January 1978
Socioecononic Environmental Studies Series
OPTION VALUES, PRESERVATION VALUES
AND RECREATIONAL BENEFITS
OF IMPROVED WATER QUALITY:
A Case Study of the South Platte River
Basin, Colorado
Health Effects Research Laboratory
Office of Research and Development
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina 27711
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EPA-600/5-78-001
January 1978
OPTION VALUES, PRESERVATION VALUES AND RECREATIONAL
BENEFITS OF IMPROVED WATER QUALITY:
A Case Study of the South Platte River Basin, Colorado
by
Richard G. Walsh, Douglas A. Greenley, Robert A. Young,
John R. McKean and Anthony A. Prato
Department of Economics
Colorado State University
Fort Col I ins, Colorado 80523
Grant No. R 803206-01-5
Project Officer
Donald GiIlette
Criteria and Special Studies Office
Health Effects Research Laboratory
Research Triangle Park, N.C. 27711
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF RESEARCH AND DEVELOPMENT
HEALTH EFFECTS RESEARCH LABORATORY
RESEARCH TRIANGLE PARK, N.C. 27711
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DISCLAIMER
This report has been reviewed by the Health Effects Research
Laboratory, U.S. Environmental Protection Agency, and approved for
publication. Approval does not signify that the contents necessarily
reflect the views and policies of the U.S. Environmental Protection
Agency, nor does mention of trade names or commercial products
constitute endorsement or recommendation for use.
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FOREWORD
The many benefits of our modern, developing, industrial society are
accompanied by certain hazards. Careful assessment of the relative risk
of existing and new man-made environmental hazards is necessary for the
establishment of sound regulatory policy. These regulations serve to
enhance the quality of our environment in order to promote the public
h.ea!th and welfare and the productive capacity of our Nation's population.
The Health Effects Research Laboratory, Research Triangle Park,
conducts a coordinated environmental health research program in toxicology,
epfdemiology, and clinical studies using human volunteer subjects. These
studies address problems in air pollution, non-ionizing radiation,
environmental carcfnogenesis and the toxicology of pesticides as well as
other chemfcal pollutants. The Laboratory develops and revises air quality
criteria documents on pollutants for which national ambient air quality
standards exist or are proposed, provides the data for registration of new
pesticides or proposed suspension of those already in use, conducts research
on hazardous and toxic materials, and is preparing the health basis for
non-ionizing radiation standards. Direct support to the regulatory function
of the Agency Is provided In the form of expert testimony and preparation of
affidavits as well as expert advice to the Administrator to assure the
adequacy of health care and surveillance of persons having suffered imminent
and substantial endangerment of their health.
Pollution may impact upon man either directly by altering his
health status or indirectly by altering the environment and his
ability to derive enjoyment thereof. This study attempts to measure,
in economic terms, some of the dfsamenltfes which are imposed upon
man from tfie pollution of our streams and rivers. These disamenities
are measured by estimating the willingness of individuals and households
to pay for the preservation and improvement of the quality of water in
selected river basins. The total annual benefits from improved water
quality In the South Platte Basin of Colorado was estimated to be in
excess of $60 million per year, of which nearly one half was directly
related to water based recreation uses and the remaining to non user
activities, I.e., the desire to maintain and preserve the quality of
the water for future use or generations.
H. Knelson, M.D.
Director,
Health Effects Research Laboratory
If
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ABSTRACT
This is believed to be the first empirical test of the concept of
option value for any non-market good. Application of the bidding game
technique was successful in meeting the primary study objective of measuring
the option value of improved water quality. Also included are improved
estimates of the benefits to recreational users of enhanced water quality,
the existence value of a natural ecosystem, and the value of its bequest
to future generations. The relationship between the value of improved water
quality and several socioeconomic variables was tested with regression and
other statistical procedures. The report is based on direct interviews with
202 residents of Denver and Fort Collins located in the South Platte River
Basin, Colorado. Interviewees responded to the survey within the context
of improving the quality of water degraded by heavy metals from post mining
activities and preventing future degradation from such sources. Substantial
benefits from improved water quality are indicated. Recreation user house-
holds interviewed reported they were willing to pay an average of $56.68
annually for improved water quality by 1983 to enhance enjoyment of water-
based recreation activities in the River Basin. Willingness to pay for the
option to choose to engage in water-based recreation activities in the
future contributed $22.60 annually to resident user household values.
Adding the two values, the total recreation value of improved water quality
to the 80.8 percent of the households who expect to continue to use water-
ways in the River Basin for recreation activities averaged $79.28 annually.
This was equivalent to $5.26 per household activity day in 1976. Preserva-
tion value of water quality was equal to nearly one-half of recreation
values. The 19.2 percent of the resident households interviewed who do
not expect to use the River Basin for recreation activities in the future
reported they were willing to pay an average of $24.98 annually for the
existence of a natural ecosystem and $16.97 annually to bequest clean water
to future generations, for a total preservation value of $41.95 annually.
As a first approximation, the existence and bequest value estimates for
non-user households were extrapolated to all residents of the River Basin,
including users. Future research should measure existence and bequest
values of recreation users as well as non-users to test the reasonableness
of this procedure.
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TABLE OF CONTENTS
Page
FOREWORD Hi
ABSTRACT ;v
TABLE OF CONTENTS v
LIST OF FIGURES vij
LIST OF TABLES vm
ACKNOWLEDGEMENTS xi
CONCLUSIONS xij
SECTIONS
1. INTRODUCTION 1
Background and Scope of Study 1
Objective and Plan of Study 2
2. CONCEPTUAL FRAMEWORK 5
Review of the Theoretical Literature on Option Value ... 5
An Empirically Testable Formulation of
Preservation Values 9
Option Value and Irreplaceable Environments 9
Existence Value 13
Bequest Value 14
3. RESEARCH PROCEDURES 16
Study Area 16
Sample Selection 19
Contacting Respondents 23
Color Photographs 25
Method of Payment 28
Bidding Game 29
4. USE AND NON-USE VALUES 34
Option and Recreation Use Value 34
Existence and Bequest Value 37
Annual Benefits and Present Value of Future Benefits ... 39
Method of Payment 41
River Basin Versus State Values of Improved Water Quality . . 43
Delay to Year 2000 45
Level of Water Quality 47
Inter-City Comparisons 4^
5. SOCIOECONOMIC VARIABLES 51
Household Income 51
Sex of Respondent 55
Employment 57
Education 60
Former Residence 60
Reasons for Moving 63
Permanence of Residence 63
Age of Respondent 66
Size of Household 66
Recreation Use 69
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Page
APPENDIX 73
References 73
Water Quality Opinion Survey 79
Environmental Awareness .. 83
Statistical Analysis 85
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LIST OF FIGURES
Number Page
1 The South Platte River Basin 17
2 Three Levels of Water Quality, South Platte River
Basin, Colorado, 1976 26
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LIST OF TABLES
Number
Page
1 Sample Response in Denver and Fort Collins,
Colorado, 1976 20
2 Comparison of Population and Sample Demographic Profile
Estimates of Denver and Fort Collins, Colorado, 1976 . . 22
3 Heavy Metal Pollution at the Three Photograph Sites,
South Platte River Basin, Colorado, 1973 27
4 Total Number of Respondents Interviewed Compared to the
Number Answering Questions Relating to Value of Water
Quality and the Number Willing to Pay, Denver, Fort
Collins, and South Platte River Basin, Colorado, 1976 . . 31
5 Willingness of Recreation User Households to Pay
Additional Sales Tax to Improve Water Quality, Denver,
Fort Collins and South Platte River Basin, Colorado, 1976 . 35
6 Willingness of Recreation User and Non-User Households
to Pay Additional Sales Tax to Improve Water Quality
for Preservation of the Existence of a Natural Ecosystem
and its Bequest to Future Generations, Denver, Fort
Collins and South Platte River Basin, Colorado, 1976 . . 38
7 Annual Value and Present Value of Benefits from Water
Quality Improvement for Recreation, Option, Existence,
and Bequest Demands by Residents of the South Platte
River Basin, 1976 40
8 Willingness of Resident Households to Pay Additional
Water Bill to Improve Water Quality, Denver, Fort
Collins and South Platte River Basin, Colorado, 1976 . . 42
9 Willingness of South Platte River Basin Residents to
Pay an Additional Sales Tax to Improved Waterways
Throughout Colorado, 1976 44
10 Effects of Delay to the Year 2000 on WiIlingness to Pay
an Additional Sales Tax to Improve Water Quality in
South Platte River Basin, Colorado, 1976 46
11 Effect of Level of Water Pollution Control on Willingness
of Residents to Pay an Additional Sales Tax to Improve
Water Quality for Recreation Use in the South Platte
River Basin, Colorado, 1976 48
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Number Page
12 Regression Coefficients of Significant Socioeconomic
Variables, Denver and Fort Collins, Colorado, 1976 ... 52
13 Household Income and Willingness to Pay Additional
Sales Tax for Improved (C-A) Water Quality, Denver,
Fort Collins, and South Platte River Basin, Colorado,
1976 53
14 Marginal Effect of a Change of Income on Willingness
to Pay Additional Sales Tax for Improved Water Quality,
at Various Age Levels, Denver Metropolitan Are-'i,
Colorado, 1976 54
15 Sex of Respondents and Willingness to Pav Ar?~ rir-r...-
Sales Tax for Improved (C-A) Water Quality, Denver,
Fort Collins, and South Platte River Ba?in, ColoraH^
1976 Cf
16 Where People Work and Will ingness +o Pay AJ.''I '•:•- -
Sales Tax for Improved (C-A) Water duality, ler>,<-
Fort Collins, and South Platte River Basin, Colorado,
1976 5£
17 Occupation and Willingness to Pay Additional Sales Tax
for Improved (C-A) Water Quality, Denver, Fort Collins,
and South Platte River Basin, Colorado, 1976 5°
18 Education and Willingness to Pay Additional Sales Tax
for Improved (C-A) Water Quality, Denver, Fort Collins,
and South Platte River Basin, Colorado, r'76 £1
19 Size of Place of Previous Rer.idf-nce an:: V; i I i I r. jne^s to
Pay for Imprcvec (C-A) Water -ual'Tv, Denver, ?:ort Collins
and South Dlatte River Ba?in, Co I once, 1 Q >> ''
20 Reason for Moving to Colorado and Willingness TO Pav
Additional Sales Tax for Improved (C-A) Water Oualitv,
Denver, For"- Collins, and South Platte River Basin,
Colorado, 1976 <•-
21 Permanence of Residence and Willingness to Pay
Additional Sales Tax for Improved (C-A) Water Oualitv,
Denver, Fort Collins, and South Platte River Basin,
Colorado, 1976
22 Age and Willingness to Pay Additional Sales Tax for
Improved (C-A) Water Quality, Denver, Fort Collins, and
South Platte River Basin, Colorado, 1976
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Number
Page
23 Size of Household and Willingness to Pay Additional
Sales Tax for Improved (C-A) Water Quality, Denver,
Fort Collins, and South Platte River Basin, Colorado,
1976 68
24 Survey Respondents' Reported Annual Water-Based
Recreation Activity Day in the South Platte River
Basin and Willingness to Pay Additional Sales Tax
for Improved (C-A) Water Quality, Denver, Fort
Collins, and South Platte River Basin, Colorado,
1976 70
25 Survey Respondents' Reported Annual Water-Based
Recreation Activity Days in the United States and
Willingness to Pay Additional Sales Tax for
Improved (C-A) Water Quality, Denver, Fort
Collins, and South Platte River Basin, Colorado, 1976 . . 71
26 Environmental Awareness of Residents, Denver, Fort
Collins, and South Platte River Basin, Colorado, 1976 . . 84
27 Grouped T-test of Significant Difference Between
Average Benefits from Improved Water Quality in
Denver and Fort Collins, Colorado, 1976 91
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ACKNOWLEDGEMENTS
Without implicating them in the final results, we wish to express our
thanks to Dr. Anthony Fisher, University of Maryland, Dr. John Krutiila,
Resources for the Future (Washington, D.C.), Dr. Allan Randall, University
of Kentucky, Dr. Phillip Meyer, Fisheries and Marine Service (British
Columbia, Canada), Dr. Lawrence Leuzzi, University of Hawaii, and
Jonathan ScherschIight, Water Quality Control Division, Colorado
Department of Health, for their assistance in development of the con-
ceptual framework and questionnaire used in this study.
