reservoir water level impacts on recreation, property, and

Transcription

JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION
VOL. 38, NO. 4
AMERICAN WATER RESOURCES ASSOCIATION
AUGUST 2002
RESERVOIR WATER LEVEL IMPACTS ON RECREATION,
PROPERTY, AND NONUSER VALUES1
Terrill R. Hanson, Luther Upton Hatch, and Howard C. Clonts2
ABSTRACT: Wise interbasin management of Southeastern U.S.
water resources is important for future development. AlabamaCoosa-Tallapoosa and Apalachicola-Flint-Chattahoochee River
basins' water usage has evolved from power generation to multiple
uses. Recreation and housing have become increasingly valuable
components. Changing use patterns imply changing resource values. This study focused on six Alabama reservoirs, using contingent
valuation questions in on-site, telephone, and mail surveys to estimate impacts on lakefront property values, recreational expenditures, and preservation values for scenarios of permanent changes
to reservoir water quantity. As summer full-pool duration
decreased, lakefront property value decreased, and as duration
increased, property values increased, but at a lesser rate. Similar
findings occurred for winter drawdown alternatives. Permanent
one-foot reductions in summer full-pool water levels resulted in a
4 to 15 percent decrease in lakefront property values. Recreational
expenditures decreased 4 to 30 percent for each one-foot lowering of
reservoir water levels. Current nonusers of the six reservoirs
showed strong preferences for protecting study reservoirs with willingness to pay values of $47 per household or approximately $29
million for the entire six-reservoir watershed basin area. Resource
management based on historic use patterns may be inappropriate
and more frequent and comprehensive valuation of reservoir
resources is needed.
(KEY TERMS: reservoir water level; recreation use value; lakefront
property value; nonuse value; interbasin water transfer; contingent
valuation.)
INTRODUCTION
Accounting for multiple market and nonmarket
values of a resource is critical, and isolating one value
can result in misallocation of resources (Johnston et
al., 2002). Studies are needed that simultaneously
investigate multiple resource values using various
methodologies, and there are few such examples in
the literature. Such studies will become more important in assisting policy makers with complex resource
management decisions, as multiple values of a
resource need to be considered for efficient and proper
resource management.
Reservoirs in Alabama, Georgia, and Florida have
multiple uses and values. Before the water use conflict arose between these states, many nonmarket values had not been measured or were measured in
isolation. Water managers in these states are now
becoming acutely aware of the links between geographically distant reservoirs, connecting river
stretches, ecosystems, and a multitude of diverse
uses. For example, there is a link between reservoir
water level management on Lake Lanier north of
Atlanta and the health and economy of the oyster
fishery at Apalachicola Bay in the panhandle of Florida, some 400 miles away. Another example is the
potential loss of future development in Alabama if
Georgia constructs a dam that uses and discharges
water into a different watershed. Such impacts could
affect each of the three states’ development well into
the 21st century. These issues are difficult to solve,
and any solution would also need to take into account
political, engineering, environmental, and sociological
aspects. Resource economists can assist policy makers
in water basin negotiations by estimating impact values resulting from various water use alternatives.
The project presented in this paper evolved from
the tri-state water conflict of Alabama, Florida, and
Georgia and the realization that only historical use
values were known and nontraditional uses were
1Paper
No. 01072 of the Journal of the American Water Resources Association. Discussions are open until February 1, 2003.
Assistant Professor, Mississippi State University, Department of Agricultural Economics, P.O. Box 5187, Mississippi State,
Mississippi 39762; Director, Environmental Institute, Auburn University, Department of Agricultural Economics and Rural Sociology, 101
Comer Hall, Auburn University, Alabama 36849; and Professor (retired), Auburn University, Department of Agricultural Economics, 202
Comer Hall, Auburn University, Alabama 36849 (E-Mail/Hanson: [email protected]).
2Respectively,
1007
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Hanson, Hatch, and Clonts
absent or unknown. State negotiators need to know
the full magnitude and consequences of their decisions on all reservoir uses. This study expands upon
prior work addressing water level change values by
incorporating the concept of permanent changes to
reservoir water quantity. Permanent water quantity
changes are relevant because ongoing negotiations
among the three states could occur, and once established, these water allotments would affect each
state's future growth.
When planning this project, it was reasoned that
increased or decreased water flow to the study reservoirs could occur. Therefore, surveys were developed
that included discrete increases and decreases to present reservoir water conditions for six Alabama reservoirs. In addition to surveys capturing recreational
user expenditures and lakefront property values, a
nonmarket valuation survey was conducted. Thus,
this study looks at hypothetical but permanent water
condition changes on market and nonmarket values.
Agricultural, municipal, industrial, and navigational
uses of water resources have not been included in this
study but certainly must be included during tri-state
negotiations. Contingent valuation questions (CV)
were used in on-site, mail, and telephone surveys to
obtain information for estimating impacts of water
level changes on lakefront property values and recreational use expenditures. These “impact” results do
not measure welfare changes but instead measure
monetary impacts on affected parties. Each scenario
needs to be considered independently of another and
should not be thought of as additive. This paper is
organized into sections providing information on the
tri-state water conflict, reservoir management, and a
review of the recreational use, lakefront property, and
nonuser studies. Each study section describes the
goals, model, methods, and results. Additional detail
on this project can be found in Hanson (1998), Hatch
and Hanson (2001), and Fisheries Information Management Systems (FIMS) (1997).
