i n g h i g h v a l u e d c r o p s such as v e g e t a b l e s and f r u i t ( B . C . M i n i s t r y of A g r i c u l t u r e a n d . F o o d ) . N e v e r t h e l e s s , I n d i a n p e o p l e in the V a l l e y f a ce c o n s t r a i n t s no d i f f e r e n t to o t h e r I n d i a n s in B . C . , wh i ch m a i n t a i n the I nd i an Community in a d i s a d v a n t a g e o u s s o c i o - e c o n o m i c p o s i t i o n when compared w i t h n o n - I n d i a n c o m m u n i t i e s . Fo r example a low l e v e l of e d u c a t i o n , dependence on w e l f a r e , h i g h unemployment r a t e and low income c h a r a c t e r i z e i n p a r t the s o c i o - e c o n o m i c c o n d i t i o n s of the S im i l k ameen n a t i v e community ( S im i l kameen Ind i an A d m i n i s t r a t i o n 1 9 8 1 ) . In a d d i t i o n , I n d i a n s t h roughou t B .C . have l i t t l e o r no a c c e s s to t r a d i t i o n a l l e n d i n g i n s t i t u t i o n s (Department of I nd i an A f f a i r s 1977 ; B .C . Economic Deve lopment Commiss ion 1 9 7 7 ) . The F e d e r a l Government has d e v e l o p e d a number of programs in o r d e r to improve the " economic c i r c u m s t a n c e s " of N a t i v e P e o p l e . S p e c i a l ARDA f o r i n s t a n c e i s a p rogram d e s i g n e d to p r o v i d e money f o r r e s o u r c e deve lopment f o r . I n d i a n s and I n d i a n Bands . ARDSA makes s i m i l a r funds a v a i l a b l e to the a g r i c u l t u r a l i n d u s t r y i n c l u d i n g i n d i v i d u a l I n d i a n s and I nd i an Bands . N e v e r t h e l e s s , s t u d i e s i n d i c a t e t h a t impor t an t o b j e c t i v e s of t hese programmes have not been met (DPA C o n s u l t i n g L t d . , .1980) . The r e s u l t i s tha t b a s i c c o n s t r a i n t s wh i ch m a i n t a i n the I nd i an c o m m u n i t i e s in a backward p o s i t i o n have not been s i g n i f i c a n t l y removed and p rob l ems s t i l l p e r s i s t . 7 1 . 1 . 3 ARDSA F u n d i n g R o l e and E v a l u a t i o n P r o c e d u r e s ARDSA i s a j o i n t f e d e r a I - p r o v i n c i a I p rogram to encourage deve lopment of the a g r i c u l t u r a l s e c t o r and food p r o c e s s i n g i n d u s t r y in r u r a l B .C . The P r o v i n c e has 1 m i l l i o n h e c t a r e s of u n d e r - d e v e l o p e d f a r m l a n d t h a t has the p o t e n t i a l f o r i n c r e a s e d p r o d u c t i o n . The program p r o v i d e s f u n d i n g f o r (a) i d e n t i f y i n g and p u r s u i n g new o r u n e x p l o i t e d deve lopment o p p o r t u n i t i e s , (b) e x p a n d i n g employment i n the a g r i c u l t u r e and r u r a l i n d u s t r i e s , (c) i m p r o v i n g the v i a b i l i t y of the e x i s t i n g i n d u s t r i e s and (d) e n h a n c i n g the a b i l i t y of r u r a l e n t e r p r i s e s t o be c o m p e t i t i v e . By f u n d i n g a d i v e r s e r ange of p r o j e c t s in a v a r i e t y of a g r i c u l t u r a l and g e o g r a p h i c a l a r e a s , ARDSA has a t t e m p t e d to s t r e n g t h e n and deve l op B . C . ' s a g r i c u l t u r a l s e c t o r . The S i m i l k a m e e n D y k i n g P r o j e c t has been c o n s i d e r e d under the ARDSA program and w i t h i n i t s P a r t I I I : P r ima ry R e s o u r c e Deve lopment Component . T h i s s e c t i o n c o n c e n t r a t e s on i n f r a s t r u c t u r e f o r u p g r a d i n g land c a p a b l e of i n t e n s i v e c u l t u r e as w e l l as a c t i v i t y o u t s i d e the farm gate and may i n c l u d e community p r o j e c t s . The main o b j e c t i v e of t h i s s e c t i o n i s t o i n c r e a s e the p r o d u c t i o n c a p a b i l i t y of the u n d e r - deve l oped land r e s o u r c e , w i t h i n the framework of t hose p r i m a r y p r o d u c t s wh i ch show market and p r o d u c t i o n p o t e n t i a l ( ' C a n a d a - B r i t i s h C o l u m b i a A g r i c u l t u r e and R u r a l Development S u b s i d i a r y Agreement , 1 9 7 7 ) . The Western I nd i an A g r i c u l t u r a l C o r p o r a t i o n (WIAC) was s e l e c t e d by ARDSA i n 1980 to u n d e r t a k e a f e a s i b i l i t y s t u d y to a n a l y z e the b e n e f i t s of the S i m i l k a m e e n F l o o d C o n t r o l p r o j e c t . The a n a l y s i s was to 8 to be s t r u c t u r e d a round the terms of r e f e r e n c e p r o v i d e d by ARDSA (Append ix A ) . A c l o s e c o n t a c t between WIAC and the ARDSA commi t tee was s t r o n g l y recommended f o r the economic f e a s i b i l i t y s t u d y . The terms of r e f e r e n c e d i d not s p e c i f y what d a t a base ( f o r c o s t and y i e l d s ) s h o u l d be u s e d , but the ARDSA commi t t ee recommended the Concensus Data S e r i e s (CDS) . WIAC u n d e r t o o k a s u r v e y to c o l l e c t d a t a about c u r r e n t s o c i o - e c o n o m i c c o n d i t i o n s , land use and y i e l d s f o r I nd i an f a r m e r s but was not a b l e to c o l l e c t i n f o r m a t i o n on p r o d u c t i o n c o s t s . D e s p i t e l a r g e d i f f e r e n c e s i n y i e l d s and p r o d u c t i o n p r a c t i c e s between I nd i an f a r m e r s and t hose i n c o r p o r a t e d in concensus b u d g e t s , ARDSA r e p r e s e n t a t i v e s i n d i c a t e d t h a t CDS da t a must be used i n the s t u d y . D i s c u s s i o n s w i t h the Band were supposed to y i e l d i n f o r m a t i o n on the fcand, farm management expe r i ence- , and I nd i an p . lans , o r e x p e c t a t i o n s r e g a r d i n g deve lopment of the a g r i c u l t u r a l r e s o u r c e s as r e l a t e d to the f l o o d c o n t r o l p r o j e c t . It was a l s o i n d i c a t e d tha t the d y k i n g p r o j e c t s h o u l d be e v a l u a t e d in terms of the a g r i c u l t u r a l b e n e f i t s i n t e g r a t e d w i t h the B a n d ' s deve lopment p l a n s . A d d i t i o n a l s c e n a r i o s f o r the e s t i m a t i o n of l and deve lopment and use were a l s o to be d e f i n e d and e v a l u a t e d by WIAC. The terms of r e f e r e n c e f u r t h e r s p e c i f i e d t h a t s t r e a m s of b e n e f i t s and- c o s t s f o r each s c e n a r i o were to be p r o j e c t e d ove r a 25 yea r l i f e . The net p r e s e n t v a l u e w i t h a 10 p e r c e n t d i s c o u n t r a t e was to be e s t i m a t e d as w e l l as the i n t e r n a l r a t e of r e t u r n in each c a s e . A d d i t i o n a l s e n s i t i v i t y a n a l y s i s was to be u n d e r t a k e n w i t h r e s p e c t t o changes i n the v a l u e s assumed f o r key economic p a r a m e t e r s such as 9 p r o d u c t p r i c e s , t o t a l l e v e l o f a g r i c u l t u r a l b e n e f i t s and e x t e n t of f I o o d damage. In the economic l i t e r a t u r e t h e r e have been two major c o n c e p t i o n s of the r o l e of the e conomis t i n p r e p a r i n g b e n e f i t - c o s t e v a l u a t i o n s f o r p o l i c y m a k e r s . In one d e s c r i p t i o n the r o l e of the " a n a l y s t " i s c o n c e i v e d as t ha t of a t e c h n i c i a n a s s i s t i n g the d e c i s i o n - m a k e r to make c h o i c e s t ha t a r e c o n s i s t e n t w i t h the v a l u e s and o b j e c t i v e s of the l a t t e r . C o n s e q u e n t l y , c o s t - b e n e f i t a n a l y s i s i s h e l d to be no more than a t e c h n i q u e , o r way of o r g a n i z e d thought f o r compa r i ng a l t e r n a t i v e c o u r s e s of a c t i o n . T h i s i s the c a t e g o r y c a l l e d the d e c i s i o n - m a k e r app roach (Sudgen and W i l l i a m s 1978). As such — i t i s a rgued — the v i r t u e of the t e c h n i q u e i s to be j udged by i t s c o n s i s t e n c y and e x p l i c i t n e s s — i r r e s p e c t i v e of the p o l i c y - m a k e r ' s v a l u e s o r o b j e c t i v e s (Mishan 1981). In any c a s e , by p r o v i d i n g the o b j e c t i v e s , the p o l i c y - m a k e r a l s o p r o v i d e s i m p l i c i t l y the v a l u e judgements t ha t the a n a l y s t has to a c cep t — a rgues M i s h a n . A v a r i a t i o n of t h i s app roach p l a c e s the r o l e of the e conomis t in a c o s t - b e n e f i t a n a l y s i s as t h a t of a s p e c i a l i s t who i s l i c e n s e d to p r o v i d e o n l y s t r i c t l y ' e c o n o m i c ' d a t a to the p o l i c y - m a k e r ; d a t a v i ewed as. i n f o r m a t i o n o n l y , w i t h no independen t c r i t e r i o n w h a t e v e r . The p o l i c y - m a k e r can a t t a c h , a g a i n wha teve r impor t ance he d e s i r e s to the q u a n t i t a t i v e e s t i m a t e s . Thus , the d i s c i p l i n e of e conomics i s r e g a r d e d s o l e y as a p o s i t i v e s c i e n c e a n d , as s u c h , can o n l y o f f e r t o p o l i c y makers i n f o r m a t i o n t h a t i s the p r o d u c t of economic a n a l y s i s and s t a t i s t i c s . T h i s p o s i t i o n has been p roposed by T i n b e r g e n (1966) who sees no r o l e in the d e c i s i o n p r o c e s s f o r a n o r m a t i v e e c o n o m i c s . The e conomis t i s , in t h i s v i e w , c o n f i n e d to f o r e c a s t the r e l e v a n t economic i m p l i c a t i o n s of a l t e r n a t i v e c o u r s e s of a c t i o n . A d i f f e r e n t c o n c e p t i o n of c o s t - b e n e f i t a n a l y s i s as an e v a l u a t i o n p r o c e d u r e i s one t h a t r e g a r d s a l l o c a t i v e t e c h n i q u e s as embedded in n o r m a t i v e f o u n d a t i o n s . No rma t i v e economic judgement r e s u l t i n g f rom the e c o n o m i s t ' s c r i t e r i o n , a r e independent of the judgements of p o l i c y makers o r , more g e n e r a l l y , of p o l i t i c a l judgement (Mishan 1 9 8 1 ) . Hence , whatever the p r o j e c t deba ted o r implemented by the p o l i t i c a l p r o c e s s , the e conomis t i s e n t i t l e d , by r e f e r e n c e to h i s c r i t e r i o n , t o p ronounce the p r o j e c t to be e c o n o m i c a l l y e f f i c i e n t o r i n e f f i c i e n t as the c a se may b e . It s h o u l d be r e c o g n i z e d tha t i t i s the p o l i t i c a l p r o c e s s i t s e l f t h a t c a l l s f o r the i m p l e m e n t a t i o n of a c o s t - b e n e f i t a n a l y s i s . Under t h i s l a t t e r c o n c e p t i o n of the c o s t - b e n e f i t a n a l y s i s such a p o l i t i c a l demand — a rgues M ishan — i m p l i e s r e c o g n i t i o n t h a t an economic r a n k i n g i s independent of a p o l i t i c a l r a n k i n g . If economic e x p e r t i s e i s v i ewed in t h i s l i g h t , the p u b l i c and the p o l i t i c i a n w i l l come to r e g a r d economic assessment and r a n k i n g as a m e a n i n g f u l and independent c o n t r i b u t i o n to the p o l i t i c a l dec i s i on-mak:img p r o c e s s . C l e a r l y t h e r e a r e e l emen t s f rom bo th app roaches in the terms of r e f e r e n c e g i v e n to WIAC. The d e c i s i o n - m a k e r d e f i n e d a ! p a r t i c u l a r s c e n a r i o to be e v a l u a t e d in terms of l and use as d e s c r i b e d in Band Deve lopment P l a n s , concensus d a t a c o s t s and y i e l d s , the d i s c o u n t r a t e to be u s e d , and key economic v a r i a b l e s f o r s e n s i t i v i t y a n a l y s i s . As we show be low the s c e n a r i o d e f i n e d by the d e c i s i o n - m a k e r , ARDSA, was e x t r e m e l y u n r e a l i s t i c . In such a c a s e , the r o l e of the e conomis t s h o u l d be to p o i n t out such a d e f i c i e n c y . WIAC was l e f t w i t h a l a r g e d i s c r e t i o n a r y power to d e f i n e and j u s t i f y a l t e r n a t i v e s c e n a r i o s and v a r i a b l e s f o r s e n s i t i v i t y a n a l y s i s . A l t h o u g h WIAC d i d p r e p a r e a l t e r - n a t i v e s c e n a r i o s , some of the most i m p o r t a n t d e f i c i e n c i e s were not ana Iyzed . 1.2 O b j e c t i v e s of the S tudy The r e s e a r c h p r o b l e m of t h i s s t u d y i n v o l v e s the i d e n t i f i c a t i o n and a p p l i c a t i o n of economic c r i t e r i a to the f l o o d c o n t r o l p r o j e c t . The o v e r a l l o b j e c t i v e i s to e v a l u a t e the ARDSA p r o c e d u r e s of c o s t - b e n e f i t a n a l y s i s as implemented by WIAC f o r the e v a l u a t i o n of the S i m i l k a m e e n R i v e r D y k i n g P r o j e c t . Based upon a s u r v e y c o n d u c t e d by WIAC, the Consensus d a t a on y i e l d s and c o s t s of p r o d u c t i o n - a re not a p p l i c a b l e to t h i s p r o j e c t . These d a t a a re r e v i s e d i n o r d e r to have a more r e a l i s t i c base upon wh i ch b e n e f i t s can be e s t i m a t e d . I m p l i c i t f a rmer r e s p o n s e to the f l o o d c o n t r o l p r o j e c t i s a p a r t i c u l a r l y i m p o r t a n t a s p e c t of the e s t i m a t i o n of b e n e f i t s by WIAC. TThe e f f e c t of f a rmer r e s p o n s e i s in terms of i n d i r e c t b e n e f i t s of the p r o j e c t . No a t t empt i s made to deve l op a fo rma l model t o p r e d i c t f a rmer r e s p o n s e . However , f a rmer r e s p o n s e and r e s u l t a n t i n d i r e c t b e n e f i t s a r e e s t i m a t e d f o r a number of a l t e r n a t i v e and the most l i k e l y a l t e r n a t i v e s p e c i f i e d . No a t t empt i s made to e v a l u a t e the d e s i g n of f l o o d c o n t r o l s t r u c t u r e s . D y k i n g c o s t s a re t aken as g i v e n and the d e s i g n i s assumed to be the bes t to p r o v i d e 12 f l o o d p r o t e c t i o n tb the a r e a . In summary, p r o j e c t o b j e c t i v e s a r e : a) to examine the S im i l k ameen P r o j e c t and d e s c r i b e the e v a l u a t i o n made, b) to r e - s p e c i f y c o s t s and y i e l d s t h a t a re r e a l i s t i c f o r I nd i an f a r m e r s , c0< to d e v e l o p a methodo logy f o r e s t i m a t i o n of i n d i r e c t and d i r e c t benef i t s , d) to e s t i m a t e d i r e c t and i n d i r e c t b e n e f i t s f o r a number of a l t e r - n a t i v e s , and e) to s p e c i f y most l i k e l y a l t e r n a t i v e s . 1.3 Me thodo logy The b a s i c p r o c e d u r e of e v a l u a t i o n of f I o o d / e r o s i o n c o n t r o l b e n e f i t s i n the c o n t e x t of c o s t - b e n e f i t a n a l y s i s i s a c o m p a r i s o n between w i t h o u t - p r o j e c t c o n d i t i o n and w i t h - p r o j e c t c o n d i t i o n . The d i f f e r e n c e between the two i s c o n s i d e r e d as b e n e f i t s . The p h y s i c a l s e p a r a b i l i t y of the f l o o d p r o t e c t i o n s t r u c t u r e s and the d i f f e r e n t l o c a t i o n of t he se s t r u c t u r e s a l l o w each dyke to be e v a l u a t e d as a s e p a r a t e p r o j e c t . C o n s e q u e n t l y , e i g h t e v a l u a t i o n u n i t s (EU) have been d e v e l o p e d . Each e v a l u a t i o n u n i t c o r r e s p o n d s to one of the p r o j e c t s . The c o n c e p t . o f the EU i s ' r e p r e s e n t e d Ln F i g u r e 1 . 2 . The EU i s a u n i t of a n a l y s i s wh i ch c o m p r i s e s f l o o d p l a i n a r e a s as w e l l 13 as f l o o d - f r e e a r e a s because i t c o n s i d e r s a l l the l and t h a t the p a r t i c u l a r fa rmer owns o r c o n t r o l s . The EU i s an a n a l y t i c a l d e v i c e to i d e n t i f y what a r e a s w i l l be a f f e c t e d and what k i n d of impact they w i l l r e c e i v e because of the p r o j e c t . N e v e r t h e l e s s , o n l y the a r e a ' w i t h i n the p r o j e c t ' ( the a r e a to be p r o t e c t e d ) has been i n c o r p o r a t e d in the q u a n t i t a t i v e a n a l y s i s . F i g u r e 1.2 The Eva Iuat ion Un i t . 14 To a n a l y z e f l o o d / e r o s i o n damages in the d i f f e r e n t a r e a s a mixed c rop h e c t a r e was c o n s t r u c t e d as an a n a l o g of the ' a r e a w i t h i n the p r o j e c t ' , f o r each EU. T h i s h e c t a r e m a i n t a i n s a l l o f the n a t u r a l c h a r a c t e r i s t i c s as w e l l as the a c t i v i t i e s of the p a r t i c u l a r EU; i . e . , i t i s a s m a l l e r r e p l i c a ( e x a c t l y 1 h e c t a r e ) of the a r e a ' w i t h i n the p r o j e c t ! o f the g i v e n EU. C o n s e q u e n t l y , the damage per h e c t a r e f o r a p a r t i c u l a r a c t i v i t y in a p a r t i c u l a r EU w i l l d i f f e r f rom the damage per h e c t a r e f o r the same a c t i v i t y in a d i f f e r e n t EU depend ing on how f l o o d p l a i n s p r o p o r t i o n w i l l d i f f e r . A l s o , the damage to a g i v e n a c t i v i t y w i l l d i f f e r w i t h i n the same EU depend ing upon the c rop comb- i n a t i o n adopted wh i ch w i l l depend upon the s o i l c a p a b i l i t y f o r a g r i c u l - t u r e and how the d i f f e r e n t s o i l c a p a b i l i t y con fo rms to the f l o o d p l a i n p r o p o r t i on . Under f l o o d c o n d i t i o n s , the e x p e c t e d y i e l d s f o r the s e v e r a l c r o p s a re d e t e r m i n e d by the r e l a t i o n s h i p . (1.1) where [Ey ] i s e x p e c t e d y i e l d f o r i . th h e c t a r e of i . th Eva Iuat ion Un i t f i s y i e l d s when f l o o d s o c c u r y nf i s a ve rage y i e l d f o r I nd i an f a r m e r s when f l o o d s do not o c c u r y i s p r o p o r t i o n of c r o p s i n g i v e n f l o o d p l a i n P i s cummu la t i v e p r o b a b i l i t y f o r o r g i v e n f l o o d p l a i n F be- f I ooded EU. i s Eva Iuat i on Un i t i . th The net p r e s e n t v a l u e of p r o d u c t i o n ove r a p e r i o d of 25 y e a r s p r o v i d e s the b a s i s f o r e s t i m a t i n g the b e n e f i t s f rom the f l o o d c o n t r o l p r o j e c t i n t h i s s t u d y . 1.4 T h e s i s Gu ide T h i s t h e s i s i s o r g a n i z e d i n t o f o u r c h a p t e r s . C h a p t e r 2 d e a l s w i t h the m e t h o d o l o g i c a l a s p e c t s . R e l e v a n t t h e o r y i s r e v i e w e d and some i s s u e s of c o s t - b e n e f i t a n a l y s i s when a p p l i e d to s o c i a l s t u d i e s a re d i s c u s s e d to p r o v i d e a framework f o r the a n a l y s i s . C h a p t e r 3 p r e s e n t s the a n a l y s i s . The p r o j e c t i s e x a m i n e d , and the most i m p o r t a n t d e f i c i e n c i e s in the e v a l u a t i o n p r o c e d u r e a re i d e n t i f i e d . C h a p t e r 4 p r e s e n t s the c o n c l u s i o n s . 16 CHAPTER 2 E V A L U A T I O N C R I T E R I A : A THEORET ICAL FRAMEWORK T h i s c h a p t e r a t t e m p t s t o i d e n t i f y an a p p r o p r i a t e c r i t e r i o n t o e v a l u a t e f l o o d c o n t r o l p r o j e c t s on a g r i c u l t u r a l l a n d s . I t e x a m i n e s t h e n a t u r e o f f l o o d c o n t r o l b e n e f i t s a n d t h e e c o n o m i c s o f f l o o d p r o t e c t i o n . The c h a p t e r b e g i n s by g i v i n g a b r i e f r e v i e w o f some a p p r o a c h e s u s e d i n t h e e v a l u a t i o n o f f l o o d c o n t r o l p r o g r a m s , a n d t h e n r e l e v a n t e c o n o m i c t h e o r y i s r e v i e w e d t o e x a m i n e some i s s u e s o f b e n e f i t - c o s t a n a l y s i s when t h i s t e c h n i q u e i s a p p l i e d t o f l o o d c o n t r o l p r o j e c t s . 2 . 1 Some A p p r o a c h e s t o E v a l u a t e F l o o d C o n t r o l P r o g r a m s A n u m b e r o f m e t h o d o l o g i e s h a v e b e e n p r o p o s e d t o e v a l u a t e f l o o d c o n t r o l p r o j e c t s . J ames ( 1 9 6 4 ) d e v e l o p e d a m e t h o d o l o g y f o r e v a l u a t i n g f l o o d c o n t r o l p r o g r a m s a n d d e t e r m i n i n g t h e o p t i m u m c o m b i n a t i o n o f s t r u c t u r a l a n d n o n - s t r u c t u r a l m e a s u r e s i n a c c o r d a n c e w i t h t h e c r i t e r i o n o f e c o n o m i c e f f i c i e n c y . H i s a p p r o a c h i s b a s e d u p o n m i n i m i z a t i o n o f " n a t u r e ' s f l o o d t a x " on t h e sum o f t h e c o s t o f t h e a l t e r n a t i v e means u s e d f o r p a y i n g i t . The p r o b l e m i s f o r m u l a t e d a s a s e q u e n c e o f s i n g l e - s t a g e p r o b l e m s , w h e r e t h e o p t i m u m s t a t e a t e a c h s t a g e i s i n d e p e n d e n t o f t h e e f f e c t o f t h a t s t a t e on s u b s e q u e n t s t a g e s . A l i n e a r p r o g r a m m i n g p r o c e d u r e i s u s e d t o o b t a i n t h e o p t i m u m s i n g l e s t a g e s o l u t i o n a s a r e a s o n a b l e a p p r o x i m a t i o n a n d t o a v o i d c o m p l i c a t i o n s o f u s i n g d y n a m i c p r o g r a m m i n g . L i n d ( 1 9 6 6 ) d e v e l o p e d a g e n e r a l l a n d - u s e m o d e l b a s e d u p o n I I o c a t i o n t h e o r y a n d a n a l y z e d t h e d i f f e r e n t k i n d s o f b e n e f i t s f r o m s t r u c t u r a l a n d n o n - s t r u c t u r a l f l o o d p r o t e c t i o n m e a s u r e s w i t h i n a d y n a m i c p r o g r a m m i n g f r a m e w o r k . The g e n e r a l e q u i l i b r i u m m o d e l d e v e l o p e d by L i n d m a k e s u s e o n l y o f r e n t a l v a l u e s o b t a i n e d i n t h e i n i t i a l e q u i l i b r i u m , e l i m i n a t i n g t h e n e e d t o e v a l u a t e f u t u r e r e n t s . B o t h L i n d a n d J ames f o r m u l a t e d t h e i r m o d e l s on a c e r t a i n t y e q u i v a l e n t b a s i s . B r o w n ( 1 9 7 2 ) s u g g e s t e d s i m u l a t i o n p r o c e d u r e s b a s e d o n d y n a m i c p r o g r a m m i n g t o i n v e s t i g a t e a n d e v a l u a t e u n d e r u n c e r t a i n t y t h e b e n e f i t s f r o m d i f f e r e n t f l o o d p r o t e c t i o n m e a s u r e s . He d e v e l o p e d a m a x i m i z i n g mode l w h i c h ' s h o w s ' t h e r a t i o n a l e o f a s i n g l e i n v e s t o r i n t h e f l o o d - p l a i n i l l u s t r a t i n g how he w o u l d e v a l u a t e t h e d i f f e r e n t a l t e r n a t i v e s . B rown b a s e d h i s t h e o r y on e x p e c t e d u t i l i t y m a x i m i z a t i o n t o e x p l a i n how i n d i v i d u a l s w i l l r e s p o n d t o a " v a r i e t y o f g o v e r n m e n t p o l i c i e s , w h i c h e i t h e r c h a n g e t h e p r o b i b i l i t y o f f l o o d s o r c h a n g e t h e c o s t o f r e p l a c e m e n t o f a c t i v i t i e s , i n c l u d i n g " d o i n g n o t h i n g " . The m a j o r a d v a n t a g e o f t h e s e a p p r o a c h e s i s t h a t t h e e v a l u a t i o n i n c o r p o r a t e s t h e r e l a t i v e e c o n o m i c e f f i c i e n c y o f s t r u c t u r a l a n d n o n - s t r u c t u r a l m e a s u r e s a s w e l l a s t h e o p t i m u m m i x o f m e a s u r e s , t h e o p t i m u m i n s t a l l a t i o n s c h e d u l e , a n d t h e r e q u i r e d c o s t o f i m p l e m e n t a t i o n . U n d o u b t e d l y t h e s e p r o c e d u r e s c a n be o f g r e a t v a l u e when p l a n n i n g c o m p r e h e n s i v e d e v e l o p m e n t o f f l o o d p l a i n s . H o w e v e r , t h e c o s t s o f t h e s e e v a l u a t i o n p r o c e d u r e s c a n be p r o h i b i t i v e b e c a u s e o f d a t a r e q u i r e m e n t s and h i g h l y s k i l l e d manpower needed to c o n s t r u c t t hese m o d e l s . Fo r s m a l l p r o j e c t s , the r e l a t i v e s i m p l i c i t y of c o s t - b e n e f i t a n a l y s i s o f t e n w a r r a n t s i t s use i n s t e a d of the v a r i o u s o p e r a t i o n r e s e a r c h m e t h o d o l o g i e s d e s c r i b e d above . Fo r t hese r e a s o n s c o s t - b e n e f i t a n a l y s i s has been w i d e l y used as a t e c h n i q u e of fo rma l q u a n t i t a t i v e a n a l y s i s of f l o o d c o n t r o l (Mishan 1976 , McKean 1 9 6 7 , and E c k s t e i n 1 9 5 8 ) . B a s i c a l l y t h i s approach c o n s i s t s of the enumera t i on and e v a l u a t i o n of a s e t of consequences of a p a r t i c u l a r change . The b a s i c c r i t e r i a i s whether b e n e f i t s exceed c o s t s where b e n e f i t s encompass the consequences of f l o o d c o n t r o l t h a t i n c r e a s e w e l f a r e , and c o s t s emcompass t hose consequences t h a t r educe w e l f a r e (Winch 1 9 7 3 ) . However , b e n e f i t - c o s t a n a l y s i s does not f o r m a l l y i n c l u d e an o p t i m i z a t i o n p r o c e d u r e so i t does not i n s u r e t h a t the bes t p r o j e c t d e s i g n w i l l be u n d e r t a k e n . However , c o s t - b e n e f i t a n a l y s i s does a l e r t d e c i s i o n makers to p r o j e c t s wh i ch w i l l d e c r e a s e s o c i a l w e l f a r e . The o p t i m i z a t i o n app roaches i l l u s t r a t e the impo r t ance of i n v e s t i g a t i n g a l t e r n a t i v e r e s p o n s e s to the danger of f l o o d i n g . B rown ' s a p p r o a c h , i n p a r t i c u l a r , i l l u s t r a t e s the impor t ance of a s s u m p t i o n s about how i n d i v i d u a l s w i l l r e s p o n d . A l l of the o p t i m i z a - t i o n p r o c e d u r e s i l l u s t r a t e the f a c t t h a t a p a r t i c u l a r p r o j e c t such as d y k i n g i s o n l y one means of r e s p o n d i n g to the t h r e a t of f l o o d s . There have been a number of r e f i n e m e n t s i n c o s t - b e n e f i t me thodo logy wh i ch i n p a r t c o r r e c t f o r the p rob l ems i l l u s t r a t e d by a c o m p a r i s o n of the c o s t - b e n e f i t approach w i t h the o p t i m i z a t i o n a p p r o a c h e s . In the f o l l o w i n g s e c t i o n s , c o s t - b e n e f i t a n a l y s i s i s r e v i e w e d i n c l u d i n g some of the r e f i n e m e n t s wh i ch r e l a t e to i m p r o v i n g p r o j e c t e v a l u a t i o n . 