We also wish to acknowledge the support by the Colorado State Univer-
sity Experiment Station of the sample survey and a portion of the principal
investigators' salaries. A number of colleagues at Colorado State Univer-
sity have raised questions and provided useful criticism: Dr. Perry Brown,
Recreation Resources Management, Dr. Raymond Anderson, Economic Research
Service, USDA, and Dr. Kenneth C. Nobe, Chairman of the Department of
Economics.
The authors also thank Mr. Austin Buckman for interviewing assistance
and Ms. Denese Gekas for typing the drafts of this report.
Finally, the advice and patience of Fred Abel, Dennis Tihansky,
Thomas WaddelI and Donald Gillette, EPA Project Officers, have been
greatly appreciated.
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CONCLUSION!:,
The purpose of this study was to develop and apply a procedure for
measuring the benefits of improved water quality in terms of: (1) enhanced
enjoyment of water-based recreation activities, (2) option values to choose
1o engage in water-based recreation activities in the future by avoiding
irreversible mineral and energy pollution, (3) preservation value of the
existence of a natural ecosystem and its bequest to future generations.
''Yohlems in the estimation of preservation values were discussed. This
report is based on interviews of 202 resident households in Denver and
Fort Collins, located in the South Platte River Basin, Colorado, in which
the bidding game technique was used as an estimating technique. A number
of statistical procedures, including regression analysis of the relation-
v' h"tv-,,.-n responses regarding ir-.er values and option values, were analysed,
ru-.-.r, r : i b ,-iccrue to users ot laKei, and streams tor fishing, boating
sr. _.v\ ',:• :r:' n j aj well ds n^n-^n tact recreation activities su^h o^ picnicklru
ar,.J sightseeing near water from enhanced aesthetic satisfaction of such
recreation experiences. Recreation user households interviewed reported
tht_'Y were wi I I i ng to pay an average of $56.68 annual iy for improved water
quality by 1983 to enhance enjoyment of water-based recreation activities
i r, th-; River Basin.
WiI I inqness to pay for the option to choose to engage in water-based
recreation activities in the future contributed $22.60 annually to resi-
dent user household values, or about 40 percent. The Henry Model tested
in this study was presented in terms of willingness to pay for the option
of choosing between two environmental alternatives, either clean water or
polluted water from energy and mineral development, at some future date
under conditions of sufficient knowledge as to the relative benefits of
each +o the respondents. Adding the two values, the total recreation
v-alue of improved water quality to the 80.8 percent of the households
who expect to continue to use waterways in the River Basin for recreation
activities averaged $79.28 annually. This was equivalent to $5.26 per
household activity day in 1976.
The preservation value of water quality improvement was equal to nearly
one-half recreation use values. The 19.2 percent of the resident households
interviewed who do not expect to use the River Basin for recreation acti-
vities in the future reported they were willing to pay an average of $24.98
annually for the existence of the natural ecosystem and $16.97 annually to
bequest clean water to future generations, for a total preservation value
of $41.95 annualIy.
As a first approximation, the existence and bequest value estimates
for non-user households were extrapolated to all residents of the River
Basin, including users. Recreation users reported preservation values of
$66.87 annually under the assumption they would not engage in recreation
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activities in the River Basin. This expected preservation value if no
recreation activities were present could not be added to recreation use
vaIues.
Total annual benefits from water quality improvement in the South
Platte River Basin were estimated at $61.1 million, including recreation
use value of $26.4 million, option value of $10.5 million, existence value
estimated at $14.4 niI I ion, and bequest value of $9.8 mi II ion. This was
the estimated value for the 576,435 households in the River Basin in 1976.
The present value of a perpetual stream of annual benefits from water
quality improvement in the South Platte River Basin was calculated as
$938.5 million, including recreation use value of $414.1 million, option
vaIue of $ 165.i '"i I lion, ex i stence vaIue est imated at $225.9 million, and
bequest value of $15^,4 million. Present value is the amount of money
that would have to be invested at 6 3/8 percent interest today in order
to yield trie specified annual benefits from improved water quality for
an inoefinite Deriou of time. This is likely to prove a conservative
estimate because of DO^ulation growth and the exclusion of tourists who
account for approximately 30-40 percent of total water-based recreation
activities in the ~iv.-"- Basin.
Residents reported they were willing to pav more for improved water
quality when the method of hypothetical payment was an increase in sales
tax compared to an increase in water bill. Willingness to pay for improved
water quality was reported as about one-third as much in annual water bill
as annual sales tax. Respondents were more reluctant to participate in
the water biM value estimation procedure. This may have resulted from
perceived inequities. Everyone including tourists pay sales tax whereas
only property owners and indirectly renters, Day water bills. Moreover,
willingness to pay additional sales tax was approximately the same per-
centage of the annual sales tax bill as the willingness to pay additional
w.-iJ.->"- hill was of the annual water bill. Thus, the selection among alter-
native methods of hypothetical payment affects the resulting values.
Ke^jl+s of this study suggest that the River Basin is an appropriate
:eographic area when evaluating willingness to pay for improved water
quality. Respondents were also queried as to their willingness to pay
if the added revenues were used throughout the state rather than only in
the South Platte Basin. There was no significant difference between willing-
ness to pay to improve water quality in the River Basin and throughout
Colorado. It seems that residents of the River Basin are not willing to
pay directly for improved water quality in other river basins in the state.
Nearly 40 percent of the residents of the River Basin were of the opinion
that the community as a whole should bear the primary responsibility for
paying the costs of water quality improvement. An additional 15 percent
reported the opinion that the polluting industries should pay the costs,
while 30 percent favored sharing the costs between polluting industries
and the people benefiting. Residents of other river basins in the state
may be willing to pay to improve water quality in their local areas. River
basin values appear to be additive throughout the state.
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The measures of willingness to pay for improved water quality through-
out this report were based on the premise that all waterways in the River
Basin^would be cleaned up by 1983 and then maintained in a clean state
indefinitely. If circumstances such as postponement of environmental
quality objectives resulted in delaying the improvement of water quality
in the River Basin to the year 2000, the proportion of respondents willing
to pay some amount of additional sales tax for improved water quality to
enhance recreation enjoyment would decline by 11 percent. If it is not
possible to improve water quality in the River Basin until the year 2000,
annual willingness to pay for recreation use would fall by an average of
$10.51 per household or 17.4 percent.
As pollution levels increased, willingness to pay for improved water
quality increased more than proportionately. Improving polluted water
to an intermediate quality level accounted for 63 percent of total recrea-
tion benefits from clean water in Fort Collins and 74 percent in Denver.
This is the willingness to pay for enhanced recreation use, as respondents
were not asked for the value of option, existence and bequest demands
attached to an intermediate level of water quality. With only three data
points, it would be heroic to generalize about the nature of the slope
of the benefit curve for water quality improvement. The average values
suggest that recreation use benefits from water quality improvement in-
crease at a decreasing rate.
The hypothesis that size of city may affect the willingness to pay
for improved water quality was not supported by this study. There was no
significant difference in the recreation use value and option value re-
ported in the two cities at the 95 percent confidence level.
The expectation that recreationists would be willing to pay more than
non-users for improved water quality was not supported by this study. The
relationship between the number of water-based recreation activity days
annually in the South Platte River Basin and willingness to pay for im-
proved water quality was not significant at the 95 percent confidence level.
Average values suggest that the relationship may have been curvilinear. As
recreation activity increased from zero to 21 days annually, average water
quality values also tended to increase. Over 21 days annually, water qual-
ity values fell off. However, the tendency was not always consistent.
The average option value of water quality increased continuously over the
entire range of recreation use, but changes in value were not statistically
signif icant.
Income was positively related to willingness to pay for improved water
quality. Level of household income was significant at the 5 percent level
in the regression analysis of variables associated with the value of
improved water quality for recreation use. For example, in Fort Collins
a $1,000 increase in household income was associated with a $3.66 increase
in willingness to pay a sales tax for improved water quality. Regression
analysis showed a significant positive relationship between household
income and option value of water quality, in both cities, as measured by
lingness to pay additional sales tax. However, in Fort Collins, there
w i
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was a negative correlation between household income and option value of
water quality, as measured by willingness to pay additional water bill.
A higher proportion of Fort Collins residents engaged in water-based recrea-
tion activities outside of the River Basin than did Denver residents.
Where people work and the type of work they do had a significant
effect on the value of improved water quality for recreation. Employees
of small business and government were willing to pay more for water quality
than either employees of large business and manufacturing or unemployed
persons. The lowest values were among the retired. Employees of small
business in Denver were willing to pay $25.08 more sales tax for improved
water quality. Government employees were willing to pay $28.44 more than
respondents work! ng in the private sector. In Denver, professionals and
business owners and rrunniiers valued water quality for recreation use by
$!'1.(>7 per yoor loss Hum other occupations. Retired residents valued
w.ilor qualify for nn re.rHon uso by $30.03 less than those who remained
nrlivo in ("he work forv.o.
Whether fho respondent was male or female had a significant effect
on willingness fo pay to improve water quality for recreation use. For
example, rnon were williru] to pay $26.^5 more for water quality than women
in Denver. The primary reason may have been that men engage in water-
based recreation activities more than women, particularly fishing and to
some extent boating. Apparently women who worked outside the home were
particularly reluctant to allocate more of their income to sales taxes
for improved water quality because housewives who remained in the home were
willing to pay $20.91 annually more than those employed in other occupa-
tions, whether male or female.
Number of children in the household was not significant at the 5 per-
cent level in the regression of variables associated with the value of
improved water quality for recreation use. However, there was a significant
relationship between number of children per household in Fort Collins and
the option value of water quality. As the number of children in Fort Collins
households increased, option value decreased by $10.45 per year.
Education level may be associated with more concern about the future
of water quality than with current recreation use. There was a positive
correlation between level of education and option value of water quality in
Fort Collins. The relationship was significant at the 5 percent level.
However, education was not significant at the 5 percent level in regression
analysis of factors explaining the value of improved water quality for
recreation use.
Age may be associated with less concern about the future of water
quality, while concern about current recreation use is not associated with
age. Older people were less concerned with preserving their option to
engage in water-based recreation activities in the River Basin in the
future. For example, willingness to pay a water bill declined by $6.60
with each 10 year increase in age of Denver respondents. However, age of
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respondent was not significant at the 5 percent level in regression analysis
of factors associated with the value of improved water quality for current
recreation use.
Permanance of residence was a significant variable in regression
analysis of variables associated with the value of improved water quality
for recreation use. For example, Denver residents were willing to pay
$3.40 less water bill for each 10 years they lived in the city. This ap-
pears contrary to the expected effects of permanence of residence on commu-
nity pride, preservation of neighborhoods, and a quality environment.
Recently arrived residents were willing to pay more than residents of
11-20 years and 21-40 years. Thus, the immigration of young adults into
the state in the past decade may have increased the value of improved water
qua Ii ty.
Reasons given for moving to the River Basin were not significant in
regression analysis. However, average values suggest that residents who
immigrated to the River Basin for environmental reasons may value water
quality more highly than those who came for other reasons. This would be
consistent with the widespread belief that many people move to Colorado
because'of its reputation for a quality living environment.
Size of former residence was significant in regression analysis of
variables associated with the recreation use and option value of improved
water quality. For Denver residents, the smaller the place of former resi-
dence, the more they tended to value water quality. Having developed an
appreciation for the natural environment in rural areas, they may place
special emphasis on preserving it for recreation use in the future. For
residents of Fort Collins, regression analysis shows the larger the place
of former residence, the more they valued water quality. Perhaps those
who are wiI I ing to pay more for improved water qua Iity tend to migrate to
smaller cities which have recreation resources nearby, while those who are
less willing to pay for water quality remain in or move to large cities.
The bidding game technique was successful in meeting the objective of
valuing the benefits of improved water quality. Bidding game techniques
have been successfully used as a research tool for valuation of air quality
in the past. The technique appears appropriate for valuation of a wide
variety of non-market goods including water quality. It should be remem-
bered, however, that bidding games measure the hypothetical responses of
individuals faced with hypothetical situations. Thus, considerable care
must be exercised in the design of bidding games and the conduct of sur-
veys, to ensure the results obtained are as realistic as possible
XVI
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SECTION 1
INTRODUCTION
BACKGROUND AND SCOPE OF STUDY
This study is an attempt to analyze and quantify recreational and
aesthetic benefits accruing to society from the control of water pollu-
tion.— Improving the estimation of benefits from pollution control pro-
grams is one of the more challenging aspects of applied benefit-cost analysis.