400 million gallons per day to Atlanta and thereafter
discharged into a different water basin (ACF watershed). This interbasin water transfer would result in
the loss of water quantity to the state of Alabama in
the ACT watershed and an increase of water to Alabama, Georgia, and Florida in the ACF watershed. Not
enough or too much water at specific times of the year
caused state negotiators to disagree as they tried to
work through engineering water flow models giving
each state the flow it wanted when it wanted it.
The State of Alabama was concerned about the
reduced future water supply to the ACT and its potential impact on future statewide development, as this
river basin runs diagonally through the entire state.
The State of Florida was concerned about the impact
additional waters would have on the oyster fishery at
Apalachicola Bay. Additional water and treated and
untreated sewage from Atlanta could upset the intricate biology of the oyster habitat in estuarine bay
waters. Control of river water for present and future
growth is the crux of the interstate conflict. A federal
court ruled that no new dam construction would be
allowed until studies among the three states investigated past, present, and future water use and the
effects of the proposed dam on water basin transfers
to these three states. Two important questions
emerged: What is the value of water, and what effects
would altered quantities have on market and nonmarket values?
The six Alabama reservoirs in this study were built
during the 1920s or the 1980s and were intended to
provide power generation, flood control, and municipal water supply. Additionally, reservoir and river
waters were used for agriculture, manufacturing, and
recreation. Overall reservoir operation is regulated by
the Federal Energy Regulatory Commission, which
maintains a water level “rule curve” for power companies to follow on each reservoir. Currently, regulated
water level management comes up for review and
reauthorization every 30 years or so, and changes in
water level management have been rare.
The following is a brief overview of how reservoirs
in Alabama are managed. It should be helpful in
understanding the subsequent studies. Reservoir
water managers use a detailed rule curve as a guide
to maintain certain water levels in a reservoir
throughout the year. Such rule curves have been
based on energy needs, seasonal rains, and repair and
maintenance considerations. A typical reservoir rule
curve would have a winter drawdown period with
water levels dropping 2 to 18 feet below summer fullpool levels, depending on the specific reservoir. This
lowering provides a safety measure so winter rains
can collect, and prevent surprise flooding. Also,
repairs and maintenance to dams, power generators,
piers, etc., are conducted during this low water
THE ACT-ACF “WATER WARS” CONFLICT
AND RESERVOIR MANAGEMENT
The Alabama-Coosa-Tallapoosa (ACT) and
Apalachicola-Chattahoochee-Flint (ACF) River basins
are the focus of a confrontation for water rights
among the states of Alabama, Florida, and Georgia
(FIMS, 1997; Allen et al., 1996). In the early 1990s,
the State of Georgia and the U.S. Corps of Engineers
announced plans to build a reservoir in northwest
Georgia on the Coosa River (ACT watershed) just
upstream from the Alabama border. It was projected
that the stored water would be pumped at a rate of
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1008
Reservoir Water Level Impacts on Recreation, Property. and Nonuser Values
maintained the seasonal rule curve while overlaying
permanent changes to summer full-pool level. As
these study reservoirs have seasonal and permanent
residents, water level impacts for all seasons of the
year were included in data collection, analysis, and
results.
period. In the spring, dam gates are elevated and
rainfall runoff collects to raise the reservoir water
level until early summer, when reservoir water levels
reach their highest (i.e., the “summer full-pool” period). Each reservoir has a specific summer full-pool
duration, varying from no drawdown for “run-of-theriver” type reservoirs to four months or more for laketype reservoirs. In the early fall, water levels are
lowered until winter drawdown levels are realized.
User Expenditure Model and Methods
The model to measure recreational user expenditures and extrapolation to aggregate reservoir levels
required submodels for user market segments, user
expenditures, and impacts from changes in water conditions. Segmenting users into markets was key to
estimating expenditures from homogeneous groups.
Data from the 1990 U.S. Census provided total household numbers in a county and was a component of the
equation that determined overall visitation. Estimating total user expenditures for a reservoir required
summing results for all counties within a market segment and summing all market segments to obtain a
reservoir user expenditure level. Reservoir level user
expenditures were corrected for visitation from outside the telephone survey area by using on-site survey
information about these visitors and their expenditures.
The impact model was applied after initial visitation frequency had been established. Respondents
were asked how low the water level would have to be
on that day for no trip to have occurred. The interviewer then calculated half this water level drop and
asked how many trips a year they would have made
at this mid-water level. Thus, three water levels and
three visitation frequencies were established and
became the basis upon which to calculate user trips
and expenditures under changing water levels for
that time of the year.
Methods used in the recreation study investigated
integration of telephone and on-site user surveys to
estimate recreational user expenditures, define market segments, and aggregate individual expenditures
to reservoir levels. Cameron (1992a) found combining
survey data could result in improved variable precision and estimate user expenditure levels. Pretesting
of the on-site survey instrument was conducted at a
study reservoir and over the telephone with residents
within the watershed basin of the study reservoirs.
Questions were modified to address areas respondents had difficulty answering. Creel clerks were
trained in conducting personal interviews, in the
details of the survey instrument, and in the recording
of data. Telephone interviews were conducted by a
professional interview service at Auburn University
in Alabama.
RELEVANT RESERVOIR STUDIES
Other recreational reservoir water level studies
have investigated temporary extensions of full-pool
water levels or impacts of temporary drawdowns
below normal seasonal reservoir water levels. Cordell
and Bergstrom (1993) investigated recreational nonmarket user values for temporary full-pool water level
extensions. Allen et al. (1996) conducted CV studies
that investigated two lowered water levels and interviewed one subgroup (boat owners) of all reservoir
users. This study entailed on-site interviews with
reservoir users and information on primary and secondary activities during visits to the reservoirs.
