Should You Repair
Flood-Damaged Land?
Kansas State University • Cooperative Extension Service • Manhattan, Kansas
Heavy rainfall and subsequent flooding in the
summer of 1993 caused significant damage on many
Kansas farms. Now farmers must decide whether to
repair (remediate) this damage to prepare for next
year’s production and before further erosion occurs.
The purpose of this fact sheet is to explain the types of
economic costs and benefits associated with land
remediation and then present a simple worksheet for
comparing these costs and benefits.
What types of remediation
do you need?
The types of remediation activities needed to
restore the productivity of agricultural lands will
naturally depend on the nature of the damage. For
example, heavy sand deposits may need to be plowed.
Land leveling and shaping will be needed to fill in
gullies; fences may need to be replaced and debris may
need to be removed.
As you assess your own situation, make a list of
the types of remediation activities you will need, their
costs, and the number of acres they will cover. You
may need an opinion from an engineer, contractor, or
other specialist for some of the major land moving
activities.
What help is available
from the government?
Federal government assistance is available for
individuals under at least two programs. The first is
the Wetlands Reserve Program. Under this program,
the government purchases permanent easements on
lands that have previously been designated as wet-
lands, to restore them to their “natural state” to
reduce future potential erosion. In return for a one-
time payment, the land owner agrees never to use the
land for any agricultural purpose again. The land may
be used for recreation and fee hunting, and the
easement does not allow public access. The terms
typically require establishing and maintaining a
cover—trees, grass, etc.—on the land.
The second program, the Emergency Conservation
Program, is designed to restore land to agricultural
production, which is the focus of this discussion. To
qualify for federal cost share assistance, remediation
costs must amount to less than one-half of the original
value of the land.
For example, land that was valued at $1,000 per
acre prior to being damaged can receive federal cost
share assistance if remediation activities cost less
than $500 per acre. If the land does qualify, the
federal government will pay 60 percent of the
remediation costs. Contact your local Soil Conserva-
tion Service (SCS) and Agricultural Stabilization and
Conservation Service (ASCS) offices for more details
on this program.
What are the benefits
of land remediation?
Several benefits can result from land remediation.
First, restoring the productivity of the land produces
higher crop yields. Thus, higher sales revenue could be
expected every year once remediation occurs. But how
should we compare benefits accruing in future years
with the remediation costs occurring today? First,
think of these future income streams like payments of
an annuity.
We can calculate an amount, the present value,
which we could receive today that would be an invest-
ment equivalent to the annuity payments in the
future. That is, we would be indifferent between
receiving a given amount now (the present value) and
the series of annuity payments in the future. Or, just
think of calculating present values as compounding
interest in reverse. The present value of these future
crop sales is clearly a benefit of remediation.
Note that the present value depends on several
factors, the most obvious being the amount of the cash
flow itself. It also depends on the discount rate, or
interest rate. Finally, the present value also depends
on the time horizon—that is, how far in the future the
cash flow actually occurs.
Second, remediating damaged land can affect
input costs. For example, leaving a layer of sand on
the surface of the land may require more fertilizer to
produce a crop; plowing the sand under would save
these added costs.
Note, however, that a savings might not occur for
every type of input. For example, if the restored land
would be irrigated while the unrestored land would
not, extra input costs are actually incurred by going
ahead with remediation. Because changes in input
costs also occur every year, their present value needs
to be calculated in the same way as the present value
of additional future crop sales.
A third benefit results from restoring the land’s
market value. Suppose you plan to retire and sell the
land 10 years from now, and that remediation would
increase the land’s value by an additional $150 per
acre. This is a substantial future benefit, for which we
can also calculate a present value. However, this type
of benefit will be less important for landowners who
have no plans to sell their land any time soon, since
cash flows occurring far in the future have a relatively
smaller present value.
What are the costs
of land remediation?
Remediation costs include the costs of activities
needed to restore the land to production, as described
earlier. These activities can include such things as
plowing, land leveling and shaping, repairing fences,
and removing debris. If the land qualifies for federal
cost sharing, the net cost to the farmer will be 40
percent of the total.
Restoring the land’s value may also have an effect
on its property taxes, since remediation would in-
