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Journal of Environmental Economics and Policy


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Comparing households total economic values and recreation value of instream flow in an urban river
John B. Loomis
a a

Department of Agricultural and Resource Economics , Colorado State University , Fort Collins , CO , 80523-1172 , USA Published online: 12 Dec 2011.

To cite this article: John B. Loomis (2012) Comparing households total economic values and recreation value of instream flow in an urban river, Journal of Environmental Economics and Policy, 1:1, 5-17, DOI: 10.1080/21606544.2011.640855 To link to this article: http://dx.doi.org/10.1080/21606544.2011.640855

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Journal of Environmental Economics and Policy Vol. 1, No. 1, March 2012, 517

Comparing households total economic values and recreation value of instream ow in an urban river
John B. Loomis*
Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, CO 80523-1172, USA (Received 23 August 2011; nal version received 30 October 2011) The empirical importance of non-use values relative to use values appears to vary by uniqueness of the natural environment being valued. At one extreme is the Grand Canyon, where non-use values are orders of magnitude higher than use values. For protecting water quality used for water-based recreation and drinking water, non-use values are still signicant, but about half the magnitude of these two use values. In this paper we investigate the relative importance of non-use values for maintaining instream ows in an urban river in the City of Fort Collins, Colorado, USA. At the request of the City Council, a contingent valuation method (CVM) survey was conducted. A dichotomous choice CVM survey of households estimated that the Total Economic Values (TEV sum of non-use and recreation) of city households is $234 per year. A second CVM question specically about recreation use value of the same households yielded an estimated annual WTP of $90 per year. Thus, the TEV to maintain current instream ow is 38% recreation value and 62% non-use values, suggesting the importance of non-use values even for a non-unique, but locally signicant urban river. Summing up the TEVs per household in the city yields an annual value of $171 per acre foot, several times larger than annual water lease rates in Northern Colorado. However, the present value of this TEV per acre foot is less than the price for purchasing water rights in order to maintain instream ows. Thus, unless the City of Fort Collins partners with downstream cities, who would also benet from instream ows, annual leases are the most ecient option for maintaining instream ows. Keywords: existence value; Colorado; non-use value; contingent valuation; willingness to pay

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Introduction Since Krutilla seminal article in 1967, economists have recognized the potential importance of including option, existence and bequest values in the total economic valuation of protecting natural environments, endangered species, water quality and air quality. Collectively, option, existence and bequest values were often referred to as non-use values (Fisher and Raucher 1984). Option value received a signicant amount of theoretical renement during the 1970s. However, since that time there has been extensive discussion on whether option value was a distinct value, and the recent literature has suggested it is not. Nonetheless, we will continue to include it in

*Email: jloomis@lamar.colostate.edu
ISSN 2160-6544 print/ISSN 2160-6552 online 2012 eftec and Dr Kenneth Willis http://dx.doi.org/10.1080/21606544.2011.640855 http://www.tandfonline.com