Through a series of questions, the interviewers determined visitation changes for varying water levels.
Lansford and Jones (1995) used a hedonic model to
isolate recreational and aesthetic components of residential property values based on seasonal (temporary)
changes in water levels. They did not consider permanent water level change impacts on property values
as investigated in this project. The hedonic pricing
model (HPM) they used was based on market sales
data and associated real estate characteristics at
observed water levels at the time of sale. In our study,
we are investigating permanent changes in yearround lake levels, and this cannot be covered with
historical sales because there have not been any sales
under such permanent water level conditions. Other
problems with the HPM models include identification
problems and the thin markets or few actual sales of
lakefront real estate on the studied reservoirs.
THE RECREATIONAL USER
EXPENDITURE STUDY
The first goal of the recreational user study was to
estimate family trip expenditures, frequency of visitation, and expansion of expenditures to aggregate
reservoir levels. The second goal was to measure the
impact of water level changes on family trip visitation
and expenditures. Reservoir management scenarios
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Travel cost market segmentation models were the
basis for development of reservoir specific market segments. The travel cost method has been used on specific sites and estimates trip related costs and number
of visits per year into a proxy for valuation of the site
(Clawson and Knetsch, 1966; Freeman, 1979, 1993).
Smith and Koop (1980) have shown that definition of
user zones was important in determining travel cost
values, and Bowes and Loomis (1980) have shown
these values to be very sensitive to chosen zone
boundaries, especially for zones of unequal population. How the population distribution around a recreational site is accounted for plays an important role in
determining total travel costs (Stynes, 1990). Other
models, such as individual or discrete choice travel
models, typically have no “zones” and therefore zonal
definition is not important. We chose to use a modified zonal travel cost method because it gave reservoir
specific information based upon unique user group
criteria (described below).
Sutherland (1982) reported considerable variation
in results depending upon how travel cost data were
aggregated. This study found that major highways
and primary roads passing near reservoirs were more
important in defining user groups than was mere distance from the reservoir. Thus, market segments for
each reservoir were created similarly and were based
upon information gathered from on-site and telephone
surveys and used in conjunction with 1990 U.S.
Census data. A market segment was defined by user
characteristics (proximity to reservoir, visitation frequency), location characteristics (highway accessibility, urban population centers), and homogeneity of
county characteristics. Market segmentation allowed
use of different user characteristics (users’ primary
activity, trip expense, and visitation frequency) to
estimate total reservoir recreational expenditures.
Changes to aggregate user expenditures due to
decreases in summer full-pool water levels were evaluated using linear regression techniques.
Lake specific market segments included five general market segments based upon the above characteristics. Primary market counties were defined as those
counties contributing 4 percent or more to overall visitation as determined through the telephone survey.
The Jefferson County market segment included the
City of Birmingham, Alabama, with its large population far exceeding any other county or metro area
counties within the telephone survey area. An “Other
Urban Counties” category consisted of counties with
highly populated standard metropolitan areas within
the telephone survey area. The “Secondary Counties”
category included those counties not in the other categories but contributing more than 1 percent of the
total visitation. The “Tertiary Counties” category
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included the remaining counties within the watershed
basin sample area.
User Expenditure Study Results
Recreational use expenditures were estimated
using elements from the telephone and on-site surveys. On-site interviews provided trip expenditures
without being hindered by memory recall problems.
On-site surveys also provided a way to enumerate visitors from beyond the telephone survey boundary, and
this was then used to make a visitation correction factor for each reservoir. As two of the study reservoirs
were well known for their sport fishery, this “outside”
visitation was large and would have been missed if
the phone survey alone had been used in visitation
calculations.
Avidity of visitation by local users can actually
overstate visitation at low trip expenditure levels if
not weighted properly (Smith and Kaoru, 1990). The
difference in visitation varied greatly between the onsite and telephone surveys for all reservoirs studied.
Even though the on-site survey had a stratified random sampling design, it seemed clear that the process
chose visitors who visited more frequently (i.e., avid
visitors), and less so those who visited less frequently.
Frequent daily visitation was highly correlated with
low trip costs. On the other hand, the telephone survey used a random sampling of households with telephones within the study watershed on a county
population proportional basis. This sampling scheme
obtained responses from the less frequent visitors
who had higher trip costs. The avidity bias associated
with on-site interviews was overcome by using visitation frequency from the telephone survey, i.e., a
potentially much broader segment of society than avid
visitors to a specific reservoir.
Total annual recreational user expenditures for the
six reservoirs ranged from $21.1 million for Lake Harris to $130.4 million for Lake Martin (Table 1). These
values were measured for the five market segments
within the six reservoir watershed area plus the correction factor for outside visitation. Aggregate recreational user expenditures for the six reservoirs were
$442 million annually. Changes to aggregate user
expenditures from a 1-foot lowering of reservoir water
levels ranged from a 4 to 30 percent decrease in recreation user expenditures depending upon the reservoir.
Collectively for the six reservoirs, a 1-foot permanent
drop in water levels would result in reduced recreational user expenditure of $44 million annually
(Table 1).
A study by Allen et al. (1996) evaluated the effects
of potential water management alternatives on waterbased recreation at 25 reservoirs, rivers, and river
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TABLE 1. Changes in Aggregate Recreational User Expenditures for Permanent
Reductions in Water Levels for Six Alabama Reservoirs, 1995 (Source: Hanson, 1998).