Determination of willingness to pay for recreational and aesthetic attributes
of improved environmental quality has proven to be a difficult aspect of
an already complex problem. In addition to the usual difficulties encoun-
tered in measuring the value to society of a recreation user good where
market transactions are absent, the benefits from pollution abatement may
include significant "option," "existence" and "bequest" components. The
primary contribution of this study will be to empirically test the importance
of these l< rter values relative to the conventional user value. However,
as noted above, measurement of the non-market and rather abstract values
such as "option," "existence" and "bequest" requires careful development
of a methodology which allows the assessment of the worth of such attributes
of water pollution abatement to members of the appropriate populace.
Krutilla [1967] noted several possible instances of willingness to pay
for environmental conditions which were distinct from the direct or imme-
diate benefits to users of the environment. These additional contributors
to the worth of a natural environment Krutilla termed "preservation bene-
fits." Because this study concentrates on the development and implementation
of a procedure for measuring these "preservation benefits" it is appropriate
to carefully delineate just what will be measured at the outset.
Option value has been the subject of considerable controversy among
economists. This study will utilize a definition and model developed by
Henry [1974]. Option value is taken to mean the premium that individuals
would be willing to pay to preserve irreplaceable environmental resources
— A complete >._unomic analysis of a proposed pollution control policy
would attempt to measure (a) the benefits of pollution control, (b) the costs
of reducing or removing waste discharge, (c) the costs of monitoring and
enforcement of regulations, and (d) where chronic unemployment exists, the
indirect or secondary benefits and costs. A feasible policy Is one for which
the incremental benefits exceed the incremental costs [Kneese and Schulze,
1975].
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now, in order that at some future date, when the necessary information
affecting their decision whether or not to preserve the environment is
available, they can at that time make the decision. It should be noted
that this construct is quite different from earlier notions of option
value. Existence value is simply the willingness to pay for the knowledge
that the natural environment is preserved. Bequest value, which seems
closely related to existence value, is the worth to present generations
from preserving the environment for future generations.
Pollution of a river or |ake to the extent that it diminishes the satis-
faction of some individuals is a damage and improved water quality, is a
benefit. Improvement in water quality which reduces this kind of external
cost is a non-market product, since it is non-exclusive, and a public good
since it is inexhaustible at least over a substantial range. That is, more
consumers of this kind of environmental improvement can be added without
diminishing the aesthetic appreciation and recreation use of the resource
available to each individual. Additional beneficiaries can be added at near
zero marginal cost over a substantial range.
Bradford [1970] has presented a conceptual framework for the valuation
of public goods. Traditional demand curves are inappropriate for the analy-
sis of demand for public goods, since the situation is not one of individuals
responding to a price per unit by choosing an appropriate number of units.
Rather, the individual directly arrives at the total value to himself of
various given packages. In the case of a public good, the individual is
unable to exercise any choice over the quantity provided him, except as a
member of the group of residents of a river basin which make a social choice.
The nature of a public good, such as water quality improvement, is that
increases in the quantity provided are not purely quantitative increases,
but are more in the nature of improvements in quality. Thus, the individual
compares, alternative packages of a public good, which may differ in quantity
and quality [Randall, 1974].
OBJECTIVE AND PLAN OF STUDY
The primary objective of this study is to develop and apply a procedure
for analyzing the benefits of improved water quality to both recreational
users of the resource as well as non-users. The South Platte River Basin,
located in northwestern Colorado was selected as the site for a case study.
A random sample of 202 residents of Denver and Fort Collins were interviewed
in their homes in the Summer of 1976.
Specific objectives are:
1. Develop a conceptual framework and empirically test its application
in the measurement of benefits of water quality improvement. Bene-
fits to be measured include:
a. Consumer surplus from enhanced enjoyment of water-based recrea-
tion activities;
b. Option value of assured choice of recreation use in the future
-------
by avoidance of irrevocable pollution by mineral and energy
development, and
c. Existence and bequest values for non-users.
2. Identify the relationship between these values and the quality of
water available as measured on a 3-point scale from low to high.
3. Test statistically the relationship between the expressed values
of improved water quality and socioeconomic variables including
income, degree of urbanization, education, age, occupation, amount
of water-based recreation, and family size.
A review of previous research shows that a number of studies have been
completed on question la of this study, recreation user benefits from water
quality improvement. No empirical estimates, to our knowledge, have been
developed on objective 1b, option value, and only one study of objective 1c,
the value associated with preservation of the existence of a natural eco-
system and its bequest to future generations. Davidson, Adams and Seneca
[1966] related unimproved and improved water quality to recreation partici-
pation in boating and fishing in the Delaware Estuary. Improved water
quality resulted in an additional 8.7 million discounted activity days of
boating and about .9 million days of fishing. No empirical estimates of
dollar values were developed. Willeke [1968] related water quality improve-
ment to recreation participation at San Francisco Bay, California. Ditton
and Goodale [1972] showed the relationship between water quality improve-
ment and recreation participation by residents of Green Bay, Wisconsin.
Stevens [1966] and Stoevener, et_ aj_. [1972] related water quality and angler
success to participation in fishing on the Yaquina Bay, Oregon. Based on
a travel cost procedure, the sport fishery was valued at $22,747 annually.
Reiling, Gibbs, and Stoevener [ 1973] related unimproved and improved water
quality to recreation participation with benefits to recreation users and
regional economic development at Klamath Lake, Oregon. The demand function
for recreation was estimated using travel cost approach. Direct and indirect
benefits of improved water quality were estimated as $2.6 million. An
Environmental Protection Agency draft report [Abel, Tihansky, and Walsh,
1975; Walsh, 1977] estimated the national damages to fishing, boating, and
swimming from water pollution levels in 1970. Extrapolation of previous
information on recreation participation and travel costs resulted in a
damage estimate ranging from $69 per household in travel costs to $115
per household including costs of travel and time at $2 per hour. Ericson
[1977] interviewed a random sample of 141 visitors to Rocky Mountain National
Park in Northcentral Colorado during the Summer of 1973. Willingness of
tourists to pay for improved water quality to enhance enjoyment of water-
based recreation activities averaged $5.55 per day of recreation. Oster
[1977] interviewed 200 residents of the Merrimack River Basin in New Hamp-
shire and Massachusetts reporting they were willing to pay $12 per person
annually for improved water quality in the River Basin. Meyer [1974] inter-
viewed a sample of residents of the Fraser River Basin, Vancouver, Canada
concerning the value of preserving salmon in a natural river environment.
He reported average preservation values of $223 per household annually.
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The remainder of this report is organized into five sections. We out-
line the conceptual framework in Section 2 and describe the research pro-
cedures used in the analysis in Section 3. The empirical findings with
respect to the user and non-user values of improved water quality are
presented in Section 4. Section 5 presents the relationship between
willingness to pay for improved water quality and socioeconomic vari-
ables. The appendix contains the sources of literature, the questionnaire,
and the statistical results of regression analysis.
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SECTION 2
CONCEPTUAL FRAMEWORK
REVIEW OF THE THEORETICAL LITERATURE ON OPTION VALUE
The origin of the concept of option demand may be traced to an article
by Weisbrod [1964]. The formulation was an attempt +o rebut Friedman's [1962]
advocacy of the extreme case of cutting down the redwoods in Sequoia Na-
tional Park. Weisbrod set forth two conditions for the presence of option
demand: (1) infrequency and uncertainty of demand for the commodity under
consideration, and (2) prohibitively high cost in time or resources of
renewing production of the commodity once it has been curtailed. Visits
to Sequoia National Park are usually infrequent and uncertain. Should
production of the magnificent forests be diverted from aesthetic enjoyment
to lumbering, it would require centuries for the forest to become reestab-
lished. The opportunity cost of lumbering would then be the aesthetic
enjoyment foregone.
Weisbrod's analysis began with a simplified problem for which he
assumed that a market exists for the collection of an admission fee from
all users to the park. It was further assumed that the park is privately
owned by a perfectly discriminating monopolist whose present value of
total costs exceed present value of total revenues. All external economies
were assumed away, the product was considered non-storabIe, and the possi-
bility of purchase before consumption was precluded. Given the foregoing
propositions, if the private and social rates of discount are equal, then
based solely on grounds of economic efficiency the park should be closed.
Its productive resources should be reallocated to other uses.
Even so, Weisbrod contended that it may be unsound from society's stand-
point to reallocate the park's resources. Given the presence of "economic
men" who anticipate possibly visiting the park, but who are uncertain and
in actuaIity may or may not make such a visit, they will be wi1 I ing to pay
a fee for an option which would guarantee their access to the park in the
future. If a private market existed whereby this "option value" could be
collected then it would influence the entrepreneur's decisions. However,
without the option market, aggregate user fees would understate the total
worth of the park to society. If in fact the park closes as a consequence
of a lack of a practical way to collect the option value, the option demand
of potential future users is unfulfilled.
Weisbrod emphasizes the fact that option value is significant for
economic decision makers only when a decision to close the park is imminent.
As long as the park remains open the provision of the option is a costless
by-product of current operation. It fulfills the conditions of a pure
-------
collective good since all potential future users of the park can maintain
the option without enfringing on the consumption opportunities of others.
Other examples, cited by Weisbrod, where option value might exist are
hospital service and public urban transit, which often meet the criteria of
infrequent and uncertain demand and high production costs of reestablishing
service once ended. In generalizing, Weisbrod explains that infrequency
and uncertainty, and the high cost of re-initiating production are relative
concepts and hence all goods probably have option value. The more frequent
the purchase and the smaller the cost of re-introduction of a commodity
the smaller will be the significance of option demand.
Following Weisbrod's introduction of option value, a debate ensued
as to whether it was a totally new concept or merely "the unrecognized
son of that old goat, consumer surplus" [Long, 1967J. Long attempted to
show that option value was nothing more than "the expected consumer surplus
from consuming the good at the terms specified in the option." He used
Lerner's measure of consumer surplus as ". . . how much money a consumer
would pay for the right to continue to buy at the current price something
that he is now buying." He pointed out that the difference between his
concept and Weisbrod's is that consumers under the latter definition may
never use the option to purchase a commodity. The key to reconciling the
two definitions according to Long, is recognizing that the terms specified
in the option will have a significant effect on option value.
Given a typical Marshal Iian individual demand curve, consumer surplus
would normally be defined as the area under the demand curve and above price.
According to Long, if price is a positive amount, option value will be
of a smaller magnitude than if price is zero. If price should rise further
to a level that the individual would never purchase the commodity because
of its prohibitively high price, then no option fee would be paid to pre-
serve future access to the good. Since option value is a fee paid for
future access, Long concludes that option value is simply expected consumer
surplus from consuming the commodity at the specified price.
Long contends that divisibility and homogeneity are the important
concerns of option value and not frequency of use as Weisbrod indicated.
In Long's view, etption value attains significance only when discrete
change in product must be made and no good substitute exists, rather than
for marginal changes necessary for efficient resource allocation. Weisbrod's
high cost condition then becomes unrelated to the problem. Long concludes
that introducing option value into economic analysis would serve only to
inflate measures of demand for public goods.
Lindsay, [1969] takes exception to Long's contention that "option
value is exactly the expected consumer surplus from consuming the good
at the terms specified in the option" [Long, 1967]. He points out that
Long ignores Weisbrod's initial assumption of uncertainty of consumption
6
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and implicitly substitutes certainty. Yet, as Lindsay explains it would be
nonsensical to purchase options for future consumption for goods which the
consumer knows with certainty he wiI I or wi II not purchase. But since
uncertainty pervades the future, many consumers may wish to pay a premium
to insure against the risk of not having the commodity available.
The debate continued with comments by Byerlee [1971] and by Cicchetti
and Freeman [1971]. Byerlee formulated the issue in mathematical terms
which up to this point had been missing. Using a game theoretic framework,
Byerlee established that under conditions of certainty of consumption that
option demand was equivalent to consumer surplus. He further argued that
where uncertainty of demand exists, option value as defined by Weisbrod
can be shown to be greater than, equal to, or less than consumer surplus.
He concludes that, as Long had suggested, including both consumer surplus
and option demand would be double counting. He supports a modification of
Lerner's definition of consumer surplus to include "how much money a con-
sumer would pay for the right to buy at the current price something that
he is now buying or may buy in the future" [Byerlee, 1971].
Cicchetti and Freeman countered Byerlee by suggesting that along with
uncertainty in demand, uncertainty in supply must also be considered.
