The Economic Impact of Improved Great Lakes Water Quality

Stakeholder MeetingMichigan City, IN

2-5-09

Recreational Water Industry Generates Billions Annually

• By 2026 346 million tourists will visit Mediterranean destinations (World Tourism Organization)

• Over 21,500 individuals visited Scottish beaches for 2003 – 2007 (SEPA)

• More than 30 million people in the United States rely on the five Great Lakes—Superior, Michigan, Huron, Erie, and Ontario—as a principal source of their drinking water, recreation, and economic livelihood (US GAO).

• 750,000 individuals, on average, visit Indiana State Park during the bathing season, roughly 152 days (Rabinovici, et al.)

• Racine, WI (population ~ 80,000) had over 85,000 visitors at North Beach in 2008

“Healthy Waters, Strong Economy”

• The Brookings Institution, September 2007– http://www.healthylakes.org/site_upload/upload/GrtLakesCostBenefit.pdf

• Investing $26 billion in the GL will result in $80 billion in short- and long-term economic benefits

• Reinvigorate the economy regionally

• Direct economic benefits from recreation

• Raises property values

• Makes region more attractive to businesses and workers

Who Should Pay?• States clearly have an interest and should

pay• Rest of the country also benefits, and thus

federal government should pay, too:– Cleanup technologies for GL will benefit other

parties of the count– Avoided engineering costs

• Sediment dredging, removal, & disposal• Less erosion• Less severe flooding• Enhanced groundwater supply

– Lower disaster costs elsewhere Brookings Report

Local Government Spending• U.S. and Canada, 143 respondents• Invest an estimated $15 billion annually to

protect and restore the Great Lakes and St. Lawrence River

• $2.5 billion on water quality management activities– wastewater systems operation, maintenance,

infrastructure • $784 million on ecosystem protection activities,

green space protection– recycling/reuse programs

• 10 times the amount of U.S. federal government

• Water quality management

– Over 33% or $5 billion per year goes to capital improvements for wastewater

– Over 25% or almost $4 billion per year goes to operation and maintenance

– Even with these investments, very hard to keep pace with growth of communities and depreciation of assets

Local Government Expenditures

• See the resource every day

• Live with the people who expect it to be clean

• Deal with all the difficult budget decisions that must be made

• Have been & will continue to do our part

Cities Are on the Front Lines…

• Great Lakes Regional Collaboration Strategy outlines needed investments in the ecosystem in addition to wastewater

– Since 2005 signing, Federal investment has been stagnant

– Local governments continue to invest more, with about 20 percent of budgets going to environmental improvements

Ecosystem protection

• Ecosystem protection is very important because so much of what happens on the land affects the water– Green spaces and wetlands provide habitat for

many plants and animals and also cleans the water before it flows back into the Great Lakes and St. Lawrence

– Proper waste management keeps toxic waste and other contaminants out of the water

Importance of Ecosystem Protection

Root River Stream Bank Stabilization Projects

Island Park, 2005

Island Park, 2006

Racine Wastewater Facility

Preserving the GL• What are the Great Lakes worth?

• In June of 2007, the Village of Sister Bay, Wisconsin, with an annual budget of $2.7 million purchased 371 feet of shoreline and beachfront at a cost of $4.9 million

• Beachfront preservation was valuable and was a significant contributor to economic benefits

Economic Costs/Benefits

• Connections exist between healthy beaches and economic opportunities

• Economic benefits related to human health and natural capital

• Costs related to remediation• Nature as a capital asset – provides goods (fish,

recreation) & services (storm and flood control, habitat)– Avoided damages: natural disasters & human health– Avoided property value loss– Avoided replacement cost for natural buffering zones– Improved social and economic sustainability

Cost of Illness (Dwight et al. 2005)• Quantify the health burden from illnesses associated

with exposure to polluted recreational marine waters

• Gastrointestinal illness (GI) = $36.58• Acute respiratory disease = $76.76• Ear ailment = $37.86• Eye ailment = $27.31

• Exposures at Orange County and Huntington Beaches estimated to generate 36,778 GI episodes per year

• 38,000 more illness episodes of other types– respiratory, eye, and ear infections

• Cumulative public health burden = $3.3 million/year

Lost Spending Beach AdvisoriesStudy Location Method Description Estimates

Murray and Sohngen(2001)

Lake Erie Lost spending per year

Per Advisory $131,000

Total for all Advisories

$4.91 million

Indiana Dunes State

Park

Lake Michigan(Indiana)

Lost spending per event

Per swim ban $43,000

Shaikh (2006) LakeMichigan(Chicago)

Lost spending per year

Total for all advisories

$2.35 million

Southern California

Los Angeles & Orange Co.