Water Level in
Relation to Normal
Summer Full-Pool
Harris
Aggregate Recreational User Expenditures
$million (percent change)
Logan
Martin
Weiss
Lay
Martin
Lewis
Smith
Current
21.10
(NA)
130.37
(NA)
51.40
(NA)
47.50
(NA)
127.30
(NA)
64.60
(NA)
-1 Foot
18.37
(-13)
118.14
(-9)
44.92
(-13)
33.35
(-30)
122.34
(-4)
61.37
(-5)
-2 Feet
15.59
(-26)
105.91
(-19)
38.45
(-25)
19.19
(-60)
117.37
(-8)
58.14
(-10)
-3 Feet
12.81
(-39)
093.68
(-28)
31.97
(-38)
05.04
(-89)
112.41
(-12)
54.91
(-15)
-4 Feet
10.03
(-52)
081.45
(-38)
25.49
(-50)
–
107.44
(-16)
51.68
(-20)
-5 Feet
07.45
(-65)
069.22
(-47)
19.02
(-63)
–
102.48
(-19)
48.45
(-25)
water level conditions and lakefront property values.
Specific objectives were to characterize lakefront
property and current property values and to estimate
impacts from changes in water conditions. Property
value impacts were determined through CV questions
asking lakefront homeowners about new water level
management scenarios and their perceived changes in
property value. Respondents were asked to give the
percentage changes to their total property value for
three water management conditions considered. The
response to this percent change question was openended, and a number of researchers have pointed out
that open-ended questions may not be reliable
(Desvousges et al., 1983; Mitchell and Carson, 1989).
However, Boyle et al. (1996) found open-ended and
dichotomous choice responses were not significantly
different and that open-ended questions underestimated values, whereas dichotomous choice questions
often led to systematic overestimates.
In this study, strategic behavior that would arise
from standard open-ended CV is mitigated by the fact
that respondents were not being asked to make a
value change for an actual transaction. Additionally,
it was thought that respondents could more easily
respond to a percentage change question that would
give a magnitude of change for each water condition
rather than a specific transaction amount for each
condition. We could have bypassed lakefront property
owners and gone directly to realtors specializing in
reservoir properties to determine the effects studied
here but ultimately decided to directly ask homeowners. The advantage of going directly to the lakefront
property owner is that responses would be coming
reaches in the ACT and ACF watersheds. Their study
consisted of an initial telephone survey to determine
use and expenses and a subsequent mail survey
employing CV questions. Only registered boat owners
were included in the sampled population. Contingent
activity questions asked how boaters’ recreational use
would change for two lowered water conditions. It was
estimated that boaters spent a total of $1.27 billion in
1995 during their trips to the 25 sites, with $873 million being contributed directly to the projects’ local
economies. Recreational trips were significantly
reduced under each reduced water scenario. The “first
impact level” decreased total trips by 35 to 63 percent
depending on location. Even greater trip decreases
were estimated for a more severe “second impact
level” ranging from 65 to 82 percent. The difference
between their study and our study is that they only
interviewed boat owners. The higher percent change
in total trips found in their study could be because
boating conditions could be more affected by lower
water conditions than are other types of recreational
activities, such as swimming, sunbathing, hiking, or
sightseeing. Thus, by including a more diverse set of
recreational activities in our estimates, the change
percentage is tempered when compared to their study,
which isolates a single segment of recreational users.
THE LAKEFRONT PROPERTY STUDY
The main goal of the lakefront property study was
to develop empirical relationships between potential
1011
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directly from those most affected by any permanent
water quantity changes to the reservoir. It would be
the property owners who would supply property to the
market under the changed condition, and they would
ultimately decide the selling price they would accept.
Also, it was thought that property owners would be
more knowledgeable about their individual properties, especially over time, than would Realtors. This is
especially true when one considers the land slope
from a lakefront property into and below the water
surface. A lakefront property having a steeper slope
would be less affected by a change in water level than
a property having a less steep slope. In the latter
case, more lake bottom would be exposed than in the
former case, and exposed lake bottom takes away
from the aesthetic appeal (and value) of a lakefront
property. It was felt that individual property owners
would be able to fully acknowledge these lot specific
changes.
In retrospect, Realtors dealing in lakefront properties are a unique source of information and should
have been consulted more formally about the potential effects of future water conditions on property values. They may have been able to provide the same
sort of information we obtained from property owners
or even more reliable information, as they deal with
transactions on a daily basis and may have a “feel” for
the impact of water quantity changes on property values. Realtors were contacted in this study and did
play a role. They were contacted in an informal survey to collect information on each reservoir’s real
estate market make-up and specific physical details
on each reservoir that assisted us in extrapolating
estimated values of individual lots to the reservoir
level.
estimated values for each scenario cannot be additive.
The important aspect of having independent scenarios
is that each provides insights on how an alternative
would affect lakefront property values.
Methods used in developing the empirical relationships between potential water level conditions and
property values required estimation of lakefront property value for current and future management conditions. The effect of each water level change was
applied to aggregate property values to determine the
total lakefront property value impact. Messonier
et al. (2000) and Bergstrom et al. (1996) provide
methodological frameworks for evaluating changes to
reservoir environments and estimation of willingnessto-pay (WTP) values.
In this study, mail surveys were pretested to determine problem areas needing adjustment. A professional consulting company sent mail surveys to
lakefront property owners at each of the study reservoirs following survey techniques of Dillman (1978).
More than 200 surveys were returned per reservoir.
In addition to the mail survey, a reservoir perimeter
count on each reservoir was conducted that placed all
lakefront lots into categories defined according to visibly identifiable structures on each lot. Four land type
categories were defined. A “Developed Lot” meant
having a house on the lot, utilities, and road access.