Possible deterioration of the natural amenities of the site must threaten
the continuance of supply for option demand to become relevant. This was
a-condition specified by Weisbrod, which Byerlee neglected in his state-
ment of the probability of option demand. Cicchetti and Freeman used
probabilistic demand theory to illustrate that a risk-averse individual
will be willing to pay a positive amount, to preserve his option of using
a facility in the future, when there is a threat to an irreversible
consequence to the natural environment. Cicchetti and Freeman then
argue for the inclusion of a risk premium to be added to consumer sur-
plus derived from recreational enjoyment of the site.
Schmalensee [1972] disagrees with the approach used by Cicchetti and
Freeman. He considers a state-preference model in a timeless world.
Under the assumption of the model, Schmalensee attempts to show that risk
from either alternative use of a natural environment must be considered.
There is an associated risk if demand for recreation greatly increases
in the future (present non-users opt to recreate at the site in the
future) and the natural environment is not saved for recreation enjoyment.
Schmalensee points out that the other alternative must also be con-
sidered. If the natural environment is preserved there is a risk asso-
ciated with a very small future demand. Society may desire products which
cause pollution of a site more than it desires recreation. The opportunity
cost of preservation becomes very great. It is argued that the magnitude
of each alternative risk determines whether option value is positive,
negative or zero. If the development alternative is riskier, then option
value is positive. Should the preservation alternative prove riskier
then option value is negative. With no way of measuring the sign or
-------
magnitude of the associated risk premiums, Schamlensee regards expected
consumer surplus as an adequate approximation of society's option values.
Henry [1974] suggests that Schmalensee's "timeless world" assumption
where an individual can make but one irreversible decision (one decision
is as irreversible as another) reduces option value to "a risk premium
in favour of 'irreplaceable assets'." Henry proposes a "sequential world"
model where decisions must be made by the individual at appropriate inter-
vals. In so doing, Henry adds to our conception of option value. The
principle changes from paying to preserve the possibility of using an
unspoiled environment, to paying for preserving the option of deciding
later on the two alternative uses of the environment when conditions of
certainty will exist. Henry's model serves as a theoretical basis for
the empirical measurement of option demand in this study. A fuller
presentation of the theory is provided below.
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AN EMPIRICALLY TESTABLE FORMULATION OF PRESERVATION VALUES
Option Value and Irreplaceable Environments
The lengthy debate surrounding the economic delineation of option
value apparently has been laid to rest. Two recent articles published at
about the same time show that option value may exist without the side con-
dition of risk aversion motivating an individual. If there is a prospect
of better information forthcoming relating to alternative uses of an asset
with irreplaceable characteristics a situation arises where a positive
option value may be generated.
Arrow and Fisher [1974] formulated a quasi-option value model developed
in terms of aggregate benefits and costs of alternative environmental action,
They questioned whether or not the existence of option value for the individ-
ual necessarily leads to a similar situation for society. They concluded
that even in the aggregate society must take cognizance of the presence
of option value.
The Henry [1974] model, adopted for this study, was presented in terms
of willingness to pay for the option of choosing between two environmental
alternatives at some future date under conditions of perfect information.
Consider a two period model with the following defined symbols:
N = The N-th individual
U = N's utility function
Y = N's i ncome
CS = N's consumer surplus generated from use of the
natural environment
D = Availability of the natural environment
D = d, the natural environment is available
D = d*, the natural environment has been appropriated
for an alternative use and is not available
0V = Option Value
i = States of the world, i = 1, 2
PJ = Probability that state i wiI I occur
j = Time period, j = 1, 2
CJ = Opportunity cost to retain the natural environment
The postulated model is based on the following assumptions: (1) the future
is uncertain, (2) one use of the natural environment is more irreversible
than the other, (3) a decision is imminent as to which use the natural
-------
environment will be put and (4) sequential decision making takes place
based on better information acquired through time. Let
22 . .
U = E E pJ lh!(Y^, DJ)
j=1 i=1 ' ' '
(where EP. = 1, for j = 1, 2)
be N's two period probability weighted utility function.
tunity cost CJ must be paid to obtain DJ = d, that is, a
Assume an oppor-
cost is imposed
in the form of foregone alternatives if the natural environment is to
remain available.. C1 and C2 must be financed at instant 1 and
respectively if DJ = d is chosen.
are assumed known with certainty
instant 2.
. .For simplicity of exposition CJ and YJ
— Finally assume that
2
E
.,
1=1
P! u!(d)
11
2
E
P! u!(d*)
11
(2)
This assumption specifies that if only the first period is considered, N
will choose d* so that the natural environment is not avaiFable. In this
case the cost, C , of preserving the natural environment is greater than
the associated benefits in period 1.
In the following case no new information is expected to become avail-
able between instant 1 and instant 2. A decision is njade as if a "timeless
world" existed. Consumer surplus for N can be defined as the equating
factor in:
Z
i=1
- CS, d) +
Z
5=1
P? U?(d)
(3)
22..
E E pJ lh!(d*)
• t • 1
=1 1=1
The equation simply states that N wi I I be willing to pay an amount CS at
instant 1 to have d.
— The notation may then be simp lied to
yj (YJ, d*) = U1! (d*) and in later equations, U^ (YJ - CJ, d) = U-j (d)
10
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Even after payment of the amount CS, the individual will still receive
the same expected utility as if the natural environment were not available.
Note that N wi I I choose the preserved natural environment as opposed
to the development alternative i f CS > C . No CS term need appear in the
second period term of the preservation alternative since no change in
information occurs between the two periods. As long as C is paid at
instant 1 the natural environment will be available in all following
periods because of the static situation. In this case CS is the present
worth of N of the preserved natural environment for all time.
Now assume that new information enters between instant 1 and instant 2.
Individual N wi I I know with certainty at instant 2 which state of the
world will obtain. Allowing for a sequential decision making process to
take place the following question must be answered: How much will N be
willing to pay at instant 1 to (1) enjoy the natural environment through
period 1 and (2) to have the option of choosing under conditions of cer-
tainty at instant 2 whether or not to retain the natural environment?
The preceding question can be answered by referring to the following
equation :
2 2
E P! ul(Y1 - CS1 - 0V, d) + £ P? max {U?(d), U?(d*)} =
1=1 ' ' 1=1'''
(4)
22..
Z Z pJ IhUd*).
•1-1 ' '
j=1 1-1
The terms CS and 0V are the balancing factors in equation (4). At instant 1
individual N wi I I be willing to pay CS to enjoy the natural environment
during period 1. In addition N is willing to pay an amount 0V to choose,
at instant 2, either the preserved environment or the development alternative
with full knowledge of which state of the world will obtain. In equation (4)
CS results from the enjoyment of the preserved natural environment through
period 1 only.
Note that the magnitude of 0V in period 1 is a function of the magni-
tudes of P?, U?(d) and U?(d*) in period 2 as they exist at instant 1.
In considering the term (max (U?(d), U.(d*)}) four possible cases can
occur:
(a) U(d) > U(d*) and
(b), U(d) < U(d*) and
11
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(0 U(d) < U(d*) and UCd) < U
(d) U^(d) > U^(d*) and U^d) > U
If, for example, situation (a) evolves then:
Z [P u (Y1 - CS1 - 0V, df] + Pf uf(d) + P; U,(d*) = (5)
i = 1 —"II L Z.
22..
E I pJ lh!(d*)
The i nequa I i ty :
2
P^ U^(d) + P^ U^Cd*) > E P? U?(d) (6)
i = 1 ' '
exists because maximum values of U?(d) and U.(d*) were chosen. Therefore
0V > zero and d will be chosen at Instant 1 if CS1 + 0V > C1 - The magnitude
of 0V is determined precisely by the difference between the right and left-
hand expressions of inequality (6). In cases (b) and (c) 0V will likewise
be positive. Only in case (d) will option value be equal to zero. None
of the four possible situations will produce a negative option value.
Option value is irrelevant to the decision-making process as long as
CSJ > C-J . Here the option to use the environment in the future has been
preserved free of cost. The option is a free by-product as long as the
user benefit of the preserved environment exceeds the opportunity costs
of preservation. It is for this reason that inequality (2) is required.
This expression states that if the first period is considered by itself,
development is preferred over conservation. Under this condition it is
necessary to include explicit consideration of the second period in order
to determine the proper course of action at the beginning of period one.
An empirically derived estimate of 0V is provided in this study. To
meet the assumptions of the model the future was assumed uncertain, a
reasonable assumption for the survey participants. The real threat of
expanding coal and metal mining operations were assumed to have irrever-
sible consequences for rivers and streams in the South Platte River Basin.
This i rreversibi I i ty results from the prohibitive costs of pollution abatement
from non-point sources. Finally, better information as to which use of the
River Basin would be more beneficial to the individual was assumed to be forth-
12
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coming in the future. Respondents were asked what they would be willing
to pay now for the option of making a choice in the future with better
information available as to whether preservation or mining development
would benefit them more.
Existence Value
There exists no rigorous definition and theory of existence value.
It has been defined as the amount an individual would be willing to pay to
preserve an area as a natural habitat for the satisfaction provided by
the knowledge that such an area exists.
KrutiI la [1967] provided a brief introduction to the possibility of
existence demand:
There are many persons who obtain satisfaction from mere
knowledge that part of wilderness North America remains
even though they would be appalled by the prospect of being
exposed to it. Subscriptions to World Wildlife Fund are
of the same character. The funds are employed predomi-
nately in an effort to save exotic species in remote areas
of the world which few subscribers to the Fund ever hope to
see. An option demand may exist therefore not only among
persons currently and prospectively active in the market for
the object of the demand, but among others who place a value
on the mere existence of biological and/or geomorphologicaI
variety and its widespread distribution.
Discussion of existence value is also found in a later work by KrutiI la
and Fisher [1975]. Essentially the same arguments are made to support the
case for existence value.
Existence value like option value attains relevance only when there
is an imminent danger to a natural environment. Otherwise it serves as a
pure public good, free to all as long as the area is preserved. No one can
be excluded from the satisfaction which is derived from the area's existence.
Although an individual may not physically use a natural environment
the knowledge of its existence acquired vicariously provides utility to
him. Let Q be defined as a preserved natural environment serving as a
native habitat for fish, plant and animal life. Knowledge of the exis-
tence of this environment is defined as K. Then K = f(Q). This means
that the natural environment Q is providing the "service" of existence,
knowledge of which yields satisfaction to the individual. A similar service
provided by the area may be the aesthetic appreciation and enjoyment derived
from hiking through the natural setting. One essential difference between
the two services is that the latter is provided "on site" while in the former
case one need never set foot in the area to gain satisfaction derived from
the knowledge of its existence. Since K = f(Q) the satisfaction from
13
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existence knowledge is dependent on the physical preservation of Q. The
reasonable assumption is made that the nearer the area is to being a natural
pristine setting (as opposed to a degraded environment) the greater will
be the magnitude of existence value. Willingness to pay for existence
knowledge must be added to recreational use benefit estimates for a pre-
served natural environment or an underestimation of such benefit estimates
will resuIt.
For the purposes of this study, empirical measurement of existence
value was undertaken within the guidelines outlined by KrutiMa. That is,
it was assumed that bona fide non-users of the South Platte River Basin
possessed satisfaction from the knowledge of existence of the preserved
environment. There appears to be no a priori reason why users as well as
non-users should not have an existence value for the South Platte River
Basin. Once the presence of existence value is established it should be
quite an easy matter to extend the empirical estimation process to users
of the natural environment. Willingness of users to pay for knowledge of
existence could* in some instances, exceed that of non-users since they
have acquired first hand experience and appreciation of the preserved area.
Survey respondents in this study were asked what they would be willing
to pay for preservation of the South Platte River Basin knowing that it
would be available as a natural habitat for fish, plant and animal life, even
though it were certain they would not use the area fro recreation in the future.
The question was designed so that an estimate from a sub-sample of non-
users could be made. Non-users were defined as those whose probability of
future recreational use of the South Platte River Basin was zero. Benefits
to the non-user population were approximated from this sub-sample,
Bequest Value
An additional type of non-user benefit has been suggested by
KrutiI la [1967]:
We are coming to realize that consumption-saving behavior
is motivated by a desire to leave one's heirs an estate as
well as by the utility to be obtained from consumption. A
bequest of maximum value would require an appropriate mix
of opportunities to enjoy amenities experienced directly
from association with the natural environment along with
readily producible goods. But the option to enjoy the
grand scenic wonders for the bulk of the population depends
upon their provision as public goods.