2.2 W e l f a r e Economics B a s i s of B e n e f i t Cos t A n a l y s i s 19 When i t was s t a t e d t h a t f l o o d c o n t r o l p r o j e c t s s h o u l d be deemed d e s i r a b l e i f " t h e b e n e f i t to whomsoever they may a c c r u e , a r e in e x c e s s of the e s t i m a t e d c o s t s " ( U n i t e d S t a t e s F l o o d C o n t r o l Act 1 9 3 6 ) , the d i s c i p l i n e of w e l f a r e economics was i n t r o d u c e d i n t o the p r a c t i c a l w o r l d of p u b l i c d e c i s i o n - m a k i n g . T h i s s e c t i o n b r i e f l y examines some of the b a s i c e l e m e n t s of w e l f a r e economics — the f o u n d a t i o n of B e n e f i t - Cos t A n a l y s i s — and the more r e l e v a n t i s s u e s of t h i s t e c h n i q u e when a p p l i e d to s o c i a l s t u d i e s . Pure w e l f a r e e c o n o m i c s , as a s c i e n t i f i c means f o r e x p l a i n i n g and p r e d i c t i n g the b e h a v i o u r of a s o c i e t y t h rough the p o l i t i c a l mechanism of p o l i c y - m a k i n g , has met w i t h l i t t l e s u c c e s s , but a p p l i e d w e l f a r e economics i s f r u i t f u l . P o s i t i v e economics e n a b l e s us to p r e d i c t the outcomes r e s u l t i n g f rom a l t e r n a t e p o l i c i e s , and the use of t h i s i n w e l f a r e economics e n a b l e s us to d e r i v e the a p p r o p r i a t e p o l i c y to a c h i e v e a p a r t i c u l a r o b j e c t i v e (Winch 1 9 7 3 ) . C o n s e q u e n t l y , as M i shan (1976) s u g g e s t e d , w e l f a r e economics i s to be r e g a r d e d as a s t udy of the c o n t r i b u t i o n economics can make to a d v a n c i n g the s o c i a l w e l f a r e . The b a s i c r e q u i r e m e n t to j u d g e p r o j e c t s in a c c o r d a n c e w i t h the i n d i v i d u a l p r e f e r e n c e s of consumers i s a measure of the s t r e n g t h of c o n s u m e r ' s p r e f e r e n c e s f o r the b e n e f i t s of the p a r t i c u l a r p r o j e c t r e l a t i v e to the b e n e f i t s t h a t t hose r e s o u r c e s c o u l d have y i e l d e d i n t h e i r next bes t use ( Pea rce and Nash 1 9 8 1 ) . Economic t h e o r y t e l l s us t h a t in an economy w i t h i d e n t i c a l consumers," ' " where they can f r e e l y a l l o c a t e t h e i r money incomes between a l l goods and s e r v i c e s , they w i l l max im ize the f o l l o w i n g e x p r e s s i o n ( s u b j e c t to the usua l a s s u m p t i o n s of r e a t i o n a l i t y and p p e r f e c t k n o w l e d g e ) : 12 .1 ) Z= U(x, «„)- x [ y ~ Z W J F i r s t o r d e r c o n d i t i o n s f o r a maximum a re (2 .2 ) o r (2 .3 ) 6 y~i J x ; Pi f°>- * // IT T h i s i s the w e l l known c o n d i t o n t h a t the consumer equa t e s h i s m a r g i n a l r a t e of s u b s t i t u t i o n between each p a i r of goods w i t h the p r i c e r a t i o . Now, i f as a r e s u l t of i m p l e m e n t i n g a p a r t i c u l a r p r o j e c t , p r o d u c t i o n of c e r t a i n goods (say i to k) i n c r e a s e s at the expense of d i v e r t i n g r e s o u r c e s f rom p r o d u c t i o n of ;o the r goods (1 to n ) , i t may be p o s s i b l e to t e s t i f t h i s change in o u t p u t has improved the s i t u a t i o n """Consumers have i d e n t i c a l t a s t e s g i v e n by the o r d i n a l u t i l i t y f u n c t i o n U = U (X„ X ), i d e n t i c a l i ncomes ( Y ) , and f a c e i d e n t i c a l I n f i x e d p r i c e s f o r goods (P^ P ) 21 of consumers in terms of the u t i l i t y m a x i m i z a t i o n h y p o t h e s i s by e x a m i n i n g the s i g n of ^ ' ( assuming f i x e d p r i c e s and t h a t i the o u t p u t g e n e r a t e d by the p r o j e c t i s d i s t r i b u t e d e q u a l l y among c o n s u m e r s ) . From the f i r s t o r d e r c o n d i t i n s and by s u b s t i t u t i n g in <2.4) J ?• c lx- = J_ J ^ A x . The v a l u e of U i s i n c r e a s e d i f _̂?£,<A"«L ^ ^ . I t f o l l o w s t h a t i under s t a t e d a s s u m p t i o n s , r e l a t i v e p r i c e s p r o v i d e a p e r f e c t measure of the r e l a t i v e b e n e f i t of o u t p u t changes in terms of consumer p r e f e r e n c e s . To compute t h i s measure we need to know the a d d i t i o n a l amounts of goods ( i to k) p roduced and the amounts of goods (1 to n) f o r g o n e by the d i v e r s i o n of r e s o u r c e s . The i m p l i c a t i o n of t h i s a n a l y s i s i s t h a t i n a p e r f e c t l y c o m p e t i - t i v e market economy, w i t h a l l the usua l a s s u m p t i o n s r e l a t i n g to p e r f e c t c o m p e t i t i o n , market p r i c e s r e f l e c t s o c i a l v a l u e f o r both i n p u t s and o u t p u t s . Market p r i c e s t h e r e f o r e a re a p p r o p r i a t e to measure the v a l u e of the p r o d u c t s p roduced by a p a r t i c u l a r p r o j e c t such as f l o o d c o n t r o l and the c o s t s of b u i l d i n g d y k e s . Wi th the i n t r o d u c t i o n of i n t e r m e d i a t e p r o d u c t s the a n a l y s i s i s c o n s i d e r a b I hy more c o m p l e x . However , i f the i i n t e r m e d i a t e p r o d u c t s a re p roduced in a market economy, then t h e i r p r i c e s r e f l e c t the s o c i a l v a l u e of the i n p u t s used i n p r o d u c i n g them. More d i f f i c u l t p rob l ems a r i s e when the a s s u m p t i o n of " i d e n t i c a l c o n s u m e r s " i s r e l a x e d ; i t i s q u i t e p o s s i b l e f o r a p r o j e c t t o Iead to the foI Iowi ng / / £ cL O f o r some consumers I and \T I / _ f o r o t h e r s Z, ii Ax_L < o The a d o p t i o n of a Benthamite ' ' " o b j e c t i v e f u n c t i o n m a x i m i z i n g the sum of i n d i v i d u a l u t i l i t i e s and the a s sumpt i on of i d e n t i c a l m a r g i n a l u t i l i t y of money income f o r a I I i n d i v i d u a I s has o f t e n been s u g g e s t e d . The s o c i a l w o r t h of a p r o j e c t may be o b t a i n e d by s i m p l e summing e q u a t i o n (2 .4 ) above a c r o s s a l l i n d i v i d u a l s . 1 2 . 5 , i S w * L I 4 ^ « u i h - x l L ? t < u , K = * Z ? ^ where A i s the m a r g i n a l u t i l i t y of money income. A g a i n , the p r o c e d u r e of v a l u i n g changes in o u t p u t at market p r i c e s wou ld be j u s t i f i e d . However , i t i s not p o s s i b l e to base the c h o i c e of an o b j e c t i v e f u n c t i o n on i n d i v i d u a l p r e f e r e n c e s a l o n e u n l e s s a l l i n d i v i d u a l s a re in agreement on the w e l f a r e f u n c t i o n to be u s e d . M o r e o v e r , the a s s u m p t i o n of i d e n t i c a l m a r g i n a l u t i l i t y of money income i s u n t e n a b l e . A t t e m p t s have been made to e s t i m a t e the e l a s t i c i t y of the m a r g i n a l u t i l i t y of income w i t h r e s p e c t to money income to measure the change in s o c i a l w e l f a r e , however t h i s approach to the t r e a tmen t of h d e n o t i n g the i n d i v i d u a l to whom the u t i l i t y K f u n c t ion appI i e s . d i s t r i b u t i v e e f f e c t s appea r s i n o p e r a b l e ( Pea rce and Nash 1 9 8 1 ) . Ano the r approach to s o c i a l a p p r a i s a l of p r o j e c t s wh i ch r e s t o r e d the P a r e t o p r i n c i p l e i s based on the H i c k s - K a l d o r (1939) c o m p e n s a t i o n t e s t wh i ch b a s i c a l l y says t h a t a p r o j e c t (or p o l i c y ) i s t o be j udged s o c i a l l y b e n e f i c i a l i f the g a i n e r s s e c u r e s u f f i c i e n t b e n e f i t s such t h a t they can compensate the l o s e r s and s t i l l have some net g a i n l e f t o v e r . If the c o m p e n s a t i o n i s a c t u a l l y p a i d , i m p l e m e n t a t i o n of the p r o j e c t b r i n g s about a P a r e t o improvement ; i f c o m p e n s a t i o n i s not p a i d , the s i t u a t i o n i s to be r e f e r r e d as a ' p o t e n t i a l ' P a r e t o improvement . N e v e r t h e l e s s , t h i s approach does not a v o i d the need to make d i s t r i b u t i o n a l j udgements i n the s o c i a l a p p r a i s a l of p r o j e c t s . In a d d i t i o n , c i r c u m s t a n c e s may e x i s t where the S c i t o v s k y ' p a r a d o x ' may . 2 a r i s e . D i s t r i b u t i v e w e i g h t i n g s ys t ems to be a p p l i e d to c o s t s and b e n e f i when the e x i s t i n g d i s t r i b u t i o n of income i s ' n o n - o p t i m a l ' i m p l i e s c o n v e r t i n g money measures of c o s t s and b e n e f i t s i n t o a measure of the s o c i a l u t i l i t y of the e f f e c t s . The p r o c e d u r e r ema ins c o n t r o v e r s i a l , If one pe r son i s b e t t e r o f f , and no one i s worse o f f , w e l f a r e i s i n c r e a s e d , i m p l y i n g t h a t w e l f a r e i s an i n c r e a s i n g f u n c t i o n of i n d i v i d u a l s ' u t i l i t i e s ; i . e . W = uo ( u, - - • • - • U-n) . 0 W . • / "SU- > L 2 . . . Imp lement ing the p r o j e c t may s a t i s f y c o m p e n s a t i o n t e s t at the i n i t i a l income d i s t r i b u t i o n , however , the p r o j e c t i m p l e m e n t a t i o n can change the income d i s t r i b u t i o n i n such a way t h a t a move to abandon p r o j e c t w i l l i t i t s e l f s a t i s f y the compensa t i on t e s t at t h a t income d i s t r i but i o n . and has been s e v e r e l y c r i t i c i z e d in the l i t e r a t u r e (Ha rbe rge r 1 9 7 1 , Mishan 1 9 7 4 ) . The a c c e p t e d p r a c t i c e in c o s t - b e n e f i t a n a l y s i s today i s j u s t <to dea l w i t h the a s s u r a n c e of the ' p o t e n t i a l ' P a r e t o improvement and l eave the d i s t r i b u t i o n a l m a t t e r t o be t r e a t e d by d i f f e r e n t mechanisms such as t a x a t i o n o r o t h e r p o l i t i c a l c r i t e r i a . The c o s t - b e n e f i t p r o c e d u r e b a s i c a l l y f o c u s e s on the economic e f f i c i e n c y i s s u e . When the impact of a p r o j e c t i s such t h a t market p r i c e s a re a f f e c t e d , the a s s u m p t i o n of c o n s t a n t p r i c e s i s no l onge r v a l i d ( F i g u r e 2 . 1 ) , then by u s i n g the concep t of consumer s u r p l u s the market demand c u r v e can be r e g a r d e d as the m a r g i n a l v a l u a t i o n c u r v e f o r s o c i e t y . Thus the a r e a under the e n t i r e c e t e r i s p a r i b u s demand c u r v e c o r r e s p o n d s to s o c i e t y ' s maximum v a l u a t i o n f o r a p a r t i c u l a r good . The F i g u r e 2.1 Measurement of b e n e f i t s w i t h a s m a l l p r o j e c t ( l e f t ) and a l a r g e p r o j e c t ( r i g h t ) c o n t r a s t . 25 consumer s u r p l u s a r e a i s to be r e g a r d e d as the s o c i a l b e n e f i t s (Mishan 1 9 7 6 ) . In a p r o j e c t such as S i m i l k a m e e n f l o o d c o n t r o l , the a d d i t i o n a l p r o d u c t i o n of a g r i c u l t u r e c o m m o d i t i e s i s s m a l l r e l a t i v e to the s i z e of the m a r k e t . C o n s e q u e n t l y , commodity p r i c e s w i l l not change whether the p r o j e c t i s funded o r not and the e v a l u a t i o n can assume f i x e d pr i c e s . The c o n s i d e r a t i o n of the s o c i a l o p p o r t u n i t y c o s t of the s p e c i f i c i n ves tmen t r e q u i r e s the e v a l u a t i o n of the a l t e r n a t i v e s o c i a l b e n e f i t s f o rgone by the p r i v a t e and p u b l i c s e c t o r i n c h o o s i n g to adopt the p a r t i c u l a r p r o j e c t (Mishan 1 9 7 6 ) . D e t e r m i n i n g the p r o j e c t ' s a d m i s s i b i l i t y t hus r e q u i r e s compa r i ng i t s annual b e n e f i t t i m e - s t r e a m w i t h the t i m e - s t r e a m of consumpt i on t h a t would have o c c u r r e d i f funds had not been used in the p a r t i c u l a r p r o j e c t . When s e l e c t i n g among ' a d m i s s i b l e p r o j e c t s ' i t i s n e c e s s a r y to choose between t i m e - s t r eams w i t h d i f f e r e n t d u r a t i o n s and p r o f i l e s . T h i s i n v o l v e s a s s i g n i n g a s i n g l e - v a l u e measure to each t i m e - s t r e a m excep t in c a s e s of dominance." ' " ( F e l d s t e i n 1 9 6 4 ) . The most common s i n g l e v a l u e d measure of a t i m e - s t r e a m of b e n e f i t s o r c o s t s i s i t s d i s c o u n t e d net p r e s e n t va Iue def i ned as : • One p r o j e c t h a v i n g g r e a t e r net b e n e f i t in each yea r than t h a t of e ve r y o t h e r p r o j e c t . 26 (2 .6 ) N P V = }_ - r - ^ 1 where i s the b e n e f i t o r c o s t in p e r i o d t n i s the t ime p r o f i l e of the p r o j e c t s , and r^ i s the s o c i a l r a t e of d i s o u n t in p e r i o d t, The s o c i a l r a t e of d i s c o u n t makes b e n e f i t s and c o s t s at d i f f e r e n t p o i n t s i n t ime commensurab le w i t h each o t h e r by a s s i g n i n g to them e q u i v a l e n t p r e s e n t v a l u e s . Any new p u b l i c i n ves tmen t h a v i n g a net p r e s e n t v a l u e above z e r o when d i s c o u n t e d at t h a t r a t e of i n t e r e s t w i l l add to soc i a I we_l f a r e . \ : . The c h o i c e of an i n ves tmen t o p t i o n w i l l depend upon the r a t e o f i n t e r e s t ( d i s c o u n t ) u s e d . The s e l e c t i o n of a s o c i a l d i s c o u n t r a t e has been a c o n t r o v e r s i a l i s s u e and i t r e m a i n s as s u c h . In a mixed economy w i t h e x t e r n a l e f f e c t s , c a p i t a l r a t i o n i n g and o t h e r market i m p e r f e c t i o n s , t h e r e a re m u l t i p l e i n t e r e s t r a t e s and no s i n g l e r a t e can be t aken as a measure of bo th t ime p r e f e r e n c e and the p r o d u c t i v i t y of c a p i t a l ( M a r g l i n 1 9 6 3 ) . Ha rbeger (1969) s u g g e s t e d tha t a s o c i a l r a t e of d i s c o u n t c o u l d o p e r a t i o n a l l y be e s t i m a t e d as a w e i g h t e d ave rage of 1 T h i s d e c i s i o n c r i t e r i a w i l l be e q u i v a l e n t in most s i t u a t i o n s to the c r i t e r i a wh i ch r e q u i r e s an i n t e r n a l r a t e of r e t u r n g r e a t e r than the s o c i a l r a t e of d i s c o u n t . The i n t e r n a l r a t e of r e t u r n i s d e f i n e d as 27 t h e m a r g i n a l r a t e o f p r o d u c t i v i t y o f c a p i t a l i n t h e v a r i o u s s e c t o r s f r o m w h i c h i n v e s t m e n t i s d i s p l a c e d . The c e n t r a l c o n c e p t h e r e i s t h a t f u n d s p r o v i d e d by g o v e r n m e n t m u s t be r a i s e d i n d o m e s t i c a n d f o r e i g n c a p i t a l m a r k e t s r e s u l t i n g i n l e s s d o m e s t i c i n v e s t m e n t i n e a c h s e c t o r w i t h r e t u r n s f o r e g o n e a s i n d i c a t e d by t h e m a r g i n a l r a t e o f r e t u r n a p p r o p r i a t e l y a d j u s t e d f o r t r a n s f e r s ( t a x e s ) . A l t h o u g h s e v e r a l a u t h o r s h a v e d i s a g r e e d w i t h H a r b e r g e r ' s a p p r o a c h ( F e l d s t e i n 1 9 7 3 , M a r g l i n 1 9 6 3 , C a m p b e l l 1 9 7 5 a n d 1 9 8 1 ) , J e n k i n s ( 1 9 8 0 ) u s e d t h e m e t h o d o l o g y t o e s t i m a t e t h e s o c i a l r a t e o f d i s c o u n t f o r C a n a d a . J e n k i n s f o u n d t h e s o c i a l r a t e o f d i s c o u n t o v e r t h e p e r i o d o f a n a l y s i s t o be 1 0 . 0 2 p e r c e n t a n d s u g g e s t e d t h a t 1 0 p e r c e n t w o u l d t h e r e f o r e be a p p r o p r i a t e . ARDSA s p e c i f i e d a r a t e o f 10 p e r c e n t f o r t h e e v a l u a t i o n o f t h e S i m i l k a m e e n d y k i n g p r o j e c t w h i c h i s i n a c c o r d w i t h t h e w o r k o f J e n k i n s . T h i s d i s c o u n t r a t e i s t h e r e f o r e a l s o u s e d h e r e . 2 . 3 M e a s u r e m e n t o f B e n e f i t s and C o s t s o f F l o o d C o n t r o l The c o s t s o f f l o o d c o n t r o l by s p e c i f i c e n g i n e e r i n g p r o j e c t s a r e e a s i l y e s t i m a t e d u s i n g t e c h n i q u e s d e v e l o p e d by b u i l d e r s a n d e n g i n e e r s . The e s t i m a t e o f t h e b e n e f i t s . o f f l o o d p r o t e c t i o n a s s u m i n g a s p e c i f i c p r o j e c t d e s i g n i s c o n s i d e r a b l y m o r e d i f f i c u l t . T h i s i n e f f e c t i s t h e t y p e o f e v a l u a t i o n t h a t was u n d e r t a k e n f o r t h e S i m i l k a m e e n d y k i n g p r o j e c t . The e v a l u a t i o n o f b e n e f i t s i s p a r t i c u l a r l y d i f f i c u l t b e c a u s e b e n e f i t s o f f l o o d p r o t e c t i o n a r e n o t t h e same a s t h e c o s t s o f f l o o d s . In g e n e r a l , t h e r e can be c o n s i d e r a b l e i n d i r e c t b e n e f i t s as the e x i s t e n c e of f l o o d p r o t e c t i o n may induce a d i f f e r e n t i n t e n s i t y in land use g i v i n g r i s e to a l a r g e r l e v e l of b e n e f i t s . The a n a l y s i s of i n d i r e c t b e n e f i t s f o r I nd i an l ands in the S im i l k ameen have been used f a r l e s s i n t e n s i v e l y than n o n - I n d i a n l a n d s . I f the cause of t h i s I e s s - i n t e n s i v e l e v e l of use can be a s s i g n e d to the f l o o d h a z a r d , then c o n s i d e r a b l e i n d i r e c t b e n e f i t s w i l l r e s u l t . On the o t h e r hand , i f the cause i s based on o t h e r f a c t o r s then the l e v e l of i n d i r e c t b e n e f i t s may be negI i g i b I e . 2 . 3 . 1 R e n t a l R a t e s , C a p i t a l C o s t s and F l o o d P r o t e c t i o n B e n e f i t s F l o o d c o n t r o l b e n e f i t s and f l o o d damages (or l o s s e s ) a r e not n e c e s s a r i l y e q u a l . In f a c t , a c t u a l o r e x p e c t e d l o s s e s may l ead to o v e r e s t i m a t i n g b e n e f i t s i f t h e r e i s o v e r i n v e s t m e n t in the f l o o d p l a i n , o r u n d e r e s t i m a t i n g t he se b e n e f i t s i f s i g n i f i c a n t enhancement b e n e f i t s can be o b t a i n e d f rom a d d i t i o n a l i n ves tmen t i n the a r e a . Renshaw ' s " t a x a n a l o g y " (1961) i l l u s t r a t e s the c a s e : f l o o d i n g may be thought of as a p o s i t i v e t ax e x a c t e d by n a t u r e on the o c c u p a n t s of f I oodp I a i:ns; i . e . , r e d u c i n g the net income s t r eams of the i n h a b i t a n t s of f l o o d p l a i n s be low those t h a t wou ld p r e v a i l in the absence of f l o o d s . These n a t u r e ' s t a x e s a re not o f f s e t by the p r o v i s i o n of goods and s e r v i c e s and t h e r e - f o r e , they a re r e a l l o s s e s to the communi t y . The m a r g i n a l p r o d u c t i v i t y of a p a r c e l of l and w i l l d e c r e a s e as a d d i t i o n a l u n i t s of non- l and i n p u t s a r e used w i t h i t as shown in 29 F i g u r e 2 .2 b e l o w . Unit Cost e/ A/0T7 - Lt\T\<L Input F i g u r e 2 .2 M a r g i n a l V a l u e P r o d u c t of Non-Land Input per U n i t of L a n d . In e q u i l i b r i u m the opt imum amount of non- l and i npu t used i s X ^ ' f o r a p r i c e of P . The e x p e n d i t u r e on non- l and i n p u t s i s P-^i ' t h e r e c t a n g l e OP^ BX^) and the r e t u r n s to l and ( i t s r e n t a l v a l u e ) i s the t r i angIe A B P . If Renshaw ' s f l o o d tax''" i s seen a s . a n e x c i s e tax o r u n i t tax on o u t p u t , then the M a r g i n a l V a l u e P r o d u c t Curve — f rom the p o i n t of v i ew of the f a rmer — s h i f t s downward to A' B ' . T h i s has s e v e r a l e f f e c t s . The o p t i m a l amount of non- l and i n p u t s i s r educed f rom to X^'.