Another percentage of the lakefront property was
defined as an “Undeveloped Lot,” where no house
existed, but utilities and road access were present and
a house could be built without any additional infrastructure. There was a lakefront property category for
“Undeveloped Land,” including land that had no present road or electric access and would need additional
infrastructure development. Finally, there will always
be a portion of the lake shore line that cannot be
developed for one reason or another. This final category was subtracted from the total shoreline perimeter
mileage in determining the land available for the
three defined categories.
Aggregation of land category results to estimate a
reservoir’s lakefront property value required additional information from Realtors. Realtors familiar with
each reservoir were used as “experts” in determining
the ratio of developed lots to undeveloped lots, total
shoreline miles, and the amount of land that would
not likely ever be developed. Developed and undeveloped lot values were estimated averages coming
directly from the landowner mail survey data for each
reservoir. The undeveloped land value was calculated
using real estate agent factors, in a ratio of raw land
value to the value of undeveloped lot land; these
ratios varied by reservoir. Values for each land type
were then multiplied by the quantity of each land
type and summed to obtain aggregate reservoir lakefront property value.
Property Valuation Model and Methods
The property valuation model was comprised of
submodels to determine individual lakefront property
values, impacts of water condition changes, and
aggregation to reservoir level impacts.
Timing of water quantity in a reservoir is very
important. Including this temporal aspect was key to
the property study, and three water quantity alternatives were developed to address this concern. The first
scenario evaluated the impact of permanent time
changes (i.e., both increases and decreases to summer
full-pool duration). A second scenario evaluated the
impact of permanent summer full-pool water level
reductions, and a third scenario evaluated the impact
of permanent changes in winter drawdown levels. It
is important to realize that each hypothesized scenario is independent of another, and the three scenarios could not occur at the same time, and thus, the
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1012
captured the valuation changes for increasing and
decreasing segments of these water condition alternatives. Similar reasoning applied to the winter drawdown scenario. Permanent lowering of summer
full-pool water levels used a straight linear regression
to determine the change in property value expected
from these changes.
Estimating the effects of changes in water conditions on property values hinged upon a series of CV
questions asking respondents to estimate the percent
change in property value they believed would occur
under varying water management scenarios. Options
presented for the change in summer full-pool duration were ±10, ±30, and ±60 days. Options presented
for the change in winter drawdown levels were ±1, ±4,
±7, and ±8 feet. An additional question focused on
permanent summer full-pool water level reductions of
1, 2, 3, 4, or 5 feet; increases were not considered, as
it would represent flood stage.
Spline regression procedures were used to estimate
the percentage change in lakefront land value estimates for summer full-pool duration and winter drawdown scenarios (Freund and Littell, 1991). Spline
regressions use a dummy variable that subtracts a
common known criterion from an indicated change,
which allows two independent linear regressions to be
joined at the common point or “knot.” The spline
regression knot in our cases was the current water
level condition for either the summer or winter seasons. The knot was subtracted from the alternate
summer full-pool days (±10, 30, or 60 days) and winter water drawdown level (±1, 4, 7, or 8 feet). It was
thought that landowners would view reducing summer full-pool duration differently from prolonging
the condition, and the spline regression technique
Lakefront Property Study Results
Lakefront property values were estimated for individual lots and other land types and aggregated to a
reservoir level for each studied reservoir. Decreases in
summer full-pool duration resulted in greater property value reductions than for similar increases in summer full-pool duration (Table 2). For instance, a
60-day decrease in full-pool duration had a 35 percent
decrease in property valuation on Lake Martin,
whereas an additional 60 days at summer full-pool
resulted in only a 15 percent increase in property valuation. Each reservoir had similar relationships with
decreases in full-pool duration causing twice the
devaluation as the identical increase in full-pool duration.
There is always the possibility that landowner
respondents were strategically responding to water
level questions (i.e., overstating the negative effect of
TABLE 2. Aggregate Lakefront Property Value for Changes in Time at Summer Full-Pool for
Six Alabama Reservoirs, 1995 (Source: Hanson, 1998).
Change in Time
at Summer
Full-Pool Days
Aggregate Lakefront Property Value
Logan
Martin
Lewis
Smith
NA
645
(+14)
582
(+19)
383
(+7)
NA
611
(+8)
538
(+10)
1,028
(+2)
364
(+1)
NA
585
(+3)
502
(+2)
138
(NA)
1,005
(NA)
359
(NA)
261
(NA)
566
(NA)
490
(NA)
-10
129
(-7)
1,944
(-6)
329
(-8)
245
(-6)
538
(-5)
467
(-5)
-30
116
(-16)
1,828
(-18)
293
(-18)
231
(-11)
480
(-15)
421
(-14)
-60
100
(-28)
1,653
(-35)
245
(-32)
212
(-19)
405
(-28)
368
(-25)
Harris
Martin
Weiss
Lay
+60
161
(+16)
1,159
(+15)
406
(+13)
+ 30
151
(+10)
1,081
(+8)
+10
143
(+3)
0
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TABLE 3. Aggregate Lakefront Property Value for Changes in Winter Drawdown Water
Level for Six Alabama Reservoirs, 1995 (Source: Hanson, 1998).
