A community surrounding a popular Alberta lake enjoyed a quantifiable economic benefit, in addition to other positive outcomes, after it signed a water management agreement with an agency that manages the lake for irrigation purposes.
Not only were water levels in the lake stabilized and water quality levels monitored, the value of shoreline properties rose considerably as a result of how those changes improved recreation and other services, according to a study conducted by researchers in ALES.
The property value increase led to the community collecting more taxes on those properties, and that amount offset the fees it has paid for the water management in the first place, by 16 to 25 per cent.
"We're interested in the value of ecosystem services provided by water," said Peter Boxall, chair of the Department of Resource Economics and Environmental Sociology, and one of authors of the study that demonstrated and captured the value of properties at Chestermere Lake, just east of Calgary.
"It's no mystery that stabilizing water levels increases shoreline property values. What we've done is look at the tax implications, using a reliable econometric approach."
The study is significant because it quantifies one of water's ecosystem services benefits for the first time in arid Alberta, where water is already of high value.
"That's very rare to find," said Boxall. "It hasn't been done (for example) for wetlands. Everyone just assumes they're good for residential property values in proximity."
If scientists and others want to justify work being done on the environment in pursuit of ecosystem services benefits- which can range from spiritual and recreational benefits to the control of climate and disease, or in this case, property values - then a beneficiary needs to be identified, said Boxall.
To do so, his team examined the property values of waterfront homes on Chestermere Lake between 2001 and 2010 (before and after a water management agreement was signed). It compared their values to non-waterfront homes, and also to a control set of properties in a community in Calgary that is also on a lake.
In its water management agreement, the town of Chestermere paid $334,000 annually to the Western Irrigation District, beginning in 2005. For the fee, the irrigation agency stabilized water and phosphorous levels in spring and summer, and cooperated on weed control. The irrigation agency, which has owned the lake since the 1940s, continued to use lake water for its purposes.
Boxall and fellow researchers Hyun No Kim and Vic Adamowicz found that for approximately 1,800 house sales that occurred after the agreement was in place, the total price increase was $58 to $94 million (the range covers comparisons of lakefront to the control group, and lakefront to non-lakefront.) Meanwhile, the total tax revenues increased between $265,000 and $430,000.
The study's results could help other irrigation water managers and policy makers, says Boxall, both because they show that some of the costs of water management can be offset by the increases in value of associated properties, and also because they sheds light on another perspective to irrigation infrastructure.
"Irrigation is controversial," he said. "Why are we irrigating deserts to grow alfalfa? To some people that makes no sense. But it happens and there are many reasons why it happens. Here, you're looking at another interesting positive value arising from the existence of this infrastructure, beyond water used for crop production."
The study, The Demonstration and Capture of the Value of An Ecosystem Service: A Quasi-Experimental Hedonic Property Analysis, is published in the American Journal of Agricultural Economics.
Not only were water levels in the lake stabilized and water quality levels monitored, the value of shoreline properties rose considerably as a result of how those changes improved recreation and other services, according to a study conducted by researchers in ALES.
The property value increase led to the community collecting more taxes on those properties, and that amount offset the fees it has paid for the water management in the first place, by 16 to 25 per cent.
"We're interested in the value of ecosystem services provided by water," said Peter Boxall, chair of the Department of Resource Economics and Environmental Sociology, and one of authors of the study that demonstrated and captured the value of properties at Chestermere Lake, just east of Calgary.
"It's no mystery that stabilizing water levels increases shoreline property values. What we've done is look at the tax implications, using a reliable econometric approach."
The study is significant because it quantifies one of water's ecosystem services benefits for the first time in arid Alberta, where water is already of high value.
"That's very rare to find," said Boxall. "It hasn't been done (for example) for wetlands. Everyone just assumes they're good for residential property values in proximity."
If scientists and others want to justify work being done on the environment in pursuit of ecosystem services benefits- which can range from spiritual and recreational benefits to the control of climate and disease, or in this case, property values - then a beneficiary needs to be identified, said Boxall.
To do so, his team examined the property values of waterfront homes on Chestermere Lake between 2001 and 2010 (before and after a water management agreement was signed). It compared their values to non-waterfront homes, and also to a control set of properties in a community in Calgary that is also on a lake.
In its water management agreement, the town of Chestermere paid $334,000 annually to the Western Irrigation District, beginning in 2005. For the fee, the irrigation agency stabilized water and phosphorous levels in spring and summer, and cooperated on weed control. The irrigation agency, which has owned the lake since the 1940s, continued to use lake water for its purposes.
Boxall and fellow researchers Hyun No Kim and Vic Adamowicz found that for approximately 1,800 house sales that occurred after the agreement was in place, the total price increase was $58 to $94 million (the range covers comparisons of lakefront to the control group, and lakefront to non-lakefront.) Meanwhile, the total tax revenues increased between $265,000 and $430,000.
The study's results could help other irrigation water managers and policy makers, says Boxall, both because they show that some of the costs of water management can be offset by the increases in value of associated properties, and also because they sheds light on another perspective to irrigation infrastructure.
"Irrigation is controversial," he said. "Why are we irrigating deserts to grow alfalfa? To some people that makes no sense. But it happens and there are many reasons why it happens. Here, you're looking at another interesting positive value arising from the existence of this infrastructure, beyond water used for crop production."
The study, The Demonstration and Capture of the Value of An Ecosystem Service: A Quasi-Experimental Hedonic Property Analysis, is published in the American Journal of Agricultural Economics.