-and c o n s e q u e n t l y e x p e n d i t u r e on non- l and i n p u t s i s r educed to O P B' X 1 ' . The amount of r e n t i s r educed to A' B' P^. The t o t a l r e d u c t i o n in r e n t i s A B B' A ' . The r e d u c t i o n i s composed of two componen ts : A C B' A ' i s a d i r e c t l o s s caused by the f l o o d , and C B B' i s an i n d i r e c t l o s s caused by the r e d u c t i o n in use of the non- land i n p u t s because of the t h r e a t of f l o o d . If n o n - l a n d i npu t c o s t s a re equa l o r g r e a t e r than A, then i t would not pay to d e v e l o p the land when f l o o d p o t e n t i a l e x i s t s . In t h i s s i t u a t i o n a l l the b e n e f i t s a r e i n d i r e c t b e n e f i t s t h a t r e s u l t f rom p u t t i n g the l and to u s e . In f a c t as the u n i t c o s t of n o n - l a n d i npu t i n c r e a s e s f rom P̂  to A the impor t ance of the i n d i r e c t b e n e f i t s f rom f l o o d c o n t r o l i n c r e a s e s r e l a t i v e to the d i r e c t b e n e f i t s of f l o o d c o n t r o l . The most i m p o r t a n t t ype of i n d i r e c t b e n e f i t s t h a t can be d e r i v e d f rom p r o v i d i n g f l o o d p r o t e c t i o n to I nd i an l ands in the S i m i l k a m e e n v a l l e y a re change in land use and y i e l d i n c r e a s e s th rough a d d i t i o n a l """Renshaw d e s c r i b e d t h i s " n a t u r e ' s tax e f f e c t " by v a r y i n g non- land i npu t p r i c e s and m a i n t a i n i n g the same m a r g i n a l e f f i c i e n c y of c a p i t a l (ma rg ina l v a l u e p r o d u c t c u r v e ) of n o n - f l o o d c o n d i t i o n s . The a u t h o r of t h i s t h e s i s , however , f e e l s t h a t a b e t t e r d e s c r i p t i o n of the " t a x e f f e c t " i s s h i f t i n g the m a r g i n a l v a l u e p r o d u c t c u r v e as in F i g u r e 2.2 and m a i n t a i n i n g p r i c e s u n c h a n g e d . A f t e r a l l , i npu t p r i c e s a re d e t e r m i n e d by the market and a re independent of the f l o o d s in the c o n t e x t of our i l l u s t r a t i o n . 31 i n p u t s . The f a c t t ha t the degree of f l o o d h a z a r d i s i n c i d e n t a l to land has i m p o r t a n t i m p l i c a t i o n s . The d i f f e r e n c e between r e n t a l v a l u e s of f l o o d f r e e l ands and land comparab l e i n a l l o t h e r r e s p e c t s excep t f o r f l o o d h a z a r d p r o v i d e s a d i r e c t measure of the net annual b e n e f i t s of f l o o d c o n t r o l . There a re a f a i r l y s i g n i f i c a n t number of c o n d i t i o n s f o r t hese r e n t s to be a measure of the net s o c i a l b e n e f i t s of f l o o d p r o t e c t i o n . These c o n d i t i o n s a re t h a t the p r o j e c t does not a f f e c t p r i c e s at the m a r g i n , the absence of e x t e r n a l i t i e s , and t h a t market p r i c e s a r e r a measure of v a l u e . In the absence of a d i r e c t measure of r e n t s , i t i s n e c e s s a r y to e s t i m a t e the r e t u r n s to land by e s t i m a t i n g c o s t s and r e t u r n s f rom p r o d u c t i o n as was done by WIAC f o r the S i m i l k a m e e n p r o j e c t . Wi th the annua l v a l u e of f l o o d p r o t e c t i o n measured d i r e c t l y by market o b s e r v a t i o n s on r e n t a l r a t e s o r e s t i m a t e s f rom budget d a t a , the c o n v e r s i o n to a s i n g l e v a l u e by d i s c o u n t i n g i s r e q u i r e d . But the market a l s o can p r o v i d e an a l t e r n a t i v e measure of the net p r e s e n t v a l u e of f l o o d p r o t e c t i o n . T h i s a l t e r n a t i v e measure i s the d i f f e r e n c e between the c a p i t a l c o s t of f l o o d f r e e land and land s u b j e c t to f l o o d i n g (both w i t h the same p r o d u c t i o n p o t e n t i a l ) . The advan tage of t h i s a l t e r n a t i v e measure i s t ha t i t i s not n e c e s s a r y to s e l e c t the r a t e of d i s c o u n t o r some of the more s u b t l e t h e o r i e s about f a c t o r s wh i ch d e t e r m i n e a s s e t v a l u e s in an u n c e r t a i n w o r l d ( M e l i c h a r 1 9 7 9 , F e l d s t e i n 1 9 7 3 ) . However , as d e s c r i b e d above , the market r a t e of d i s c o u n t i s not l i k e l y to be the same as the s o c i a l r a t e of d i s c o u n t and an ad ju s tmen t 32 of market v a l u e s i s n e c e s s a r y to a ccoun t f o r t h i s d i f f e r e n c e . 2 . 3 . 2 Causes of Lack of Deve lopment and the Measure of I n d i r e c t Benef i t s Market d a t a on r e n t s o r c a p i t a l v a l u e s may be d i f f i c u l t to o b t a i n f o r a number of r e a s o n s . Both r e n t and c a p i t a l v a l u e s a re ve ry l o c a l phenomena dependent upon such t h i n g s as t r a n s p o r t a t i o n , d i s t a n c e f rom market c e n t r e s and i n f r a s t r u c t u r e . It i s f r e q u e n t l y the c a s e t h a t land s u b j e c t to f l o o d i n g i s somewhat un ique i n the a r ea so t h a t d a t a a re not a v a i l a b l e on comparab l e land w i t h o u t f l o o d h a z a r d . T h i s i s p a r t i c u l a r l y the c a se f o r R e s e r v e l ands as the land i s g e n e r a l l y not t r a d e d in a w e l l d e f i n e d m a r k e t . In t hese s i t u a t i o n s i t i s n e c e s s a r y to e s t i m a t e the b e n e f i t s of f l o o d p r o t e c t i o n in terms of the i n c r e a s e d p r o d u c t i o n tha t can be o b t a i n e d as a r e s u l t of f l o o d p r o t e c - t i o n . The measurement of i n d i r e c t b e n e f i t s become a p a r t i c u l a r l y c r i t i c a l i s s u e in t h i s a p p r o a c h . The p o s s i b l e b e n e f i t s a s s o c i a t e d w i t h the e r o s i o n and d y k i n g p r o t e c t i o n sys tem f o r the S i m i l k a m e e n c a s e i n c l u d e : a) net v a l u e of p r o d u c t i o n on land saved f rom b e i n g e r o d e d ; b) p r o d u c t i o n saved because of f l o o d c o n t r o l , o r a l t e r n a t i v e l y d i r e c t c r o p l o s s e s ; c) p r o d u c t i o n saved f rom d e c r e a s i n g p r o d u c t i v i t y l e v e l s in a g i v e n p e r i o d as a r e s u l t of f l o o d i n g i n the p r e v i o u s p e r i o d ; d) p r o d u c t i o n c o s t s saved because of f l o o d c o n t r o l ; 33 e) a d d i t i o n a l net v a l u e of p r o d u c t i o n o b t a i n e d because of induced changes in land u s e : f ) a d d i t i o n a l net v a l u e of p r o d u c t i o n o b t a i n e d because of more i n t e n s i v e management in e x i s t i n g u s e s ; g) i n t a n g i b l e b e n e f i t s I terns (a) and (d) c a p t u r e the d i r e c t b e n e f i t s ; t hese a re the a d d i t i o n a l v a l u e of p r o d u c t i o n tha t wou ld r e s u l t i f t h e r e were no changes i n p r o d u c t i o n p r a c t i c e s and land u s e . But some i n t e n s i f i c a t i o n of management p r a c t i c e s and a change to h i g h e r v a l u e d uses may be e x p e c t e d i f f l o o d p r o t e c t i o n o c c u r s . The s o u r c e s of t hese a d d i t i o n a l b e n e f i t s a r e i d e n t i f i e d i n i t ems (e) and ( f ) . A l s o , o t h e r b e n e f i t s s h o u l d a c c r u e to the f l o o d p r o t e c t i o n such as the enhancement of the sense of s e c u r i t y of the p e o p l e . T h i s t ype of b e n e f i t f a l I s in the c a t e g o r y of i n t a n g i b l e b e n e f i t s and i s e x t r e m e l y d i f f i c u l t to measure in economic t e r m s . The U .S . Water R e s o u r c e C o u n c i l s u g g e s t s a p r o c e d u r e to e s t i m a t e f l o o d c o n t r o l b e n e f i t s as i l l u s t r a t e d i n F i g u r e 2 . 3 . D i r e c t b e n e f i t s a re e s t i m a t e d f a i r l y e a s i l y as the d i f f e r e n c e between the v a l u e of p r o d u c t i o n in a f l o o d - f r e e s i t u a t i o n and the v a l u e of p r o d u c t i o n in a f l o o d s i t u a t i o n . The e s t i m a t i o n of i n d i r e c t b e n e f i t s i s more complex because the p r o c e d u r e i m p l i e s some s o r t of p r e d i c t i o n c o n c e r n i n g changes in the p a t t e r n of a g r i c u l t u r a l l and use and changes i n p r o d u c t i o n t e c h n o l o g y . The a g g r e g a t e of d e c i s i o n s taken o ve r t ime by d e c i s i o n makers r e s p o n s i b l e f o r o r g a n i z i n g and o p e r a t i n g i n d i v i d u a l land h o l d i n g s a re De te rm ine c u r r e n t and p r o j e c t e d v a l u e of p r o d u c t i o n ( f l o o d - f r e e y i e l d ) De te rm ine damage - w i t h o u t p r o j e c t De t e rm ine b e n e f i t as d i f f e r e n c e in damage w i t h ' a n d w i t h o u t p r o j e c t De t e rm ine v a l u e of p r o d u c t i o n w i t h i n t e n s i f i e d use De te rm ine b e n e f i t as d i f f e r e n c e i n net income • Tota I Benef i t F i g u r e 2 . 3 : F l o w c h a r t of A g r i c u l t u r a l F l o o d w a t e r R e s o u r c e s S o u r c e : Water Resou r ce C o u n c i l , F e d e r a l R E g i s t e r , P a r t IX, December 1 4 , 1979 , W a s h i n g t o n , D .C . U . S . A . r e f l e c t e d i n the p a t t e r n of a g r i c u l t u r a l land u s e . Change i n t h i s p a t t e r n depends upon d e c i s i o n s b e i n g made to adopt new p r a c t i c e s . I d e a s , p r o d u c t s and p r a c t i c e s p e r c e i v e d as new by i n d i v i d u a l s have been d e f i n e d as " i n n o v a t i o n s " , w h i l e the p r o c e s s by wh i ch they s p r e a d to members of a s o c i a l s y s t em has been d e f i n e d as " d i f f u s i o n " (Rogers and Shoemaker 1 9 7 1 ) . D e c i s i o n makers a r e u s u a l l y c l a s s i f i e d in terms of the s t a g e at wh i ch they adopt an i n n o v a t i o n , and t h i s has been r e l a t e d to p e r s o n a l c h a r a c t e r i s t i c s and commun i ca t i on n e t w o r k s . Those who i n v e s t , d e v e l o p or a re f i r s t i n one a r e a to adopt an i n n o v a t i o n a re c l a s s i f i e d as " i n n o v a t o r s " . O t h e r s a re c l a s s i f i e d as " e a r l y a d o p t o r s " , " e a r l y m a j o r i t y " , " l a t e r m a j o r i t y " and " l a g g a r d s " . The main f a c t o r s i n v o l v e d in the one- f a rm d e c i s i o n mak ing p r o c e s s can be summar ized i n F i g u r e 2 . 4 . The r e l a t i o n s h i p s between economic c o n s t r a i n t s , a v a i l a b l e knowledge and p e r s o n a l a t t r i b u t e s of the d e c i s i o n maker s h o u l d be n o t e d . The d e c i s i o n maker , when d e c i d i n g a l t e r n a t i v e forms of land u s e , does not n e c e s s a r i l y choose v e n t u r e s wh i ch a re opt imum in terms of economic r e t u r n . It i s p o s s i b l e t ha t h i s c h o i c e may be random, but i t i s more l i k e l y to be in terms of l and use s t r a t e g y wh i ch i s s a t i s f a c t o r y r a t h e r than op t imum. In f a c t , i t has been s u g g e s t e d t h a t the d e c i s i o n maker r a r e l y has the c a p a b i l i t y o r d e s i r e to examine a l l the p o s s i b i l i t i e s i n v o l v e d i n s e e k i n g to o p t i m i z e the outcomes of h i s d e c i s i o n s , and thus i s w i l l i n g to seek me re l y a s a t i s f a c t o r y s o l u t i o n . D i f f e r e n c e of t h i s k i n d can be a c c o u n t e d f o r i n terms of d i f f e r i n g r a t e s of c o m m u n i c a t i o n , c > c T>ecis ton t TWJ'I i-om merit ALT BR NflTU/ES. Other Jncome Sooi-cc 3 F i g u r e 2 . 4 The F a r m D e c i s i o n M a k i n g P r o c e s s S o u r c e : d e r i v e d f r o m C o o k e & J o h n s o n ( 1 9 6 9 ) v a r i a t i o n s in knowledge and l e v e l s of a s p i r a t i o n s , a t t i t u d e s to r i s k , and u n c e r t a i n t y about the env i ronment w i t h i n wh i ch d e c i s i o n s a re made. The d e c i s i o n env i ronmen t r e f e r s to the s e t of knowledge a v a i l a b l e to the d e c i s i o n maker and i s f u n d a m e n t a l l y d e t e r m i n e d by the n a t u r e of the d e c i s i o n maker . The ex tended o r r e a l env i ronment ( i . e . , the s e t of comp l e t e knowledge assumed in most n o r m a t i v e economic mode l s ) i s u n l i k e l y to c o i n c i d e w i t h the f o r m e r . It has been h y p o t h e s i z e d t h a t i n n o v a t i o n s p e r c e i v e d by d e c i s i o n makers as h a v i n g g r e a t e r u t i l i t y tend to be adopted f i r s t . N e v e r t h e l e s s , i t has been p o i n t e d out t h a t i n c r e a s e i n fa rm income and r a t e of r e t u r n on i n ves tmen t does not a lways c o r r e l a t e p o s i t i v e l y w i t h the r a t e of a d o p t i o n ( F l i e g e l and K i l v i n 1 9 6 2 ) . C o n s e q u e n t l y , f a r m e r s ' e x p e c t e d u t i l i t i e s a r e s u b j e c t - i v e l y d e t e r m i n e d and a re not n e c e s s a r i l y based on s t r i c t l y economic c r i t e r i a . C o n s i d e r i n g a l l o f the above and t h a t a p r e d i c t i o n model has not been used in the a n a l y s i s , the r e s p o n s e f rom l o c a l f a r m e r s to the p r o v i s i o n of f l o o d p r o t e c t i o n in the S i m i l k a m e e n i s not easy to d e t e r m i n e . Thus , the i n d i r e c t b e n e f i t s a s s o c i a t e d w i t h changes in land use and changes i n p r o d u c t i o n t e c h n o l o g y a re d i f f i c u l t to measu re . The c a u s e s of the c u r r e n t p a t t e r n i n the use of the l and and the low l e v e l of p r o d u c t i v i t y a re not w e l l known f o r the S i m i l k a m e e n I nd i an Bands . A l t h o u g h the l and p o t e n t i a l o f f e r s o p p o r t u n i t i e s to the - S i m i l k a m e e n Band to d e v e l o p i t s a g r i c u l t u r a l r e s o u r c e s , the p a t t e r n of l and use on the R e s e r v e s u g g e s t s t h a t I n d i a n s have f a ced s e r i o u s d i f f i c u l t i e s i n t h i s r e g a r d . The c r o p p a t t e r n on r e s e r v e l a n d o u t s i d e t h e p r o j e c t a r e a i s r o u g h l y 3 0 p e r c e n t n o n - i r r i g a t e d g r a s s a n d t h e r e m a i n i n g 70 p e r c e n t u n d e r n a t i v e p a s t u r e a n d s h r u b s ( W e s t e r n I n d i a n A g r i c u l t u r a l C o r p . 1 9 8 0 ) . The c u r r e n t a n d p o t e n t i a l l a n d u s e on t h e S k e m e o s k u a k i n R e s e r v e i l l u s t r a t e s t h e t y p i c a l l a c k o f d e v e l o p m e n t t h r o u g h o u t t h e p r o j e c t a r e a ( T a b l e 2 . 1 ) . The y i e l d s o b t a i n e d by I n d i a n f a r m e r s i n t h e S i m i l k a m e e n a r e a ( T a b l e 2 . 3 ) a l s o s u g g e s t t h e e x i s t e n c e o f p r o b l e m s when c o m p a r e d t o t h e y i e l d s o b t a i n e d by n o n - I n d i a n f a r m e r s i n t h e same a r e a . The l i t e r a t u r e on I n d i a n p o v e r t y b a s i c a l l y o f f e r s t h r e e d i f f e r e n t t y p e s o f e x p l a n a t i o n s t h a t may a c c o u n t f o r t h e d i f f e r e n c e s b e t w e e n I n d i a n a n d n o n - I n d i a n a g r i c u l t u r e . The f i r s t i s t h a t I n d i a n s h a v e d i f f e r e n t c o n s t r a i n t s on t h e i r p a r t i c i p a t i o n i n t h e m a r k e t t h a n do n o n - I n d i a n s ( B e c k e r 1 9 7 1 ) ; a n o t h e r e x p l a n a t i o n i s t h a t I n d i a n s l a c k m a n a g e r i a l a n d t e c h n i c a l k n o w l e d g e ( S o r k i n a n d J o h n s t o n 1 9 7 1 ) . A t h i r d e x p l a n a t i o n i s t h a t I n d i a n s h a v e d i f f e r e n t g o a l s t h a n n o n - I n d i a n s ( B e n n e t 1 9 6 9 ) w h i c h i s e q u i v a l e n t t o t h a t o f t h e " i n e r t p e a s a n t " o r " s a t i s f i c i n g p e a s a n t " i n t h e e c o n o m i c d e v e l o p m e n t t h e o r y l i t e r a t u r e ( s e e R e y n o l d s 1 9 7 5 ) . D o r n e r ( 1 9 5 9 ) h a s a t t r i b u t e d some e f f e c t s t o a l l t h r e e i n e x p l a i n i n g I n d i a n p o v e r t y i m p l y i n g t h a t t h e t h r e e t y p e s o f e x p l a n a t i o n s a r e n o t m u t u a l l y e x c l u s i v e . Work d o n e by T r o s p e r ( 1 9 7 8 ) s u g g e s t s t h a t l a n d t e n u r e o r o t h e r i n s t i t u t i o n a l p r o b l e m s may u n d e r l i n e I n d i a n d i f f i c u l t i e s i n a t t a i n i n g t h e o p e r a t i n g l e v e l s o f n o n - I n d i a n a g r i c u l t u r a l p r o d u c t i o n . Tab l e 2.1 Land Use in A g r i c u l t u r a l A r eas of Skemeoskuak in Ind ian Rese r ve S i m i l k a m e e n V a l l e y , B .C . ( h e c t a r e s ) C rops C u r r e n t S i t u a t i on Land Po t en t i a 1 Vege tab1es 0 405 O r c h a r d 0 662 A l f a l f a ( i r r i g . ) 0 658 G r a s s ( i r r i g . ) 0 662 G r a s s ( n o n - i r r i g . ) 297 728 N a t i v e P a s t u r e 431 728 S o u r c e : WIAC S u r v e y , 1980 T h i s might be compared to n o n - r e s e r v e l and use in the Va l where about 40 p e r c e n t of the land i s i n o r c h a r d s , 8 p e r c e n t ' i n v e g e t a b l e s and the r e m a i n i n g in h a y , g r a i n s and o t h e r c r o p s Tab l e 2 . 2 . The Rese r ve land i s c o n s i d e r e d to be among the bes t land in the V a l l e y ( B . C . M i n i s t r y of A g r i c u l t u r e and Food) T a b l e 2 .2 Land Use P a t t e r n in the Okanagan-S imi Ikameen Year Crop 1971 1976 1981 Haycrop 4 2 . 6 4 5 . 3 48 O r c h a r d 46 .1 4 0 . 3 38 V e g e t a b l e & Sma1 1 F ru i t s 5 .9 8 .3 8 Gra i ns 1.5 1.7 3 O t h e r s 3.7 3 .9 4 N o t e : F i g u r e s in p e r c e n t on a b a s i s of 1 3 , 8 3 8 h e c t a r e s . Tab l e 2 .3 Ave rage Y i e I d s i n F l o o d f r e e A reas of the S i m i l k a m e e n V a l l e y , B .C . Crop Uni t s I nd ian Farmers [uni t/ha) Average in the VaI Iey (un i t/ha) i r r i g a t e d Crop Al f a l f a G r a s s Non-1rr i ga ted Al f a l f a G r a s s N a t i v e P a s t u r e tons tons tons tons AUM C 8 .5 6 .7 3.2 2 .9 0 .25 1 3 . 0 1 0 . 0 6 . 4 5 .2 NA ha = h e c t a r e S o u r c e : WIAC F i e l d S u r v e y , 1980 'B.C. M i n i s t r y of A g r i c u l t u r e - Consensus Data Ser i es ' A n i n a l U n i t Month - d e f i n e d as one mature cow w i t h / w i t h o u t unweaned c a l f at s i d e McLean , A . , Range Management - A g r i c u l t u r e C a n a d a ) . 42 If one a c c e p t s B e n n e t ' s " i n e r t p e a s a n t " t h e s i s , then one may e x p e c t v e r y l i t t l e impact of the dykes i n c h a n g i n g land use and p r o d u c t i o n p r a c t i c e s . However , we f e e l t h i s t h e s i s i s p r o b a b l y not t e n a b l e . The argument has a l s o been used in the deve lopment l i t e r a t u r e t o d e s c r i b e underdeve lopment in many t h i r d w o r l d c o u n t r i e s but has been c o n v i n c i n g l y r e f u t e d by S c h u l t z (1961). At the same t ime p rob l ems w i t h t e n u r e , a c c e s s to f i n a n c e , l a ck of t r a i n i n g and e d u c a t i o n a l o p p o r t u n i t i e s , d i s c r i m i n a - t i o n and s o c i a l p r o b l e m s a re impo r t an t b a r r i e r s to deve lopment of I nd i an agr i c u I t u r e . B a s i c a l l y two forms of t e n u r e a r r angements a re found on band l ands in B r i t i s h C o l u m b i a . Most of the l and i s common p r o p e r t y and s u b j e c t to band management. The a d m i n i s t r a t i o n of band land has in the pas t been u n d e r t a k e n by the Department of N o r t h e r n and I nd i an A f f a i r s . As p o i n t e d out above , the a d m i n i s t r a t i v e f u n c t i o n in the S i m i l k a m e e n has been r e t u r n e d to the i n d i v i d u a l Bands . However , the Bands a re in the p r o c e s s of d e v e l o p i n g the i n s t i t u t i o n s to make use of the l a n d . If the land i s to r ema in as common p r o p e r t y then some form of c o - o p e r a t i v e i n s t i t u t i o n s need to be d e v e l o p e d b e f o r e the land can be e f f e c t i v e l y used a n d , of c o u r s e , t h e r e i s the d i f f i c u l t p r o b l e m of f o r m i n g these i n s t i tu t i o n s . Some land i s a l s o h e l d under C e r t i f i c a t e s of P o s s e s s i o n wh i ch in many r e s p e c t s i s e q u i v a l e n t to p r i v a t e o w n e r s h i p . C e r t i f i c a t e s of P o s s e s s i o n can be t r a n s f e r r e d between band members but not to non-band members. T r a n s f e r s a re d i f f i c u l t to e f f e c t however because the market i s v e r y na r row and t h e r e f o r e few o t h e r band members can a f f o r d 43 to p u r c h a s e . A l s o , mor tgages on the land to f a c i l i t a t e t r a n s f e r s a re not f e a s i b l e because land cannot be used as s e c u r i t y w i t h non-band f i n a n c i a l i n s t i t u t i o n s such as b a n k s . Of c o u r s e , the s e l l e r c o u l d in t h e o r y " t a k e b a c k " a mor tgage but t h i s i s r a r e l y done . C e r t i f i c a t e s of P o s s e s s i o n tend to be h e l d by o l d e r I n d i a n s who were once f a r m e r s as a l egacy f o r t h e i r g r a n d c h i l d r e n . T r a n s f e r s a l s o r e q u i r e band p e r m i s s i o n wh i ch w i l l f r e q u e n t l y c r e a t e p o l i t i c a l p rob l ems and t h e r e f o r e a re f r e q u e n t l y not p e r f e c t e d when i n i t i a t e d . E d u c a t i o n l e v e l s a re low in the band p o p u l a t i o n as i s p r a c t i c a l e x p e r i e n c e in fa rm and b u s i n e s s management. T h i s makes the f o r m a t i o n n of e f f e c t i v e c o - o p e r a t i v e s d i f f i c u l t as w e l l as r e d u c i n g the p o t e n t i a l of i n d i v i d u a l f a r m e r s . As B a r i c h e l l o (1978) p o i n t s o u t , e d u c a t i o n l e v e l s a re an i m p o r t a n t f a c t o r i n e x p l a i n i n g fa rmer management a b i l i t i e s , but low e d u c a t i o n l e v e l s l ead to h i g h p a y o f f f rom e x t e n s i o n and a d u l t e d u c a t i o n p r o g r a m s . However , low l e v e l s of e d u c a t i o n a re a l s o c o r r e l a t e d w i t h low l e v e l s of r e s p o n s e to new p r o d u c t i o n o p p o r t u n i - t i e s such as those c r e a t e d by d y k i n g p r o g r a m s . I n d i a n s in g e n e r a l have a ve ry l i m i t e d a c c e s s to t r a d i t i o n a l l e n d i n g s o u r c e s . A major f a c t o r i s the i n a b i l i t y to use t h e i r major a s s e t , l a n d , as c o l l a t e r a l . T h i s in p a r t has l ed to a " v i c i o u s c i r c l e " where I n d i a n s have not been a b l e to b u i l d up o t h e r a s s e t s ( c a t t l e , m a c h i n e r y , e t c . ) because of the i n a b i l i t y to use land as c o l l a t e r a l . Even p e r s o n a l p r o p e r t y i s d i f f i c u l t to e n f o r c e as the p r o p e r t y i s on r e s e r v e l a n d . I n d i a n s can a p p l y to t h r e e f e d e r a l government s o u r c e s f o r g r a n t s : the F i r s t C i t i z e n F u n d , S p e c i a l ARDA, and the Economic 44 Deve lopment F u n d . A l l of t hese funds g e n e r a l l y r e q u i r e an i m p o r t a n t f i n a n c i a l committment f rom I n d i a n s b o r r o w i n g the money f o r any i n v e s t - ment to be u n d e r t a k e n . T h i s i s i f an I n d i a n fa rmer wanted to spend $ 6 0 , 0 0 0 to d e v e l o p an i r r i g a t e d o r c h a r d , then he wou ld have to have $ 3 0 , 0 0 0 of h i s own money to be a b l e to bor row an a d d i t i o n a l $ 3 0 , 0 0 0 from one of t hese s o u r c e s . In a d d i t i o n , the a p p l i c a t i o n p r o c e d u r e i s i n v o l v e d and t h e r e a re maximum l i m i t s of $ 3 0 , 0 0 0 f o r i n d i v i d u a l s and $ 1 0 0 , 0 0 0 f o r b a n d s . These a re l a r g e amounts of money f o r most I nd i ans o r bands to r a i s e but g e n e r a l l y s m a l l in terms of the money needed f o r v i a b l e commerc ia l f a r m i n g t o d a y . In the p a r t i c u l a r c a se of the S i m i l k a m e e n I nd i an Bands and in c o n n e c t i o n w i t h the e s t i m a t i o n of f l o o d c o n t r o l b e n e f i t s , two hypo4=- t h e s e s can be s u g g e s t e d , one wh ich a t t r i b u t e s the l a ck of deve lopment ( i n terms of l and use and in terms o f y i e l d s ) e n t i r e l y t o the f l o o d h a z a r d . The second h y p o t h e s i s i s t ha t the l a ck of deve lopment i s due to f a c t o r s o t h e r than f l o o d s ; i . e . , Hypothes i s Causes of Lack of Deve lopment H F I oods o F i n a n c e , Management, A b i l i t i e s , T e n u r e , E d u c a t i o n Four p o s s i b l e c o m b i n a t i o n s in r e g a r d to the f l o o d p r o t e c t i o n can be c o n s e q u e n t l y e s t a b l i s h e d C o m b i n a t i o n I was i m p l i c i t l y assumed in the WIAC type of b e n e f i t s f rom as in T a b l e 2 . 