Change in Winter
Water Level*
Logan
Martin
Lewis
Smith
–
458
(-19)
578
(+18)
352
(-2)
–
492
(-13)
554
(+13)
1,098
(+9)
398
(+11)
–
611
(+8)
524
(+7)
148
(+7)
1,020
(+2)
384
(+7)
–
594
(+5)
505
(+3)
Normal Winter
Drawdown
138
(NA)
1,005
(NA)
359
(NA)
261
(NA)
566
(NA)
490
(NA)
- 0 to 2 Feet
120
(-13)
0.955
(-5)
309
(-14)
219
(-16)
498
(-12)
456
(-7)
- 3 to 5 Feet
106
(-23)
0,836
(-17)
284
(-21)
164
(-37)
441
(-22)
417
(-15)
- 6 to 8 Feet
090
(-35)
0,717
(-29)
258
(-28)
146
(-44)
385
(-32)
377
(-23)
≤ - 8 Feet
079
(-43)
0,678
(-33)
237
(-34)
133
(-49)
357
(-37)
338
(-31)
Harris
Martin
Weiss
Lay
≥ + 8 Feet
166
(+20)
1,200
(+19)
330
(+8)
+ 6 to 8 Feet
166
(+20)
1,175
(+17)
+ 3 to 5 Feet
159
(+15)
+ 0 to 2 Feet
*Normal winter drawdown is in relation to normal full-pool water level for each reservoir. Winter drawdown for Lake Harris is 8 feet below
*full-pool; Lake Martin is 10 feet below full-pool; Lake Weiss is 6 feet below full-pool; Lake Lay has no winter drawdown; Lake Logan Martin
*is 5 feet below full-pool; and Lake Lewis Smith is 18 feet below full-pool.
level continued, two reservoirs were estimated to lose
more than 50 percent of the aggregate lakefront property value at five feet below current summer full-pool
water levels.
Lansford and Jones (1995), using a hedonic model,
estimated marginal house sale prices for lake level
deviations from historical levels at $717 and $650 per
foot above long-term lake levels for the two study
lakes. For a six-foot negative deviation from longterm water levels at the time of sale, they estimated a
loss of $6,800 to the final sale amount because of this
lowered water level. Maintenance of higher water levels added value to homes surrounding the lake and
increased the recreational and aesthetic values of the
residential lot. However, it must be remembered that
their study looked at short-term fluctuating water
level changes on actual house sale transactions. This
study sought to value the consequences of permanent
year-round water level changes, as suggested in the
ACT-ACF water basin transfer, which would permanently reduce water quantity to these study reservoirs. There are no sale transactions available
because this is a new and different situation.
water changes they do not favor and understating the
positive effects of water changes they favor). This
would be a logical set of behaviors for respondents
wanting to increase the likelihood of favorable policy
changes at no cost to them. If strategic behaviors
were followed, then resulting values for positive and
negative water changes would probably be dampened
and linear regression slope differences would be less
than evidenced here with no strategic bias correction.
Similar findings occurred when winter drawdown
was altered (i.e., if the winter drawdown was lessened), people responded with a positive lakefront
property valuation but this was approximately half
the reaction for further lowering of the winter water
level (Table 3). Looking at Lake Martin as an example, a 19 percent increase in valuation and a 33 percent decrease in valuation were estimated for the ±8
feet change from normal (rule curve level) winter
drawdown water level.
Permanent reductions in summer full-pool water
level resulted in a 4 to 15 percent decrease in lakefront property values for each one-foot reduction
(Table 4). As the lowering of summer full-pool water
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1014
TABLE 4. Aggregate Lakefront Property Value for Reductions in Summer Full-Pool
Water Level for Six Alabama Reservoirs, 1995. (Source: Hanson, 1998).
Feet Below Summer
Full-Pool
Harris
Martin
Weiss
Lay
Logan
Martin
Lewis
Smith
0
138
(NA)
1,005
(NA)
359
(NA)
261
(NA)
566
(NA)
490
(NA)
1
125
(-9)
025
(-8)
312
(-13)
222
(-15)
504
(-11)
470
(-4)
2
115
(-17)
824
(-18)
266
(-26)
183
(-30)
453
(-20)
451
(-8)
3
101
(-27)
724
(-28)
222
(-38)
146
(-44)
391
(-31)
426
(-13)
4
88
(-36)
633
(-37)
190
(-47)
125
(-52)
345
(-39)
397
(-19)
5
75
(-46)
533
(-47)
158
(-56)
112
(-57)
300
(-47)
358
(-27)
A telephone survey was used to determine nonuser
preservation values of reservoir resources. The sampling frame for the telephone survey was population
proportional for 25 Alabama and 12 Georgia counties
within the Coosa and Tallapoosa River watersheds.
This area contained 959,114 households. Telephone
respondents were provided definitions for preservation values (i.e., option, bequest, and existence). The
option preservation value was presented to respondents as a value they would be willing to pay to
ensure that future use of the resource would be possible for them. Bequest preservation value was presented as a value respondents would be willing to pay to
be sure future generations could use the resource as it
exists today. Existence preservation value was presented as a value respondents would be willing to pay
to be sure the resource would continue to exist as a
place where fish and wildlife would survive and prosper.
Dichotomous choice CV questions were asked to
collect data on preservation values and determine
barriers to use. The two-part CV question resembled
a double-bounded referendum question format and
was devised for its potential to obtain additional
information to estimate true WTP preservation values
(Jordan and Elnagheeb, 1994a, 1994b; Cameron,
1988; Cameron and Huppert, 1991).
An ordered probit model was developed that would
directly estimate respondents’ WTP as a function of
socioeconomic variables and the offered bid amount.
The corresponding log likelihood function identifies
the variance, and the maximum likelihood method
THE NONUSER PRESERVATION STUDY
Goals of the nonuser preservation study were to
measure nonmarket preservation values, including
option, bequest, and existence values, for the residents in the six reservoir watershed area. Users of
reservoirs are obvious and nonusers are not, but
nonusers still have vested interests in reservoir water
resource preservation. Since we cannot go to a reservoir to capture nonuser preferences or willingness to
pay to preserve the reservoir resource, different survey methods and analytical techniques were required
than for the two prior studies.