Public Health losses

Total for all advisories

$62 million

Economic Impacts• Economic impacts are measured by the

effect of spending by beach visitors• Total impact arises from measurements of

direct spending• Relationship exists between local

spending and overall economic growth• Impact of beaches on employment, profits

and tax revenues• What visitors are willing to spend money

on while at the beach

Great Lakes Economic Benefits

• The most significant Great Lakes economic work comes from several studies of Lake Erie

• Lake Erie study estimates economic impacts of beach visitors of up to $8 million

• A study of property values along Lake Erie shows that housing prices increase by $22 for each centimeter increase in water clarity

• A study for Lake Michigan shows economic welfare of nearly $1 billion for visitors to Chicago beaches

The Chicago Beach Project• Motivation: Uncover the value of Chicago beaches to

beachgoers. – Beach improvements are costly– what about benefits?– In particular, what about the benefits to beachgoers?– Economics: the price we pay usually reveals at least how much we

are willing to pay – No entrance fee or direct price to use the beach

• Goals: Assess the value of Chicago beaches to beachgoers– Value of a day at the beach– Lost value from swim bans– Information on beach users for policymakers, beach managers

Dr. Sabina Shaikh, University of Chicago

Value of a Day at the Beach• Per-person Value of a Day at the Beach: $35/day

– Does this make sense?– Average time on beach is 3 hours, Average income is $62,000.

This indicates the value per hour on beach is about 1/3 wage rate.

– Other Estimates: LA/SD: $30, Lake Erie $15-25

• Overall seasonal Value: $801 million – For lowest attendance year (2004) — easily over $1 billion in

higher attendance years

• Economic Impact (excluding jobs/taxes): $100 million

– $4.37 day spent at beach

Swim Bans• Perceptions:

– 90% of respondents had heard of swim bans – 1/3 would not visit the beach on a swim ban day– Over 30% felt the water was not clean enough for

swimming– 35% who chose not to swim cited unclean water as the

reason why.

• Loss from Swim Bans in 2004: At least $17 million– Only includes those who stated they would no longer visit– Does not include:

• Those who have stopped visiting• Those who still come but cannot swim• Non-use value: Civic pride, existence/future values

Economic Welfare• Intrinsic to individual preferences • Measures the value of satisfaction or

enjoyment from being able to visit the beach• Extra value the individual places on a good or

activity (over and above spending)– Many individuals visit beaches with little or no

actual spending– “consumer surplus”

• Total value of the activity—expenditures (impact) plus consumer surplus– “willingness to pay”

Low Cost/No-Cost Measures

• It doesn’t take a lot of money to be proactive• Racine has implemented many low cost/no-cost

measures to protect the Great Lakes:– Low cost curbside tree program for citizens– Incorporating green space & trees into road reconstruction– Banning the sale of phosphorous containing fertilizers– Citizen mercury product collection/thermometer exchange

• Run by the Health Department & Wastewater Utility– Household hazardous waste collection

• Funded by $1.50 quarterly fee attached to water bill– Prescription/Non-prescription drug drop off program

• US EPA program partner, Earth Day 2008– Stormwater infrastructure monitoring & improvements

• Funded through $50.00 surcharge added to tax bill

Form Public/Academic Partnerships

• GLSLCI Mayor’s Scholars Program

• Opportunities for undergraduate and graduate students

• “Real world” experience

Blue Wave Campaign –Restoring Public Confidence

• Certification program recognizing good management practices, environmental stewardship, and effective public communication regarding water quality

• Good for tourism & local economy• North Beach is first WI beach to receive

designation & second certified Great Lakes beach in the US

North Beach Oasis

Lake Michigan Pathway

•Multi-purpose pathway •Extends along Lake Michigan•Approximately 9.8 miles•WI APWA public works project of the year

Corona Light EVP Pro-Am Beach Volleyball Tour

Photo courtesy of Racine County Convention & Visitors Bureau

Spirit of Racine Triathlon

Dragon Boat Races – Racine, WI

Awards• 2008 Governor’s Award for

Excellence in Environmental Performance

• 2003 & 2007 NRDC

– Beach Buddy

• Clean Beaches Council, 2004 –present

– Blue Wave certification

• 2006 - 2008 Corona Light EVP Pro-Am Beach Volleyball Tour

– Host City of the Year, 2006-2007

– World Championship, 2008

North Beach -2008

North Beach - 2002