4 . s t u d y . Based upon 45 the above , we f e e l t h a t C o m b i n a t i o n I I , III o r e s p e c i a l l y IV i s l i k e l y i n v i e w of the f i n a n c i a l demand r e q u i r e d to implement changes in management and land u s e . T a b l e 2.4 Y i e l d / H a n d Use H y p o t h e s i s C u r r e n t S i t u a t i o n of Comb i nat i on Low Y i e l d s Land Use 1 H o H o 1 1 H o H l 1 1 1 H l H o IV H l H l Under c o m b i n a t i o n I, f l o o d e v e n t s a re i n d i c a t e d as the p r i m a r y r e a so n f o r the low y i e l d s and c u r r e n t land use in the a r e a . In t h i s s i t u a t i o n , b e n e f i t s f rom f l o o d p r o t e c t i o n a re c a p t u r e d in the f o l l o w i n g e x p r e s s i o n : , 2 . 7 , 3 - ( C 5 t " - C 5 ^ ' ) t ( f \ Z , ' ) where g = T o t a l B e n e f i t s (measurab le in net p r e s e n t v a l u e ) = Net P r e s e n t V a l u e of C u r r e n t P r o d u c t i o n S i t u a t i o n w i t h P r o t e c t i o n and Low Y i e l d S c e n a r i o 46 CS w/o LY = Net P r e s e n t Vaue of C u r r e n t P r o d u c t i o n S i t u a t i o n w i t h o u t P r o t e c t i o n and Low Y i e l d S c e n a r i o A W HY = Net P r e s e n t V a l u e of A l t e r n a t i v e P r o d u c t i o n S i t u a t i o n w i t h P r o t e c t i o n and H igh Y i e l d S c e n a r i o . T h i s r e p r e s e n t s a s i t u a t i o n w i t h more i n t e n s i v e use of I and . The f i r s t te rm of the r i g h t hand s i d e r e p r e s e n t s the d i r e c t b e n e f i t s f rom f l o o d c o n t r o l and the second term r e p r e s e n t s the i n d i r e c t b e n e f i t s . C o m b i n a t i o n IV r e p r e s e n t s a s i t u a t i o n where low y i e l d s and land use a r e a t t r i b u t e d e x c l u s i v e l y to f a c t o r s o t h e r than f l o o d h a z a r d . C o n s e q u e n t l y , o n l y d i r e c t b e n e f i t s a r e to be d e r i v e d f rom f l o o d p r o t e c t i o n . T h i s i s r e p r e s e n t e d b y : C o m b i n a t i o n II and III r e p r e s e n t a t ype of s i t u a t i o n where the combined e f f e c t of f l o o d h a z a r d and i n s t i t u t i o n a l c o n s t r a i n t s p l a y a r o l e in p r e v e n t i n g a g r i c u l t u r e deve lopment in the a r e a . In the f i r s t c a s e ( ( c o m b i n a t i o n I I ) o n l y the low y i e l d s a re a t t r i b u t e d to the p r e s e n c e of f l o o d s ( d r a i n a g e p r o b l e m s ) . F a c t o r s o t h e r than f l o o d s a re i n d i c a t e d to d e t e r m i n e the land use p a t t e r n . C o n s e q u e n t l y , b e n e f i t s in the fo rm of y i e l d i n c r e a s e s in the c u r r e n t land use a re -the d i r e c t b e n e f i t s : . . (2.8) (2.9) For c o m b i n a t i o n I I I , y i e l d s r e l a t e to f a c t o r s o t h e r than f l o o d s (such as l a ck of management, l e v e l of i n v e s t m e n t , i n f o r m a t i o n , e t c . ) but land use i s c o n s i d e r e d to be a f f e c t e d by the f l o o d s i t u a t i o n . T h e r e - f o r e d i r e c t b e n e f i t and i n d i r e c t b e n e f i t a re to be a c c o u n t e d . T h i s i s r e p r e s e n t e d by : where the f i r s t term i s the d i r e c t b e n e f i t and the second term c a p t u r e s the i n d i r e c t b e n e f i t . T h i s i s summar ized i n T a b l e 2 . 5 . Note t ha t d i r e c t b e n e f i t s a r e the same in a l l c a s e s , but i n d i r e c t b e n e f i t s change w i t h each c o m b i n a t i o n . Under a s e p a r a t e deve lopment program c o n s i s t i n g of a package of t e n u r e improvement , p r o v i s i o n of a s o u r c e of e x t e r n a l c r e d i t , a c c e s s to e d u c a t i o n a l and e x t e n s i o n s e r v i c e s wou ld be needed to o b t a i n the i n d i r e c t b e n e f i t s . These t ypes of b e n e f i t s a r e a r e s u l t of t r a i n i n g and/or i n f o r m a t i o n wh i ch e n a b l e s f a r m e r s not o n l y to i d e n t i f y t h e i r bes t p r o d u c t i o n o p p o r t u n i - t i e s , but o f t e n to implement t h e i r a c t i v i t i e s s u c c e s s f u l l y , . In c o m b i n a t i o n I, b e n e f i t s f rom y i e l d i n c r e a s e s and f rom a change i n c r o p p i n g p a t t e r n a re e n t i r e l y a s s i g n e d to the f l o o d p r o t e c t i o n and t h e r e f o r e b e n e f i t s f rom a deve lopment program a re n i l . In s i t u a t i o n I I , c r o p p i n g p a t t e r n changes may be a s s o c i a t e d w i t h a deve lopment p rog ram. In s i t u a t i o n I I I , o n l y y i e l d i n c r e a s e s a re to a s s o c i a t e w i t h a deve lopment and in s i t u a t i o n IV, c r o p p a t t e r n changes as w e l l as y i e l d i n c r e a s e s can be l i n k e d to t h i s s o r t of b e n e f i t . (2 .10 ) 48 T a b l e 2 .5 F l o o d C o n t r o l B e n e f i t s (measurab le in NPV"do I I a r s ) C o m b i n a t i o n D i r e c t B e n e f i t s I n d i r e c t B e n e f i t s C S W - C S W / ° A W - C S W LY L b L Y HY L i L Y w w/o W W M C S L Y - C S L Y C S H Y - C S L Y I I . C S W - C S W / ° A W - C S W I L b L Y L \ Y A L Y L b L Y IV 0 T o t a l f l o o d c o n t r o l b e n e f i t s a r e g i v e n in T a b l e 2 . 6 . T o t a l f l o o d c o n t r o l b e n e f i t s a r e h i g h e s t under c o m b i n a t i o n T and lowest under c o m b i n a t i o n IV. The t o t a l l e v e l o f b e n e f i t s w i l l be at an i n t e r m e d i a t e l e v e l f o r c o m b i n a t i o n II and I I I . Note t h a t i f a s u c c e s s f u l deve lopment program were u n d e r t a k e n , t h e r e wou ld be a c o n s i d e r a b l e impact on f l o o d p r o t e c t i o n b e n e f i t s f o r a l l h y p o t h e s i s c o m b i n a t i o n s e x c e p t 1. In t h i s s i t u a t i o n , I and use and/or y i e l d s would be changed and the " c u r r e n t s i t u a t i o n " wou ld no l onge r be the base f rom wh i ch b e n e f i t s a re e s t i m a t e d . If l and use and/or y i e l d s can be m o d i f i e d w i t h a deve lopment p r o g r a m , then the b e n e f i t s of such a program can be e s t i m a t e d as shown in T a b l e 2 .7 under each of the h y p o t h e s i s c o m b i n a t i o n s . These b e n e f i t s a r e the i n v e r s e of t hose in T a b l e 2 .6 i n terms of r e l a t i v e magn i tude w i t h the l a r g e s t b e n e f i t s f o r c o m b i n a t i o n IV and no b e n e f i t s f o r c o m b i n a t i o n I. As a f i n a l p o i n t , i t i s n e c e s s a r y to s t r e s s t h a t a l l of the h y p o t h e s i s c o m b i n a t i o n s a re somewhat e x t r e m e . It may be the c a se tha t bo th f l o o d p r o t e c t i o n and a deve lopment program a re i n s e p a r a b l e components of a s i n g l e p r o j e c t to i n c r e a s e bo th the l e v e l of manage- ment and move to h i g h e r v a l u e d u s e s . In t h i s c a s e , f l o o d p r o t e c t i o n would be p a r t of a t o t a l deve lopment package w i t h b e n e f i t s equal t o : T a b l e 2 .6 T o t a l F l o o d C o n t r o l B e n e f i t s H y p o t h e s i s ~ . . . . -B'enef i t s C o m b i n a tio n Wi-f hou t deve I opmen t -program: I I I I I IV A W - C S W / ° ' HY U 5 L Y c s w - c s w / o HY L b L Y - CS w/o LY w c s L Y - CS w/o LY Wi th Deve lopment p r o g r a m : I I I IV HY - CS HY w/o LY w/o LY HY - CS w^o HY - A w/o HY HY T a b l e 2 .7 Development Program B e n e f i t s 51 H y p o t h e s i s B e n e f i t s C o m b i n a t i o n W i thout F l o o d C o n t r o l I I IV w/o r c w / o LY L b L Y r c - W / o _ r q w / o HY LY .w/o _ r c .w/o HY L b L Y 52 CHAPTER 3 ANALYSIS OF ARDSA PROCEDURES TO EVALUATE FLOOD CONTROL BENEFITS In t h i s c h a p t e r the e s t i m a t e s of c o s t s as s p e c i f i e d i n the WIAC s tudy a re r e v i e w e d . As s t a t e d above in the o b j e c t i v e s , the s t r u c t u r e s a re assumed to be the bes t d e s i g n to o b t a i n f l o o d p r o t e c t i o n in the a r ea and no m o d i f i c a t i o n of t he se c o s t s o r e v a l u a t i o n of the s c a l e i s u n d e r t a k e n . N e x t , an e s t i m a t i o n of b e n e f i t s based upon land v a l u e s i s made. Because of the l a ck of d a t a t hese r e s u l t s have to be seen as t e n t a t i v e , but do p r o v i d e a v e r i f i c a t i o n of the c a l c u l a t i o n of b e n e f i t s based upon an a n a l y s i s of c r op p r o d u c t i o n a c t i v i t i e s . In the f o l l o w i n g s e c i o n , b e n e f i t s under H y p o t h e s i s C o m b i n a t i o n I f rom . T ab l e 2 .5 a re r e s p e c i f i e d based upon a m o d i f i c a t i o n of c o s t s and y i e l d s f rom the Consensus d a t a used by WIAC. These a re compared w i t h the WIAC r e s u l t s to show the e f f e c t of d a t a used on e s t i m a t i o n of b e n e f i t s . T h i s i s f o l l o w e d by an e s t i m a t i o n of d i r e c t and i n d i r e c t b e n e f i t s under H y p o t h e s i s C o m b i n a t i o n s I I , I I I , and IV. The f i n a l s e c t i o n c o n t a i n s an e s t i m a t i o n of maximum p o s s i b l e b e n e f i t s of a deve lopment program as an a l t e r n a t i v e to i n c r e a s e w e l f a r e . 3.1 F l o o d Hazard and C o s t s of P r o t e c t i o n F l o o d and e r o s i o n h a z a r d has been i n d e p e n d e n t l y a n a l y z e d f o r each e v a l u a t i o n u n i t (EU) c o n s i d e r i n g the r e l e v a n t f l o o d p l a i n s , f l o o d 53 c h a r a c t e r i s t i c s , and the l e v e l of economic a c t i v i t y in each of them. The B .C . M i n i s t r y of Env i ronment (1973) has r e p o r t e d t h a t f l o o d s in the a r e a u s u a l l y exceed a p e r i o d of 15 days in the two f l o o d p l a i n s r e l e v a n t to the p r o j e c t . T h i s f l o o d in both c a s e s has a d u r a t i o n of 15 d a y s ; f o r f l o o d p l a i n A the f l o o d p r o b a b i l i t y i s 16 p e r c e n t , f o r f l o o d p l a i n B the f l o o d p r o b a b i l i t y i s 8 p e r c e n t . The damage in terms of lower y i e l d s and h i g h e r c o s t s i s the same f o r bo th t ypes of f l o o d f o r a h e c t a r e t h a t i s f l o o d e d . T h i s i s i l l u s t r a t e d in F i g u r e . 3 . 1 . The p r o j e c t a r e a s and c o s t s of p r o t e c t i o n a re shown in T a b l e 3 . 1 . F i g u r e 3.1 R e l e v a n t F l o o d p l a i n and P r o b a b i l i t y of I n u n d a t i o n 54 T a b l e 3.1 Summary of C o n s t r u c t i o n C o s t s of S i m i l k a m e e n F l o o d and E r o s i o n C o n t r o l P r o j e c t s (1981 do I l a r s ) A rea P r o t e c t e d ( h e c t a r e s ) Eva 1uat i on Uni t 8 % 16 % Cos t of P r o j e c t Cos t per H e c t a r e 1 1 2 b 4 0 , 0 0 0 3 ,333 2 10 - 2 4 0 , 0 0 0 2 4 , 0 0 0 3 50 44 4 5 5 , 0 0 0 4 , 8 4 0 4 24 36 4 6 5 , 0 0 0 7 ,750 5 - 400 2 , 0 4 5 , 0 0 0 5 ,112 6 - 100 4 4 0 , 0 0 0 4 , 4 0 0 7 - 187 720 ,000 3 ,850 8 - 728 1 , 5 7 2 , 0 0 0 2 ,159 A rea p r o t e c t e d f rom a f l o o d w i t h an 8 % and 16 % cummu la t i v e p r o b a b i l i t y of o c c u r r e n c e . The a r e a p r o t e c t e d f rom the l e s s s e v e r e f l o o d (16 %) wou ld a l s o be p r o t e c t e d f rom the 8 % p r o b a b i l i t y f l o o d . E r o s i o n p r o t e c t i o n r a t h e r than f l o o d p r o t e c t i o n . Land b e i n g l o s t at 1/4 h e c t a r e per y e a r . For EU1 where the r i v e r e r o s i o n p r o c e s s i s e s t i m a t e d to p r o g r e s s at a r a t e of about 1/4 of a h e c t a r e of l and l o s s per y e a r , o n l y e r o s i o n c o n t r o l has been p roposed by the B .C . M i n i s t r y of Env i ronment d e s p i t e the f a c t t h a t f l o o d i n g i s a l s o a p r o b l e m . In the r e m a i n i n g a r e a s e r o s i o n p r o t e c t i o n i s o n l y to p r o t e c t the dyke s t r u c t u r e and c o n s e - q u e n t l y b e n e f i t s c anno t be s e p a r a t e d i n t o e r o s i o n c o n t r o l b e n e f i t s and f l o o d c o n t r o l b e n e f i t s . 3.2 B e n e f i t s Based Upon Land V a l u e s Good d a t a on the d i f f e r e n c e between r e n t a l v a l u e s o r c a p i t a l c o s t s f o r land w i t h and w i t h o u t f l o o d h a z a r d i s r e q u i r e d to e s t i m a t e f l o o d p r o t e c t i o n b e n e f i t s based on land v a l u e s . An a c c u r a t e measure would have to t ake i n t o a ccoun t the degree of f l o o d h a z a r d . R e n t a l r a t e s f o r I nd i an l ands show a g r ea t v a r i a b i l i t y v a r y i n g f rom 42 to 346 d o l l a r s per h e c t a r e i n the S i m i l k a m e e n V a l l e y (Western Ind ian A g r i c u l t u r a l C o r p o r a t i o n 1 9 8 3 ) . These r a t e s r e p r e s e n t r e n t a l r a t e s f o r C . L . I , c l a s s 2 l and s u b j e c t to f l o o d i n g . Because of the ' t h i n n e s s ' of the m a r k e t , t h e r e i s c o n s i d e r a b l e u n c e r t a i n t y about what e q u i t a b l e r e n t s s h o u l d b e . The $ 42 and $ 346 per h e c t a r e a re r a t e s p a i d by the Band to i n d i v i d u a l Band members. Ano the r i n s t a n c e has been r e c o r d e d of s i m i l a r land r e n t e d to a band at $ 123 per h e c t a r e . Da ta a re not a v a i l a b l e on land s a l e s of r e s e r v e l and between I n d i a n s o r between I n d i a n s and n o n - I n d i a n s . I n f o r m a t i o n on s a l e s of non- Ind i an land can o n l y g i v e an a p p r o x i m a t i o n of the v a l u e of f l o o d p r o t e c t i o n because of the d i f f e r e n t c h a r a c t e r i s t i c s of o w n e r s h i p . However , t hese d a t a may p r o v i d e an upper bound on the p r o b a b l e l e v e l of b e n e f i t s f rom f l o o d p r o t e c t i o n . Land v a l u e s va r y g r e a t l y in the Okanagan-S imi Ikameen r e g i o n w i t h e x i s t i n g land use ( Tab l e 3 . 2 ) . Fo r age land a ve r ages 5 ,167 and 7 ,710 d o l l a r s per h e c t a r e a c r o s s a l l s a l e s in 1980 and 1981 r e s p e c - t i v e l y . A c c o r d i n g to McRoy (1983) hay land in the S i m i l k a m e e n v a l l e y would s e l l f o r $ 6 , 1 7 0 - $ 7 ,413 per h e c t a r e in 1983 . Da ta a re not a v a i l a b l e on the d i f f e r e n c e in market v a l u e of l and s u b j e c t to f l o o d i n g and the assessment a u t h o r i t y does not have a means f o r e s t i m a t i n g the impact of f l o o d haza rd on land v a l u e . But L a r r y Shannon (1983) e s t i m a t e d t h a t land s u b j e c t to f l o o d i n g eve ry 5 - 1 0 y e a r s wou ld have a r educed v a l u e of a round 10 p e r c e n t . Assuming tha t l and v a l u e s wou ld be enhanced by 10 p e r c e n t of $ 7 ,413 o r $ 741 per h e c t a r e , t h i s v a l u e i s f a r l e s s than the c o s t s of f l o o d p r o t e c t i o n in a l l E v a l u a t i o n U n i t s . Even i f we assume land i s in the most v a l u a b l e u s e , b e n e f i t s f rom f l o o d p r o t e c t i o n f o r p r i v a t e n o n - I n d i a n l ands wou ld at most be $ 3 ,824 1 per h e c t a r e . T h i s v a l u e i s h i g h e r than the c o s t of f l o o d p r o t e c t i o n f o r EUs excep t EU 8. It m ight be a rgued tha t the p r i v a t e market d i s t o r t s v a l u e s of f l o o d p r o t e c t i o n . S p e c u l a t i v e f o r c e s , c a p i t a l a p p r e c i a t i o n ove r t ime as d i s c u s s e d by M e l i c h a r ( 1 9 7 9 ) , and the s o c i a l r a t e of d i s c o u n t w i l l T h i s i s ten p e r c e n t of land v a l u e f o r " s m a l l f r u i t " l a n d . T a b l e 3 .2 Land V a l u e s in the Okanagan-S im i I kameen , B .C . Use Land V a l u e (dol 1980 1 a r / h e c t a r e ) 1981 G r a i n and Fo rage 5 ,167 7 ,710 Vegetab1e 8 ,552 2 2 , 7 0 9 Tree F ru i t 3 7 , 4 0 7 3 0 , 7 8 9 Sma1 1 F ru i t s 3 8 , 2 4 4 22 ,511 Beef 1,707 2-, 520 Da i r y 3 ,805 8 ,006 Pou1 t r y 5,491 1 1 , 4 1 6 Mi xed 8 ,745 5 ,856 Othe r 7 ,885 8 ,426 Weighted Average 5 ,782 3 ,954 S o u r c e : B .C . Assessment A u t h o r i t y 58 make the s o c i a l v a l u e of f l o o d p r o t e c t i o n to appear h i g h e r than i t shou Id b e . 3.3 D i r e c t B e n e f i t s Based Upon Net V a l u e of A g r i c u l t u r a l P r o d u c t i o n 3.3.-1.- WIAC E s t i m a t i o n of B e n e f i t s Data used by WIAC i n c l u d i n g c o s t s of p r o d u c t i o n , y i e l d s , e x i s t i n g land u s e , n o r m a l i z e d p r i c e s a re a l l g i v e n in Append ix B. These d a t a a re used to d e r i v e the net b e n e f i t s o f d y k i n g in Tab l e 3 . 3 . Fo rage p r o d u c t i o n has been i d e n t i f i e d as the b a s i c a c t i v i t y in the c u r r e n t I nd i an a g r i c u l t u r e i n the S i m i l k a m e e n : a l f a l f a and g r a s s , ( i r r i g a t e d and n o n - i r r i g a t e d ) . A l t h o u g h c o w - c a l f o p e r a t i o n s were r e p o r t e d , they a re not c o n s i d e r e d i n the a n a l y s i s f o r two r e a s o n s : o n e , d a t a were not . a v a i I a b I e and s e c o n d , the m a i n , l o s s e s f rom f l o o d s and e r o s i o n b a s i c a l l y a f f e c t the f o r a g e p r o d u c t i o n . It i s however , r e c o g n i z e d tha t f l o o d s may have a d i r e c t impact on c a t t l e o p e r a t i o n s i n c r e a s i n g the c o s t s of the o p e r a t i o n because of the need to move c a t t l e f rom the f l o o d p l a i n . M o r e o v e r , f l o o d s may cause c a t t l e l o s s e s . F l o o d damage f o r each c r o p was a r r i v e d at t h rough c o n s u l t a t i o n w i t h s p e c i a l i s t s of the B .C. M i n i s t r y of A g r i c u l t u r e . It was i n d i c a t e d t h a t a p e r i o d of 15 days of f l o o d c o n d i t i o n s , as in the S i m i l k a m e e n Tab le 3 .3 E s t i m a t i o n of Net B e n e f i t s of F l o o d P r o t e c t i o n as made by WIAC (NPV: thousand d o l l a r s 1981) Ind i ans Soc i e t y Eva Iuat i on Uni t s C u r r e n t S i t ua t ion Farmer 1 3 A l t e r n a t i v e 0 PI ans P l ans C u r r e n t Farmer A l t e r n a t i v e S i t u a t i o n P l a n s P l a n s 1 2 9 37 - 43 - 36 - 8 2 15 17 13 - 256 - 254 - 258 3 34 144 285 - 479 - 369 - 228 4 25 89 133 - 499 - 435 - 391 5 255 917 2 ,189 - 2 ,049 - 1 ,387 - 115 6 80 222 552 - 416 - 274 56 7 106 361 983 - 705 - 450 172 8 266 1,387 2,901 - 1 ,505 - 384 1,130 imated as csw LY - c s w / o LY E s t imated W A W / ° as A H Y - A H Y •imated as F W -HY w/o HY ^Est imated in a , b and c minus dykes c o s t s . a r e a , k i l l s f o r a g e crops"*" (100 p e r c e n t d i r e c t c r op damage) . No damage was i n d i c a t e d f o r n a t i v e p a s t u r e . Secondary damage f o r a l f a l f a and g r a s s a r e c o n s i d e r e d in the a n a l y s i s as w e l l , i . e . 2 r e d u c t i o n of y i e l d s in the y e a r s f o l l o w i n g the f l o o d . The economic impact of f l o o d s and e r o s i o n on the p r o d u c t i o n a c t i v i t i e s has been measured by compu t i ng changes in c o s t s and r e t u r n s f o r the v a r i o u s a c t i v i t i e s . F l o o d damage has been e s t i m a t e d th roughou t the a n a l y s i s u s i n g these e s t i m a t i o n of impac t s on y i e l d s and c o s t s . WIAC e v a l u a t e d b e n e f i t s f o r t h r e e s c e n a r i o s as f o l l o w s : a) A " C u r r e n t S i t u a t i o n " S c e n a r i o w i t h change in l and use and y i e l d s c o r r e s p o n d i n g to h y p o t h e s i s c o m b i n a t i o n II in T a b l e 2.5. In t h i s a l t e r n a t i v e , c u r r e n t s i t u a t i o n y i e l d s were used w i t h concensus d a t a c o s t s . b) " F a rmers P l a n " S c e n a r i o where Concensus y i e l d s and c o s t s were assumed, but l and use was assumed to change to p a t t e r n s r e f l e c t i n g I nd i an i n t e n t i o n s . T h i s i m p l i c i t l y assumes tha t land use w i l l s u d d e n l y change j u s t b e f o r e dykes a re b u i l t but i ndependen t of dykes be i ng b u i l t . " ' " A l f a l f a and c u l t i v a t e d g r a s s The c r o p r o t a t i o n c y c l e i s a f f e c t e d and f u l l p r o d u c t i o n i s r eached at l e a s t one year l a t e r . c) An " A l t e r n a t i v e Plan' . ' S c e n a r i o 1 where c o n s e n s u s y i e l d s and c o s t s were assumed but l i k e (b) above , land use changes s u d d e n l y and i n d e p e n d e n t l y of dykes b e i n g b u i l t . The change in l and use i s more e x t e n s i v e than the f a r m e r s ' p l a n s and i n c l u d e s o r c h a r d and v e g e t a b l e c r o p s . Fo r both the second and t h i r d s c e n a r i o s , the change i n land use and the concensus y i e l d s a re seen to d e r i v e f rom o u t s i d e f o r c e s and a re not r a t i o n a l i z e d . The b e n e f i t s of the dykes in t hese s i t u a t i o n s a re e s t i m a t e d as (3.1) B = /? - R These b e n e f i t s c o r r e s p o n d then to b e n e f i t s of f l o o d p r o t e c t i o n assuming an e f f e c t i v e deve lopment p rogram has been e s t a b l i s h e d as g i v e n in T a b l e 2 .6 ( C o m b i n a t i o n IV, w i t h deve lopment p r o g r a m ) . As d i s c u s s e d in C h a p t e r 2 , p rob l ems of t e n u r e , f i n a n c e , l e v e l s of e d u c a t i o n and management a b i l i t y , make i t u n l i k e l y t h a t t hese deve lopments w i l l o c c u r w i t h o u t s u b s t a n t i a l deve lopment p r o g r a m s . WIAC a l s o c a l c u l a t e d b e n e f i t s f rom a " r i s k a v e r t e r " s c e n a r i o f o r " A l t e r n a t i v e " and "Farmer P l a n " where both y i e l d s and land use were assumed to c h a n g e , but they were assumed to change f rom a no use b a s e . I m p l i c i t l y a l l p r o d u c t i o n c o m p l e t e l y was assumed to cease u n l e s s dykes were b u i l t . Because t h i s a s sumpt i on seems so f a l s e , no a t t empt i s made he re to r e p r o d u c e t he se r e s u l t s . A c t u a l l y two " A l t e r n a t i v e P l a n s " were e v a l u a t e d w i t h two d i f f e r e n t changes in land u s e . 