crease the property’s value and hence one’s property
taxes. However, the change in taxes will probably be
quite small in comparison to the other costs and
benefits of remediation.
A worksheet for comparing costs
and benefits of land remediation
The Kansas State University Cooperative Exten-
sion Service has developed a worksheet for comparing
the costs and benefits of land remediation, as de-
scribed in this fact sheet. Table 1 shows an example of
this worksheet for a hypothetical situation.
In the example, Joe Farmer had some serious
damage on the property he calls the North 40. After
consulting a contractor, he discovered that effective
remediation would require some deep plowing, land
leveling, and debris removal. These costs are listed on
lines 1 through 5 in Section A on the worksheet. For
the deep plowing, it will take three bulldozers, each
charging $85 per hour. It takes them 1.2 hours to plow
1 acre, resulting in a total cost per acre of $306. Land
leveling and debris removal costs are listed in the
same section. Line 6 shows the total remediation cost
per acre as $386.
Does this qualify for cost-sharing from the govern-
ment? The initial value of the land was $900 per acre
(Line 7), so the maximum remediation cost to qualify
for cost sharing is $450 (Line 8). Joe qualifies since the
estimated remediation cost per acre is $386. Thus, he
has to pay only 40 percent of the remediation costs,
making his cost $154 per acre (Line 6).
Lines 9 through 14 in the worksheet calculate the
total remediation cost over all acres and provide a
means for looking at financing arrangements if any
are needed. For the entire 40 acres, the remediation
cost will be $6,176 (Line 10). Joe figures he needs to
borrow $5,000 toward this amount (Line 11). He can
get the money at 9% interest (Line 12), and plans to
repay it over seven years (Line 13). This loan would
have an annual payment of $993.45 (Line 14).
Section B in the worksheet shows the annual
changes in crop income resulting from remediation.
Joe grows corn on the North 40, and estimates that
remediation will restore 25 bushels per acre in yield
(Line 15). Pricing this at $2.30 per bushel (Line 16),
Joe could expect to receive an extra $57.50 per acre in
sales revenue each year (Line 17). Joe’s deficiency
payment would not change, regardless of his
remediation decision, so Line 18 is zero.
Section C shows the annual changes in input costs
due to remediation. If Joe doesn’t remediate, he would
need to use an extra 50 pounds per acre of anhydrous
ammonia to maintain proper fertility in the now-sandy
soil. If he remediates, he will save this input cost; at
$0.11 per pound, this amounts to $5.50 per acre each
year.
Section D calculates the present value of the
increase in land price due to remediation and then
adds up the costs and benefits calculated in the
previous sections. Joe estimates that fixing the land
will restore an extra $200 per acre to its value (Line
26). He is planning to retire in 10 years and sell the
ground to his neighbor, so that is his time horizon for
evaluation (Line 27). Because rates of return to land
have averaged around 6 percent historically for his
area, Joe uses that for his discount rate (Line 28).
Table 1. Cost-Benefit Analysis for Repairing Flood-Damaged Land Lines 29, 30, and 31 show the present values of
the additional future crop income, savings on input
Name: Joe Farmer
costs, and the increase in land value. Receiving an
Address: Flooded Out, KS, 66666
Land: North 40 extra $57.50 per year in sales over the next ten years
has a present value of $423 per acre, the fertilizer
A. Remediation Costs savings of $5.50 per year have a present value of $40
per acre and the extra $200 per acre in land sales
Cost Hours Cost Cost Net price ten years from now has a present value of $112.
per per per share farm
Activity hour acre acre % cost
Line 32 shows the sum of these benefits to be $575 per
acre.
1. Deep plowing $255 1.2 $306 60% $122 From the calculations in Section A, Joe’s share of
2. Leveling, shaping $50 1 $50 60% $20 the remediation cost is only $154 per acre, so
3. Remove debris $10 3 $30 60% $12 remediation seems to be quite advantageous. In fact,
4. $0 0 $0 0%
in this situation it would appear to be to Joe’s advan-
5. $0 0 $0 0%
6. Totals ($/A) $386 $154 tage to remediate even if he didn’t get cost-sharing
7. Initial value of land ($/A) $900 from the government, as the total remediation cost
8. Maximum remediation cost to obtain cost share ($/A) $450 came to $386 per acre.
9. Number of acres 40
10. Total net farm remediation cost $6,176
11. Principal for remediation loan $5,000 Data input form for your own
12. Interest rate for remediation loan (%) 9.00 cost-benefit analysis
13. Length of remediation loan (in years) 7 This fact sheet includes a form for the input data
14. Annual remediation loan payment $993.45 needed for the cost-benefit analysis. Complete the
form and return it to a representative of the KSU
B. Changes in Annual Crop Income
15. Yield restored by land remediation (units per acre) 25 Cooperative Extension Service office if you wish to
16. Price per unit ($ per unit) $2.30 have an analysis performed for your farm.
17. Total sales revenue restored by remediation ($/acre) $57.50
18. Restored deficiency payments due to remediation ($/A) $0.00
19. Total additional annual income from remediation $57.50