J.B. Loomis

our discussion as it was included in many empirical analyses of the 1980s discussed below. The emergence of the concept of non-use values occurred during the 1970s rebirth of Daviss (1963) contingent valuation method (CVM). This method provided the means to empirically measure the non-use values. The initial published empirical analyses included valuation of water quality in the South Platte River in Colorado by Greenley et al. (1981, 1982) and national water quality by Mitchell and Carson (1981). This was quickly followed by Brookshire et al. (1982) for estimating option and existence values for bighorn sheep and grizzly bears, and Walsh et al. (1984) estimating Colorado residents non-use values for wilderness in their state. These studies were the rst to demonstrate that these non-use values were nontrivial, i.e., more than a theoretical curiosity. Greenley et al. (1982) and Walsh et al. (1984) found non-use values to be equal in size to recreation use values. Fisher and Rauchers (1984) summary of the literature on values of water quality and waterrelated resources found a ratio of non-use value to use value of 0.5, meaning that non-use values were half as large as traditional use values. The policy implications of these empirical analyses were clear: non-use values were substantial enough that optimal allocation of natural resources to preservation required inclusion of these non-use values. But many of the resources discussed above (e.g. the South Platte River, bighorn sheep) were not the unique natural resources Krutilla (1967) wrote about, such as the Grand Canyon. Schulze et al. (1983) published the rst CVM estimates of nationwide benets of protecting air quality over the Grand Canyon National Park. Their national estimates of $23.5 billion for non-use values were two orders of magnitude larger than recreation use values (Schulze et al. 1983, p. 172). The empirical importance of these non-use values was part of the justication for estimating and including non-use values in the nal Environmental Impact Statement (EIS), which recommended a more natural river ow pattern in the Grand Canyon below Glen Canyon Dam. Consistent with the ndings of Schulze et al. (1983), the national benets of providing a more natural pattern of ow releases were two orders of magnitude higher than the water-based recreation use benets (Welsh et al. 1995, Loomis et al. 2005). Of course including non-use values has been, and no doubt will continue to be, somewhat controversial among some economists, industry and governments. The need for the National Oceanic and Atmospheric Administration (NOAA) blue ribbon panel on CVM (Arrow et al. 1993) grew out of the controversy over using CVM to estimate non-use value in the Exxon Valdez damage assessment. Given the NOAA panels qualied endorsement of CVM for measuring non-use values (with stringent conditions on implementation), federal agencies in the USA have increasingly included recognition that non-use values are part of a complete benets assessment. For example, the US Environmental Protection Agencys manual on benet cost analysis (USEPA 2000) discusses non-use benets and CVM, as does the US Oce of Management and Budgets benet cost guidelines (US Oce of Management and Budget 2000). The EU Water Framework Directive (WFD), particularly Articles 4 and 9, allows for non-market valuation. The review of nonmarket valuation concepts and techniques prepared for the WFD recognizes non-use value as a component (Economics for the Environment Consultancy (eftec) 2009). Despite this formal recognition of non-use value in principle, whether a particular resource has signicant non-use value and whether a particular CVM study has

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Journal of Environmental Economics and Policy

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correctly measured non-use value will still often be contested in actual policy debates. This paper provides some insights into one such CVM study, requested by a municipal government to measure recreation use and non-use values for instream ow of a river within their city limits. With the exception of Welsh et al. (1995), most past CVM studies previously cited reected the early state of CVM, e.g., use of open-ended or iterative bidding elicitation methods. They often represented resources with statewide or national scope. This article reports the results of a survey of urban households regarding their values of maintaining instream ows of a river that ows through a small city to provide a comparison of non-use values and recreation use values for an urban river. Knowing the ratio of non-use values to use values adds to the literature on understanding whether it is important or not to measure existence and bequest values when the natural resource is not a unique natural environment or one of national scope. Since the study was requested and funded by a municipal government, we also investigate whether the amount of instream ows that are ecient to preserve in the river is substantially inuenced by whether to include nonuse values. Our study adds to the literature by: (a) using more modern CVM methods such as the dichotomous choice rather than older open-ended and iterative bidding WTP questions in many prior studies; (b) using two separate WTP questions to estimate TEV and recreation use value of households rather than relying on households pro-rating their TEV into components as done in some of the older studies; and (c) studying a new dimension of river quality, that of maintaining instream ow and in an urban setting rather than a pristine natural environment. In particular, while the economic values of traditional measures of water quality (e.g. shable, drinkable) have been well studied (see Johnston et al. 2003, 2005), there have been fewer than a dozen studies on economic value of instream ow, nearly all of which relate to recreation. The primary instream ow valuation studies that have been done are for either unique natural resources (e.g. the Grand Canyon study by Welsh et al. 1995), endangered sh (Berrens et al. 1996) or statewide rivers in natural environments (Brown and Dueld 1995). Study area Reduced instream ows are problematic on many rivers throughout the world. River ows on many rivers have been diverted for irrigated agriculture to the extent the rivers no longer ow their historic length (e.g. the Colorado River often does not have sucient ows to make it to its historic terminus in Mexico). In the western United States between 80% and 90% of river ows have been diverted for agriculture, with much of the rest having been diverted for municipal and urban uses. These same forces have aected ows in our study river, the Poudre River in northern Colorado. The Poudre River has its headwaters in Rocky Mountain National Park, and ows through the cities of Fort Collins and Greeley, Colorado, before joining the South Platte River. However, major water diversions occur prior to the river entering Fort Collins. This has resulted in reductions in the total river ows. By September, Poudre River ows are reduced to the level that the river barely has enough water to wet the rocks in portions of the river bed where there is a wide channel. As a result, many ecosystem services the river could provide, such as waterfowl and sh habitat as well as rafting, shing and swimming, are lost. These lost ecosystem services are particularly apparent to the tens of thousands of visitors

