Economic evaluation of the compensation payments for agriculture in the area of a flood water dry detention reservoir

Abstract

The aim of the research was to evaluate different methods of compensation payment, at the future dry detention reservoir for flood waters Brdnikova, based on the estimated economic impact of floods, which will allow the investor to make transparent decision on selecting a proper scheme. We prepared four compensation types: (a) a single payment, (b) annuity, (c) the payment after the loss event; and (d) the purchase of land. Calculated single payment is competitive to annuity for 40 years of land utilization. Annuity allows the investor to require from producers the fulfilment of agri-environmental conditions. The purchase of land requires a lot of financial resources. Payment upon the occurrence of a loss event provides the most realistic assessment is highly variable during the four decades. It brings additional obligations like restoration of agricultural land and neglects the drop in the value of land in the property market. This research offers a good starting point for preparing methodology for evaluation of compensation payments on a national level under the Water Act for damage on agricultural land as a consequence of building flood water dry detention reservoirs.

Keywords

• flood waters
• dry detention reservoir
• agriculture
• economic evaluation
• compensation payment