Bequest value is the satisfaction derived from endowing future generations
with a natural environment. In many respects it is similar to existence
value. Little work has been done theoretically or empirically on this
concept. Although the bequest motivation means that non-users may also
have a desire to preserve natural environments, there is no a priori
14
-------
reason that users could not likewise have such a desire with an appropriate
value. Bequest value may actually be greater for users than non-users as
they have firsthand knowledge of the environment.
Bequest value is a pure inter-temporal public good. Members of the
present generation will be in a position to provide a bequest of a natural
area to future generations so long as its remains preserved. If there is a
threat to the area's preservation, bequest value takes on greater signifi-
cance. Bequest value then is no longer a free service of the environment.
It must be estimated along with use values of the environment to attain an
accurate estimate of the total benefits of the preserved area. The total
value of the natural environment to society may be underestimated and a
serioues misaI location of resources could result if bequest values are
ignored.
As in the case for existence value, bequest value in this study was
conservatively measured only for individuals who did not use the natural
environment. Non-users were defined as those who probability of future
use was zero. Respondents were asked what they would be willing to pay
to bequest improved water quality in the Souht Platte River Basin to future
generations if it were certain they themselves would not use it for recrea-
tion in the future. A sub-sample of non-users was drawn to estimate the
aggregated benefits to the general non-user population of the survey area.
It should be restated that as long as there is no threat to the natural
environment by a competing use (e.g., metal and energy development), then
option, existence and bequest values are provided as a free public good
to all who possess such satisfaction. If circumstances change so that
there is a significant possibility of a competing use occurring, such
values may attain great importance for society. The total value of all al-
ternative uses of the environment must be ascertained to enable society
to make the correct decision as to which use it should be put.
15
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SECTION 3
RESEARCH PROCEDURE
STUDY AREA
The South Platte River Basin drains an area of 19,450 square miles in
northwestern Colorado, approximately one-fifth of the total land area in
the state of Colorado (Figure 1). It extends from the Continental Divide
on the western edge to the Nebraska border on the east. It extends from
a line just outside Colorado Springs on the south to Wyoming and Nebraska
borders on the north. It encompasses an area known locally as the Northern
Front Range of Colorado.
Streams originate in the higher mountainous elevations with pristine
water quality, and gradually yield to degradation as elevation diminishes
and human encroachment increases. There are some areas within the Basin
even at high elevations where streams have become heavily polluted through
past mineral mining and milling operation and abandoned shaft drainage.
The Central City and Boulder Creek drainage areas are examples. Rocky
Mountain National Park on the western edge of the River Basin contains
the headwaters of the Cache La Poudre River, the Big Thompson River and
the St. Vrain River, major northern tributaries to the South Platte River.
The River Basin contains 2,400 miles of fishing stream, about 30 percent
of the 8,233 miles of stream in the State capable of sustaining game fish
such as trout.
With an estimated population of 1,742,900 in 1976, the River Basin
contains two-thirds of Colorado's estimated population of 2,628,137. The
Denver Metropolitan Area excluding Boulder County with population of about
1.3 million is representative of larger cities in the U.S. It is the
principle commercial center of the Rocky Mountain Region. Manufacturing,
service industries and government are important sources of employment.
Agriculture is important economically with large cattle feeding operations,
packing plants, irrigated and dryland crops. The 1969 Census of Agriculture
showed approximately 10,158 farms in the South Platte River Basin. With
an average family size of 4 persons, the farm population is estimated at
40,632 or 2.4 percent of the total Basin population. About 11.5 percent
of the residents in the Basin live in areas of less than 2,500 people.
A substantial portion of the crops produced in the Basin are irrigated.
Most of the Basin east of the mountains is arid and irrigation is necessary
for agricultural production other than wheat and grazing. More rainfall
and snow occurs at the higher elevations, and runoff in the Spring is
captured in reservoirs for agricultural and domestic consumption. Also,
water is transferred into the region from the Western Slope of Colorado.
16
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STERLING
GREELEY
MORGAN/^
PLA
SOUTH PLATTE
RIVER BASIN
BOULDER
IDAHO
SPRINGS
COLORADO
DENVER
FIG. I THE SOUTH PLATTE RIVER BASIN, COLORADO
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The South Platte River Basin contains 267 lakes and reservoirs suit-
able for shoreline fishing, about 38 percent of the 711 lakes and reservoirs
in the state. With 1,122 miles of shoreline, the Basin contains 48 percent
of the total lake and reservoir shoreline in the state of 2,314 miles.
The Basin provides 40.5 percent of water-based recreation activities in
the state. It provided 58 percent of the lake swimming, 56 percent of the
sailing and 49 percent of the power boating. It provided 34 percent of
the lake fishing and 26 percent of the stream fishing. Resident water-
based recreation use of the River Basin accounted for approximately 72
percent of the total recreation use by residents and non-resident tour-
ists. Many types of water-based recreation such as fishing and swimming
are not compatible with water pollutants from mine drainage and other
sources. Therefore if current demand is large relative to the available supply
of water-based recreation areas the consequences of further degradation
may be of a much greater order of magnitude than if demand was small while
the available supply was large.
Streams and rivers in the Basin are generally out of compliance with
state water quality standards. Almost all rivers and streams in the South
Platte River Basin are classified Class B fisheries. Lakes and reservoirs
are classified as Class A, suitable for body contact recreation activities.
Major point sources of pollution are municipal and industrial discharges.
In 1974 the Colorado Department of Health and local departments found
95 of approximately 120 discharges out of compliance with state effluent
standards. The largest non-point source of pollution in the Basin is
irrigation return flow. Feed lot run-off ranks second as a source of non-
point pollution. Heavy metal effluent serves as an index of water pollu-
tion for the study. Although metal-mine drainage is generally limited
to streams in the headwaters of the Basin there is a total of 111 miles
of streams polluted with heavy metals. In the absence of complete water
quality analysis and an objective index of overall water quality, heavy
metal effluent serves well in representing the general problem of
polluted waterways. It is estimated that a 90 percent reduction is heavy
metals would be required before fish could live in Clear Creek above
Denver. This particular form of pollution tends to be irreverisble
because of the prohibitive costs of improvement in most areas of the
Basin.
Mining activity is expanding with opening of the Henderson molybdenum
mine, other newly found ore deposits and the opening of abandoned metal
mines and new open pit coal mines. This expansion is likely to have a
pronounced effect on the River Basin's water quality. There are more than
250 indentifiable minerals in the South Platte River Basin. Metallic
minerals include gold, silver, copper, lead, zinc, tungsten, molybdenum
and uranium. Two coal fields are located in the Basin. The Denver
Region coal field is an area of 535 square miles extending from the Colo-
rado-Wyoming state Iine southward to the Arkansas River Basin. The South
Park coal field covers about 100 square miles in Park County. Over 3,682
million tons of coal is estimated to exist in these two fields.
18
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SAMPLE SELECTION
A random sample of residents was selected from the Denver Metropolitan
Area (as representative of residents of large cities in the U.S.), and
from Fort Collins (as representative of residents of small cities in the
South Platte River Basin). Fort Collins is smaller than Boulder but larger
than other small cities in the Basin such as Greeley, Loveland, Fort Morgan
and Sterling. Figure 1 shows the location of these communities in the
River Basin.
A total of 202 in-depth interviews were completed in the two cities
from May through July, 1976. The 101 interviews in Fort Collins repre-
sented a 0.5 percent sample of 18,923 households in that city. With a
population of 58,531 in 1976, the average number of persons per household
was 3.1. Boulder County was excluded from the Denver Metropolitan Area
on the grounds that it is more representative of small cities in the River
Basin. The 101 interviews in the Denver Metropolitan Area (less Boulder
County) represented a very small proportion of the 424,900 households in
that large city, approximately 1 in 4,200. The number of households inter-
viewed was based on experience with similar opinion surveys and was specified
in the contract with the Agency.
A list of names was randomly selected from current telephone directories
for the two cities. For the Denver Metropolitan Area, one name was drawn
randomly from every ninth page of the telephone directory. Two names were
drawn randomly from every page of the directory for Fort Collins. Initially,
an attempt was made to select the sample from city directories. However,
at the time the sample was drawn, the directories were over one year old.
Telephone directories were more up-to-date than city directories and this
was considered important because of high mobility of residents in the two
cities. By sampling from telephone directories, it is recognized that
residents who moved into the cities within the year and residents without
phone service were automatically excluded from the sample. However, it
was concluded that the resulting bias in sample selection was small, as
92 percent of the households in the Denver Metropolitan Area had telephone
service, as did 95 percent of the households in Fort Collins.
An initial list of potential respondents (392 in Denver and 208 in
Fort Collins) was selected from the current telephone directory. Each house-
hold on the list was sent an introductory letter. The interviewers con-
tacted respondents by telephone, proceeding randomly through the initial
list until the pre-established quota of 100 for each city was interviewed.
Table 1 shows the rate of acceptance and refusal in the two cities.
In Denver, 25.8 percent of an initial list of 392 households were inter-
viewed, compared to 48.6 percent of a list of 208 in Fort Collins, a small
city where Colorado State University is located. Therefusal rate was small,
21.7 percent in Denver and 16.3 percent in Fort Collins. However, a large
proportion of the sample could not be contacted although telephoned at
least twice. Interviewers were unable to contact 42.1 percent of the sample
19
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Table 1
Sample Response in Denver and Fort Collins, Colorado, 1976.
Response
Denver
Metropol itan
Area
Number
Percent
Fort Col 1 ins
Number
Percent
South Platte
River Basin
Number
Percent
TotaI Samp Ie
Accepted and
Interviewed
Refused
Could Not Contact
Returned Letters
392
101
85
165
41
100.0
25.8
21.7
42.1
10.4
208
101
34
66
7
100.0
48.6
16.3
31.7
3.4
600
202
119
231
48
100.0
33.7
19.8
38.5
8.0
20
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in Denver compared to 31.7 percent in Fort Collins. In addition, returned
letters accounted for 10.4 percent of the Denver sample and 3.4 percent
in Fort Collins. The letters were returned by the Postal Service because
they could not be delivered. These potential respondents had moved since
publication of the directory and had no forwarding address.
Characteristics of the sample were compared with the available demo-
graphic characteristics of the population of the two cities. Generally,
the relatively' smaI I sample represented the population rather well. For
most comparisons, the sample statistic was very close to the population
parameter. Table 2 lists the demographic data for the relevant popu-
lation and sample.
The Metropolitan Denver sample under-represented young residents of
18-24 years of age. There is less chance of younger residents being listed
individually in telephone directories. Often younger adults continue to
live with their families where the listing is not in their name. If they
are living independently of their families they are likely to be living
in a shared household so that the listing may be under another individual's
name.
Minorities including Spanish surnamed, black Americans and American
Indians were also under-represented. A large percentage of minority resi-
dents with common surnames such as Martinez or Gonzales are concentrated
on a few pages of the alphabetically listed directories. The selection
procedures used in this study would result in an under-representation
because of this phenomenon. It may also be true that fewer minorities
have telephone service. Twenty percent of the population of the Denver
Metropolitan Area were non-white as compared to 5 percent of the sample.
Average incomes were virtually identical for the sample and the popu-
lation at about $15,000. Income distribution categories for the sample
had slightly different brackets than the population data brackets; however,
it appears that the sample included slightly more lower income people than
in the general population. Average education of the sample at 14.6 years
was higher than for the population, reported as 12.5 years in 1970.
Sample representation of the sexes closely approximated the popula-
tion characteristics. In Fort Collins females were under-represented by
about 10 percent. This was the result of a number of female family members
requesting that their spouse provide the information for the survey. There
was a reluctance on the part of these female family members to provide the
survey information. In most of these cases the husband was the traditional
family spokesman and the wife requested that he provide the necessary data.
The Fort Collins sample also under-represented young residents of
18-24 years of age. However, average age of the sample was 38 years compared
to a 40.5 years average age of the population. Average education of the
sample was 14.6 years compared to 12.6 years for population in 1970. Minor-
ities represent about 9 percent of the population compared to only 1 percent
21
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Table 2 . Comparison of Population and Sample Demographic Profile Estimates
of Denver and Fort Collins, Colorado, 1976.