C. Annual Changes in Input Costs Due to Remediation

(Enter input savings as positive values)

Change Cost Change

Monte L.Vandeveer
Input in per in KSU Extension Agricultural Economist,
Input name unit amount unit Cost Northeast Area

20. Anhydrous ammonia pounds 50 $0.11 $5.50

21. 0 0.00 0.00
22. 0 0.00 0.00
23. 0 0.00 0.00
24. 0 0.00 0.00
25. Total savings on input costs
due to remediation ($/A) $5.50

D. Summary Calculations
26. Increase in land price due to remediation ($/A) $200
27. Time horizon for evaluation (years) 10 Cooperative Extension Service
28. Present value discount rate (%) 6.00 Kansas State University
29. Present value of additional future crop income $423 Manhattan, Kansas
30. Present value of future savings on input costs ($/A) $40
31. Present value of increase in land price ($/A) $112 MF-1153 January 1994
32. Total benefits ($/A) (Lines 29 + 30 + 31) $575
Issued in furtherance of Cooperative Extension Work, acts of May 8 and June 30, 1914, as
33. Total farm cost after cost share ($/A) (Line 6) $154 amended. Kansas State University, County Extension Councils, and United States Department
34. Net benefit to remediation ($/A) $421 of Agriculture Cooperating, Richard D. Wootton, Associate Director. All educational programs
and materials available without discrimination on the basis of race, color, national origin, sex,
35. Net benefit to remediation, all acres $16,839 age, or disability.
1-94-5M
 INPUT DATA FOR FLOOD REMEDIATION COST-BENEFIT ANALYSIS
Kansas Cooperative Extension Service

Name: ________________________________________________________________________________

Address: ________________________________________________________________________________

Land: ________________________________________________________________________________

LAND REMEDIATION COSTS Cost Hours Cost

per per share
Remediation activity Hour Acre %

1. __________________________________________________ ___________ __________ ____________

2. __________________________________________________ ___________ __________ ____________
3. __________________________________________________ ___________ __________ ____________
4. __________________________________________________ ___________ __________ ____________
5. __________________________________________________ ___________ __________ ____________
6. Initial value of land ($/A) ............................................................. ___________
7. Number of acres ......................................................................... ___________
8. Principal for remediation loan ..................................................... ___________
9. Interest rate for remediation loan ............................................... ___________
10. Length of remediation loan (in years) ......................................... ___________

CHANGES IN ANNUAL CROP INCOME

11. Yield restored by land remediation (units per acre) ................. ___________
12. Price per unit ($ per unit) ......................................................... ___________
13. Restored deficiency payments due to remediation ($/A) ......... ___________

ANNUAL CHANGES IN INPUT COSTS DUE TO REMEDIATION

(Enter input savings as positive values)
Change Cost
Input in per
Unit amount unit
14. _________________________________________________ ___________ __________ ____________
15. _________________________________________________ ___________ __________ ____________
16. _________________________________________________ ___________ __________ ____________
17. _________________________________________________ ___________ __________ ____________
18. _________________________________________________ ___________ __________ ____________

CHANGE IN LAND VALUE

19. Increase in land price due to remediation ($/A) ........................... ___________

20. Time horizon for evaluation (years) ............................................. ___________