J.B. Loomis

to the 18 designated Natural Areas and ve city parks along the river. Also lost are the aesthetics of the river for the tens of thousands of people who use the bike paths along the river that the City of Fort Collins maintains. However, despite the already compromised state of the Poudre River through the City of Fort Collins, there are some unexercised senior water rights upstream. Exercise of these rights would capture a signicant portion of the remaining high spring and early summer ows. In 2007, a study was begun on whether to build a large o-channel reservoir to capture and store these high spring and early summer ows. The proposed two-reservoir system project is commonly referred to by the name Glade Reservoir, although the technical name for the project is Northern Integrated Supply Project (NISP). Glade Reservoir is a large reservoir that would store 170,000 acre feet (more than 200,000 megaliters) in its ve mile length and 260 foot depth. The project has an overall price tag of $405 million (www.ncwd.org). In order to provide this much water, the late spring and early summer ows of the Poudre River would be reduced by between 50% and 75%. Even a 50% reduction would cut the peak of the hydrograph in half, putting at risk the remaining riparian vegetation (and its associated bird population) as well as greatly shortening the water-based river recreation season, and reducing the aesthetics of the natural areas to bike path users. In order to approve this project, the project sponsors (towns receiving the water) and the US Army Corps of Engineers must develop an Environmental Impact Statement (EIS) prior to issuing the permits required to build Glade Reservoir. As part of the EIS process the stakeholders, including the City of Fort Collins, would be providing comments on the EIS. The geographic and institutional setting for this study ts the classic externality case. The towns receiving the water from Glade Reservoir are geographically distant and hydrologically disconnected from the Poudre River. Fort Collins residents bear the external costs in terms of reduced ows of the Poudre River through the city of Fort Collins but do not receive the benet from the diverted water. The City Council of Fort Collins decided that in order to provide factual and objective comments on the EIS about the magnitude of the external environmental cost imposed upon its citizens it would commission a series of studies. One of these studies was this economic study on the eects of reduced ows on recreation benets, and other benets the citizens of Fort Collins receive from the Poudre River. At the time of the study and continuing today, the project sponsors and the US Army Corps of Engineers preferred alternative is to build the full-size Glade Reservoir. This made a simple CVM scenario of future with the dam and the resulting 50% reduction in Poudre River ows versus WTP to maintain current ows. Of course, had the City requested a study to determine the optimum ows in the river given the value of water in the reservoir, several CVM scenarios could have been asked to estimate a WTP function. Methods Given the 1400 acres of public land along one side or the other of the Poudre River in town, and open access to the river, CVM is used to estimate both the recreation use and non-use values. Although not without controversy (see Portney 1994), CVM has been used to simulate local voter referendums and has been shown to be reasonably accurate (Vossler and Kerkvliet 2003), and yield values comparable to

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Journal of Environmental Economics and Policy

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actual behavior valuation methods for urban air quality (Brookshire et al. 1982) and recreation (Carson et al. 1996). Nonetheless, hypothetical bias has been a found in several CVM studies (Neil et al. 1994, Cummings et al. 1995, Brown et al. 1996). Our case study has more similarities to the situations studied by Vossler and Kervliet (2003), Brookshire et al., and Carson et al. Similar to these three studies, the public good being valued, the Poudre River, is well known to the local residents we are surveying. The familiarity is due to the substantial length of time people have lived in Fort Collins and high use of the bike paths or Natural Areas along the Poudre River. For example, our data show that about half the population has lived here 20 years or more. About three-fourths of Fort Collins residents have visited the Poudre River or used adjacent Natural Areas or bike paths along the river at least once during the time they have lived there. City residents have periodically voted to renew the City of Fort Collins sales tax add-on for purchase of open space and park lands. Thus, all four reference operating conditions that Cumming, Brookshire and Schulze (1986) suggest are necessary for obtaining accurate estimates of benets are met in our study.1 Data Survey development, focus groups and pre-testing The actual survey booklet followed Dillmans (2000) Tailored Design Method. The survey described the roles that the Poudre River plays in the regions water supply, recreation to city residents, and wildlife and sh habitat. In particular, respondents were told there were several hundred bird species, 30 sh species, several hundred native plants, etc. that depended on adequate ows in the Poudre River. Inserted into the survey booklet was a color map of the study area showing the river, bike paths along the river, and the city parks and natural areas. Also inserted into the survey was Figure 1, which illustrated the 50% reduction in late spring and summer river ows with the proposed new diversions. Prior to answering the WTP questions, respondents were asked to rate on a Likert scale the relative importance of dierent reasons why the Poudre River might be important to them. These items included water-based recreation (e.g. shing) and land-based recreation such as bird watching. They also included non-uses such as providing habitat for plants, trees, sh and wildlife. The nal survey was the result of interaction between the author and City of Fort Collins Natural Areas sta, with input from the City Water Utilities sta. Once the basic survey design and information was agreed upon, two focus groups of 14 or 15 city residents were held in Fort Collins to evaluate the clarity of information presented, graphs, maps, and questions being asked. Then a pre-test of the entire survey booklet was conducted on another group of 14 Fort Collins residents. Final revisions and nal review by City Natural Areas sta resulted in the survey that was printed and mailed to residents. Sample design and data collection procedures The survey was mailed to a sample of 550 Fort Collins residents in the Fall of 2007. The distribution of the sample followed the population distribution in each of the postal codes. Following Dillman (2000), there was a personalized cover letter, a $1 bill enclosed as a token incentive, and a stamped return envelope. Reminder