Statistic
Male/Female Ratio9 (1975)
Average Agea(1970)
( 18 years and over)
Age Distribution3 (1970)
18-24
25-49
50-64
65 and over
Average Educat iona( 1 970)
(25 years and over)
Raceb (1976)
White
Other
Average I ncome
Income Distribution3 (1975)
(Under $5,000) (Under $6,000)
($5,000-$7,999)($6,000-$8,499)
($8,000-$9,999) ($8,500-$10,999)
Denver
Population | Sample
49.5/50.5 48.9/51.1
38.2 46.5
19.7 7.6
48.9 50
19.5 25.3
11.9 17.4
12.5 14.6
79.7 94.6
20.3 5.4
$14,647a $14,958
8.2 14.1
8.0 8.7
9.1 9.8
($10,000-$14,999)($11,000-$15,999) 26.5 22.8
($15,000 & over)($16,000 & over)
48.2 44.6
Fort Co
Popu I at ion
53.1/46.9
40.5
23.2
48.5
16.8
11.6
12.6
91.2
8.8
$13,500C
11.1
13.5
11.0
25.9
38.5
I lins
I Sample
63.3/36.4
38
9.1
57.6
16.1
17.2
14.6
99
1
$12,838
15.2
10.1
12.1
31.3
31.3
a(Colorado Department of Health, 1976).
''(Colorado Division of Planning, 1976).
'Estimate for the Fort Collins Metropolitan Statistical Area by the Department
of Housing and Urban Development, Denver, December 31, 1976.
22
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of the sample. Average income of the population was reported as $13,500
in December, 1976 compared to $12,838 for the sample taken in May - July,
1976. Income distribution of the sample conformed closely to income dis-
tribution of the general population with slightly more lower income people
included in the former.
CONTACTING RESPONDENTS
The method adopted to contact potential respondents was successfully
used in a previous study by Meyer [1974]. An introductory letter was
mailed to respondents about seven days before they were contacted by phone.
The introductory letter said they would be contacted and asked them to
participate in a survey of attitudes toward the quality of water resources
in the state. It stated that there was no obligation to cooperate in the
survey but that those who did may influence future water quality decisions.
A copy of the introductory letter is shown in the Appendix to this report.
The letter of introduction proved useful in identifying the Univer-
sity and added credibility to the survey. This was found to be quite
important because of the many telephone sales schemes to which the
general public are subjected. The seven days between receipt of the initial
introductory letter and phone contact was an appropriate length of time
in most cases. The potential respondents had sufficient time to discuss
the letter with family members yet not so lengthy a time that contents
of the letter would be forgotten.
Within approximately one week after mailing the introductory letter,
interviewers began telephoning potential respondents. They were asked
if they had received the introductory letter, and the credentials of the
caller were reestablished in the memory of the potential respondent. For
those who agreed to participate, a convenient time was arranged for an
interview with the head of the household. The interviews occurred during
the following five days. The proportion of potential respondents missing
appointments rose appreciably as the scheduled time exceeded five days
after telephone contact.
Two trained interviewers were used to minimize inconsistency of pre-
sentation. The interviewers had advanced training in economics of natural
resources and environmental management at the Masters degree level. Close
liaison was maintained between them throughout the survey process so that
unanticipated procedural problems were solved as they arose. Interview
time ranged from 15 minutes to 2 hours and averaged approximately one-half
hour each. Approximately five interviews per interviewer were completed
per day.
Relatively few problems were encountered during the survey. Most
problems that did arise resulted from interviewing in a large metropolitan
area such as Denver. It took more time in the large city to establish
credentials and explain the importance of the study during the initial
23
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phone contact. Also, there was no feasible way to survey one section of the
city at a time and effort was spent traveling from one interview to another.
Another problem encountered in both cities was an expressed lack of con-
fidence in public entities to achieve improvement in water quality even
if appropriate financing could be secured. Little confidence was expressed
in the Denver Water Board, the State of Colorado, and Environmental Pro-
tection Agency and the Federal government by a significant number of
participants. This problem may have led to more conservative bids then
would otherwise be forthcoming. In some cases there was an expressed
disapproval of one or both methods of financing improved water quality.
Minor problems were also encountered with a few individuals who could
not easily grasp financing water quality through one of the posited methods.
Hence considerable time was expended in explanation.
At the time of the scheduled interview, an introductory statement
established the credentials of the interviewer and the purpose of the
survey. This was an informal paraphrase of the following:
"Hello, I am of Colorado State University in
Fort Collins (hand respondent a copy of the introductory
letter). A short time ago you received a similar letter in
the mail. An appointment was made with you for this hour.
This letter from the chairman of the Department of Economics
briefly explains the purpose of the study and the importance
of talking with people in households Iike yours throughout the
(Denver) (Fort Collins) area. I want to find out how you feel
about water quality. I am interested in your enjoyment from
using and viewing rivers and lakes (fish, waterfowl, waterplants
and the water itself), and your satisfaction in knowing such
natural environments are preserved."
Then the respondent was handed a copy of the questionnaire shown in
the Appendix and asked to read along with the interviewer. Any questions
raised by the respondents were clarified by the interviewer. First, the
respondent was asked to provide some common socioeconomic information such
as age, place of former residence and income. Then, respondents were
asked their opinions about general environmental problems and perceived
water quality in the South Platte River Basin.
Immediately after the respondents were asked their opinion on how
they rated the waterways of the South Platte River Basin in terms of quality
(Question 11) they were shown a map illustrating the area encompassing
the Basin. They were thus made familiar with the rivers and boundaries of
the Basin. When such information was needed during the remainder of the
interview to provide an appropriate answer the respondents were free to
review the map.
Next the respondents were read the following introduction to water
quality and associated problems in Colorado:
24
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"Coal development along with expanding mining operations may
have significant effects on the quality of Colorado's water
in the near future. As an aid in planning for the future I
would like to find out how you feel about clean water for
recreational activities. I have some questions which consider
different ways of financing improved water quality. Let us
consider three levels of water quality in a waterway such as
the South Platte River."
COLOR PHOTOGRAPHS
Then respondents were shown pictures of three levels of water quality
illustrated in Figure 2 and technical data on heavy metal pollution shown
in Table 3 . The three photographs depict three levels of water quality
in the South Platte River Basin. The respondent was told that in Situa-
tion A, water pollution had been nearly eliminated and the waterway re-
stored to its natural condition. Situation B shows considerable reduction
in water pollution, but a greenish tint resulting from the presence of
copper and other metals remains clearly visible. Situation C shows severe
water pollution, with a heavy load of mining waste.
The interviewers pointed out the salient features of water pollution
in each set of photographs. For most of the respondents, the situations
were rooted in real experience. The residents of the River Basin are
familiar with pollution of waterways by mine tailings as in Situations C
and B. Situation B was a fairly good approximation of the Denver situation
at the time of the interviews. The pristine water quality of Situation A
is typical of several high mountain streams in Rocky Mountain Park and
National Forests on the western edge of the River Basin.
Photographs were taken at river locations along the Colorado Front
Range. The composition of photographs was held constant in so far as
possible. Site C with the most pollution is located on California Gulch
near Leadville. Although California Gulch is in the Arkansas River Basin
drainage system, pollution at the site was equal to Clear Creek in the
South Platte River Basin. By using this site colored water features related
to mine drainage could be illustrated. Site B is an intermediate pollution
situation. It is directly below the Henderson Molybdenum mine near Berthoud
Falls. The site is located en the West Fork of Clear Creek. Site A, the
cleanest of the three pictural sites is located on the Poudre River above
Fort Col I ins.
Color photographs are realistic in depicting evidence of visual pollu-
tion such as algae, weeds and heavy metal coloration, but do not show non-
visual pollution such as odor, nor the presence of chemicals and bacteria.
Measures of heavy metal concentrations at the sites where the photographs
were taken were available, and these were presented to the respondents as
an example of one major source of water pollution.
25
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Figure 2. Three Levels of Water Quality, South
Platte River Basin, Colorado, 1976.
26
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Table 3 . Heavy Metal Pollution at the Three Photograph Sites,
South Platte River Basin, Colorado, 1973.
Heavy Meta 1 s
Metal Concentration (Microq rams/Li ten)
C
B
A
Recommended Biological
Limits for Fish
Surviva 1
Arsenic
Cadmium
Copper
1 ron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Selenium
Vand ium
Zinc
Total Metals
16*
620*
2,000*
50,000*
450*
66*
28,000
-
50
48*
-
100,000
181,250
-
<10
10
380*
<50
1.4
580
1
<25
-
3.1
90
<1,150.5
1,000
10
10-20
300
5-10
-
1,000
-
50
1,000
-
30-70
500
*lndicates these metalic concentrations exceeds recommended drinking water
standards.
Source: [Wentz, 1974].
27
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Water quality data for the three photograph sites are shown in
Table 3 . Metals associated with acid mine drainage are listed with
the amount of each in micrograms per liter. An * indicates that the
concentration exceeds recommended drinking water standards. Recommended
biological limits for fish and wildlife communities are also shown.
Site C exceeds concentration recommended for drinking water. Site B
exceeds total metal concentrations recommended for fish and wildlife
communities. No heavy metals were measurable at Site A by the sampling
and analytical methods used.
METHOD OF PAYMENT
The bidding game process described in Section 2 was used to measure
the respondent's consumer surplus in two separate simulated market situa-
tions. These situations were: a general sales tax and residential sewer-
water bill. The methods of payment were chosen so as to maximize the real-
ism and credibility of the hypothetical situation posited to respondents.
Both approaches represent established, routinized methods of paying for
public services. It was therefore not difficult for most respondents to
comprehend the financing of pollution abatement by either approach.
Residents of both cities were familiar with the practice of paying
xa sales tax. For most it is a daily occurrence. People are aware that
income collected in sales taxes is used to provide public services. It
is realistic to conceive of a public agency collecting a sales tax and
using the income to finance improved water quality. Respondents were
asked to assume that a sales tax would be collected on a I I purchases in
the South Platte River Basin for purposes of financing improved water
quality in the region. This provision was designed to avoid the effects
of the free-rider problem.
The sales tax measure of the value of improved water quality may be con-
sidered superior to the water bill in that tourists pay sales taxes as
well as residents of the River Basin. Tourism is the third largest industry
in the state with total sales of approximately $700 million in 1976.
Tourism is an important source of revenue to state and local units of
government. A 6 percent sales tax raises approximately $42 million
annually in revenue from tourists.
Residents of born cities are familiar with the practice of paying
for wastewater treatment through monthly water bills. Homeowners and
renters realize that revenues collected through the water bill also provides
sewer treatment services. Monthly water bills show the sewer assessment
as a separate item, and sewer rates are based on water usage. Inadequate
treatment of wastewater causes much of the water pollution in the River
Basin. Most people can readily comprehend that reduction of the damage
may raise the cost of operating sewer treatment plants, and that paying
these additional costs through increases in the sewer-water bill is a
distinct possibility. For the residents of small and large cities of the
28
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River Basin, payment of .3 monthly sewer-water bill is routine. Howe/en,
renters do not directly pay water bills, landlords do, so the sales tax
is considered to have more general acceptance than a water bill.
Immediately preceding the commencement of the bidding game the respon-
dents were shown a table with the annual amount of money in dollars that
families in Colorado pay in sales tax as estimated by the Internal Revenue
Service in 1975. Tax rates were shown for Internal Revenue Service income
brackets and family size. The table showed the amount of money a family
would pay with a 5 percent sales tax, the amount of state and city tax
collected per dollar in Fort Collins. Denver residents pay 6.5 percent
per dollar in sales tax and surrounding areas pay a varying amount depending
on the particular suburb. The additional annual amount of money that
would be paid through a one-quarter cent increment in sales taxes was
shown and the total annual amount paid in sales tax was calculated for
each respondent. Thus the respondent knows approximately how much money
he presently paid in sales taxes along with how much additional money he
would pay for every one-quarter cent increment in sales tax before the
bidding game began.
BIDDING GAME
The bidding game procedure used in this study had been successfully
applied to other natural resource value problems such as recreation use
of forest areas and air quality [Davis, 1963, Randall, 1974]. It was
employed here to determine willingness to pay for improved water quality
to enhance recreation enjoyment, option, existence, and bequest values.
Respondents were asked by how much they would be willing to increase their
current sales tax in cents per dollar and water bill in dollars per month
to pay for improved water quality in the South Platte River Basin. The
sales tax bidding procedure began at one-half cent with one-fourth cent
incremental changes upward or downward. The water bill bidding procedure
began at 50 cents per month with 50 cents per month incremental changes.
For each bidding situation, respondents were asked to consider Situa-
tion C, the greatest degree of water pollution as the starting point.
The bidding games were designed to discover the maximum amount of money
which the respondent, an adult speaking for his or her household, was
willing to pay to improve water quality to intermediate Situation B and
the clean water of Situation A. Answers were given as "yes" or Mno" to
questions expressed in the following form:
"Would you be willing to add one-fourth cent on the dollar to
present sales taxes every year, if that resulted in an improve-
ment from Situation C to Situation B?"