62 3 . 3 . 2 M o d i f i c a t i o n of Data Some of the d a t a used by WIAC a re not r e a l i s t i c . T h i s in l a r g e p a r t i s p r o b a b l y due to ARDSA terms of. r e f e r e n c e . In t h i s s e c t i o n , the m o d i f i c a t i o n s t h a t s h o u l d be made a r e d e s c r i b e d . The e f f e c t of t hese m o d i f i c a t i o n s on c a l c u l a t i o n s of the b e n e f i t s of d y k i n g a re shown. The 17 I nd i an f a r m e r s i n v o l v e d in the p r o j e c t were o b t a i n i n g on the ave rage 8 .5 t o n s / h e c t a r e f rom i r r i g a t e d a l f a l f a (Western Ind i an A g r i c u l t u r a l C o r p o r a t i o n 1 9 8 0 ) . Because of no a v a i l a b l e i n f o r m a t i o n r e g a r d i n g i r r i g a t e d g r a s s y i e l d o b t a i n e d by the I n d i a n s , the 10 t o n s / h e c t a r e ave rage r e p o r t e d f o r the v a l l e y by the M i n i s t r y of A g r i c u l t u r e was a d j u s t e d c o n s i s t e n t w i t h the a l f a l f a y i e l d d i f f e r e n t i a l between the I nd i an f a r m e r s and the f i g u r e s r e p o r t e d by the M i n i s t r y . T h e r e f o r e , the ave rage y i e l d f o r i r r i g a t e d g r a s s among the I n d i a n s was e s t a b l i s h e d at 6 . 7 t o n s / h e c t a r e in t h i s s t u d y . Fo r n o n - i r r i g a t e d a l f a l f a , the ave rage y i e l d among Band members was e s t i m a t e d at 3 .2 t o n s / h e c t a r e (Western Ind ian A g r i c u l t u r a l C o r p o r a t i o n 1 9 8 0 ) . Because d a t a were not r e g a r d i n g i r r i g a t e d g r a s s , y i e l d o b t a i n e d by the I n d i a n s , the 10 t o n s / h e c t a r e ave rage r e p o r t e d f o r the V a l l e y by the M i n i s t r y of A g r i c u l t u r e was a d j u s t e d c o n s i s t e n t w i t h the a l f a l f a y i e l d d i f f e r e n t i a l between the I nd i an f a r m e r s and the f i g u r e s r e p o r t e d by the M i n i s t r y . T h e r e f o r e , the ave rage y i e l d f o r i r r i g a t e d g r a s s among the I n d i a n s was e s t a b l i s h e d at 6 . 7 t o n s / h e c t a r e in t h i s s t u d y . Fo r n o n - i r r i g a t e d a l f a l f a , the ave rage y i e l d among Band members was e s t i m a t e d at 3 .2 t o n s / h e c t a r e (Western 63 I nd i an A g r i c u l t u r a l C o r p o r a t i o n 1 9 8 0 ) . Because d a t a were not o b t a i n e d f o r the a ve rage fa rmer in the V a l l e y , the 6 .4 t o n s / h e c t a r e of the Consensus Da ta (CDS) Model f o r A rms t rong-Ende rby a r e a was u s e d . Fo r n o n - i r r i g a t e d g r a s s , the ave rage in the V a l l e y w a s - d e r i v e d by WIAC f rom a l f a l f a p r o d u c t i o n , A rms t rong-Ende rby a r e a as the base and the f i g u r e was a d j u s t e d c o n s i s t e n t w i t h a g r a s s - a l f a l f a p r o d u c t i o n r e l a t i o n . The ave rage f i g u r e f o r the V a l l e y was e s t a b l i s h e d at 5.2 t o n s / h e c t a r e . Fo r I nd i an f a r m e r s , the ave rage y i e l d f o r n o n - i r r i g a t e d g r a s s was r e p o r t e d at 2 .9 t o n s / h e c t a r e . P r o d u c t i o n f rom n a t i v e p a s t u r e was e s t a b l i s h e d in terms of the c a r r y i n g c a p a c i t y e s t i m a t e d by B .C . M i n i s t r y of A g r i c u l t u r e range s p e c i a l i s t s f o r the p a r t i c u l a r a r e a . These y i e l d e s t i m a t e s (summar ized in T a b l e 2 . 2 , C h a p t e r 2 ) , r e p r e s e n t l ong term ave rage y i e l d s o b t a i n e d by the p r o d u c e r s i n f l o o d f r e e c o n d i t i o n s . In f l o o d p l a i n a r e a s , e x p e c t e d ave rage y i e l d s w i l l v a r y in a c c o r d a n c e w i t h the p r o b a b i l i t y of b e i n g f l o o d e d and the c r o p mix on the v a r i o u s f l o o d p l a i n s of the d i f f e r e n t e v a l u a t i o n u n i t s ( Tab l e 3.4) . There a re a number of r e a s o n s t h a t sugges t t h a t c o s t of p r o d - u c t i o n d a t a p r o v i d e d by the M i n i s t r y of A g r i c u l t u r e ( consensus Da ta S e r i e s - CDS) do not r e f l e c t the c u r r e n t I nd i an s i t u a t i o n i n the S im i l k ameen V a l l e y . Consensus Da ta a re o n l y a g u i d e to p r o d u c e r s and i t i s r e c o g n i z e d t h a t because s u b s t a n t i a l d i f f e r e n c e s e x i s t in p r o d u c t i o n c o n d i t i o n s among f a r m e r s , t he se d a t a s h o u l d be used w i t h c a u t i o n , e s p e c i a l l y i f a p p l i e d to those f a r m e r s who d i d not p a r t i c i p a t e 64 T a b l e 3 .4 Expec t ed Average Y i e l d f rom I nd i an Fa rmers in F l o o d / E r o s i o n A reas C u r r e n t S i t u a t i o n Eva Iuat i on Crop U n i t s : ton / h e c t a r e / yea r A l f a l f a G r a s s U n i t s I r r i g N o n - l r r i g I r r i g N o n - l r r i g 1 8 .13 - - - 2 7.73 - - 3 - - 2 .2 4 - 2 .42 - 2 .3 5 to 8 - 2 ,03 - 2 .2 65 in the p r o c e s s of p r o d u c i n g the d a t a as i s the c a se w i t h the I nd i an f a r m e r s . If CDS c o s t - b a s e d f i g u r e s a re a p p l i e d to the I nd i an f a r m e r s i n the S i m i l k a m e e n - under f l o o d c o n d i t i o n s - p r o d u c t i o n a c t i v i t i e s e x h i b i t n e g a t i v e r e t u r n s per h e c t a r e f o r a l l but ' . two e v a l u a t i o n u n i t s . Fo r these two u n i t s (w i t h i r r i g a t e d a l f a l f a c r o p s ) the p r o f i t a b i l i t y of the o p e r a t i o n i s e x t r e m e l y low. ( Tab l e 3.5) If n o r m a l i z e d p r o d u c t p r i c e s r e p r e s e n t an ave rage v a l u e ove r a p e r i o d of t i m e , e x p e c t e d y i e l d s a re c o n s i d e r e d f a i r e s t i m a t e s ( g i v e n the long r e c o r d of i n f o r m a t i o n on the p r o b a b i l i t i e s of f l o o d s f o r the a r e a ) , and n o n - i r r i g a t e d c r o p s have been grown by the I n d i a n s f o r a long t i m e , then the fa rm o p e r a t i o n s must have ceased b e f o r e i f n e g a t i v e r e t u r n s a re e x p e c t e d . The i m p l i c a t i o n of t h i s i s t h a t a model of the c u r r e n t c r op p r o d u c t i o n s i t u a t i o n - wh i ch i n c o r p o r a t e s CDS c o s t d a t a f i g u r e s - does not r e p r e s e n t r e a l i t y r e a s o n a b l y w e l l u n l e s s one a c c e p t s the h y p o t h e s i s t h a t I n d i a n f a r m e r s i n the S i m i l k a m e e n a re i r r a t i o n a l . C o n s e q u e n t l y , a d i r e c t s u r v e y was done in the a r e a in S e p t - ember of 1982 to o b t a i n more economic d a t a r e l a t e d to c o s t of p r o d - u c t i o n among I nd i an f a r m e r s . Main f i n d i n g s were t h a t I nd i an f a r m e r s have u s u a l l y used l e s s seed and l e s s f e r t i l i z e r than n o n - I n d i a n f a r m e r s in the V a l l e y . R e s e e d i n g has not been a common p r a c t i c e and f e r t i l i z e r has not been a p p l i e d to the c r o p s e ve r y y e a r . Because no c o s t d a t a have been kept by I nd i an f a r m e r s , the f i n d i n g was used i n c o n j u n c t i o n w i t h the CDS d e r i v e d d a t a to p roduce a s e t of c o s t d a t a wh i ch b e t t e r r e f l e c t the I nd i an p r o d u c t i o n s i t u a t i o n . Based on the 66 T a b l e 3 .5 P ro !f i tab i I i ty of C u r r e n t P r o d u c t i o n A c t i v i t i e s f o r I nd i an Fa rmers - W i thou t F l o o d P r o t e c t i o n Eva 1uat ion Un i t IRR 3 (%) Net P r e s e n t V a l u e ( thousand d o l l a r s 1981) 1 3.4 - 1 3 . 7 2 2 .65 - 1 0 . 5 3 0 . 0 - 3 6 . 3 4 0 . 0 - 1 5 , 9 5 0 . 0 - 3 4 5 . 0 6 0 . 0 - 1 2 1 . 8 7 0 . 0 - 1 5 4 . 5 8 0 . 0 - 3 9 5 . 2 N o t e s : i n t e r n a l Ra te of R e t u r n b NPV d i s c o u n t e d @ CDS c o s t - b a s e d f i 25 yea r p e r i o d 10 % ( p r i v a t e f i n a n c i a l a n a l y s i s ) gu res f a c t t h a t I nd i an f a r m e r s i n the a r e a do not f e r t i l i z e e ve r y y e a r , t h i s i t em has been a d j u s t e d a c c o r d i n g 1 y . 1 The amount o f seed mix used ( oa t s and a l f a l f a ) has been e s t i m a t e d p r o p o r t i o n a l l y to the y i e l d . M a c h i n e r y o p e r a t i n g c o s t s have been a d j u s t e d i n terms of F e r t i I i z e r a p p I i c a t ion- i n a I t e r n a t e . y e a r s 6 7 t ime s a v i n g (hours of mach ine r y ) because of l e s s f e r t i l i z e r b e i n g a p p l i e d , no r e s e e d i n g , and. h a r v e s t i n g and h a n d l i n g of a lower c r o p 1 y i e l d . Two a d j u s t m e n t s have been made to l a b o u r : one to r e f l e c t 2 t ime s a v i n g (man-hours) because of l e s s c u l t u r a l p r a c t i c e and l e s s c r op h a r v e s t and s e c o n d , an a d j u s t m e n t to the v a l u e of man-hours to r e f l e c t a "shadow p r i c e " f o r I nd i an l abou r in a c c o r d a n c e w i t h unemployment r a t e s p r e v a i l i n g on the r e s e r v e ; the ave rage r a t e was reduced to the s t a t u t o r y minimum wage r a t e . S i m i l a r a d j u s t m e n t s have been made to the i npu t c o s t s f o r the r e m a i n i n g p r o d u c t i o n a c t i v i t i e s . (Append ix B) C a p i t a l i n ves tmen t c o s t s based on CDS d a t a have been b a s i c a l l y m a i n t a i n e d . However , the c a p i t a l c o s t f i g u r e s were not i n c o r p o r a t e d i n t o the c o s t s t r e a m as lump sums s t a r t i n g yea r one and then a d d i n g c a p i t a l r e p l a c e m e n t , as o r i g i n a l l y done . T h i s p r o c e d u r e i s u n r e a l i s t i c f o r an " e x i s t i n g s i t u a t i o n " and a l s o i s a p o t e n t i a l s o u r c e of upward b i a s in c o s t s when t h i s " e x i s t i n g p r o d u c t i o n s i t u a t i o n " i s i n t r o d u c e d as o p p o r t u n i t y c o s t i n the a n a l y s i s of o t h e r a l t e r n a t i v e p r o d u c t i o n s i t u a t i o n s . Because the e x i s t i n g s i t u a t i o n b a s i c a l l y c o m p r i s e s o n - g o i n g o p e r a t i o n s , i n ve s tmen t c o s t s have been i n c o r p o r a t e d i n t o the s t r e a m of c o s t s (on an annual b a s i s ) as a c o n s t a n t f i g u r e formed by a c o m b i n a t i o n of r e p l a c e m e n t c a p i t a l c o s t s w e i g h t e d in a c c o r d a n c e Ti me T ime r e d u c t i o n in mach ine r y o p e r a t i o n : s a v i n g e s t i m a t e @ 30 % 20 to 25 % w i t h the d e p r e c i a t i o n s c h e d u l e f o r the d i f f e r e n t i t e m s . Thus , the i nves tmen t c o s t s have been y e a r l y s p r e a d ove r the p e r i o d of a n a l y s i s . A summary of the p r o d u c t i o n c o s t e s t i m a t e s i s shown in T a b l e 3 . 6 . (For d e t a i l s see Append ix B ) . Net economic v a l u e of c u r r e n t p r o d u c t i o n a c t i v i t i e s of I nd i an f a rmer s i n the S i m i l k a m e e n u s i n g CDS c o s t - b a s e d f i g u r e s and c o s t - a d j u s t e d f i g u r e s a re compared in Tab l e 3 . 7 . The c o s t s a d j u s t m e n t s were i n c o r p o r a t e d i n t o the c o s t - b e n e f i t a n a l y s i s to e s t i m a t e the d i r e c t b e n e f i t s f rom f l o o d c o n t r o l as d e s c r i b e d i n Tab l e 3 . 8 . These b e n e f i t s a r e those a p p l i c a b l e under c o m b i n a t i o n IV in T a b l e 2 . 4 . If t h i s s i t u a t i o n h o l d s , then c l e a r l y f l o o d p r o t e c t i o n s h o u l d not be u n d e r t a k e n on any EU. The r e s u l t s i n Tab l e 3.8 might be compared w i t h those r e p o r t e d as " C u r r e n t S i t u a t i p n " by WIAC ( T a b l e 3 . 3 ) . D i r e c t b e n e f i t s of f l o o d c o n t r o l a f t e r c o s t a d j u s t m e n t s appear lower than t hose r e p o r t e d by WIAC. 3.4 E s t i m a t i o n of I n d i r e c t B e n e f i t s A l t e r n a t i v e p r o d u c t i o n s i t u a t i o n s based on d i f f e r e n t c r op p a t t e r n s and p r o d u c t i o n l e v e l s have been i n v e s t i g a t e d and i n c o r p o r a t e d i n t o the a n a l y s i s of b e n e f i t s . T h i s r e c o g n i z e d the p o s s i b i l i t y t ha t t hese s i t u a t i o n s might be induced by the p r o v i s i o n of f l o o d p r o t e c t i o n to the a r e a . 69 Tab l e 3 .6 Summary of Average P r o d u c t i o n Cos t E s t i m a t e d f o r the S im i l k ameen A rea - C u r r e n t S i t u a t i o n (1981 d o l l a r per h e c t a r e ) O p e r a t i n g C o s t s Investment C o s t s C r o p s a b e d I n d i a n s Non- Ind i ans I n d i a n s Non- Ind i ans I r r i g a t e d A l f a l f a 248 .6 378 .1 2 1 5 . 9 3 ,136 G r a s s 2 1 2 . 2 318 .8 2 1 5 . 9 3 ,136 Non-1rr i ga ted A l f a l f a 9 3 . 8 143 .3 9 2 . 4 1,431 G r a s s 9 2 . 5 1 3 5 . 9 9 2 . 4 1,431 A d j u s t e d as d e s c r i b e d ( c o s t per y e a r ) CDS f i g u r e s ( co s t per y e a r ) Y e a r l y amount ove r the 25 yea r p e r i o d 'Lump sum s t a r t up c o s t s N o t e : 10 p e r c e n t c o n t i n g e n c y o r i g i n a l l y i n c l u d e d in the f i g u r e has been removed. T a b l e 3.7 Net Economic V A l u e of C u r r e n t P r o d u c t i o n of I nd i an Fa rmers i n the S i m i l k a m e e n A rea W i thou t F l o o d P r o t e c t i o n ( thousand d o l l a r s 1981) Eva 1uat i on Uni t Net P r e s e n t V a l u e (CDS f i g u r e s ) Net P r e s e n t V a l u e ( co s t a d j u s t e d ) 1 - 1 3 . 7 2 6 . 5 3 2 - 1 0 . 5 1 8 . 3 6 3 - 3 6 . 3 7 .12 4 - 1 5 . 9 5 .40 5 - 3 4 5 . 0 1 8 . 1 6 6 - 1 2 1 . 8 6 . 0 7 - 1 5 4 . 5 8 .74 8 - 3 9 5 . 2 2 9 . 1 9 D i s c o u n t r a t e of 10 p e r c e n t . Tab l e 3 .8 E s t i m a t i o n of Net B e n e f i t of F l o o d P r o t e c t i o n (NPV: thousand d o l l a r s 1981) E v a l u a t i o n • . ,, . , To I n d i a n s To S o c i e t y Un i t s 1 5.1 - 40 2 5.6 - 265 3 1 8 . 8 - 494 4 8 .5 - 515 5 1 8 8 . 9 - 2 ,115 6 6 6 . 5 - 429 7 8 3 . 4 - 728 8 218 .1 - 1 ,553 72 3 .4 .1 Induced Changes i n Land Use The c r o p p a t t e r n a s s o c i a t e d w i t h what has been named ' Fa rmer P l a n s 1 , has been p r i m a r i l y based on i n f o r m a t i o n o b t a i n e d f rom a s u r v e y done among the f a r m e r s in August of 1980 . In p e r s o n a l i n t e r v i e w s , I nd i an f a r m e r s were asked to answer q u e s t i o n s such a s : Have you c o n s i d e r e d e x p a n d i n g your p r e s e n t ' f a r m i n g a r e a ' ? Are you g o i n g to grow the same c r o p next y ea r ? Have you c o n s i d e r e d g row ing d i f f e r e n t c r o p s in the near f u t u r e ? What would be the main o b s t a c l e f o r you in g o i n g f rom what you grow now to a d i f f e r e n t k i n d of c r o p ? What i s the main p r o b l e m you have w i t h the p r e s e n t c r o p , i f any? A l l these q u e s t i o n s aimed at d e p i c t i n g an a l t e r n a t i v e p r o d u c t i o n s i t u a t i o n whose p o s s i b i l i t y w i l l be d i s c u s s e d l a t e r . A l t h o u g h on a s m a l l s c a l e , new p r o d u c t i o n a c t i v i t i e s emerge w i t h the I nd i an fa rmer p l a n s — t r e e f r u i t and v e g e t a b l e p r o d u c t i o n . The Band have a l r e a d y p l a n t e d 5 h e c t a r e s of v a r i o u s f r u i t t r e e s in f l o o d f r e e land in an a t t empt to d i v e r s i f y p r o d u c t i o n among t h e i r members. For f a r m e r s i n v o l v e d in the p r o j e c t , however , o r c h a r d and v e g e t a b l e p r o d u c t i o n a re new a c t i v i t i e s . The " A l t e r n a t i v e P l a n s " r e p r e s e n t h y p o t h e t i c a l s i t u a t i o n s in wh i ch I nd i an f a r m e r s a re assumed to a c h i e v e h i g h e r l e v e l s of d i v e r s i f i c a t i o n and i n t e n s i f i c a t i o n g i v e n the p r o d u c t i o n p o t e n t i a l of the land base in the a r e a . These A l t e r n a t i v e p l a n s r e l a t e d to h y p o t h e s i s c o m b i n a t i o n s I and III ( T ab l e 2.4) where f l o o d s a re assumed to be the main c o n s t r a i n t s r e l a t e d to the use of land in the 73 a r e a . P r o d u c t i o n of a p p l e s i s i n c o r p o r a t e d in the a n a l y s i s as a p roxy f o r o r c h a r d p r o d u c t i o n . The f i g u r e s a re based on a c a se where prod-.-, u c e r s a re c o n s t r a i n e d to 4 h e c t a r e s of l a n d , f a c ed w i t h e s t a b l i s h i n g and m a i n t a i n i n g an o r c h a r d s y s t em ove r a t w e n t y - f i v e year t ime p e r i o d . The model i s d e s c r i b e d in the Append ix B. Fo r v e g e t a b l e p r o d u c t i o n , tomatoes a re used as a p r o x y . Da ta f rom P r o d u c e r Consensus C o s t s and R e t u r n s - F i e l d Tomato, South Okanagan and S i m i l k a m e e n a r e a s , BCMA - CDS 238 1 9 8 0 . P r o d u c t i o n f i g u r e s a re based on long t e rm ave rage y i e l d s o b t a i n e d by the p r o d u c e r s . It has been r e p o r t e d t h a t the p roduce i s marke ted in f o u r d i f f e r e n t m a r k e t s . The economics of tomato p r o d u c t i o n i s summar ized in Tab l e 3 .9 A 100 p e r c e n t f l o o d damage was assumed f o r v e g e t a b l e p r o d u c t i o n ( t o t a l c r o p l o s s e s ) . Fo r o r c h a r d , no l o s s of p r o d u c t i o n i s assumed, but l a b o u r c o s t s a re c o n s i d e r e d to r e c e i v e the main impact of the f l o o d ( S w a l e s , 1 9 8 0 ) . A f t e r c o n s u l t a t i o n w i t h the s p e c i a l i s t f rom the B .C . M i n i s t r y of A g r i c u l t u r e and F o o d , a 20 p e r c e n t i n c r e a s e in l abou r c o s t s was e s t i m a t e d to r e f l e c t the b a s i c impact of f l o o d on o r c h a r d p r o d u c t i o n . Land use a s s o c i a t e d w i t h the v a r i o u s a l t e r n a t i v e s a re d e s c r i b e d in Append ix D. 3 . 4 . 2 Induced Changes in Management: Y i e l d s and C o s t s 74 E s t i m a t e d p r o d u c t i o n f rom Farmer P l a n s was based on the ave rage e x p e c t e d y i e l d s f o r n o n - I n d i a n s d e s p i t e the s u r v e y h a v i n g r e v e a l e d lower y i e l d s f o r c u r r e n t p r o d u c t i o n of I nd ian f a r m e r s i n the a r e a . To r e c o g n i z e t h i s f a c t and make a more p l a u s i b l e a n a l y s i s , Farmer P l a n s have been c o n s i d e r e d under two d i f f e r e n t s c e n a r i o s : a low y i e l d s c e n a r i o and an ave rage y i e l d s c e n a r i o . Fo r the low y i e l d s c e n a r i o , d a t a a re based on what i s r e p o r t e d as ave rage f o r the I n d i a n s in the a r e a . For the o t h e r s c e n a r i o , the ave rage e s t i m a t e s a p p l i c a b l e to n o n - I n d i a n f a r m e r s a re a p p l i e d to the I n d i a n s as w e l l . A d j u s t m e n t s have been made to the i n ves tmen t c o s t s to make a l l o w a n c e s because of the i n t r o d u c t i o n of h i g h e r y i e l d s in the c u r r e n t s i t u a t i o n . T h i s has been based on the a s s u m p t i o n t h a t c u r r e n t y i e l d s among I n d i a n s w i l l i n c r e a s e up to the ave rage y i e l d in the V a l l e y , p r o p o r t i o n a l to an i nves tmen t a d d i t i o n . C o n s e q u e n t l y , the i nves tmen t c o s t s have been i n t r o d u c f e d in the combined form composed by the y e a r l y f i x e d amount r e s u l t a n t of s p r e a d i n g the i n ves tmen t o ve r the p e r i o d of a n a l y s i s (as in c u r r e n t s i t u a t i o n s ) p l u s about one t h i r d of the c o r r e s p o n d i n g lump sum fo rm of c a p i t a l i n ve s tmen t (or r e p l a c e m e n t ) when a p p l i c a b l e . T ab l e 3 .9 summar izes the d a t a base f o r both s c e n a r i o s and f o r the s e v e r a l p r o d u c t i o n a c t i v i t i e s . For bo th v e g e t a b l e and o r c h a r d p r o d u c t i o n , e s t i m a t e s have been a l s o a d j u s t e d f o r the Low Y i e l d S c e n a r i o w i t h c r i t e r i a s i m i l a r to the one a p p l i e d to the t r a d i t i o n a l f o r a g e c r o p s . 75 T a b l e 3 .9 E x p e c t e d Y i e l d and Cos t S c e n a r i o s Da ta Base F l o o d F r ee C o n d i t i o n (per h e c t a r e ) Act i v i ty o r Crop Low Y i e l d S c e n a r i o Average Y i e l d S c e n a r i o I r r i ga ted Al f a l f a Y i e l d A l f a l f a P r o d . Cos t A l f a l f a Inv . Cos t G r a s s Y i e l d G r a s s P r o d . Cos t G r a s s Inv . Cos t Veg . Y i e l d Veg . P r o d . Cos t Veg . Inv . Cos t 8 .6 tons $ 251 $ 218 6 .7 t ons $ 215 $ 218 (x y i e I ds ) 9;.7cwt $ 5 ,922 $ 4 , 7 6 2 13 t ons $ 382 $ 218 y e a r l y +1/3 J-.ymp Sum Inv . Cos t 1 0 . 2 tons $ 322 $ 218 y e a r l y +1/3 Lump Sum Inv . Cos t (x y i e l d s ) f a b l e $ 8 ,462 $ 6 , 8 0 5 O r cha rd Y i e l d s O r cha rd C o s t s ( y i e l d s x 0 -7 ) t on s y i e l d s tons ( c o s t s x 0 .7 ) c o s t s t a b l e Non-1rr i ga ted A l f a l f a Y i e l d 3.2 tons A i ' f a i f a P r o d . Cos t $ 95 A f f a l f a Inv . -Cost $ 9 3 . 5 G ra s s Y i e l d 3 t ons G ra s s P r o d . Cos t $ -215 G ra s s Inv . Cos t $ 9 3 . 5 6 . 5 tons $ 145 $ 9 3 . 5 y e a r l y + 1 / 3 Lump Sum_ Inv . Cos t 5.2 t ons $ 138 $ 9 3 . 5 y e a r l y + 1 / 3 Lump Sum, Inv . Cos t o r r e p l a c e m e n t N o t e s : do I I a r s of 1981 The v a l u e of p r o d u c t i o n o b t a i n e d f rom Farmer P l a n s under bo th s c e n a r i o s a re p r e s e n t e d in T a b l e 3 . 