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Figure 1. Poudre River ows: 30-year average (19762006) and potential 50% reduced ows with future diversions.

postcards were sent to each household one week after they received a copy of the survey. If a survey was not returned, then the household received another copy of the questionnaire. Wording of the two willingness to pay questions In order to calculate our ratio of non-use values to recreation value, two dierent dichotomous choice willingness to pay questions were asked: the rst one for Total Economic Value (TEV), and the second one about WTP for recreation use. The same order was used in all surveys. Thus it is possible this sequence had some order eect on the recreation valuation responses. The wording of the Total Economic Value question to maintain the same current ows as was currently being experienced by visitors was:
If the costs of keeping the current peak ows were spread among all Fort Collins households and businesses, your share of the cost is estimated to be $YY per year. Would you pay this amount each year to be used solely to keep Poudre River ows at the current 30 year average ows shown in Figure 1 rather than have 50% reduced ows? ___ Yes ___ No ___ Unsure

The annual bid amounts ($YY) ranged from a low of $2 a year to a high of $950. The selection of the bid amounts was based on results from the focus groups and pretests.

Journal of Environmental Economics and Policy The wording of the recreation use value question is:
As you know, costs of gasoline, rental rates for equipment, and other recreation expenses typically increase over time. If the cost to visit the Poudre River in town had been $TT higher, would you have still made this visit? ___ Yes ___ No ___ Not Sure

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The per trip bid amounts ($TT) ranged from $2 to $90, with most of the bids clustered in the $520 range. Given the typical number of trips taken by our sample respondents (about six trips), the annualized recreation bid distribution is not as dierent from the TEV bid distribution as it might rst appear. To be conservative and increase the likelihood of validity of our WTP estimates, we follow Champ et al. (1997) and others and recoded the Not Sure and Unsure responses as No responses.

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Statistical models We analyze the responses using a logit model. Our general specication of the logit willingness to pay model is:   Pi Li Ln 1 b0 b1 Bid b2 X2 b3 X3 bn Xn ui 1 Pi where Pi is the probability of a Yes response, b values are slope coecients and X values are independent variables. To estimate Equation (1) using maximum likelihood requires the equation to be rewritten as a log likelihood function (see Haab and McConnell (2002, p. 29) for the details). X2 . . . Xn are explanatory variables specic to visitors in the recreation WTP logit model, and to households in the resident TEV WTP model. From the coecients in Equation (1), WTP can be calculated for both recreation use and TEV using a formula from Hanemann (1984). We calculate the WTP using Equation (2), where b1 is the coecient on the bid amount and Xm2 . . . Xmn are sample means of the independent variables. Equation (2) is used, with the respective logit coecients, to calculate WTP per trip for recreation and per household for the TEV question. With the linear in bid logit model, Equation (2) is both the median and the mean WTP (Hanemann 1984, p. 335). WTP bo b2 Xm2 b3 Xm3 bn Xmn =b1 2