A ''yes" answer would lead the interviewer to raise the amount by one-fourth
cent and repeat the question, as many times as need be until a "no" answer
was given. A "no" answer would lead the interviewer to reduce the amount
-------
until a "yes" answer was given. The increment which resulted in the high-
est "yes" answer was recorded as the amount the respondent was willing to
pay. One important advantage of the bidding game procedure Is that it
asks yes-no questions rather than for a dollar estimate. This is expected
to yield less biased estimates of willingness to pay [Randall, 1974].
It should be noted that the respondents were instructed to assume that
the method of payment used was the only possible way to finance water quality
improvement. This stipulation was designed to minimize the Incidence of
zero bids as protests against the particular method of payment. If a re-
spondent said that he was not willing to pay anything, he was asked a
series of questions to find out why. Table 4 shows that 13.9 percent
of the respondents refused to answer the sales tax questions stating that
taxes are already too high or the belief that it is unfair to expect people
who are adversely affected by the pollution of others to pay the costs.
A respondent reporting that he did not consider his household harmed by
water pollution and saw no reason to pay for improved water quality was
recorded as bidding zero. Only 1.9 percent of respondents fell into this
category with respect to zero payment for current recreation use value,
however, 26.7 percent gave zero option value.
The hypothetical situations presented to respondents were designed to
be as realistic and credible as possible. The bidding procedure was in-
troduced with the following statement:
"Suppose a sales tax was collected from the citizens of the
South Platte River Basin for the purpose of financing water
quality in this basin. All of the additional tax would be
used for water quality improvements to enhance recreational
enjoyment. Every Basin resident would pay the tax. All bodies
of water in the River Basin would be cleaned up by 1983.
Assume that this is the only way to finance water quality
improvement."
The definition of recreation enjoyment was left to each individual
respondent. This approach was adopted so that respondents would be more
likely to estimate the total recreation value. Any particular definition
of water-based recreation activities provided by the interviewer might
have omitted an activity for which the respondent would be willing to
pay. The estimated value of water quality to enhance the water-based
recreation experience then would be biased downward. As a result, re-
spondents conceived of water-based recreation broadly to include swimming,
boating, fishing, sightseeing, picnicking, camping, hiking, driving,
and other leisure time activities within view of lakes and streams.
The year 1983 was specified because it is a national goal that water-
ways become suitable for fish life and human contact recreation by that
year. Abatement methods incorporating the best available technology which
is economically achievable are to be employed by industry point source
polluters by 1983.
30
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Table 4. Total Number of Respondents Interviewed Compared to the Number Answering
Questions Relating to Value of Water Quality and the Number Willing to
Pay, Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Response
Denver
Metropol i tan
Area
Number | Percent
Fort Col 1 i ns
Number
Percent
South Platte
River Basin
Number | Percent
Total Number Interviewed
Number Answering Value of Water
Quality Questions
Recreation Use Value
Annual Sales Tax
Water BiI I
Option Value
Annual Sales Tax
Water BiI 1
Number WiI I ing to Pay Some
Amount
Recreation Use Value
Annual Sales Tax
Water BiI I
Option Value
AnnuaI Sales Tax
Water BiI I
101
100.0
101
100.0
202
100.0
85
82
88
83
84.2
81.2
87.1
82.2
89
78
89
78
88.1
77.2
88.1
77.2
174
160
177
161
86.1
79.2
87.6
79.7
84
81
65
59
83.2
80.2
64.3
58.4
86
75
58
52
85.1
74.3
57.4
51.5
170
156
123
111
84.2
77.2
60.9
55.0
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The hypothetical situation presented to respondents regarding option
value was designed to be as realistic as possible. A rereading or explanation
was provided by interviewers where deemed necessary. The introductory
paragraph explains a realistic coal and metal mining threat to water quality
in the River Basin and possible irreversible consequences. The possibility
of substituting other recreation areas is minimized. The alternative
uses of water are explained, i.e., irreversibly polluted water or pre-
servation of water quality. The option value questions were the following
statements:
"In the near future, one of two alternatives is likely
to occur in the South Platte River Basin. The first alternative
is that a large expansion in mining development will soon take
place, creating jobs and income for the region. As a conse-
quence, however, many lakes and streams would become severely
polluted. It is highly unlikely, as is shown in Situation C,
that these waterways could ever be returned to their natural
conditions. They could not be used for recreation. Growing
demand could cause all other waterways in the area to be crowded
with other recreationists.
"The second possible alternative is to postpone any decision
to expand mining activities which would irreversibly pollute
these waterways. During this time, they would be preserved at
level A for your recreational use. Furthermore, information
would become available enabling you to make a decision with near
certainty in the future, as to whether it is more beneficial
to you to preserve the waterways at level A for your recreational
use or to permit mining development. Of course, if the first
alternative takes place, you could not make this future choice
since the waterways would be irreversibly polluted.
"Given your chance of future recreation use, would you be
wiI I ing to add cents on the do Ilar to present sales taxes
every year to postpone mining development. This postponement
would permit information to become available enabling you to
make a decision with near certainty in the future as to which
option (recreational use or mining development) would be most
beneficial to you? Would it be reasonable to add to
your water bill every month for this postponement?"
The bidding procedure for existence and bequest values was introduced
with a question concerning the chances of future recreation use of water
in the River Basin. This was designed to facilitate use of a sub-sample
of non-user values. The hypothetical situation presented to respondents
also was prefaced with the condition that it is certain the respondent
will not use the River Basin for water-based recreation activities. The
existence and bequest questions were:
32
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"(1) What would you estimate are the chances in 100 that
you will travel to lakes and streams in the South Platte River
Basin in the next year, for water-based recreation if they are
preserved at level A? Do you anticipate any significant change
in your chances for future years? (If 'yes') What change?
"(2) If it were certain you would not use the South Platte
River Basin for water-based recreation, would you be willing to
add cents on the dollar to present sales taxes every
year, just to know clean water exists at level A as a natural
habitat for plants, fish, wildlife, etc.? Would it be reason-
able to add to your water bilI every month for this
know I edge?
"(3) If it were certain you would not use the South Platte
River Basin for water-based recreation, would you be willing
to add cents on the do Ilar to present sales taxes every
year to ensure that future generations will be able to enjoy
clean water at level A? Would it be reasonable to add
to your water bill every month for this knowledge?"
33
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SECTION 4
RECREATION USE AND NON-USE VALUES
This section presents a summary and analysis of the results of the
interview survey described earlier. Responses to recreation use and
option value questions are first discussed and existence and bequest
value estimates are described. We then aggregate the survey results to
the basin population and express the estimates in terms of the present
worth of a future time stream of values.
OPTION AND RECREATION USE VALUES
Option value constitutes a substantial part of the total value of
improved water quality for recreation use in the South Platte River Basin.
From our random sample, 175 resident households reported they were willing
to pay for the option to choose to engage in water-based recreation activ-
ities in the future. Their responses averaged $22.60 per year. The
preservation of water quality provides the option to make a future deci-
sion between two alternative uses of waterways in the River Basin, either
for water-based recreation or for wastewater discharge by industrial and
energy development, under conditions of certain knowledge about which
will be more beneficial. Option value added about 40 percent to the
recreation user value from enhanced enjoyment of recreation activities
with improved water quality by 1983.
These same 175 resident households reported they were willing to
pay an average of $56.68 annually to improve water quality in the River
Basin for recreation use. This was the average value for the 80.8 per-
cent of the households interviewed who expect to continue to use lakes
and streams in the River Basin for fishing, boating, swimming, and non-
contact recreation activities such as picnicking and sightseeing near
water with enhanced aesthetic satisfaction of such recreation experiences.
These residents' households reported an average of about slightly over
15 water-based recreation activity days annually in the River Basin, so
the recreation use value of improved water quality was equivalent to
$3.76 per activitiy day. The two values, current recreation use and the
option value to choose future recreation use, are additive. Table 5
shows that the total recreation value of improved water quality averaged
$79.28 annually, which was equivalent to $5.29 per household activity
day.
There is very little empirical literature available with which to
compare these results. The recreation use value of water quality improve-
34
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Table 5. Willingness of Recreation User Households to Pay Additional Sales Tax to Improve
Water Quality, Denver, Fort Collins and South Platte River Basin, Colorado, 1976.
Water Qua I ity Values
Denver
Metropol itan
Area
Tax?./
Rate
Cents
Annual
Do I lars
Per
User
Day
Fort Col 1 i ns
Tax
Rate
Cents
Annua 1
Dol tars
Per
User
Day
South Platte
River BasinJL/
Tax
Rate
Cents
Annua 1
Dol lars
Per
User
Day
Ul
Ul
Mean Recreation Use
Value
95$ Conf idence
Interval £/
Number Reporting
Mean Option Value
95$ Confidence
Interval
Number Reporting
Total Use Value
.00 $50.18 $3.92
($42.94-$57.43)
) (85)
.39 $18.31 $1.43
($13.27-$23.36)
1.63
$74.00 $3.57 1.17
$56.68 $3.76
($51.07-$96.94)
(89)
.85 $34.05 $1.65
($20.11-$47.99)
.52
1.39
(88)
$68.49
$5.35
2.48
(89)
$108.05
$5.22 1.69
(174)
$22.60
(177)
$79.28
$1.50
$5.26
— Each one-hundredth cent increase in sales tax added 50.32 cents to annual sales tax payment, at mean
income of $13,500 and a family of 4 persons. (IRS 1975 Sales Tax Table for Colorado.) These average
values include those who bid zero because they felt no water quality improvement was necessary. It
excludes those who refused to bid because taxes were considered already too high or for some other
reason.
— Weighted by population. The Denver Metropolitan Area population of 1,267,000 persons excluding
Boulder County was 72.7 percent of the 1,742,900 persons in the South Platte River Basin in 1976.
— The confidence intervals show the range of values that would include 95 percent of the means of a I I
samples of this size drawn from the population.
-------
merit to residents of the River Basin was similar to tourists in Rocky
Mountain National Park. A substantial portion of the national park is
located within the South Platte River Basin. In the Summer of 1973,
park visitors reported they were willing to pay an average of $5.55 per
household day to avoid water pollution where they engage in outdoor recrea-
tion activities [Ericson, 1977]. Water quality is higher in the park
than in the River Basin as a whole. The park is one of the unique natural
areas of the nation, with pristine rivers and lakes, and majestic mountain
peaks. This unique natural setting may have influenced value estimates
of these respondents.
The present estimate of the recreation use value of water quality in
the South Platte River Basin was somewhat higher than a recent study of
the Merrimack River Basin in New Hampshire and Massachusetts. Ostar [1977]
interviewed 200 residents of that basin and found an average willingness
to pay for pollution abatement of $12 per person annually. If family size
averaged four persons, this would be equivalent to a value of $48 per
household in that basin. This figure, however, is well within the 95 per-
cent confidence interval of the South Platte River Basin.
The recreation use value of water quality to residents of the South
Platte River Basin was similar to a national estimate. The annual use
value of water quality to fishermen, boaters and swimmers was $69.59 per
U.S. household in 1970 [Walsh, 1977]. This was based on a calculation of
travel cost savings resulting from improved water quality, excluding
travel time costs. River Basin residents have experienced less water
pollution than in the industrial centers of the nation. Also, Colorado
residents may have more close substitutes available, i.e., pristine high
mountain rivers and lakes elsewhere in the Rocky Mountains. Davis found
the bidding game approach to valuing outdoor recreation resources yields
results not significantly different from the travel cost approach [Knetsch
and Davis, 1966]. In any case, the fact that the national estimates pre-
pared by the travel cost figure method falls in the 95 percent confidence
interval of our South Platte survey suggests the reasonableness of the
resuIts.
The recreation use value of water quality is similar in amount to
the recreation value of air quality. A 1972 survey of resident and
tourist households showed a willingness to pay $85 annually to avoid
aesthetic damages from air pollution by the Four Corners Power Plant at
Fruitland, New Mexico [Randall, 1974]. The reliability of this study has
5een tested by replication under similar conditions. A random sample of
households were interviewed while visiting Lake Powell in Glen Canyon
National Recreation Area [Brookshire, Schulze and Ives, 1976]. In 1973,
households were wilting to pay an average of $2.77 per recreation day to
avoid air pollution damage from the Navajo power plant visible south
of the lake. It was reported that an unpublished replication of these
studies in Farmington, New Mexico, also was consistent with the earlier
results [Randal I, 1977].