1 0 . Tab l e 3 ,10 Economic V a l u e of P r o d u c t i o n f rom Farmer P l a n D i f f e r e n t P r o d u c t i o n S c e n a r i o s (NPV thousand d o l l a r s 1981) Low Y i e l d s S c e n a r i o Average Y i e l d s S c e n a r i o EU • Wi t hou t P r o t e c - t i on Wi th P r o t e c - t i on Benef i t s to 1nd i ans Wi t hou t P r o t e c - - t i on Wi th P r o t e c - t i on Benef i t s to 1 nd i ans 1 2 6 . 5 ' • 3 1 . 6 5.1 3 6 . 7 4 6 . 1 5 9 .45 2 1 8 . 4 2 4 . 0 5.6 2 6 . 9 . 3 5 . 5 8 .6 3 " 4 , 3 8 7 . 5 8 3 . 2 1 7 3 . 3 2 9 9 . 7 6 1 2 6 . 5 4 . - 1 3 . 5 3 4 . 3 4 7 . 9 7 6 . 5 1 4 9 . 2 9 7 2 . 8 5 •: - 3 9 4 . 4 1 6 6 . 4 5 5 6 0 . 4 3 1 3 . 0 4 1 , 1 5 9 . 7 8 8 4 6 . 7 6 - 1 4 . 4 1 2 0 . 8 1 3 5 . 2 160 .91 366 .57 2 0 5 . 7 7 ' - 1 3 1 . 2 5 9 4 . 2 2 2 5 . 5 2 6 5 . 1 4 6 0 2 . 8 7 3 3 7 . 7 8 - 3 0 0 . 1 5 5 7 1 . 5 8 7 1 , 6 8 3 0 . 1 7 2 , 1 5 5 . 9 1 1 , 3 2 5 . 8 -804 .1 1 , 1 3 0 . 3 1 , 9 3 4 . 5 1 , 8 8 2 . 6 6 ' 4 , 8 1 5 . 8 2 , 9 3 3 . 1 A l t e r n a t i v e P l a n s have a l s o been a d j u s t e d in the same manner to p roduce two d i f f e r e n t s c e n a r i o s . The model i s run a g a i n and r e s u l t s a re shown in Tab l e 3 . 1 1 . 77 T a b l e 3.11 Economic V a l u e of A l t e r n a t i v e P l a n s Under D i f f e r e n t P r o d u c t i o n S c e n a r i o s (NPV: Thousand d o l l a r s 1981) Low Y i e l d s S c e n a r i o Average Y i e l d s S c e n a r i o EU Wi t hou t P r o t e c - t i on Wi th P r o t e c - t i on Benef i t s to 1nd i ans ..Wi thou t P r o t e c - t.ion Wi th P r o t e c - t i on Benef i t s to 1 nd i ans 1 1 0 2 . 3 1 3 3 . 2 3 0 . 9 1 7 0 . 4 2 1 8 . 9 4 8 . 6 2 - 1 1 7 . 4 - 1 1 3 . 4 4 . 0 1 0 9 . 4 1 1 3 . 3 3 .9 3 - 2 9 . 3 1 6 5 . 2 1 9 4 . 3 7 3 0 . 2 1 , 0 0 6 . 2 276 .1 4 - 6 . 7 8 0 . 1 2 8 6 . 8 4 7 9 . 3 6 0 2 . 7 1 2 3 . 4 5 5 2 9 . 5 2 , 0 6 8 . 5 1 , 5 3 9 . 0 3 , 4 8 4 . 4 5 , 6 8 4 . 7 2 , 2 0 0 . 4 6 7 3 . 2 4 6 1 . 9 3 8 8 . 7 8 3 4 . 5 1 ,391 .1 5 5 6 . 5 7 2 6 8 . 9 9 6 0 . 7 6 9 2 . 0 1 , 4 5 7 . 4 2 , 4 5 1 . 4 9 9 4 . 0 8 - 6 2 . 2 1 , 9 7 0 . 8 2 , 0 3 3 . 0 3 , 9 5 8 . 7 6 , 8 9 1 . 8 2 , 9 3 3 . 0 7 5 8 . 3 5 , 7 2 7 . 0 4 , 9 6 8 . 7 1 1 , 2 2 4 . 6 1 8 . 3 6 0 . 0 7 , 1 3 6 . 0 N o t e : CS not taken as o p p o r t u n i t y c o s t . 78 3 . 4 . 3 E v a l u a t i o n of B e n e f i t s B e n e f i t s t h a t may r e s u l t f rom p r o v i d i n g f l o o d p r o t e c t i o n on the a r e a a re e s t i m a t e d f o r the v a r i o u s h y p o t h e s i s c o m b i n a t i o n s as e x p l a i n e d in Chap t e r 2. I n d i r e c t b e n e f i t s to the I n d i a n s a re shown in Tab l e 3 . 1 2 . T a b l e 3 .12 I n d i r e c t B e n e f i t s to I nd i ans ( thousand d o l l a r s 1981) E v a l u a t i o n H y p o t h e s i s C o m b i n a t i o n s Uni t s I II III IV 1 187 15 101 0 2 89 12 - 89 0 3 980 28 139 0 4 589 18 66 0 5 5 ,477 256 1,861 0 6 1,319 89 390 0 7 2 ,359 106 869 0 8 6 ,645 278 1,724 0 Induced changes in management p r a c t i c e s and in land use as a r e s u l t of f l o o d p r o t e c t i o n a re c a p t u r e d in above b e n e f i t s . These b e n e f i t s r e p r e s e n t p o s s i b l e a d d i t i o n a l net b e n e f i t s 1 to the I n d i a n s s i n c e c o s t s of the dykes a re to be funded th rough ARDSA g r a n t . T o t a l b e n e f i t s of f l o o d c o n t r o l ( d i r e c t and i n d i r e c t b e n e f i t s ) to I nd i ans and to s o c i e t y a r e g i v e n in T a b l e 3 . 1 3 . These t o t a l b e n e f i t s i l l u s t r a t e a s i t u a t i o n where f l o o d c o n t r o l i s in p l a c e w i t h o u t a deve lopment p r o g r a m . These r e s u l t s i n Tab l e 3 .13 might be compared w i t h those r e p o r t e d by WIAC (see T a b l e 3 . 3 ) . In WIAC r e s u l t s , the ' c u r r e n t s i t u a t i o n ' r e p r e s e n t s the d i r e c t b e n e f i t s of f l o o d c o n t r o l ; the ' a l t e r n a t i v e s i t u a t i o n s ' m ight r e p r e s e n t i n d i r e c t b e n e f i t s of some s o r t , but no r a t i o n a l e was i n d i c a t e d to a t t a i n these i n d i r e c t b e n e f i t s . A deve lopment program i n c l u d i n g e x t e n s i o n , t r a i n i n g and f i n a n c e to overcome p o s s i b l e i n s t i t u t i o n a l c o n s t r a i n t s was not c o n s i d e r e d by WIAC in the e v a l u a t i o n of the i n d i r e c t b e n e f i t s of t h i s p r o j e c t . T h e r e f o r e , i t was i m p l i c i t l y assumed t h a t c o n s t r a i n t s p r e v e n t i n g a b e t t e r u t i l i z a t i o n of the land and p r e v e n t i n g h i g h e r p r o d u c t i v i t y in the a r e a wou ld be a u t o m a t i c a l l y removed by p r o v i d i n g f l o o d p r o t e c t i o n . . T h i s wou ld imp ly a c c e p t a n c e of h y p o t h e s i s c o m b i n a - t i o n I. In t h a t c a s e , the WIAC c a l c u l a t i o n of i n d i r e c t b e n e f i t s i s i n c o r r e c t . If a c o m b i n a t i o n of f l o o d h a z a r d and i n s t i t u t i o n a l c o n s t r a i n t s i s assumed ( H y p o t h e s i s c o m b i n a t i o n II o r I I I ) , then the i m p u t a t i o n of i n d i r e c t b e n e f i t s as done by WIAC i s a l s o i n c o r r e c t . F u r t h e r m o r e , i f H y p o t h e s i s c o m b i n a t i o n IV i s to assume, then t h e r e To the above b e n e f i t s , d i r e c t b e n e f i t s s h o u l d be added . Tab le 3 .13 To t a l B e n e f i t s of F l o o d C o n t r o l ( thousand d o l l a r s 1 9 8 1 ) 3 I nd i ans ' 3 S o c i e t y 0 H y p o t h e s i s C o m b i n a t i o n s H y p o t h e s i s C o m b i n a t i o n s E v a l u a t i o n — : : : Uni t s I II III IV I II III IV 1 192 20 106 5 147 -25 61 • -40 2 95 18 -83 6 -176 -252 -353 -265 3 999 47 158 19 486 -466 -355 - -494 4 597 26 74 8 73 -498 -450 -516 5 5,666 445 2 , 050 189 3 ,362 - 1 , 8 5 9 -254 - 2 , 1 1 5 6 1,385 155 456 66 889 -341 -40 -430 7 2 ,442 189 952 83 1,631 -622 141 -728 8 6 ,863 496 1, 942 218 5 ,092 - 1 , 2 7 5 171 - 1 , 5 5 3 3 Rounded f i gures ^ D i r e c t and 1 nd i r e c t Benef i t s w i t h o u t s u b t r a c t i n g c o s t s of d y k e s . D i r e c t and 1 nd i r e c t Benef i t s mi nus c o s t s of dykes are nor i n d i r e c t b e n e f i t s . S i n c e no r a t i o n a l e was i n d i c a t e d i n the e s t i m a t i o n of i n d i r e c t b e n e f i t s by WIAC, t ha t e s t i m a t i o n i s p r o b a b l y not c o r r e c t . S u r v e y s among I nd i an f a r m e r s (Western I nd i an A g r i c u l t u r a l C o r p . , 1 9 8 0 , 1982 and 1983) i n the S im i l k ameen a r e a have i n d i c a t e d t h a t low y i e l d s a re p r i m a r i l y a s s o c i a t e d w i t h l e s s use of f e r t i l i z e r when and where r e q u i r e d , v a r i e t y c h o s e n , l e s s seed and o t h e r c r i t i c a l c r op management p r a c t i c e s such as s t a n d e s t a b l i s h m e n t , i r r i g a t i o n p r a c t i c e s , c u t t i n g s c h e d u l e s , h a r v e s t and s t o r a g e . A l s o , under i nves tmen t has been s u g g e s t e d as a r eason f o r o b t a i n i n g low y i e l d s , ( i n a p p r o p r i a t e mach ine r y and e q u i p m e n t ) . On the o t h e r hand , p l a n t s p e c i a l i s t s f rom the M i n i s t r y of A g r i c u l t u r e , I nd i an A f f a i r s and Western I nd i an A g r i c u l t u r e C o r p . , have i n d i c a t e d t h a t u n l e s s f l o o d s a c t u a l l y o c c u r , c r op y i e l d s s h o u l d be as h i g h as the ave rage of a f l o o d f r e e a r e a i f c r o p s a re p r o p e r l y managed. C o n s e q u e n t l y , H y p o t h e s i s C o m b i n a t i o n I and II can be e l i m i n a t e d f rom the a n a l y s i s . C o m b i n a t i o n III s t i l l c o n s i d e r s f l o o d s as l i m i t i n g f a c t o r s of land use c h a n g e s . In i n t e r v i e w s , however , I nd i an f a r m e r s have put more emphas i s on o t h e r f a c t o r s such as f i n a n c i n g than f l o o d i n g . The s u r v e y among the f a r m e r s i n 1980 d i d not r e v e a l i n t e n t i o n of d i v e r s i f i c a t i o n of p r o d u c t i o n a c t i v i t i e s nor p roduced e v i d e n c e tha t d i v e r s i f i c a t i o n has not been implemented because of f l o o d s in the a r e a . None of the s i x t e e n a p p l i c a t i o n s to S p e c i a l ARDA f o r f u n d i n g a s s i s t a n c e in 1980 ( i n the p r o j e c t a r ea ) c o n s i d e r e d c rop d i v e r s i f i c a - t i o n . The Band , however , s t a r t e d a 5 h e c t a r e o r c h a r d o p e r a t i o n i n f l o o d f r e e land some y e a r s ago to i n t r o d u c e the i d e a of d i f f e r e n t c r op o p p o r t u n i t i e s among Band members, but no o t h e r f a r m e r s u n t i l now have f o l l o w e d the i n t e n t i o n of the Band p l a n n e r s . No e v i d e n c e has been found wh i ch s u p p o r t s C o m b i n a t i o n I I I . On the c o n t r a r y , t h e r e i s e v i d e n c e wh i ch s u g g e s t s t h a t t h i s i s not the most l i k e l y s i t u a t i o n : the 728 h e c t a r e s of EU 8 , the bes t land of the p r o j e c t , has been p r o t e c t e d a g a i n s t f l o o d i n g s i n c e January 1 9 8 3 , and f i v e months l a t e r , I nd i an f a r m e r s have been s t i l l u n a b l e to d e f i n e p l a n s to i n c o r p o r a t e t h i s a r e a i n t o p r o d u c t i o n . M o r e o v e r , the Band f a r m i n g a c t i v i t i e s — c o m p r i s i n g about 200 h e c t a r e s ( f l o o d - f r e e l and ) have been r e c e n t l y r e p o r t e d in f i n a n c i a l d i f f i c u l t i e s because o f management p rob l ems (Western I nd i an A g r i c u l t u r a l C o r p . , 1 9 8 3 , Depar tment of I nd i an A f f a i r s 1 9 8 3 ) . It i s p e r t i n e n t to i n d i c a t e a l s o t h a t about 80 h e c t a r e s of t h i s l and has been m a i n t a i n e d in f o r a g e c r o p s , and t h a t t h e r e i s no s i g n a l to a n t i c i p a t e any change in land u s e . A c l o s e e x a m i n a t i o n to the r e l e v a n t c o n s t r a i n t s t ha t f a r m e r s f a c e s u g g e s t s t h a t a p a r t i c i p a t i o n r a t e such as the one d e s c r i b e d f o r A l t e r n a t i v e P l a n s i s not ve ry l i k e l y , even in the p r e s e n c e of e x t e n s i o n p r o g r a m s . F i n a n c i n g f o r i n s t a n c e , a s e c u l a r c o n s t r a i n t t h a t has a f f e c t e d I nd i an f a r m e r s , r e p r e s e n t s a need of o ve r 2 m i l l i o n d o l l a r s a n n u a l l y f o r at l e a s t the f i r s t f i v e y e a r s to s u p p o r t a deve lopment such as t h a t s u g g e s t e d in the a I t e r n a t i v e p I a n s , f o r EU 8 o n l y ; f o r the e i g h t E U 1 s the annual f i n a n c i a l needs of f a r m e r s s u r p a s s the amount of 5 m i l l i o n , in a d d i t i o n a l i n v e s t m e n t s . O the r f a c t o r s t h a t a f f e c t the p a r t i c i p a t i o n r a t e and t h a t e x t e n s i o n does not s o l v e a r e : t enu re s i t u a t i o n , o r g a n i z a t i o n a l c o n f l i c t s w i t h i n the Band , e t c . There i s e v i d e n c e tha t t he se t y p e s of f a c t o r s s t i l l e x i s t in the a r e a ( S im i l kameen I nd i an Band 1982 & 1 9 8 3 ) . P a t t e r n s of deve lopment such as t hose d e s c r i b e d as the Farmer P l a n s a re indeed more l i k e l y than t hose d e s c r i b e d as A l t e r n a t i v e P l a n s . A f t e r a l l , Farmer p l a n s — based on a s u r v e y among the f a r m e r s — may c a p t u r e p r o d u c t i o n i n t e n t i o n s in the f u t u r e as o p p o s i t e to A l t e r n a t i v e P l a n s wh i ch o n l y r e f l e c t the l and p o t e n t i a l but not f a r m e r s ' i n t e n t i o n s (see Append ix C ) . However , f o r the same r e a s o n s t h a t A l t e r n a t i v e P l a n s a re not c o n s i d e r e d to be a dominant f e a t u r e of the a g r i c u l t u r e s cene in the near f u t u r e , the " i n s t a n t a n e o u s " i m p l e m e n t a t i o n r a t e of Farmer P l a n s i s not c o n s i d e r e d as the most l i k e l y . T h i s c o n s i d e r a t i o n i m p l i e s t h a t Farmer P l a n s s h o u l d have a 1 t ime l ag of at l e a s t 5 y e a r s wh i ch w i l l make the economic d e s c r i p t i o n f o r t h i s s c e n a r i o a r educed v e r s i o n of the c o r r e s p o n d i n g b e n e f i t s . The i m p l i c a t i o n of the above i s t h a t the most l i k e l y s c e n a r i o of b e n e f i t s d e r i v e d f rom f l o o d c o n t r o l in the S i m i l k a m e e n I nd i an F i v e yea r p e r i o d i s c o n s i d e r e d i n a l t e r n a t i v e p l a n s f o r the p a r t i c i p a t i o n r a t e to be at i t s maximum e x p r e s s i o n . l ands i s d e t e r m i n e d by the H y p o t h e s i s c o m b i n a t i o n type IV. 84 3.5 B e n e f i t s f rom a Deve lopment P rogram A s u c c e s s f u l deve lopment program as e x p l a i n e d in C h a p t e r 2 may have a c o n s i d e r a b l e impact on f l o o d p r o t e c t i o n b e n e f i t s f o r a l l hypo^ t h e s i s c o m b i n a t i o n s e x c e p t I. The e s t i m a t i o n of t h i s impact i s shown in T a b l e 3 . 1 4 . The major impact of such a p rogram can be r e l a t e d to p o s s i b l e change i n l and u s e . T h i s can be c l e a r l y seen by compa r i ng C o m b i n a t i o n II of T a b l e 3 .13 and 3 . 1 4 . Fo r C o m b i n a t i o n III and IV, the economic impact i s l e s s , but s t i l l i m p o r t a n t . In terms of Net P r e s e n t V a l u e (NPV) the b e n e f i t s to the I n d i a n s i n c r e a s e up to 20 t imes o r more ( C o m b i n a t i o n I I ) compared to the NPV of f l o o d c o n t r o l w i t h o u t a deve lopment p r o g r a m . The v a l u e of t h i s program to s o c i e t y i s c l e a r . In T a b l e 3 .14 b e n e f i t s of the program combined w i t h f l o o d a re shown. The b e n e f i t s of the program in a c o n t e x t of no f l o o d c o n t r o l a r e shown in T a b l e 3 . 1 5 . In t h i s c a s e , f i g u r e s i l l u s t r a t e the maximum amount t h a t s o c i e t y may spend on t h a t p r o g r a m . For a s i t u a t i o n d e s c r i b e d as C o m b i n a t i o n IV, a deve lopment p rogram appea rs a b e t t e r a l t e r n a t i v e than f l o o d c o n t r o l . Tab l e 3 .14 B e n e f i t s to I n d i a n s f rom a Development Program Wi th F l o o d C o n t r o l ( thousand d o l I a r s 1981) _ , , . H y p o t h e s i s C o m b i n a t i o n s Eva I u a t i o n U n i t s I II M l IV 1 192 117 182 49 2 95 230 86 4 3 999 1,035 . 952 276 4 597 609 587 123 5 5,666 5 ,155 5 ,560 2 ,200 6 1,385 1,318 1,348 557 7 2 ,442 2 ,183 2 ,400 994 8 6 ,963 6 ,954 6 ,752 2 ,933 Fo rmu las as in Tab l e 2 .6 B e n e f i t s to I n d i a n s f rom a Deve lopment Program T a b l e 3 .15 I i    e ve lop W i thou t F l o o d C o n t r o l ( thousand d o l l a r s 1981) H y p o t h e s i s C o m b i n a t i o n a I ua 11on Uni t s I II III IV 1 0 76 10 144 91 2 0 -135 9 3 0 -36 47 723 4 0 -12 11 474 5 . 0 512 107 3,466 6 0 67 37 828 7 0 262 42 1,448 8 0 -91 111 3 ,929 E s t i m a t e d as f o r m u l a s i h T a b l e 2 .7 87 CHAPTER 4 CONCLUS IONS T h i s c h a p t e r s u m m a r i z e s t h e i be d r a w n f r o m t h i s s t u d y r e l a t i n g w e l l a s t h e g e n e r a l m e t h o d o l o g y , i m p l i c a t i o n s f o r f u r t h e r r e s e a r c h l o s t i m p o r t a n t c o n c l u s i o n s t h a t c a n t o b o t h t h e s u b j e c t o f a n a l y s i s a s The m a i n l i m i t a t i o n s o f t h e s u d y and a r e a l s o i n d i c a t e d . 4 . 1 S p e c i f i c t o t h e P r o j e c t A number o f c o n c l u s i o n s c a n be r e l a t e d s p e c i f i c a l l y t o t h e p r o j e c t , . a) A g r i c u l t u r a l p r a c t i c e s among I n d i a n f a r m e r s d i f f e r f r o m t h o s e o f n o n - I n d i a n f a r m e r s i n t h e S i m i l k a m e e n a r e a . T h e r e f o r e , an e c o n o m i c d e s c r i p t i o n o f t h e c u r r e n t I n d i a n a g r i c u t u r e i n t h a t a r e a , b a s e d on C o n s e n s u s D a t a S e r i e s ( B . C . M i n i s t r y o f A g r i c u l t u r e ) i s n o t a r e a l i s t i c r e p r e s e n t a t i o n o f t h e s y s t e m and i n t r o d u c e s b i a s i n e c o n o m i c a n a l y s i s . b) The c a u s e s o f l o w p r o d u c t i v i t y among t h e I n d i a n s i n t h e V a l l e y a s w e l l a s t h e c u r r e n t l a n d u s e i n a g r i c u l t u r e a r e n o t w e l l k n o w n . c ) The c u r r e n t s i t u a t i o n (CS) r e p r e s e n t s t h e e x i s t i n g p r o d u c t i o n s i t u a t i o n among t h e I n d i a n p r o d u c e r s i n t h e S i m i l k a m e e n V a l l e y . Farmer p l a n s (FP) r e p r e s e n t i n t e n t i o n s of the I nd i an f a r m e r s to d e v e l o p t h e i r r e s o u r c e s f u r t h e r . A l t e r n a t i v e p l a n s (AP) r e p r e s e n t h y p o t h e t i c a l s i t u a t i o n s where even f u r t h e r a g r i c u l t u r a l deve lopment ( h i g h e r y i e l d and more i n t e n s e use of the land) may be a c h i e v e d , g i v e n the a g r i c u l t u r a l c a p a c i t y of the a r e a . d) D i r e c t b e n e f i t s of d y k i n g p r o t e c t i o n r e p r e s e n t i m p o r t a n t i n c r e a s e s of net income to I nd i an f a r m e r s in the a r e a ( f rom o n - g o i n g o p e r a t i o n s ) . ^ e) D i r e c t b e n e f i t s of the f l o o d c o n t r o l p r o j e c t s to s o c i e t y a re s u b s t a n t i a l l y l e s s than the c o s t s of the dykes in any EU. C o n s e q u e n t l y , the p r o t e c t i o n i n the a r e a i s not e c o n o m i c a l l y j u s t i f i e d . f ) Because of the s u b s t a n t i a l amount of i n d i r e c t b e n e f i t s i n t h i s p r o j e c t , i t i s e x t r e m e l y i m p o r t a n t to d e t e r m i n e the most l i k e l y r e s p o n s e of the f a r m e r s to the p r o v i s i o n of p r o t e c t i o n in the a r e a , s i n c e t h i s k i n d of b e n e f i t w i l l d i r e c t l y depend on the k i n d of f a r m e r s ' r e s p o n s e s to the p r o t e c t i o n . g) R e s u l t s i n d i c a t e t h a t in a p r o j e c t such as the S i m i l k a m e e n p r o j e c t most of the b e n e f i t s a r e in the form of i n d i r e c t b e n e f i t s . If the most l i k e l y s c e n a r i o c o r r e s p o n d s to H y p o t h e s i s c o m b i n a t i o n IV, then i n d i r e c t b e n e f i t s of f l o o d c o n t r o l do not e x i s t . In ' t h i s s i t u a t i o n , b e n e f i t s t o s o c i e t y a re l e s s than the c o s t of the f l o o d p r o t e c t i o n . h) However , a deve lopment program i n c l u d i n g e x t e n s i o n , t r a i n i n g 8 9 f i n a n c e and land t e n u r e improvement a s s o c i a t e d w i t h f l o o d c o n t r o l may induce changes in l and use and management p r a c t i c e s in the a r e a . The combined b e n e f i t s f rom f l o o d p r o t e c t i o n and the deve lopment may e v e n t u a l l y exceed the c o s t of the p r o j e c t s and make them e c o n o m i c a l l y j u s t i f i a b l e to s o c i e t y as d e s c r i b e d in Tab l e 3 . 1 4 . i ) Fo r a s i t u a t i o n such as H y p o t h e s i s c o m b i n a t i o n IV, more b e n e f i t s to s o c i e t y can be o b t a i n e d th rough i m p l e m e n t i n g the d e v e l o p - ment p rogram w i t h o u t f l o o d c o n t r o l . In t h i s s i t u a t i o n such a program i s c l e a r l y a s u p e r i o r a l t e r n a t i v e in terms of economic e f f i c i e n c y c r i t e r i o n as can be seen in Tab l e 3 . 1 5 . 4 . 2 Gene ra l Me thodo logy A number of p o i n t s can be c o n c l u d e d in r e g a r d to the methodo logy used in t h i s s t u d y . a) The c o s t - b e n e f i t approach e n a b l e s us to e v a l u a t e the d i r e c t b e n e f i t s and i n d i r e c t b e n e f i t s of a ; p a r t i c u l a r f l o o d c o n t r o l d e s i g n . I t s r e l a t i v e s i m p l i c i t y i s an advantage to o t h e r more r e f i n e d e v a l - u a t i o n methods e s p e c i a l l y when q u a n t i t y and q u a l i t y of the d a t a i s s c a r c e . b) The e v a l u a t i o n approach based on the net v a l u e of a g r i c u l t - u r a l p r o d u c t i o n i s indeed more a p p r o p r i a t e (but l e s s s i m p l e ) than the a l t e r n a t i v e of e v a l u a t i n g b e n e f i t s based on land v a l u e s when the l and market in the a r e a i s not w e l l d e f i n e d o r not e x i s t i n g i n the 90 case of I nd i an l a n d s . c ) A l t h o u g h no fo rma l p r e d i c t i o n model was used to f o r e c a s t the r e s p o n s e of f a r m e r s to the p r o v i s i o n of p r o t e c t i o n , the a n a l y s i s of b e n e f i t s i n s e p a r a b l e component and the c o m b i n a t i o n of h y p o t h e s e s r e l a t i n g y i e l d s and c r o p p a t t e r n (as d e s c r i b e d in t h i s t h e s i s ) p e r m i t t e d us to d e t e r m i n e the most l i k e l y s c e n a r i o . d) Output p r i c e e s t i m a t e s r e p r e s e n t c o m p e t i t i v e market c o n d i t i o n s w i t h o u t s h o r t - t e r m a b n o r m a l i t i e s and t h e r e f o r e a re a r e l i a b l e e s t i m a t e of the b e n e f i t s . On the o t h e r hand , a d j u s t m e n t to the p r o d u c t i o n c o s t s as d e s c r i b e d in C h a p t e r 3 c o r r e c t e d d i s t o r t i o n s i n t r o d u c e d in the a n a l y s i s . The new e s t i m a t e s f o r a l t e r n a t i v e p l a n s a d j u s t i n g the c o s t to r e f l e c t changes i n p r o d u c t i v i t y ( d i f f e r e n t y i e l d s c e n a r i o s ) i s more a p p r o p r i a t e to b e t t e r a s s e s s the p o s s i b l e impact of p r o v i d i n g f l o o d p r o t e c t i o n to the a r e a . e) A l t h o u g h c o s t - b e n e f i t a n a l y s i s i s not an o p t i m i z i n g p r o c e d u r e , i t was p o s s i b l e in t h i s s t udy to d e t e r m i n e t h a t an e x t e n s i o n program in a c o n t e x t of no f l o o d p r o t e c t i o n can be s u p e r i o r to p r o v i d i n g p r o t e c t i o n in the c o n t e x t of no e x t e n s i o n ( Tab l e 3'. 