Risk: Why Do Free Lunches Cost $70K?

Another fun issue in my town is the subject of flooding, which highlights how residents sometimes expect a free lunch until confronted with the true cost of risk.

Lake Forest basements are notoriously soggy.  We do not have an obvious river flood issue, and Lake Michigan is 90 feet below our elevation, but our regional drainage runs between long ridgelines through several municipalities and water management is a challenge.  We've also had an uptick in summer thunderstorms, with 100-year-flood rain levels three times in six years. 

Our 1930's era stormwater system cannot handle this water and has been illegally cross-connected to our sewer system over the years.  The end result of this is sewer backups into local basements, which is every bit as pleasant as it sounds.  Remediation can be quite costly. I have a friend whose house was totaled by this phenomenon – insurance literally tore down his house and rebuilt due to the permanent damage caused.  So this is a risk that needs be managed.

Local construction in my area has made the problem worse, and so our neighborhood has been engaged with the city to address the issues.  Sewer remediation can run several thousand dollars in our area; a bill of $30K for a finished basement with extensive flooding is certainly possible.  So homeowners tend to be irate about the city fixing perceived issues.  It does occasionally devolve to Parks and Rec.

One exchange highlighted for me how individuals value risk in the end, though.

With our rainfall of late there is legitimate reason to question our rain modeling and whether our drainage capacity suffices.  Our city engineer did a nice job explaining that our system historically is designed to handle a 50-year flood, but not more.  As 100-year floods have caused recent flooding issues in homes, homeowners immediately jumped to "why aren't you fixing this? we pay your salaries!" etc.

"Well, to expand the sewer system in our town to handle a 100-year flood would be a major project.  We had that independently estimated.  Our engineering firm came back with was a $500M estimate.  This would result in a local tax assessment of roughly $70,000 per household."

No further questions.