The annual WTP per household from Equation (2) will be compared to the annual value of recreation use. This annual recreation use value is calculated by multiplying the value per trip (calculated using the same formula as Equation (2)) by the annual number of trips each household in our sample took that year. By subtracting this estimate of annual recreation use value from the TEV, we have an estimate of nonuse values. From here, we can calculate the percent of TEV that is non-use values, as well as the ratio of non-use values to recreation use value. The legitimacy of this calculation rests on the fact that both questions were based on WTP to maintain current ows. In particular, the recreation question was WTP for current visits with the current level of ow. The TEV WTP question was WTP to maintain the current

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level of ow. Thus both provide an indication of WTP for current ows, so we feel comfortable subtracting the recreation use value from TEV to derive non-use value. Results Survey response rate Of the 550 surveys mailed out, there were 22 undeliverable, and seven people were deceased. This yields a net eligible sample of 521. We received 332 surveys back. Deleting the undeliverable surveys and deceased addressees, this represents a response rate of 64% of deliverable/eligible surveys. This survey response rate is reasonably good and signicantly higher than most City of Fort Collins mail-in ballot election turnouts which are in the range of 42% to 45%.2 The distribution of responses also matches the population distribution by postal codes. As usual for mail surveys the respondents are somewhat older than the population, and have slightly (10%) higher incomes. Relative importance of dierent reasons for valuing the Poudre River Prior to the WTP questions, the sample was asked to respond to a series of Likert scale questions regarding the reasons they might value the Poudre River. The highest rating was a non-use category habitat for sh and wildlife (2.6 on a 4-point scale ranging from 0 to 3), which was statistically greater than any other category, as well as all use-related categories. The non-use motive of providing river water for plants such as willows and trees such as cottonwoods rated 2.3, which was identical to userelated opportunities to view nature. Water recreation rated the lowest at 1.85. This suggests that even for urban residents living within several miles of the river, there are both use and non-use values for the river. Statistical results Logistic regression results for recreation (Table 1) and TEV (Table 2) are shown. Socio-demographic variables not reported in these two tables were not signicant and not included in the following best-t models. Income is not included as a
Table 1. Logistic regression results for recreation economic value of a visit to the Poudre River at current ows. Variable Constant Recreation trip bid amounta Visit Park/Natural Area yearb Water rec importancec Mean dependent variable Log likelihood Restricted log likelihood
a b

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Coecient

z-Statistic

Probability Means 0.1765 0.0000 0.0105 0.0556 1 28.42 0.659 1.85

70.56149 71.3514 70.04002 74.9071 0.92478 2.5582 0.30134 1.9141 0.404 McFadden R2 0.172 7110.605 LR statistic 45.94 7133.574 Probability 0.000

The increased dollar amount per trip visitors were asked to pay. Whether the respondent visited a Park or Natural Area along the Poudre River this year (versus visiting other areas along the Poudre River). c An attitude variable measuring how important a respondent thought the Poudre River was for waterbased recreation.

Journal of Environmental Economics and Policy

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Table 2. Logistic regression results for Total Economic Value (TEV) of maintaining current Poudre River ows. Variable Coecient z-Statistic Probability Means 0.0000 0.0000 0.0000 0.0241 0.0177 0.0021 0.0799 1 180.10 71.516 0.623 0.62 15.23 1.85

Constant 74.8272 74.487 TEV bid amount 70.0032 75.179 Poudre River change 70.8601 74.525 Visit Park/Natural Area year 0.6755 2.255 Gender 0.6933 2.372 Years of education 0.1946 3.072 Water rec importance 0.2530 1.751 Mean dependent variable 0.5466 McFadden R2 0.25 Log likelihood 7155.19 LR statistic (6 df) 102.88 Restr. log likelihood 7206.63 Probability 0.000

