PEABODY — "It is impossible to grow a business knowing there will be more floods."
"We, as a small startup business, can't afford this type of interruption in business and expect to be profitable."
"We have been reluctant to put dollars into the building."
Those are just a few of the things that downtown business and property owners told a consulting firm about how flooding has affected them.
Consulting firm RKG Associates Inc. interviewed dozens of downtown business owners, as well as real estate, insurance and banking professionals, to attempt to determine the economic impact that flooding has on Peabody's downtown.
Using historical data and fresh data obtained during the most recent flood in October, RKG estimated that downtown businesses could save nearly $8 million over the next 20 years if the flooding problems stop. The city could also see a 5 percent bump in property values if it goes forward with plans to install a massive underground culvert to carry excess water underneath downtown and into the North River. The added values would result in an additional $585,000 in tax revenues over 20 years, and that doesn't take new growth into account. Businesses would likely be more willing to move into the downtown after the fear of flooding is gone, increasing tax revenues even more, the study said.
The study took about two months and cost $20,000, which was paid with a federal grant, city planners said.
RKG sent out surveys to 92 downtown businesses just days before the October flood that drenched the North Shore. The consultants then went and interviewed many of the businesses after the flood to obtain more specific data. Of the 23 businesses that responded:
60 percent said they had withheld making investments in their property because of recurring flooding.
80 percent said they could not recover any of their losses from the October flood through insurance settlements.
53 percent said it took two or more days to get back to regular business operations after the October flood.
Average lost sales due to the flooding in October were $3,500.
Average damages were $2,700.
Average cleanup costs were $1,300.
Two-thirds of the respondents said the flood mitigation efforts would provide peace of mind and encourage investment.
Based on interviews, RKG estimated a total cost of about $780,000 to businesses due to the October flood.
The city is on the verge of moving forward with the $21 million flood mitigation project — $3 million of which would be paid for with a federal grant.
"We wanted some data to support the claim that there would be a significant economic benefit to completing the flood mitigation project," Assistant Planning Director Blair Haney said about why the city commissioned the study. "We've long said we view the project as an investment in the city. We believe (the study's findings) are a conservative estimate on what the returns would be on that investment."
Past flood costs
When transportation disruptions, property damage and other costs are taken into account, Peabody's major floods in 1996, 2001, 2004 and 2006 collectively accounted for $29 million in losses to the city and businesses. The city spent a whopping $12 million just recovering from the 2006 Mother's Day flood. Those big events, and smaller flooding events in 2010 and this year, are keeping businesses from investing in the downtown, the study said.
The flooding has resulted in a "wide array" of indirect costs, including reduced economic and consumer activity downtown, lost business productivity, lost inventory, stagnant rents, and a hesitancy to invest in downtown properties, the study said.
Although the study looks at many figures — such as property values, growth rates and vacancy rates — it's hard to know for sure if flooding or other factors such as the economy shoulder more of the blame.
The downtown gained a net of four commercial establishments from fiscal 2006 to fiscal 2011, and total commercial square-footage increased 3.5 percent over that time. That lagged behind the rest of the city, which saw 4.5 percent growth in commercial space. Residential square-footage, however, increased in downtown by 19.3 percent from 2006 to 2011, while the rest of the city saw only a 4.2 percent increase in residential square-footage.
The commercial property values downtown went down 5.7 percent over the last five years, while commercial property in the rest of Peabody fell only 0.3 percent.
According to real estate professionals, commercial rents in Peabody have remained around $12 per square foot since the mid-1990s. However, commercial vacancy rates have climbed from nearly zero on the ground floors to about 15 percent today. The upper-floor vacancy rate has jumped from about 15 percent in the 1990s to almost 50 percent today. Numerous businesses have left the downtown since 2006, according to the study, including lawyers, accountants and others with no ties to the physical buildings. Also, banks have relocated headquarters away from downtown, reducing daytime office population.
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