Preservation values are usually obtained through
WTP questions presented to users of the resource
(Loomis, 1990; Krutilla, 1967; Krutilla and Fisher,
1975; Lazo et al., 1992). However as Cameron (1992b)
and Hanneman (1994) have pointed out, nonusers of
the resource also have preservation values. Therefore,
full accounting of the value of nonmarket resources
should include both user and non-user values.
Preservation Valuation Model and Methods
An ordered probit model was used to estimate nonuser preservation values for the six reservoirs. Random bid values were inserted into the telephone
survey questions for the three preservation values,
and this information allowed for direct estimation of
WTP values.
1015
JAWRA
The standard deviation of the WTP distribution
was estimated directly. For the option WTP distribution, the standard deviation was calculated to be
$7.30; therefore, 95 percent of the nonuser population
sampled would be willing to pay an option value
between $0 and $27.13 annually. For the bequest
WTP distribution, the standard deviation was $6.95;
implying that 95 percent of the population sampled
would be willing to pay a bequest value between $3.17
and $30.97 annually. For the existence WTP distribution, the standard deviation was estimated at $6.54
and 95 percent of the nonuser population willing to
pay between $4.53 and $30.69 annually.
was used to estimate the unknown parameters. With
the variance term separated from the Xβ terms, the
resulting equation has coefficients that directly indicate the change in willingness to pay in dollar terms
(Cameron, 1988). Summing the coefficients multiplied
by mean values of independent variables, the empirical WTP measure for the average respondent was
solved. Independent variables used in the final model
were respondent’s age, age squared, income, income
squared, and gender.
Nonuser Preservation Study Results
Results from the nonuser survey indicated 63 percent of the 959,114 households within the telephone
survey area were nonusers of the study reservoirs. A
total of 2,050 individuals responded to the survey.
Nonuser respondents showed strong preferences for
protecting study reservoirs. Estimated households’
willingness to pay to preserve the six reservoirs under
present management conditions was $47.21 per
household or approximately $29 million for the entire
watershed basin area (Table 5).
CONCLUSIONS
Use of water and land are changing rapidly in the
southeast, based largely on population, regional competition, and income growth. These changes are the
basis of conflicts among competing resource users.
Resource valuation is often complicated by competing
uses with radically different markets and historic use
patterns. The “highest valued use” is not easy to
implement, but resource economists can contribute to
conflict resolution in several ways – by facilitating
negotiation, asserting the importance of institutional
mechanisms, analysis of incentives, resource valuation, and impact analysis.
As reservoirs have evolved from being primarily a
power generation resource to a multi-use resource,
the increasingly important recreation and housing
sector needs to be considered when water managers
are thinking about changes to existing water quantity
management. Results from this study show recreational user expenditures and property values are
large and changes to reservoir water management
can have great impacts on reservoir stakeholders.
Changing resource use patterns imply changing
resource values, and there is a need for these values
to be included into the reservoir and watershed management decision processes. More research is needed
on the multiple economic and environmental effects of
reservoir level management on reservoirs, tail waters,
and open river stretches. Consistent and continued
reevaluation of resource values needs to be a part of
the resource planning process.
Study results showed immense economic impacts
from potential reservoir water changes for the six
study reservoirs. The states of Alabama, Florida, and
Georgia have much to gain or lose depending on how
much water each state will eventually control. Summer control of water in these basins is key to maintaining full-pool water levels, which is when the
water is valued most by recreation and lakefront
TABLE 5. Nonuser Individual and Aggregate Willingness-to-Pay
Preservation Values (Option, Bequest, and Existencea)
for the Six Study Reservoirs (Source: Hanson, 1998).
Amount
Willing
to Pay
Per Yearb
($)
Annual
Aggregated
Average
Nonuser
Willingness
to Payc
($million)
Option Value – Personal Use
12.53
7.57
Bequest Value –
Intergenerational Use
17.07
10.31
Existence Value –
Fish and Wildlife Habitats
17.61
10.64
Total Willingness to Pay on an
Annual Basis
47.21
28.52
Preservation
Value Type
a Willingness to pay is a function of age, age squared, income,
aincome squared, and gender.
bAnnual willingness to pay is for the ‘average’ respondent (average
bcharacteristics).
cBased on the U.S. Census Bureau’s data of 959,114 households in
cthe 27 counties in the six reservoir watershed basin areas and
cnearby metropolitan areas proportionately sampled in the telecphone survey of non-users. Sixty-three percent of the total housecholds (604,242) in the area were determined to be ‘nonusers’ of
cthe reservoir resources under study.
JAWRA
1016
property owners. Impacts on the agricultural, municipal, industrial, and navigational uses of these water
resources have not been included in this study but
need to be valued as well. More research needs to be
conducted to develop an integrated water basin model
that could determine the economic effects of alternative water management decisions on multiple user
groups. Such a comprehensive model would be valuable in assisting state water managers and negotiators.
This paper has provided details on the models and
methods used to estimate impacts from proposed
water management changes on recreational user
expenditures and property values. Contingent valuation questions in mail, direct, and telephone surveys
provided data for estimating the impacts of changing
water conditions. This is significant because these
models have provided equations that can be used for
other specific changes that negotiators may want to
consider. Hedonic models can only infer from historical changes but cannot project to permanent future
changes in reservoir conditions.