1 5 ) . f ) P r o j e c t s i n c l u d i n g s t r u c t u r a l and n o n - s t r u c t u r a l c o n t r o l measu re s , t r a i n i n g and e x t e n s i o n and f i n a n c i n g c o m b i n e d , as an i n t e g r a t e d package of r u r a l deve lopment appea rs to make more economic sense than a mere c o n s t r u c t i o n of d y k e s . g) The ARDSA p r o c e d u r e of c o s t - b e n e f i t a n a l y s i s as implemented by WIAC f o r the e v a l u a t i o n of the S im i l k ameen R i v e r D y k i n g P r o j e c t was e s s e n t i a l l y based upon i n d i r e c t b e n e f i t s . L i t t l e c o n s i d e r a t i o n was g i v e n to the l i k e l i h o o d of r e a l i z i n g these b e n e f i t s w i t h o u t an e x t e n s i o n component w i t h i n the p r o j e c t . E x t e n s i o n wh ich t r a n s f e r s modern t e c h n o l o g y to the farm s i t u a t i o n and g u i d e s Ind ian p r o d u c e r s in a l l a s p e c t s of fa rm p r o d u c t i o n and b u s i n e s s management encou rages e f f i c i e n t use of a g r i c u l t u r a l r e s o u r c e s . Measured by what l abou r c o n t r i b u t e s to o u t p u t the p r o d u c t i v e c a p a c i t y of human b e i n g s has been i n d i c a t e d as t r emendous l y l a r g e r than a l l o t h e r forms of w e a l t h t aken t o g e t h e r ( S h u l t z 1 9 6 1 ) . C o n s e q u e n t l y , i n ves tmen t i n human c a p i t a l i n the form of t r a i n i n g and e x t e n s i o n as b r o a d l y d e f i n e d above must be a n o n - s e p a r a b l e component of the p r o j e c t and t h e r e f o r e c o n s i d e r e d in the assessment of the b e n e f i t s . The e v a l u a t i o n p r o c e d u r e i s o t h e r w i s e i n c o r r e c t . 4 . 3 F u r t h e r R e s e a r c h Even though r e l a t i v e l y s i m p l e d a t a a re r e q u i r e d f o r c o s t - b e n e f i t e v a l u a t i o n s compared to o t h e r r e s e a r c h o p e r a t i o n p r o c e d u r e s , i t can be c o n c l u d e d f rom t h i s s t udy t h a t t h e r e i s a l a ck of i m p o r t a n t i n f o r m a t i o n wh i ch d e s e r v e s f u r t h e r i n v e s t i g a t i o n . The r e a s o n s f o r l a ck of deve lopment in I nd i an l ands i s a c r u c i a l i s s u e to d e t e r m i n e more r i g o r o u s l y the r e s p o n s e of I nd i an f a r m e r s to d i f f e r e n t p r o j e c t s . To c o n s t r u c t a p p r o p r i a t e d e c i s i o n mode ls i n c o r p o r a t i n g u n c e r t a i n t y and/ or t e s t d i f f e r e n t h y p o t h e s e s by u s i n g a p r o f i t f u n c t i o n , f o r e x a m p l e , o r m a t h e m a t i c a l programming to e v a l u a t e d i f f e r e n t p o l i c i e s on I nd i an l a n d s , more d a t a a re r e q u i r e d . B a s i c d a t a on c o s t s of p r o d u c t i o n and/ o r y i e l d o b t a i n e d on I nd i an r e s e r v e s i s an a r ea wh i ch must be i n v e s t - i g a t e d . If t hese d a t a a re a v a i l a b l e , a number of a r eas c o n c e r n i n g I nd i an deve lopment c o u l d be e x p l o r e d and a p p r o p r i a t e e x t e n s i o n o r deve lopment programs c o u l d be d e s i g n e d . REFERENCES B a r i c h e l l o , R. "An Economic and D i s t r i b u t i v e E v a l u a t i o n of Community P a s t u r e P r o g r a m s . " V a n c o u v e r . D e p t . of A g r i c u l t u r a l E c o n o m i c s , U n i v e r s i t y of B r i t i s h C o l u m b i a ( 1 9 7 8 ) . B e c k e r , G. The Economics of D i s c r i m i ma t i on 2nd e d . , C h i g a g o (1971) c i t e d by R. T r o s p e r , " A m e r i c a n I nd i an R E I a t i v e R a n c h i n g E f f i c i e n c y . " The Amer i can Economic Rev i ew 6 8 : 4 ( S e p t - ember 1 9 7 8 ) : 5 0 3 - 5 0 4 . B enne t , R. " E conomic Deve lopment as a Means of Overcoming P o v e r t y " in U .S . C o n g r e s s , J o i n t Economic C o m m i t t e e , Toward Economic Deve lopment f o r N a t i v e Amer i can C o m m u n i t i e s , 91s t C o n g r e s s , 1 s t s e s s i o n , Wash ington (1969) c i t e d by R. T r o s p e r , " A m e r i c a n I nd i an R e l a t i v e R a n c h i n g E f f i c i e n c y . " The Amer i can Economic Rev iew 6 8 : 4 (September 1 9 7 8 1 : 5 0 3 - 5 0 4 . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Farm Economic B r a n c h , P r o d u c e r Consensus C o s t s and R e t u r n s N o n - I r r i g a t e d A l f a l f a Hay P r o d u c t i o n A rms t rong-Ende rby , CDS 2 2 4 , V i c t o r i a F e b r u a r y ( 1 9 7 8 ) . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Farm Economic B r a n c h , P r o d u c e r Consensus C o s t s and R e t u r n s A l f a l f a and G r a s s Hay P r o d u c t i o n i n the O l i v e r D i s t r i c t , CDS 2 2 5 , V i c t o r i a , F e b r u a r y ( 1 9 7 8 ) . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Farm Economic B r a n c h , P r o d u c e r Consensus C o s t s and R e t u r n s F i e l d Tomato P r o d u c t i o n South Okanagan and S i m i l k a m e e n , CDS 2 3 8 , V i c t o r i a , F e b r u a r y ( 1 9 8 0 ) . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Agr i c u I t u r e P r o f i l e O t i v e r D i s t r i c t , V i c t o r i a , December ( 1 9 8 0 ) . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Agr i cu I t u r a I S t a t i s t i c s F a c t s h e e t s , V i c t o r i a , J u l y ( 1 9 8 1 ) . B r i t i s h C o l u m b i a . M i n i s t r y of A g r i c u l t u r e and F o o d , Census of A q r i c u l t u r e in B . C . , V i c t o r i a ( 1 9 8 1 ) . Br i t i sh C o l u m b i a . M i n i s t r y of Economic Deve l opmen t , Economic Deve lopment C o m m i s s i o n , S o c i o - E c o n o m i c S tudy of the PopuI at i on of B . C . , V i c t o r i a , J u l y ( 1 9 7 7 ) . I nd i an B r i t i s h C o l u m b i a . M i n i s t r y of E n v i r o n m e n t , Water I n v e s t i g a t i o n B r a n c h , Repo r t 2124 , V i c t o r i a :C1973). B rown, J . "The Economic E f f e c t of F l o o d s : I n v e s t i g a t i o n s of a S t o c h a s t i c Model of R a t i o n a l Investment B e h a v i o u r i n the Face of F l o o d s . " D e p t . of E c o n o m i c s , Brown U n i v e r s i t y ( 1 9 7 2 ) . C a m p b e l l , H. "A B e n e f i t Cos t R u l e f o r E v a l u a t i n g P u b l i c P r o j e c t s i n C a n a d a . " Canad i an P u b l i c P o l i c y - A n a l y s e de P o l i t i q u e s 1:2 ( 1 9 7 5 ) : 1 7 1 - 1 7 5 . C a m p b e l l , H. "Shadow P r i c e s f o r the Economic A p p r a i s a l of P u b l i c S e c t o r E x p e n d i t u r e s . " Canad i an P u b l i c P o l i c y - A n a l y s e de P o l i t i q u e s I I :3 (1981) . Canada . Depar tment of R e g i o n a l Economic E x p a n s i o n and B r i t i s h Columb M i n i s t r y of A g r i c u l t u r e , A g r i c u l t u r e and R u r a l D e v e l o p - ment S u b s i d i a r y Agreement ( 1 9 7 7 ) . Canada . Depar tment of I nd i an A f f a i r s , P rogram S t a t i s t i c D i v i s i o n , Number and Ac reage of I nd i an R e s e r v e by Band'. (1976) . Canada . Depar tment of I nd i an A f f a i r s , The S o c i o - E c o n o m i c Deve lopment of I nd i an P e o p l e , O t t a w a , O c t o b e r ( 1 9 7 7 ) . Canada . Depar tment of I nd i an A f f a i r s , B .C . 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The Economics of P r o j e c t Eva Iuat i on • M a s s a c h u s e t t s : H a r v a r d U n i v e r s i t y P r e s s (1958) F e l d s t e i n , M. "Net S o c i a l B e n e f i t C a l c u l a t i o n and the P u b l i c I n ves t - ment D e c i s i o n . . ' " O x f o r d Economic Pape r s ( 1 9 6 4 ) . F e l d s t e i n , M. "The Inadequacy of We ighted D i s c o u n t R a t e s " i n R. Laya rd ( e d . ) , Cos t B e n e f i t A n a l y s i s . London : Pengu in (1973) F l i e g e l , F. and K i l v i n J . "Farm P r a c t i c e A t t r i b u t e s and A d o p t i o n R a t e s . " S o c i a l F o r c e s 4 0 : 4 (1962) c i t e d by A u s t r a l i a n Water R e s o u r c e C o u n c i l . T e c h n i c a l Paper 3 0 , D e p t . of N a t i o n a l R e s o u r c e s , C a n b e r r a ( 1 9 7 7 ) . H a r b e r g e r , A. "On M e a s u r i n g the S o c i a l O p p o r t u n i t y Cos t of P u b l i c F u n d s " (1969) c i t e d by H. Campbe l l in "Shadow P r i c e s f o r Economic A p p r a i s a l of P u b l i c S e c t o r E x p e n d i t u r e s . " Canad ian P u b l i c Pol i c y 1 1 : 3 ( 1 9 8 1 ) . ~96 H a r b e r g e r , A. "The O p p o r t u n i t y Cos t of p u b l i c Investment F i n a n c e d by B o r r o w i n g " i n P r o j e c t E v a l u a t i o n : S e l e c t e d P a p e r s . C h i c ^ . a g o : U n i v e r s i t y P r e s s . (1971) . H i c k s , J . Va Iue and Cap i t a I . 2nd E d . , London : O x f o r d U n i v e r s i t y P r e s s ( 1 9 3 9 ) . James, L. " Economic A n a l y s i s of A l t e r n a t i v e F l o o d C o n t r o l M e a s u r e s . " Water R e s o u r c e R e s e a r c h 3:2 U n i v e r s i t y of Ken tucky ( 1 9 6 4 ) . J e n k i n s , G. " D i s c o u n t Ra t e s f o r Economic A p p r a i s a l of P u b l i c S e c t o r E x p e n d i t u r e s . " C a n a d i a n P u b l i c P o l i c y - A n a l y s e de P o l i t i q u e s 1:3 ( 1 9 8 0 ) : 5 4 9 - 5 5 5 . L i n d , R. The Na tu r e of F l o o d C o n t r o l B e n e f i t s and the E conomics of F l o o d P r o t e c t i o n . I n s t i t u t e i n E n g i n e e r i n g Economic S y s t e m s , S t a n f o r d U n i v e r s i t y ( 1 9 6 6 ) . McKean, R. E f f i c i e n c y in Government t h rough Sys tem A n a l y s i s . P u b l i c a - t i o n in O p e r a t i o n R e s e a r c h 3, N.Y. W i l e y & Sons ( 1 9 6 7 ) . McLean , A . Range Management Handbook f o r B .C . A g r i c u l t u r e Canada R e s e a r c h S t a t i o n , Kamloops : (1979) . M c N e i l l , R. " P r o d u c t i o n F u n c t i o n s f o r A p p l e O r c h a r d Sys tems in the Okanagan V a l l e y of B r i t i s h C o l u m b i a . " M.Sc . T h e s i s D e p t . ^ o f A g r i c u l t u r a l E c o n o m i c s , U n i v e r s i t y of B r i t i s h C o l u m b i a ( 1 9 7 7 ) . McRoy, L. A s s i s t a n t Manager Farm C r e d i t C o r p o r a t i o n Summer land. P e r s o n a l C o m m u n i c a t i o n . J u l y 8 ( 1 9 8 3 ) . M a r g l i n , S. "The S o c i a l Ra te of D i s c o u n t and the Op t ima l Ra te of I n v e s t m e n t . " Q u a r t e r l y J o u r n a l of Economics 77 :1 (1963) 9 5 - 1 1 1 . M e l i c h a r , E. " C a p i t a l G a i n s v e r s u s C u r r e n t Income in the F a r m i n g S e c t o r " Amer i can J o u r n a l " o f A g r i c u l t u r a l E conomics (Dec. 1979) . M i s h a n , E. Cos t B e n e f i t A n a l y s i s . Expanded E d i t i o n , N e w Y o r k : P r aege r P u b l i s h e r s (1976)-. 97 M i s h a n , E. Economic E f f i c i e n c y and S o c i a l W e l f a r e . S e l e c t e d E s s a y s on Fundamenta l A s p e c t s of the Economic Theory of S o c i a l W e l f a r e . London : A l l e n and Unwin : (1981) . P e a r c e , D. and Nash , C . The S o c i a l A p p r a i s a l of Pro jects- . -London The M a c M i l l a n P r e s s ( 1 9 8 1 ) . Renshaw, E. "The R e l a t i o n s h i p between F l o o d L o s s e s and F l o o d C o n t r o l B e n e f i t s . " Pape r s on F l o o d P r o b l e m s . The U n i v e r s i t y of C h i c a g o P r e s s ( 1 9 6 1 ) . R e y n o l d s , L. A g r i c u l t u r e i n Deve lopment Theory '(1975) c i t e d by R. T r o s p e r " A m e r i c a n I nd i an R a n c h i n g E f f i c i e n c y . " The Amer i can Economic Rev iew 6 8 : 4 (September 1 9 7 8 1 : 5 0 3 . R o g e r s , E. and Shoemaker , F. Commun ica t ion of I n n o v a t i o n . New Y o r k : The F r ee P r e s s ( 1 9 7 1 ) . Shannon, L. A p p r a i s e r . B .C . Assessment A u t h o r i t y , P e r s o n a l Communica- t i o n , J u l y ( 1 9 8 3 ) . S h u l t z , T. " I n v e s t m e n t in Human C a p i t a l " Amer i can Economic Rev iew (March 1 9 6 1 ) . S i m i l k a m e e n I nd i an Band . Community Deve lopment P l a n , Keremeos (1980) S i m i l k a m e e n Ind i an Band . I n t e r v i e w w i t h M r s . A. L a u , Band P l a n n e r , Keremeos ( 1 9 8 1 ) . S i m i l k a m e e n Ind i an Band . Reques t to Western I nd i an A g r i c u l t u r a l C o r p . to Rev i ew S i m i l k a m e e n Band A g r i c u l t u r a l O p e r a t i o n , L e t t e r of the Band , December 9 ( 1 9 8 2 ) . S i m i l k a m e e n Ind ian Band . S e r i e s of m e e t i n g s w i t h T. Snow, Band Manager Keremeos and V a n c o u v e r , J anuary and F e b r u a r y (1983) S o r k i n , A . Amer i can I n d i a n s and F e d e r a l A i d , Wash ington (1971) c i t e d by R. T r o s p e r , " A m e r i c a n I n d i a n R e l a t i v e R a n c h i n g E f f i c i e n c y . " The Amer i can Economic Rev iew 6 8 : 4 (September 1 9 7 8 ) : 5 0 3 . 98 Sudgen , R. and W i l l i a m s , A. The P r i n c i p l e s of P r a c t i c a l C o s t - B e n e f i t Ana l y s i s . O x f o r d : O x f o r d U n i v e r s i t y P r e s s ( 1 9 7 8 ) . S w a l e s , J . H o r t i c u l t u r i s t , B .C . M i n i s t r y of A g r i c u I t u r e , . S u m m e r I and : P e r s o n a l c o n t a c t ( 1 9 8 0 ) . T a l b o t , R. " S i m i l k a m e e n V a l l e y I nd i an L a n d s : F l o o d i n g and E r o s i o n P r o t e c t i o n R e q u i r e m e n t s . " V i c t o r i a , M i n i s t r y of E n v i r o n m e n t , Water I n v e s t i g a t i o n B r a n c h . ( 1 9 7 9 ) . The P e n t i c t o n H e r a l d . " F a r m l a n d s of S i m i l k a m e e n V a l l e y under W a t e r " , P e n t i c t o n , B . C . , May 31 ( 1 9 7 2 ) . T i n b e r g e n , J . (1966) c i t e d by E. M ishan "The Na tu re of Economic E x p e r t i s e R e c o n s i d e r e d " Economic E f f i c i e n c y and S o c i a l Wei f a r e , London ( 1 9 8 1 ) . T r e a s u r y Board S e c r e t a r i a t . P l a n n i n g B r a n c h , B e n e f i t C o s t A n a l y s i s G u i d e . Ot tawa ( 1 9 7 6 ) . T r o s p e r , R. "Amer i c an I nd i an R e l a t i v e R a n c h i n g E f f i c i e n c y " The Amer i can Economic Rev iew 6 8 : 4 (September 1 9 7 8 ) : 5 0 3 - 5 1 4 . U .S . Water Resou r ce C o u n c i l . " P r o c e d u r e s f o r E v a l u a t i o n of N a t i o n a l Economic Deve lopment B e n e f i t s and C o s t s i n Water Resou r ce P l a n n i n g . " F e d e r a l R e g i s t e r 4 4 : 2 4 2 (December 1 9 7 9 ) . Western I nd i an A g r i c u l t u r a l C o r p . F i e l d S u r v e y , August (1980) Western I nd i an A g r i c u l t u r a l C o r p . " E conomic F e a s i b i l i t y S tudy of the S i m i l k a m e e n I nd i an Bands . F l o o d and E r o s i o n C o n t r o l P r o j e c t . " ARDSA P r o j e c t No. 271305 Vancouver ( 1 9 8 1 ) . Western I n d i a n A g r i c u l t u r a l C o r p . "Addendum to the Economic F e a s i b i l i t y S tudy of the S i m i l k a m e e n F l o o d E r o s i o n C o n t r o l P r o j e c t . " Vancouver J u l y ( 1 9 8 1 ) . Western I nd i an A g r i c u l t u r a l C o r p . V a r i o u s l o c a l s u r v e y s F i e l d - w o r k e r s . September and O c t o b e r ( 1 9 8 2 ) . - by WIAC Western I nd i an A g r i c u l t u r a l C o r p . "Lower S im i l k ameen I n d i a n Band C u r r e n t A g r i c u l t u r a l O p e r a t i o n . " R e p o r t March 3 (1983) W inch , D. A n a l y t i c a l W e l f a r e E c o n o m i c s . Pengu in E d u c a t i o n , B . J . McCo rm i ck , G. B r i t a i n ( 1 9 7 1 ) . APPENDIX A Terms of R e f e r e n c e - A g r i c u l t u r a l B e n e f i t E v a l u a t i o n S i m i l k a m e e n I nd i an Bands F l o o d C o n t r o l P r o j e c t 101 Terms of R e f e r e n c e - A g r i c u l t u r a l B e n e f i t E v a l u a t i o n - S i m i l k a m e e n I nd i an Bands F l o o d C o n t r o l P r o j e c t (March 4 , 1980) The p roposed S i m i l k a m e e n F l o o d C o n t r o l P r o j e c t w i l l have an impact on I nd i an and n o n - I n d i a n l ands a l o n g the r i v e r f rom P r i n c e t o n to the Canada/U . S . b o r d e r . The f e a s i b i l i t y s t u d y to be u n d e r t a k e n s h o u l d encompass t h i s P r i n c e t o n - t o - b o r d e r r e g i o n . Terms of r e f e r e n c e r e g a r d i n g a g r i c u l t u r a l a s p e c t s of the p r o j e c t s h o u l d c o n t a i n the f o l l o w i n g e l e m e n t s : 1. D e t a i l e d d e s c r i p t i o n of the a g r i c u l t u r a l land base a f f e c t e d by the p r o j e c t . Such d e t a i l s s h o u l d i n c l u d e : a) maps of the a r e a w i t h i n d i c a t i o n as to wh i ch a g r i c u l t u r a l a c t i v i t i e s they w i l l be devo ted and a re c u r r e n t l y d e v o t e d ; b) s p e c i f i c a t i o n of a c r e a g e s i n v o l v e d i n a g r i c u l t u r a l p r o d u c t i o n ) c u r r e n t l y employed in a g r i c u l t u r e ; ) l and whose p r o d u c t i v i t y w i l l be i n c r e a s e d by the p r o j e c t ; III) land to be d e v e l o p e d toward f u t u r e p r o d u c t i o n ( i . e . e x p a n s i o n of e x i s t i n g p r o d u c t i o n ) c) a t a b l e to d i s c l o s e the breakdown of the a g r i c u l t u r a l a c t i v i t i e s i n t o the a c r eage devo ted to each e x i s t i n g and p roposed u s e . T h i s p r o v i d e s a means of compar ing the p r e s e n t s i t u a t i o n w i t h the s c e n a r i o a f t e r the p r o j e c t i s imp l emen ted . d) any a d d i t i o n a l i n f o r m a t i o n r e l a t i n g to l and use s h o u l d be p r o v i d e d . M a t e r i a l such as s o i l maps, f l o o d f r e q u e n c y / 102 s e v e r i t y d a t a , e t c . wh i ch c o u l d be h e l p f u l in the ARDSA r e v i e w p r o c e s s i s welcome in the r e p o r t p r e s e n t e d to the Sub Commi t t e e . 2. C u r r e n t and e x p e c t e d l e v e l s of c r op y i e l d s , p r o d u c t p r i c e s and o n - f a r m p r o d u c t i o n c o s t s s h o u l d be s p e c i f i e d . a) c r o p y i e l d s g i v e n s h o u l d be r e p r e s e n t a t i v e f o r the a r e a and p r o j e c t i o n based on r e a l i s t i c e x p e c t a t i o n s of i n d u s t r y members o r l o c a l a g r i c u l t u r a l i s t s ; b) p r o d u c t s p r i c e s must be r e f e r e n c e d and r e l a t e d to market c o n d i t i o n s / p r o s p e c t s f o r the p r o d u c t s i n q u e s t i o n . A r a t i o n a l e f o r p r i c e e x p e c t a t i o n s s h o u l d be g i v e n whenever poss i b I e ; c) p r o d u c t i o n c o s t s must be c l e a r l y s p e c i f i e d o r r e f e r e n c e d ( e . g . Consensus C o s t s and R e t u r n s , Farm Economic B r a n c h , BCMA) so t h a t c o s t components may be i d e n t i f i e d as r e a l i s t i c o r r e p r e s e n t a t i v e . 3. M a r k e t s and market o p p o r t u n i t i e s be i d e n t i f i e d and e v a l u a t e d f o r the a g r i c u l t u r a l p r o d u c t s p roduced on l ands w i t h i n the p r o j e c t a r e a . ~ 4. Any methodo logy employed to e v a l u a t e b e n e f i t s t o f l o o d c o n t r o l and e r o s i o n p r e v e n t i o n s h o u l d be c l e a r l y d e s c r i b e d in the r e p o r t so t ha t v a l u a t i o n p r o c e d u r e s may be f o l l o w e d by the r e a d e r . 5. The S i m i l k a m e e n I nd i an Band C o u n c i l i s empowered to a c t as a d y k i n g a u t h o r i t y and r e p r e s e n t I nd i an i n t e r e s t s in p r o j e c t : 103 i m p l e m e n t a t i o n . D i s c u s s i o n s w i t h the Band or i t s a d m i n i s t r a t i v e r e p r e s e n t a t i v e s s h o u l d y i e l d the f o l l o w i n g i n f o r m a t i o n : a) employment p a t t e r n s of band members; b) employment b e n e f i t s a r i s i n g f rom the p r o j e c t and a c c r u i n g to band members; c ) band fa rm management e x p e r i e n c e and I nd i an p l a n s o r e x p e c t a ^ ; t i o n s r e g a r d i n g deve lopment of t h e i r a g r i c u l t u r a l r e s o u r c e s as r e l a t e d to the f l o o d c o n t r o l p r o j e c t ; d) s o c i o - e c o n o m i c b e n e f i t s f rom a g r i c u l t u r e wh i ch a r e promoted th rough i n t e g r a t i o n of the deve lopment p r o j e c t s l i s t e d ( l a s t page) w i t h the d y k i n g / e r o s i o n c o n t r o l p r o j e c t . The deve lopment p r o j e c t s l i s t e d on the l a s t page of t he se terms may be under r e v i e w f o r f u n d i n g by o t h e r f e d e r a l o r p r o v i n c i a l a g e n c i e s ( e . g . S p e c i a l ARDA). ARDSA i s i n t e r e s t e d in t hose p r o j e c t s showing deve lopment p o t e n t i a l in a g r i c u l t u r e . W i th t h i s i n m i n d , the c o n s u l t a n t s h o u l d c l e a r l y e s t a b l i s h the B a n d ' s deve lopment p l a n s in terms of the d y k i n g / e r o s i o n c o n t r o l p r o j e c t i n r e l a t i o n to i t s a g r i c u l t u r a l b e n e f i t s . The T e c h n i c a l Sub Commit tee w i s h e s to know: a) P r o j e c t I a y o u t / I o c a t i o n in r e l a t i o n to bo th the d y k i n g works and p roposed a g r i c u l t u r a l a c t i v i t i e s . b) w h i c h p r o j e c t s ( i f any) a r e c u r r e n t l y under r e v i e w by S p e c i a l ARDA o r o t h e r a g e n c i e s and wh i ch may have an impact on the f e a s i b i l i t y of the p roposed p r o j e c t s under the ARDSA p r o p o s a l 104 c ) the r e s u l t s of any a n a l y s i s u n d e r t a k e n on b e h a l f o f o r by the Band r e g a r d i n g s u b m i s s i o n s to o t h e r a g e n c i e s r e g a r d i n g a g r i c u l t u r a l p r o j e c t f u n d i n g . d) b e n e f i t s t o p r o j e c t s e l i g i b l e f o r o t h e r agency f u n d i n g s h o u l d not be coun ted a g a i n as b e n e f i t s to t h i s ARDSA p r o j e c t i f the p o s s i b i l i t y of d o u b l e - c o u n t i n g s h o u l d a r i s e . 7. D e t a i l e d B e n e f i t - C o s t a n a l y s i s to d e t e r m i n e economic p r o j e c t f e a s i b i l i t y under ARDSA i s to be c o n d u c t e d in a c c o r d a n c e w i t h T e c h n i c a l Sub C o m m i t t e e , P a r t III g u i d e l i n e s and the f o l l o w i n g p o i n t s : a) a t a b l e wh i ch " s t r e a m s " r e l e v a n t p r o j e c t c a p i t a l c o s t s , o n - farm p r o d u c t i o n c o s t s and a g r i c u l t u r a l b e n e f i t s o v e r each yea r of the assumed 25-year l i f e of the p r o j e c t i s to be p r o v i d e d in the r e p o r t . T h i s t a b l e s h o u l d p r e s e n t the c o s t s and b e n e f i t s i n c u r r e d each yea r ove r the 25-year p e r i o d in a way tha t members of the Sub Commit tee can r e p l i c a t e the c a l c u l a t i o n s pe r f o rmed by the c o n s u l t a n t . b) the Net P r e s e n t V a l u e and B e n e f i t / C o s t r a t i o to each p r o j e c t s c e n a r i o s h o u l d be c a l c u l a t e d u s i n g a d i s c o u n t r a t e of 10 p e r c e n t (10 % ) . c) the I n t e r n a l Ra te of R e t u r n to each p r o j e c t s c e n a r i o s h o u l d a l s o be g i v e n . d) s e n s i t i v i t y a n a l y s i s of the p r o j e c t to changes i n the v a l u e s a t t r i b u t e d to key economic p a r a m e t e r s p r e s e n t e d i n the b e n e f i t / c o s t t a b l e s h o u l d be p e r f o r m e d . S e n s i t i v i t y a n a l y s i s 105 s h o u l d c o n s i s t of at l e a s t one o r a f l of the f o l l o w i n g a d j u s t m e n t s to the b e n e f i t a n a l y s i s : i ) v a r y i n g a g r i c u l t u r a l p r o d u c t p r i c e s ove r a r ange of a I t e r n a t i ve v a I u e s ; i i ) r e d u c i n g the l e v e l of a g r i c u l t u r a l b e n e f i t s by 5 %, then 10 %, to d e t e r m i n e e f f e c t s on the net p r e s e n t v a l u e , b e n e f i t / c o s t r a t i o and i n t e r n a l r a t e of r e t u r n ; i i i ) v a r y i n g the assumed r i s k and e x t e n t of f l o o d damage to a r eas under p roposed p r o t e c t i o n to d e t e r m i n e e f f e c t s on b e n e f i t l e v e l s f rom the p r o j e c t . 