variable as it drops out from the utility dierence model for a linear in bid logit model. Table 1 presents the best-t logit model results for a visit to the Poudre River. As might be expected, whether the respondent visited the Poudre River this year has a positive and signicant eect on the odds of paying the bid amount. The higher the respondent rated the importance of water-based recreation the higher are the odds of paying the bid amount. Using the estimated coecients and Equation (2) WTP is calculated as $15 per trip. Multiplying this by the sample six trips taken per household yields $90 annual WTP for recreation use at the current water levels. Table 2 presents the best t TEV logistic regression results for households. The variable Poudre River change is if an individual thought the reduction in Poudre River ows was a bad change (coded negative). Of course, if they thought the reduction was a good change they were less likely to pay for maintaining the current instream ows. All other variables are as dened above in the recreation model. Males and those with higher education were more likely to pay than females and those with less education. Since TEV includes recreation, respondents who visited the Poudre River this year have signicantly higher odds of agreeing to pay the bid amount than non-visitors, but the magnitude of the coecient is only about twothirds the size of what the coecient is in the recreation logit equation. Likewise, the higher the respondent rated the importance of water-based recreation the greater were the odds of paying the TEV bid amount. Using Equation (2) above, the annual per household TEV for maintaining the current river ows is $234. Subtracting our $90 annual recreation value at current ows from $234 yields $144 of non-use values. Thus the ratio of non-use values to recreation use value for maintaining instream ow in this urban river is 1.6. Our ratio of non-use values to use value is substantially higher than the 0.5 average ratio found in Fisher and Rauchers (1984) review of the literature on such ratios for water quality, as well as the Greenley et al. study on the South Platte River in Colorado. Dividing $144 non-use values by $234 TEV indicates that 62% of TEV is non-use values, and 38% recreation use value. With 62% of TEV being non-use value, failing to include the existence and bequest values would seriously understate the benets of maintaining instream ows, even in an urban river setting. Hence from an economic eciency standpoint, failure to include non-use value could result in too little instream ow being protected in the Poudre River during negotiations over potential Glade Reservoir river ow mitigation measures.

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14 Policy implication of TEV results

J.B. Loomis

To calculate aggregate TEV we use the annual WTP per household and the total number of households in Fort Collins. According to the US Census there were 129,467 persons living in Fort Collins in 2006. The US Census also estimates an average of 2.29 persons per household. Thus, there are an estimated 56,536 households in Fort Collins. However, while we do have a relatively high response rate of 64%, this means that 36% of Fort Collins households sent surveys did not either take the time or have sucient interest to return the survey after two mailings. If we take a conservative approach of assuming those households have no willingness to pay to maintain ows in the Poudre River, we then generalize our sample only to the 64% of Fort Collins households that did return the survey. This yields about 36,183 households. With a WTP per household of $234, this yields annual total benets of maintaining the current ows in the Poudre River of $8.5 million. In other words, Fort Collins households would pay a total of $8.5 million each year to maintain current ows in the Poudre River. We used data from the Poudre River ow gauge within Fort Collins for the most recent 30 years to calculate the amount of water needed to oset the 50% reduction in ows from April to September 6th that was illustrated to respondents in the survey graph. A total of 25,124 cubic feet per second (cfs), or roughly 49,381 acre feet (60,739 megaliters), of water would be required. Using the total Fort Collins annual TEV divided by the 49,381 acre feet of water represents an annual TEV value of water for instream ow of $172 per acre foot. This annual TEV compares with an annual lease value of water of $11 per acre foot from 1995 to 1999 in Colorado for environmental purposes (Loomis et al. 2003) and $18 per acre foot for all lease transactions regardless of purpose from 1990 to 2000 (Czetwertynski 2002). While water lease prices have tripled from these time periods to the present, even tripling the lease rates to $33 to $54 suggests that the annual TEV to Fort Collins residents of maintaining instream ow ($172 per acre foot) exceeds these lease/rental rates of water in Colorado. However, the recreation use value per acre foot of $65 would only slightly exceed the upper bound of the water lease rates. Taking the present value or present worth of the aggregate annual TEV using the Federal government discount rate of 3% used by agencies such as the US Army Corps of Engineers (the agency overseeing the Glade Reservoir project) yields $282.7 million. The $282.7 million to maintain current ows in the Poudre River implies a present value of $5673 per acre foot. According to personal communication with Joe OBrien at WaterColorado.com, water rights sell for about $10,000 an acre foot (which is also about the cost of water being developed with the proposed Glade Reservoir). Thus City of Fort Collins residents total economic value is about half the cost per acre foot of purchasing the needed water to maintain existing ows. Roughly $500 million would be needed (49,381 acre feet times $10,000 per acre foot). Given the high cost of permanently maintaining instream ow in a city with rising population, it may be more economical in the short term to simply lease water each year rather than buy water rights. As the Fort Collins population increases from its 130,000 people to 150,000 people over the next couple of decades, this would raise city residents aggregate total economic values by 15%. Thus it may be an ecient policy for the City of Fort Collins to continue to lease water until the population in Fort Collins grows enough that water right purchase might be feasible.