Methodologies developed in this study could be
applied to similar environmental scenarios occurring
in other reservoir or river systems or public resources
such as parks, wildlife preserves, and national
forests. Such methods that can project valuation
changes for alternative management scenarios are
critical in assisting stakeholders, resource use planners, and governmental policy makers in making
informed resource use decisions.
Boyle, K. J., F. R. Johnson, D. W. McCollum, W. H. Desvousges,
R. W. Dunford, and S. P. Hudson, 1996. Valuing Public Goods:
Discrete Versus Continuous Contingent-Valuation Responses.
Land Economics 72(3):381-396.
Cameron, T., 1988. A New Paradigm for Valuing Non-Market Goods
Using Referendum Data: Maximum Likelihood Estimation by
Censored Logistic Regression. Journal of Environmental Economics and Management 15:355-379.
Cameron, T., 1992a. Combining Contingent Valuation and Travel
Cost Data for the Valuation of Nonmarket Goods. Land Economics 68(3):302-317.
Cameron, T., 1992b. Non-User Resource Values. American Journal
of Agricultural Economics 74:1133-1137.
Cameron, T. and D. Huppert, 1991. Referendum Contingent Valuation Estimates: Sensitivity to the Assignment of Offered Values.
Journal of the American Statistical Association 86:910-918.
Clawson, M. and J. Knetsch, 1966. Economics of Outdoor Recreation. Johns Hopkins University Press, Baltimore, Maryland.
Cordell, H. K. and J. C. Bergstrom, 1993. Comparison of Recreation
Use Values Among Alternative Reservoir Water Level Management Scenarios. Water Resources Research 29(2):247-258.
Desvousges, W. H., V. K. Smith, and M. P. McGivney, 1983. A Comparison of Alternative Approaches for Estimating Recreation
and Related Benefits of Water Quality Improvements. EPA-23005-83-001, U.S. Environmental Protection Agency, Office of Policy Analysis, Washington, D.C.
Diamond, P. and J. Hausman, 1994. Contingent Valuation: Is Some
Number Better Than No Number? Journal of Economic Perspectives 8:45-64.
Dillman, D. A., 1978. Mail and Telephone Surveys: The Total
Design Method. John Wiley and Sons, New York, New York.
Fishery Information Management Systems (FIMS), 1997. Potential
Impacts of Water Diversion on Recreational Use and Economic
Values Associated with Six Alabama Reservoir Systems – Final
Report. Alabama Department of Economics and Community
Affairs, ADECA-OWR-97-07.
Freeman III, A. M., 1993. The Measurement of Environmental and
Resource Values – Theory and Methods. Resources for the
Future, Washington, D.C.
Freeman, III, A. M., 1979. The Benefits of Environmental Improvement: Theory and Practice. Johns Hopkins University Press for
Resources for the Future, Baltimore, Maryland.
Freund, R. J. and R. C. Littell, 1991. SAS System for Regression.
SAS Institute Inc., Cary, North Carolina.
Hanemann, W., 1994. Valuing the Environment Through Contingent Valuation. Journal of Economic Perspectives 8:19-43.
Hanson, T. R., 1998. Economic Impact of Environmental Characteristics on Recreational Demand. Ph.D. Dissertation, Department
of Agricultural Economics and Rural Sociology, Auburn University, Alabama.
Hatch, L. U. and T. R. Hanson, 2001. Change and Conflict in Land
and Water Use: Resource Valuation in Conflict Resolution
Among Competing Users. Journal of Agricultural and Applied
Economics 33(2):297-306.
Johnston, R. J., T. A. Grigalunas, J. J. Opaluch, M. Mazzotta, and
J. Diamantedes, 2002. Valuing Estuarine Resource Services
Using Economic and Ecological Models: The Peconic Estuary
System Study. Coastal Management 30:47-65.
Jordan, J. L. and A. H. Elnagheeb, 1994a. Differences in Contingent Valuation Estimates from Referendum and Checklist Questions. Journal of Agricultural Research Economics 19:115-128.
Jordan, J. L. and A. H. Elnagheeb, 1994b. Consequences of Using
Different Question Formats in Contingent Valuation: a Monte
Carlo Study. Land Economics 70(1):97-110.
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Review 57:777-786.
ACKNOWLEDGMENTS
The authors would like to acknowledge the financial support,
collaboration, and comments of Fisheries Information Management
Service (FIMS), the Office of Water Resources of the Alabama
Department of Economic and Community Affairs, and external
JAWRA reviewers.
LITERATURE CITED
Allen, D. S., R. S. Jackson, and A. Perr, 1996. Alabama-CoosaTallapoosa and Apalachicola-Chattahoochee-Flint Comprehensive Study, Recreational Demand Element. Draft Report, U.S.
Army Engineer Waterways Experiment Station, Vicksburg, Mississippi.
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K. English, 1996. Effects of Reservoir Aquatic Plant Management on Recreational Expenditures and Regional Economic
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Krutilla, J. and A. Fisher, 1975. The Economics of Natural Environments: Studies in the Valuation of Commodity and Amenity
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Riparian Property Values: Recreational and Aesthetic Components of Lake Side Housing in the Colorado River Basin. Report
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Institute, College Station, Texas.
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and H. K. Cordell, 2000. Survey Response-Related Biases in
Contingent Valuation: Concepts, Remedies, and Empirical
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Future, Washington, D.C.
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Cost Recreation Demand Model. Land Economics 56:64-72.
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Recreation Demand to the Functional Form and Definition of
Origin Zones. Western Journal of Agricultural Economics 7:8798.
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