reservoir water level impacts on recreation, property, and
Transcription
reservoir water level impacts on recreation, property, and
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, JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 1007 JAWRA 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 JAWRA 1008 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 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 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 1009 JAWRA Hanson, Hatch, and Clonts 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 JAWRA 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 1010 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION Reservoir Water Level Impacts on Recreation, Property. and Nonuser Values 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 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 1011 JAWRA Hanson, Hatch, and Clonts 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 JAWRA 1012 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION Reservoir Water Level Impacts on Recreation, Property. and Nonuser Values 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 $million (percent change) 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 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 1013 JAWRA Hanson, Hatch, and Clonts TABLE 3. Aggregate Lakefront Property Value for Changes in Winter Drawdown Water Level for Six Alabama Reservoirs, 1995 (Source: Hanson, 1998). Aggregate Lakefront Property Value $million (percent change) 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 JAWRA 1014 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION Reservoir Water Level Impacts on Recreation, Property. and Nonuser Values TABLE 4. Aggregate Lakefront Property Value for Reductions in Summer Full-Pool Water Level for Six Alabama Reservoirs, 1995. (Source: Hanson, 1998). Aggregate Lakefront Property Value $million (percent change) 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. JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION 1015 JAWRA Hanson, Hatch, and Clonts 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 JOURNAL OF THE AMERICAN WATER RESOURCES ASSOCIATION Reservoir Water Level Impacts on Recreation, Property. and Nonuser Values 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. 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