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Earthquake afterthoughts

Peter Gordon’s research indicates that transport-related business interruptions, in the wake of the Northridge earthquake, were so costly that they make road and bridge seismic retrofitting appear cost-effective.

Photo by Irene Fertik

The expense of retrofitting freeway bridges seems modest when compared to the transportation-disruption costs of the 1994 Northridge earthquake, according to USC urban economists.

Peter Gordon and Harry W. Richardson, professors in the School of Urban Planning and Development, found that transportation-related impacts represented about 27 percent – or $1.5 to $2 billion – of “business-interruption” losses in the Los Angeles area. Transport-related impacts included inhibited commuting, impeded customer access, inability to make shipments and cut-off of supplies.

The arithmetic is simple.

“Essentially, 10 bridges [fell] that would not have gone down if they had been retrofitted,” Gordon said. “And we would be between $1.5 and $2 billion ahead of the game, minus the cost of retrofitting.”

The scholars’ findings were generated through a U.S. Department of Transportation-funded report, “Transport-Related Business Interruption Impacts of the Northridge Earthquake.” The report will be presented at a conference on “Restoring Mobility and Economic Vitality Following Major Urban Earthquakes: Lessons From Two California Quakes Within Five Years,” to be held April 25 and 26 in Los Angeles.

In a previous study, Gordon and Richardson had determined that business losses caused by the Northridge earthquake are about $6 billion higher than the original estimate of $20 billion.

They found that in addition to structural and material damage, losses resulted from factors that aren’t traditionally calculated. The researchers had cited three major reasons for business interruption: employee difficulties in getting to work, absenteeism due to personal matters and physical damage to the workplace. Other frequently cited reasons were restricted customer access to buildings and interruptions in utilities service.

Those findings stemmed from telephone surveys of businesses and individuals in impact zones directly affected by the quake – Los Angeles, Santa Monica, San Fernando and Glendale. This data was then extrapolated to span the five-county region composed of Los Angeles, Orange, Riverside, Ventura and San Bernardino counties.

In the new study, Gordon, Richardson and graduate student Bill Davis relied on the same survey data and research methods but isolated the results for transportation-related business-interruption losses. They also increased the total business interruption impact from $6 billion to about $6.5 billion, because experts have since raised damage estimates of the quake from $20 billion to $25 billion, Gordon said.

The study attributes transport-related losses to the following sources: 41 percent ($615 million) for employee access or commuting problems, 27 percent ($408 million) for shipping problems, 17 percent ($252 million) for supply disruptions, and 15 percent ($229 million) for disruptions to customer access.

More than 60 percent of the total $1.5 billion – or 27 percent of all local business-interruption costs – occurred within the impact zones. But the remaining 40 percent leaked out elsewhere in the five-county region. Another $282 million of transport-related impacts were felt outside the region, the study shows.

The scholars found that the majority of employees surveyed missed work because of the earthquake. Major reasons for missing work included damage to work sites and/or residences. Damage to the commuter route was a relatively minor factor.

“More than two-fifths of commuters suffered some deterioration in their commute for an average period of three months,” Gordon said. Only a small proportion changed their commuting mode; most adjustments involved changing either routes or the time of travel (see related story, page 1).

Valuing travel-time at $5 per hour, the researchers calculated that earthquake-related travel-time losses for workers living in the impact zone amounted to $32.4 million. Large as it is, that figure is an underestimation, because it excludes commuters living outside the impact zone.

And that’s just the tip of the iceberg, Gordon said, because “travel-time losses were modest relative to the transport-related business-interruption impact.”

In terms of policy implications, Gordon and Richardson argue that transport-related business interruption was substantial enough to make road and bridge seismic retrofitting appear cost-effective.

The study also looked at how firms responded to the transport-related interruptions of the earthquake. The major finding was that, predictably, firms with employee access problems were much more likely to implement alternative commuting programs (69 out of 92 firms) than firms with no such problem. The study notes, however, that 85 out of 172 unaffected firms did make commuting reforms.

Gordon and Richardson conclude that where feasible and appropriate, “it may pay businesses to prepare in advance to deal with the transport-related consequences of earthquake risks.”

It’s easier, they note, to implement flextime as a solution to emergency conditions if a firm has already implemented such strategies to fight normal rush-hour pressures.u0000

Earthquake afterthoughts

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