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Journal of Environmental Economics and Policy

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However, maintaining instream ows to Fort Collins residents generates a regional public good to downstream residents. Since purchase of water for instream ow through Fort Collins is a non-consumptive use, those ows would be available downstream of Fort Collins to the town of Windsor and the City of Greeley for them to enjoy as instream ows in their segments of the Poudre River. As such, it would make sense for the three municipal governments to share the costs in proportion to their populations. Greeley has a population of 92,000 people while Fort Collins has a population of 130,000. Windsor has a population of about 18,000. Thus, Fort Collins would pay about 55% of the cost, Greeley about 38% of the cost and Windsor about 7% of the cost. Even if the benets per household in Greeley and Windsor were somewhat less than in Fort Collins, it appears likely the total benets to all three cities would cover the $500 million one-time cost to purchase the water rights. So in the end how did the City of Fort Collins use these results? Based on the results of the survey, the City Natural Areas sta recommended that the City Council provide comments indicating that the Draft EIS inadequately addressed recreation impacts, and that a Supplemental Draft EIS be prepared. The City Council, with additional input from the city water utilities department on water quality concerns associated with the diversion, formally requested the US Army Corps of Engineers to prepare a Supplemental Draft EIS to address these concerns of the City of Fort Collins. Due to these and other public concerns over the Draft EIS, the US Army Corps of Engineers agreed to prepare a Supplemental Draft EIS, a process that continues at this time of writing.

Conclusions The Total Economic Values (on-site recreation use and non-use values) of maintaining current instream ows is estimated for a western USA urban river through the city of Fort Collins, Colorado. Using the dichotomous choice contingent valuation method (CVM) survey of households we found that WTP for Total Economic Value (TEV) of households in Fort Collins was $234 per year to maintain current ows. A dichotomous choice CVM question of current WTP for recreation use value at current ows yields an annual WTP of $90 per year. The ratio of non-use values to annual recreation is 1.6. Thus, the majority of the benets of maintaining instream ow in this urban river are existence and bequest values. This illustrates the potential importance of measuring and including these values even when the resource is not a unique natural environment. In terms of policy implications of the study for the City of Fort Collins, summing up the TEVs per household across the percentage of responding households (64%) yields an annual value of $171 per acre foot. This TEV value is several times larger than annual water lease rates in Northern Colorado. However, the present value of the TEV is $5670, below the permanent water right prices of $10,000 an acre foot. With the future growth of the Fort Collins population, it may make more economic sense for the city to lease water or cost share purchase of the water rights with downstream cities of Windsor and Greeley. The broader policy relevance of the ndings is that non-use values can be signicant even if the natural resource is not one of the wonders of the world. In this sense, non-use value may be related to sociologists concept of sense of place. Williams and Stewart (1998) dene sense of place as a strong emotional, social and cultural bond that people form with natural resources that are of signicance to

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them. For example, we heard in our focus groups that having the free-owing Poudre River through town is part of the identity of Fort Collins. It is also one of the largest free-owing rivers on the Front Range of Colorado, so in that sense local residents know the river has ecological signicance, and may feel some degree of responsibility for being good stewards of this natural resource on behalf of current and future Coloradoans. For many of the residents of Fort Collins, other rivers in Colorado would not be good substitutes for the Poudre River. These reactions to the Poudre River suggest that many people would indeed pay for knowing that healthy ows of water are maintained in the Poudre River, even if they rarely visit the river itself. Thus a broader implication from this study may be that non-use values such as existence and bequest value may be signicant for local natural environments. However, we would expect that the market area over which one would vertically sum these values is probably much more limited than for one of the wonders of the world or an endangered species found nowhere else on earth. Future research into the extent of the market for locally signicant versus nationally or internationally signicant natural environments may be an important next step. Notes
1. 2. The four reference operating conditions are: (1) familiarity with the commodity to be valued; (2) prior valuation or exchange experience (in our case the sales tax add on votes); (3) there must be little uncertainty; (4) WTP not WTA values are measured. Latest mail-in ballot election was 45% (see http://www.fcgov.com/cityclerk/results-2011 apr.php) and the 1995 mail-in ballot was 42% (see http://www.usmayors.org/best practices/bp_volume_2/fortcoll.htm).

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