8. R e f e r e n c e m a t e r i a l to be used a g u i d e l i n e s in p r e p a r i n g the f e a s i - ; b i l i t y s t udy i s l i s t e d as f o l l o w s : a) P r o j e c t A p p r a i s a l G u i d e l i n e s , C a n a d a - B r i t i s h C o l u m b i a A g r i c u l t u r a l and R u r a l Deve lopment S u b s i d i a r y Agreement , P r i m a r y Resou r ce Deve l opmen t , A g r i c u l t u r e Canada , R e g i o n a l Deve lopment A n a l y s i s D i v i s i o n , June 1979 . *-•&) H a r d i e , J . Handbook f o r A g r i c u l t u r a l P r o j e c t A p p r a i s a l . R e g i o n a l Deve lopment A n a l y s i s D i v i s i o n , A g r i c u l t u r a l Canada . O t t a w a , November 1976 . c ) T r e a s u r y Board S e c r e t a r i a t , P l a n n i n g B r a n c h . B e n e f i t Cos t A n a l y s i s G u i d e . O t t a w a , 1976 . d) P r o v i n c i a l M i n i s t r y of E n v i r o n m e n t , E n v i r o n m e n t a l and E n g i n e e r i n g S e r v i c e s , R . J . T a l b o t , P. E n g . , S i m i l k a m e e n V a l l e y I nd i an Lands F l o o d i n g and E r o s i o n P r o t e c t i o n R e q u i r e m e n t s . V i c t o r i a , June 1979 . 106 e) A l s o , any e n g i n e e r i n g i n f o r m a t i o n r e g a r d i n g f l o o d and e r o s i o n p r o t e c t i o n f o r n o n - I n d i a n l ands may be a c q u i r e d f rom the E n v i r o n m e n t a l and E n g i n e e r i n g S e r v i c e s , s h o u l d such i n f o r m a t i o n be deemed n e c e s s a r y d u r i n g the c o u r s e of the s t u d y . A l l o w a n c e s h o u l d be made in the f e a s i b i l i t y s t udy f o r the f a c t t ha t the who le p r o j e c t a r e a under a n a l y s i s may not p r o v e e l i g i b l e f o r ARDSA f u n d i n g . The c o n s u l t a n t s h o u l d s t r a t i f y h i s a n a l y s i s to i n d i c a t e wh i ch a r e a s appear to p r o v i d e s u f f i c i e n t a g r i c u l t u r a l b e n e f i t s to j u s t i f y f u n d i n g of the c a p i t a l c o s t s r e q u i r e d to p r o t e c t some f e a s i b l e p o r t i o n of the t o t a l p r o j e c t a r e a . That i s , i f the t o t a l p r o j e c t does not appear v i a b l e , an a n a l y s i s of v a r i o u s s u b s e t s w i t h i n the t o t a l a r e a may p o i n t to c e r t a i n a c t i v i t i e s wh i ch meet ARDSA f u n d i n g r e q u i r e m e n t s . The method of s t r a t i f i c a t i o n i s l e f t up to the c o n s u l t a n t and i n t e r a g e n c y commi t t ee (see p o i n t 1 0 ) . A s u g g e s t e d b a s i s f o r s t r a t i f i c a t i o n i s the e n g i n e e r i n g r e p o r t c i t e d i n r e f e r e n c e 8 (d) above . The a r e a s of work g i v e n p r o j e c t p r i o r i t i e s on page ( i v ) of t h i s r e p o r t p r o v i d e a means of a n a l y z i n g c o s t s and b e n e f i t s t o each r e s p e c t i v e c a r e a shown in the t a b l e . An " I n t e r a g e n c y C o m m i t t e e " c o m p r i s e d of members f rom DREE, A g r i c u l t u r e Canada , M i n i s t r y of E n v i r o n m e n t , M i n i s t r y of A g r i c u l t u r e and Depar tment of I nd i an A f f a i r s i s t o c o o r d i n a t e the s t u d y and d i s c u s s p r o g r e s s and r e s u l t s to the T e c h n i c a l Sub Commit tee as the f e a s i b i l i t y s t udy i s b e i n g c o n d u c t e d . Once the f e a s i b i l i t y s t udy i s c o m p l e t e , r e s p o n s i b i l i t y f a l l s t o the T e c h n i c a l Sub Commit tee 107 f o r f i n a l recommendat ion r e g a r d i n g a c c e p t a n c e o r r e j e c t i o n of the Band p r o p o s a l . A Band r e p r e s e n t a t i v e and the c o n s u l t a n t a re a l s o members of the I n t e r agency Commi t t ee . In a d d i t i o n to the above p o i n t s , t h e r e a re some o t h e r q u e s t i o n s of a gene ra l n a t u r e to wh i ch the r e p o r t may be a d d r e s s e d as the c o n s u l t a n t deems n e c e s s a r y : 11. I n t e r a c t i o n of a g r i c u l t u r e w i t h o t h e r a t t r i b u t e s of the p r o j e c t i . e . i n c l u s i o n of any e x t e r n a l e f f e c t s of a g r i c u l t u r e a c t i v i t y on the a r e a such a s : wa te r q u a l i t y c h a n g e s , e f f e c t s on downstream use of w a t e r , e r o s i o n p r e v e n t i o n o r o t h e r i n d i r e c t e f f e c t s may make t h e m s e l v e s known. These e f f e c t s s h o u l d be i d e n t i f i e d and q u a n t i f i e d where p o s s i b l e w i t h methodo logy and c a l c u l a t i o n s shown. 12. C o n s i d e r a t i o n of p l a n n i n g and a d m i n i s t r a t i o n c o s t s may be n e c e s s a r y . Fo r e x a m p l e , the I n d i a n and non- Ind i an a g e n c i e s may r e q u e s t t ha t p r o j e c t s u p e r v i s o r s o r managers be h i r e d on a term b a s i s d u r i n g e a r l y s t a g e s of p l a n i m p l e m e n t a t i o n - t h e s e a re c o s t i tems wh i ch s h o u l d be i n c o r p o r a t e d i n t o the b e n e f i t - c o s t e va I ua t i o n . F i n a l l y , i t i s s t r o n g l y recommended tha t the c o n s u l t a n t m a i n t a i n c l o s e c o n t a c t w i t h the T e c h n i c a l Sub Commit tee as w e l l as the i n t e r a g e n c y commi t t ee and use r g roups i n the f i e l d . W i th t h i s in m i n d , p r o g r e s s r e p o r t s s h o u l d be s c h e d u l e d to i n f o r m the T e c h n i c a l Sub Commit tee of p r o j e c t d e v e l o p m e n t . M e e t i n g s w i t h the c o n s u l t a n t s h o u l d be t imed at v a r i o u s s t a g e s d u r i n g the c o u r s e of the f e a s i b i l i t y s t u d y . 108 These m e e t i n g s may be c a l l e d at the c o n s u l t a n t ' s d i s c r e t i o n o r upon the TSC ' s r e q u e s t - at l e a s t two m e e t i n g s a re to be c o n s i d e r e d mandatory : The f i r s t : Once the d a t a has been g a t h e r e d as n e c e s s a r y to e v a l u a t e the a g r i c u l t u r a l and s o c i o - e c o n o m i c a s p e c t s of the p r o j e c t , c o n s u l t a n t s s h o u l d r e p o r t o n : i ) any p rob l ems in d a t a a v a i l a b i l i t y i i ) d a t a a v a i l a b l e and c o l l e c t e d i i i ) i n t e n d e d approach o r methodo logy to be used in u t i l i z i n g d a t a to q u a l t i f y p r o j e c t c o s t s and b e n e f i t s i v ) a t ime frame o r s c h e d u l e of a c t i v i t i e s r e q u i r e d f o r f e a s i b i l i t y s t udy c o m p l e t i o n . The S e c o n d : A f t e r d a t a has been p r o c e s s e d and p r e l i m i n a r y r e s u l t s d e t e r m i n e d , the c o n s u l t a n t s h o u l d d i s c u s s t he se f i n d i n g s • w i t h the Sub C o m m i t t e e . It goes w i t h o u t s a y i n g t h a t a t h i r d m e e t i n g w i l l of c o u r s e be r e q u i r e d , t h a t to p r e s e n t the f i n a l r e p o r t f o r ARDSA a p p r o v a l . . The above m e e t i n g s s h o u l d be c o n s i d e r e d as a minimum. O t h e r s w i l l a r i s e d u r i n g the c o u r s e of the f e a s i b i l i t y s t udy i t s e l f as e n c o u n t e r s w i t h u se r g roups may become n e c e s s a r y . H o p e f u l l y , the m e e t i n g s w i l l improve commun i ca t i on d u r i n g the e v a l u a t i o n p r o c e s s and a i d in the p r e s e n t a t i o n of the f i n a l r e p o r t . 109 Addendum to E n c l o s e d Terms of R e f e r e n c e : It i s e x p e c t e d t h a t the p roposed r i v e r band p r o t e c t i o n w i l l r e s u l t in a d d i t i o n a l land b e i n g c l e a r e d , i r r i g a t e d , and b rough t i n t o p r o d u c t i o n . The c o n s u l t a n t s h o u l d i d e n t i f y t hese l ands and e v a l u a t e r e s u l t i n g b e n e f i t s t o g e t h e r w i t h a s s o c i a t e d c a p i t a l and annua l c o s t s of pumping equipment and d i s t r i b u t i o n s y s t e m s ; on- fa rm equipment c o s t s ; c l e a r i n g e s t a b l i s h m e n t and p r o d u c t i o n c o s t s . The M i n i s t r y of A g r i c u l t u r e s h o u l d be c o n t a c t e d f o r recommendat ions r e g a r d i n g peak r a t e s of a p p l i c a t i o n and d e s i g n d u t i r e s f o r v a r i o u s s o i l t y p e s . B e n e f i t s and c o s t s s h o u l d be s t reamed i n a c c o r d a n c e w i t h the e x p e c t e d t ime frame f o r t h i s l and to be b rought i n t o f u l l p r o d u c t i o n . The above wou ld a l s o a p p l y to c o s t s and b e n e f i t s to l ands r e c e i v i n g improved d r a i n a g e as a r e s u l t of the p r o j e c t . APPENDIX B Cos t E s t i m a t e s f o r V a r i o u s P r o d u c t i o n A c t i v i t i e s in the A rea I l l T a b l e B . l Average P r o d u c t i o n Cos t E s t i m a t e s f o r Non- Ind i an Fa rmers in the S i m i l k a m e e n Area (1981 d o l I a r s / h e c t a r e ) IRRIGATED NON-1RRI GATED I terns a l f a l f a g r a s s a l f a l f a g r a s s F e r t i 1i z e r 57 89 30 44 Seed 25 12 15 10 E 1 e c t r i c i ty 52 35 7 5 Twi ne 17 12 Mach ine r y O p e r a t i o n 84 64 40 35 Labour 126 94 47 37 Cash Overhead 17 12 5 5 Sub-to ta1 378 318 144 136 Con t i ngency 10 % 38 32 14 14 9 T o t a l O p e r a t i n g C o s t s per yea r 416 350 158 150 ^ C a p i t a l Investment Cos t 3 ,447 3 ,447 1,574 1,574 S o u r c e : D e r i v e d f rom CDS - 224 and 225 . BCMA. F i g u r e s a d j u s t e d by means of the Farm Input P r i c e Index f o r Western Canada to r e f l e c t 1981 d o l l a r s . ( S t a t i s t i c s Canada C a t a l o g u e 6 2 - 0 0 4 ) . •Rep resen t s w e i g h t e d ave rage f o r each c rop p r o d u c t i o n c y c l e . ^For g r o s s p r o d u c t i o n , c a p i t a l i n ves tmen t was assumed to be s i m i l a r to a l f a l f a p r o d u c t i o n (""") because no d a t a was a v a i l a b l e . ( T axes , I n t e r e s t and D e p r e c i a t i o n e x c l u d e d ) . 112 Tab l e B.2 C a p i t a l Investment C o s t s f o r A l f a l f a Hay P r o d u c t i o n in the S im i l k ameen V a l l e y ( D o l I a r s 1981) IRRIGATED CROP NON-1RRI GATED CROP $ per -y.ears $ per y e a r s h e c t a r e of use h e c t a r e • of use D i s c , P l o w , 531 20 T r a c t o r 435 15 Cu1t i v a t o r , Seeder Wagon, Rake Harrow 82 20 F e r t i 1 i z e r Sp r eade r 25 15 S p r e a d e r s 77 20 T r a c t o r 571 1 2 ' T ruck 126 10 Loader 52 12 B a l e Wagon 287 15 Ba 1 er 165 10 & E l e v a t o r Swather 138 8 Ba 1 er 143 10 Truck P i c k - u p 170 5 Sma1 1 too 1s 32 10 Sma1 1 Too 1s 49 10 Hay Shed 175 40 Mach ine r y Shed 86 40 Mach i nery 37 40 Hay Shed 383 40 Shed I r r i g a t i o n Pump 161 20 Shop 37 40 Pi pe1s/Sp r i nk1er 413 15 Wei 1 388 25 S u b t o t a l 3 ,132 Sub tota1 1,431 Cont i ngency 10 % 314 Con t i ngency 10 % 143 TOTAL 3 ,447 TOTAL 1 ,574 S o u r c e : CDS 224 and 2 2 5 , BCMA - 1979 A d j u s t e d w i t h Farm Input P r i c e Index to r e f l e c t 1981 d o l l a r s . 113 T a b l e B.3 Average P r o d u c t i o n C o s t s f o r A l f a l f a I r r i g a t e d i n the S i m i l k a m e e n V a l l e y (per h e c t a r e ) N o n ^ l n d i a n I nd i an Fa rmers Farmers 1 tern (do 1 1ars ) (1981) (do 1 1ars ) •' (1981) F e r t i 1 i z e r s 3 57 28 Seed* 3 25 16 E 1 e c t r i c i ty 52 52 T • B Twi ne 17 11 c Mach ine r y O p e r a t i o n 84 63 d Labour ( own/h i r ed ) 126 ' 66 Cash Overhead 17 • 12 TOTAL 378 248 Rounded f i g u r e s F e r t i l i z e r a p p l i c a t i o n s in a l t e r n a t e y e a r s ^ P r o p o r t i o n a l to the y i e l d c About 20 to 25 % t ime r e d u c t i o n i n mach ine r y o p e r a t i o n d Man hours saved because l e s s y i e l d s and l e s s c u l t u r a l p r a c t i c e s e s t i m a t e d @ 30 %. Ad jus tment to the d o l l a r - h o u r of 25 % has been made to r e f l e c t a shadow p r i c e f o r I nd ian l abou r (unemployment on r e s e r v e r e p o r t e d as h i g h as 75 % i n w i n t e r months and as low as 25 % in summer) . 114 Table B.4 Apple Production Costs in the Similkameen Valley High Density Dwarf Rootstock (1981 d o l l a r s - f i r s t quarter) Mater- Wach- Labour Harvest TOTAL Yield Pr i ce Gross i a 1 s i nery Costs COST Revenue Year $/ha $/ha $/ha $/ha $/ha ton/ha $/ton $/ha 1 10,887 2,627 2,881 0 16,395 0 593 0 2 798 961 969 0 2,728 0 593 0 3 635 899 3,141 0 4,675 0 593 0 4 672 954 3,541 991 6,158 16 593 3,736 5 672 922 3,941 2,108 7,643 33 593 7,947 6 672 890 3,941 3,225 8,728 50 593 12,157 7 672 857 3,941 3,775 9,247 59 593 14,233 8 672 825 3,941 4,327 9,766 68 593 16,308 9 672 803 3,941 4,893 10,309 77 593 18,444 10 672 771 3,941 4,893 10,277 77 593 18,444 11 672 2,377 3,941 4,893 11,883 77 593 18,444 12 672 1,025 3,941 4,893 10,532 77 593 18,444 13 672 993 3,941 4,893 10,499 77 593 18,444 14 672 954 3,941 4,893 10,460 77 593 18,444 15 672 922 3,941 4,893 10,428 77 593 18,444 16 672 890 3,941 4,893 10,396 77 593 18,444 17 672 857 3,941 4,893 10,363 77 593 18,444 18 672 825 3,941 4,893 10,331 77 593 18,444 19 672 803 3,941 4,893 10,309 77 593 18,444 20 672 771 3,941 4,893 10,277 77 593 18,444 21 672 2,377 3,941 4,893 11,883 77 593 18,444 22 672 1,025 3,941 4,893 10,532 77 593 18,444 23 672 993 3,941 4,893 10,499 77 593 18,444 24 672 953 3,941 4,893 10,460 77 593 18,444 25 672 922 3,941 4,893 10,428 77 593 18,444 Source : WIAC estimation based on R.C. WcNei11 study ' 'Production Functions for App 1 e Orchard Systems in the Okanagan Valley in B.C.' ' U.B.C. Dep t. of Agr i cu1tura 1 Economics, Unpubl ished W.Sc. Thes i s, 1977. (Cost f i gures do not inc 1 ude taxes, depreciation and i nterests) . ha = hectare 115 ' Notes F i g u r e s p r e s e n t e d i n c l u d e both o p e r a t i o n a l p r o d u c t i o n c o s t s ( i . e . f e r t i l i z e r , l a b o u r , p e s t i c i d e s , e t c . ) and i n ves tmen t c o s t s ( i . e . b u i l d i n g s , t r a c t o r s , s p r a y e r s , e t c . ) per h e c t a r e o ve r a twen ty- f i ve yea r p e r i o d . The a p p l e p r i c e per ton was based on the a v e r a g e - p r i c e r e p o r t e d , by the B .C . Tree F r u i t G r o w e r ' s A s s o c i a t i o n i n Ke lowna (24 <t pe r K g ) . T h i s p r i c e r e p r e s e n t s the a ve rage p r i c e a t the f a rm ga te r e c e i v e d by f a r m e r s f o r s a l e s to p r o c e s s o r s and w h o l e s a l e r s a i d at r o a d s i d e s t a n d s . Mach ine r y i n c l u d e s a t r a c t o r i n the 40 horsepower r a n g e , a s p r a y e r adequate f o r the t r e e - s i z e , a weed s p r a y e r , an o r c h a r d mower, b u i l d i n g s used to house equipment and m i s c e l l a n e o u s equ ipment such as l a d d e r s , p r u n i n g a i d s and h a r v e s t i n g e q u i p m e n t . It i s assumed t h a t the major mach ine r y i t ems a re r e p l a c e d a f t e r 10 y e a r s . M a t e r i a l s i n c l u d e p e s t i c i d e s , f e r t i l i z e r , t r a c e e l e m e n t s , and i r r i g a t i o n - sys tems . Labour c o s t s do not i n c l u d e h a r v e s t i n g . These f i g u r e s have been a d j u s t e d to r e f l e c t 1981 d o l l a r s (Farm Input T o t a l f o r M a c h i n e r y , M a t e r i a l s and Wages h o u r l y r a t e d f o r Labour - f rom Farm Input P r i c e Index f o r Western C a n a d a ) . H a r v e s t i n g c o s t s were e s t i m a t e d as f o l l o w s : M c N e i l l ' s r e p o r t e d an ave rage p r i c e l e s s h a r v e s t c o s t s of 1 1 . 2 <J per Kg f o r dwarf v a r i e t i e s (1974 d o l l a r s ) . A f t e r a d j u s t i n g tha t f i g u r e to r e l e c t 1981 ( f i r s t q u a r t e r ) d o l l a r s by means of the Consumer P r i c e Index f o r V a n c o u v e r , the o b t a i n e d p r i c e was 17.8 ct per K g . The h a r v e s t i n g c o s t per Kg was o b t a i n e d by s u b t r a c t i n g the computed f i g u r e f rom the ave rage a p p l e p r i c e f o r the 1981 c r o p , r e p o r t e d by the B .C . Tree F r u i t Growers A s s o c i a t i o n , of 24 $ pe r K g . The e s t i m a t e d h a r v e s t i n g c o s t was 6.4 4 pe r Kg o r $ 58.00 pe r t o n . H a r v e s t i n g c o s t s per h e c t a r e were then o b t a i n e d by m u l t i p l y i n g the c o r r e s p o n d i n g y i e l d per h e c t a r e by the above computed f i g u r e . (The s t r e a m of y i e l d per h e c t a r e e s t i m a t i o n s o v e r the t w e n t y - f i v e yea r p e r i o d was t aken f rom the R. M c N e i l l s t u d y ; the s t r e a m was computed based on the e s t i m a t e d p r o d u c t i o n f u n c t i o n s ) . 117 T a b l e B.5 Summary of Tomato P r o d u c t i o n C o s t s Per H e c t a r e (1981 $ - 1s t q u a r t e r ) I tern D o l l a r s / H e c t a r e F e r t i I i z e r 163 Seeds and p l a n t s 949 P e s t i c i d e s 109 Custom Work 2 ,903 C o n t a i n e r s 949 O the r Supp l y &: S e r v i c e Items 954 M a c h i n e r y O p e r a t i n g C o s t s 432 H i r e d Labour 670 Cash Overhead 363 O p e r a t o r Labour 872 TOTAL 8 ,364 T a b l e B.6 ' F i e l d Tomato P r o d u c t i o n : S i mi 1 kameen Va1 ley MARKET YIELDS PRICE GROSS RETURN Kg per $ per $ per h e c t a r e h e c t a r e h e c t a r e F r e s h market - m a r k e t i n g 3 ,700 .58 2 ,146 board F r e s h market - grower sa1es 7 ,500 .70 5 ,250 Farm ga te s a ! 1 es 1 1 , 2 0 0 .41 4 , 5 9 2 Cannery 1 1 , 2 0 0 . 10 1 ,120 TOTAL 3 3 , 6 0 0 ,39 13 ,108 S o u r c e : CDS - 238 - 1980 - F i g u r e s a d j u s t e d to r e f l e c t economic va Iue in 1981 do I I a r s a w e i g h t e d ave rage .118 T a b l e B . 7 C a p i t a l Investment f o r Tomato P r o d u c t i o n in the S i m i l k a m e e n V a l l e y ITEM INVESTMENT YEARS PER HECTARE OF USE (1981 $) MACHINERY 1. Harrow 2. P l o w , d i s c , c u l t i v a t o r mulch and b i - w a l l l a y e r , t r a n s p I a n t e r 3. F r o n t l o a d e r 4 . T r a c t o r 5. F e r t i l i z e r s p r e a d e r and s p r a y e r 6 . Truck 20 15 15 15 10 10 3 , - 7 2 8 86 843 3.14 1,391 200 894 SMALL TOOLS 10 217 BUILDINGS 1. M a c h i n e r y shed 2. Cool s t o r a g e 30 20 •488 272 217 IRRIGATION EQUIPMENT 1. I r r i g a t i o n sys tem - Tr i c k I e b i-waI I 2. F i l t e r , i n j e c t o r , f i t t i n g 3. Pump and motor 4 . Wei I 15 20 25 2 ,290 1,062 677 163 388 TOTAL 6 ,723 (Taxes not i n c l u d e d and f i g u r e s rounded) S o u r c e : CDS - F e b r u a r y 1980 , a d j u s t e d to r e f l e c t 1981 d o l l a r s 119 T a b l e B.8 Summary of N o r m a l i z e d Marke t P r i c e s f o r C u r r e n t C r o p s (1981 d o l l a r s ) CROP UNIT DOLLAR/UNIT I r r i g a t e d P r o d u c t i o n A l f a l f a hay tons 9 1 . 0 G r a s s hay tons 9 0 . 0 N o n - I r r i g a t e d P r o d u c t i o n A l f a l f a hay tons 9 0 . 0 G r a s s hay tons 9 0 . 0 N a t i v e P a s t u r e A U 3 1 3 . 3 a A n imaI Un i t The v a l u e of p r o d u c t i o n f rom n a t i v e p a s t u r e was e s t i m a t e d based on the economic v a l u e of an animal u n i t month (AUM) d e t e r m i n e d by B a r i c h e l l o ( 1 9 7 8 ) . T h i s v a l u e was a d j u s t e d to r e f l e c t 1981 d o l l a r s w i t h the Farm Input P r i c e Index ( g r a s s and legume componen t ) . •APPENDIX C Land Use in the P r o j e c t A rea T a b l e C l Land Use i n EU1 ( h e c t a r e s ) YEARS LAND USE CROPS I r r i g . A l f a l f a V e g e t a b l e s C u r r e n t 12 0 1 - 2 5 P l anned 12 0 1 .- 25 A l t e r n a t i v e 5 7 T o t a l Land = 12 h e c t a r e s Tab l e : C 2 Land Use in EU2 ( h e c t a r e s ) YEARS LAND USE CROPS N a t i v e P a s t u r e A l f a l f a O r c h a r d C u r r e n t 2 8 0 1 - 2 5 P l anned 2 8 0 1 - 2 5 A l t e r n a t i v e 2 0 8 T o t a l Land = 10 h e c t a r e s i = i r r i g a t e d 122 T a b l e C . 3 Land Use i n EU3 ( h e c t a r e s ) LAND USE YEARS CROPS Nat . p a s t . G r a s s Al f a l f a V e g . O r c h a r d C u r r e n t - 63 3 0 n i 0 0 0 P1anned 1 - 25 3 2 2 1 68 0 0 1 27 22 32 8 4 2 19 22 30 14 8 A1 t e r n a t i ve .; 3 13 22 28 18 12 4 1. : 22 26 22 16 5 - 25 3 22 26 22 20 T o t a l Land = 94 h e c t a r e s Tab l e C . 4 Land Use in EU4 ( h e c t a r e s ) LAND USE YEARS CROPS N a t . p a s t . G r a s s A l f a l f a . . Veg . O r c h a r d C u r r e n t P l anned 1 - 2 5 1 2 3 - 2 5 Al t e r n a t i ve 45 7 33 19 7 „n i _n i 25 9 9 9 28 9 15 19 0 4 8 12 0 0 4 8 12 T o t a l Land = 59 h e c t a r e s i = i r r i ga ted n i = not i r r i ga ted 123 Tab l e C . 5 Land Use i n EU5 ( h e c t a r e s ) LAND USE YEARS CROPS Shrubs Nat i ve P a s t u r e G r a s s - A l f a l f a V e g . O r c h a r d C u r r e n t 147 2 2 6 " ' 2 6 n i 0 0 P1anned 1-25 6 9 1 1 296 ' 7 0 1 81 60 99 107 40 12 A l t e r n a t i ve | \ 2 ' 21 46 99 140 73. 20 > \ ' 3 0 27 86 140 113 32 4 0 6 47 140 162 60 5-25 0 6 47 140 162 60 T o t a l Land = 400 h e c t a r e s Tab Ie C. 6 Land Use in EU 6 ( h e c t a r e s ) LAND USE YEARS CROPS N a t . p a s t . G r a s s A l f a l f a V e g . O r c h a r d C u r r e n t - 11 8 0 n ' 9 n i 0 0 P1anned 1 - 25 0 6] 9 3 ' 0 0 1 6 26 61 8 4 Al t e r n a t i ve > 2 0 14 61 16 8 1/ 3 0 0 61 24 14 4 - 25 0 0 61 44 14 T o t a l Land = 100 h e c t a r e s 124 T a b l e C . 7 Land Use in EU7 ( h e c t a r e s ) LAND USE YEARS CROPS N a t . p a s t . G r a s s A l f a l f a V e g . O r c h a r d C u r r e n t - 73 114 0 0 0 P l anned 1 - 2 5 15 102 62 4 4 1 21 53 89 20 4 r\ 2 6 53 89 20 4 Al t e r n a t i v e I > V 3 6 38 91 40 12 4 6 4 91 70 16 5 - 25 6 0 91 70 20 T o t a l Land = 187 h e c t a r e s i n i = i r r i g a t e d = not i r r i ga ted 125 Tab l e C . 8 Land Use in EU8 ( h e c t a r e s ) LAND USE YEARS CROPS Na t . p a s t . G r a s s Al f a l f a V e g . O r c h a r d C u r r e n t - 431 ~~-,n i 297 0 0 0 P1 anned 1 - 25 55 142 ' 532 0 0 1 152 297 243 20 16 Al t e r n a t i ve > 2 61 251 323 60 32 V f 3 20 182 364 120 40 4 20 67 399 182 60 5 - 25 20 46 399 180 80 T o t a l Land = 728 h e c t a r e s i n i = i r r i g a t e d = not i r r i ga ted Tab l e C . 9 C u r r e n t Land Use in the P r o j e c t A rea ( h e c t a r e s ) EVALUATION UNITS ACTIVITY % 1 2 3 4 5 6 7 8 T o t a l I r r i g . A l f a l f a 1.2 12 8 0 0 0 0 0 0 20 I r r i g . G r a s s 0 0 0 0 0 0 0 0 0 0 Non-i r r i g . A l f a l f a 2 .5 0 0 0 5 26 9 0 0 40 N o n - i r r i g . G rass 4 7 . 5 0 0 30 10 226 80 113 297 756 G r a z i n g (Na t i v e p a s t u r e s ) 4 8 . 8 0 2 63 45 147 11 . 74 431 774 TOTAL 1 0 0 . 0 12 10 94 60 400 100 187 728 1,590 S o u r c e : WIAC F i e l d S u r v e y , 1980 .

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