36
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EXISTENCE AND BEQUEST VALUES
Non-user values from preservation of water quality in the South
Platte River Basin were defined to include both the value placed on exis-
tence of a natural ecosystem and the value of its bequest to future genera-
tions. Table 6 compares existence and bequest values for resident user
and non-user households.
From our random sample, 181 resident user households reported an
average existence value of $33.86 and a bequest value of $33.01, for a
total preservation value of $66.87 annually. This was the value reported
by the 80.8 percent of the households interviewed who expected to continue
to use lakes and streams in the River Basin for fishing, boating, swimming,
and non-contact recreation activities such as picnicking and sightseeing
near waterways. If there were no recreation activities in the South
Platte River Basin, this group of households would still value improved
water quality. Estimates of preservation values by recreation users were
premised on the assumption that the respondents knew with certainty they
would not engage in water-based recreation activities in the River Basin.
Thus, existence and bequest value estimates by recreation users can not
be added to their recreation use and option value estimates but are in
lieu of them. Preservation values reported by recreation users are the
expected levels if no recreation use values were present.
Non-user households reported an average existence value of $24.98 and
a bequest value of $16.97, for a total preservation value of $41.95 annually.
This was the value reported by the 19.2 percent of respondents who reported
a zero chance of future use of the River Basin for recreation activities.
The two tailed t-test of significance revealed that the value estimates
for this small sub-sample of 24 respondents was significantly different
from zero in the case of existence and bequest values in Denver but not
in Fort Collins. A one tail test may be more appropriate for data such as
this where only positive values were reported. Existence value in Fort
Collins was significant in a one tail test at the 95 percent confidence
level, and bequest value was significant at the 90 percent level. However,
we consider the average values reasonable and a larger sub-sample would
increase their significance. These estimates of non-user preservation
values in the South Platte River Basin are small compared to those es-
timated in the Fraser River Basin, British Columbia, Canada [Meyer, 1975].
There, preservation values increase salmon fishing values by 54 percent
or $233 per household annually. It should be noted that these values were
reported for the preservation of a free flowing river system from a large
water impoundment project, and are not strictly comparable to values from
the preservation of water quality alone.
As a first approximation, the existence and bequest value estimates
for the 19.2 percent of respondents who reported a zero chance of future
recreation use of the River Basin are extrapolated to all residents.
The procedure involves the premise that recreation users would be willing
37
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Table 6 . Willingness of Recreation User and Non-User Households to Pay Additional Sales Tax to
Improve Water Quality for Preservation of the Existence of a Natural Ecosystem and its Bequest
to Future Generations, De wer, Fort Collins and South Platte River Basin, Colorado, 1976.
Water Quality Values
Denver
Metropol itan
Tax
Rate
Cents
Annua 1
Dol lars
Fort Col 1 ins
Tax
Rate
Cents
Annua 1
Dol lars
South Platte
River Basin
Tax
Rate
Cents
Annua 1
Dol lars
03
Resident User
If Non-Use for Recreation Assumed Cer+ain
Existence of Natural Ecosystem
95% Confidence Interval!./
Number Reporting C )
Bequest to Future Generations
95% Confidence Interval
Number Reporting ( )
TOTAL
Resident Non-User
Sub-sample Reporting a Zero Chance
of Future Use
Existence of Natural Ecosystem
95% Confidence Interval
Number Reporting ( )
Bequest to Future Generations
95% Conf i dence 1 nterva 1
Number Reporting C. )
TOTAL
.61 $28.95
($22.67-535.22)
(88)
.56 $28.48
($22.70-$34.26)
(88)
1.17 $57.43
.70 $26.03
($1.78-$50.29)
(15)
.42 $16.43
($6.67-$26.19)
(15)
1.12 $42.46
1.09 $46.92 .74
($32.00-$61.84)
(91)
1.10 $45.09 .70
($30.18-$60.01)
(93)
2.19 $92.01 1.44
.50 $22.17 .64
L-$5.33-$49.66)
(9)
.40 $18.42 .41
(-$9.70-$46.53)
(9)
.90 $40.59 1.06
$33.86
(179)
$33.01
(181)
$66.87
$24.98
(24)
$16.97
(24)
$41.95
— The confidence intervals show the range of values that would include 95 percent of the means of a I
samples of this size drawn from the population.
-------
to pay as much in additional sales tax for existence and bequest values
as non-users. Users were also asked existence and bequest value questions,
but the resulting value estimates were much larger than those for non-
users and were not considered additive to recreation users values. It was
felt that many recreation users would have lowered their reported existence
and bequest values if they were to be added to previously reported recrea-
tion use and option values. Therefore, the extrapolation of the smaller
existence and bequest values of non-users is appealing. However appealing
this procedure may be, our survey did not ask users for their existence
and bequest values in such a way as to permit adding them to user's values.
Thus, the extrapolation of non-user existence and bequest values over all
residents cannot be interpreted as an estimate of true willingness to pay
for these preservation values. It would be interesting to extend this
research to allow measurement of existence and bequest values to recrea-
tion users as welI as non-users in such a way as to a I low them to be added
to user values.
ANNUAL BENEFITS AND PRESENT VALUE OF FUTURE BENEFITS
Estimates of total annual benefits from improved water quality were
prepared for the South Platte River Basin. These were used to calculate
the present value of a future stream of annual benefits. Table 7 shows
the annual and present values of benefits from recreation use, option,
existence, and bequest demands.
Total annual benefits from water quality improvement in the South
Platte River Basin were estimated at $61.1 million, inlcuding recreation
use value of $26.4 million, option value of $10.5 million, existence value
estimated at $14.4 million, and bequest value of $9.8 million. These annual
benefits were estimated in two steps: (1) for the 80.8 percent of the house-
holds who expect to be recreation users in the future, and (2) for the
19.2 percent of the households who expect to be non-users in the future.
It was estimated that there were 576,435 households in the River Basin in
1976. The annual benefit estimates were a weighted average based on the
proportion of Basin population in the Denver Metropolitan Area and the pro-
portion of the population in non-metropolitan areas. It was assumed that
Fort Collins was representative of the non-metropolitan areas of the River
Bas i n.
The weighted average benefits to the 80.8 percent of the households
who reported they intend to engage in recreation use of the waterways in
the River Basin was estimated as $121.23 annually. This is the sum of the
average recreation use value of $56.68, option value of $22.60, existence
value of $24.98, and bequest value of $16.97. Existence and bequest values
are those reported by a sub-sample of residents who currently do not expect
to use the River Basin for recreation, on the assumption that they are
representative of existence and bequest values for the general population
in the River Basin. This may be a conservative estimate as the experience
and appreciation gained in the recreation use of these resources may result
in somewhat higher estimates of existence and bequest values than for the
non-user sample of the population.
39
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Table 7 . Annual Value and Present Value of Benefits from Water Quality Improvement for Recreation,
Option, Existence, and Bequest Demands by Residents of the South Platte River Basin, 1976.
Water Qual ity Values
(Wi 1 1 ingness to Pay
Sales Tax)
Denver
Metropol itan
Area
Annual
Value
Present ,
Va 1 ue^7
Non-Metropol itan
Areas
Annual
Value
Present,
Value^
South Platte
River Basin
Annua 1
Value
Present,
Va 1 ue2-7
Recreation Use Value
Improvement from Polluted
Water to Intermediate Level
of Water Quality (C-B) by
1983
Improvement from Polluted Water
to Highest Level of Water
Quality (C-A) by 1983
Improved Water Quality
Delayed to the Year 2000
Option Value
Existence of Natural
Ecosystem
Bequest to Future
Generations'
Total Benefits of Highest
LeveI of Water Qua Ii ty
Improvement, (C-A) by
1983 for Recreation, Option,
Existence and Bequest
Values
$12,491,660 $195,947,600 $750,883 $11,778,555 $18,499,947 $290,195,255
16,886,624 264,888,216 1,191,622 18,692,110 26,399,220 414,105,414
14,594,916 228,939,855
6,161,700 96,654,102
11,060,147 173,492,502
863,765 13,549,254
548,307 8,600,896
419,523 6,580,752
21,504,093 337,319,106
10,526,153 165,116,132
14,399,346 225,872,099
6,981,107 109,507,561 348,562 5,467,634 9,782,102 153,444,736
41,089,578 644,542,400 2,508,014 39,341,396 61,106,821 958,538,360
— Assuming a pecpetiiial benefit stream, where Present Value = B/i, B = Annual Aggregate Benefits and i =
Federal Rate of Discount, 6 3/8 percent.
-------
The weighted average benefits to the 19.2 percent of the households
who reported they do not expect to make recreational use of the waterways
in the River Basin was estimated as $41.95 annually. The non-user benefits
from improved water quality were the sum of existence and bequest demand
values for the relevant population of non-users. Recreation use and option
value estimates were excluded from non-user benefits since they reported a
zero probability of future recreation use in the River Basin. These non-
user households represented 14.9 percent of the Fort Collins population,
and 20.8 percent of the Denver population.
The present value of a perpetual stream of benefits from water quality
improvement in the South Platte River Basin was calculated as $958.5 million,
including recreation use value of $414.1 million, option value of $165.1 mil-
lion, existence value estimated at $225.4 million, and bequest value of
$153.4 million. Present value is the amount of money that would have to
be invested at interest today in order to yield the specified annual bene-
fits from improved water quality for an indefinite period of time. The
formula is PV = B/i where PV is the present value of a perpetual stream
of annual benefits, B is the annual benefits from water quality improve-
ment and i is the Federal discount rate of 6 3/8 percent currently used
in calculation of benefits and costs of public projects.
The calculation of present value of future benefits is included for
illustrative purposes, and is likely to be a low estimation for a number
of reasons. Future benefits are assumed to remain constant at 1976 levels,
which seems unlikely to occur. For one thing, population is espected to
continue to grow rapidly in some parts of the River Basin, as migration
from other parts of the nation continues to occur. Also, the results of
the socio-economic regression analysis suggest that variables such as
future growth in income, increased education levels, and changes in the
age characteristics of the population will significantly increase willing-
ness to pay for improved water quality. Substitute recreation areas may
become crowded and polluted, and with more leisure time available the
proportion of the population who engage in water-based recreation activ-
ities in the River Basin may increase. These trends suggest that the present
value of the benefit stream may prove conservative. In addition, tourists
account for approximately 30-40 percent of the total water-based recreation
activities in the River Basin, and benefits to them were not estimated in
this study. The value of improved water quality to non-resident tourists
should be added to the resident values shown here to arrive at a complete
estimate of water quality benefits in the River Basin [Ericson, 1977].
METHOD OF PAYMENT
Survey respondents indicated a greater willingness to pay for improved
water when the method of hypothetical payment was an increase in sales tax
rather than an increase in water bill. Comparing table 8 with tables 5 and
6 shows that willingness to pay additional water bill for improved water
quality was about one-third as much as willingness to pay additional sales
41
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Table 8. Willingness of Resident Households to Pay Additional Water Bill to Improve Water
Quality, Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Water Quality Values
Denv«
Metropo
Arec
Monthly
Water
Surcharge
sr
i tan
3
Annua 1
Dol lars
Fort Col 1 ins
Month ly
Water
Surcharge
Annua 1
Dol lars
South Platte
River Basin
Monthly
Water
Surcharge
Annual
Dol lars
Recreation Use Value
95% Conf i dence 1 nterva 1
Number Reporting ( )
Option Value
95$ Confidence Interval
Number Reporting ( )
Existence of Natural
Ecosystem!*/
95% Confidence Interval
Number Reporting ( )
Bequest to Future
Generations3.'
95$ Confidence Interval
Number Reporting ( )
$1.32 $15.84 $2.16
($12.99-$18.69)
(82)
.50 6.04 1.00
($4.58-$7.51)
(83)
.54 6.43 .58
($4.78-$8.07)
(14)
.46 5.57 .42
($3.93-$7.22)
(14)
$25.92 $1.55
($11.79-$40.06)
(78)
12.00 .64
($5.86-$18.14)
(73)
7.00 .55
($5.37-$8.63)
(9)
5.00 .45
($2.70-$7.31)
(9)
$18.60
(160)
7.65
(160)
6.60
(23)
5.40
(23)
—Existence and bequest values shown here are for a 20 percent sub-sample of respondents who
reported a zero chance of future use of the South Platte River Basin for water-based
recreation activities.
-------
tax. This was an unexpected result, as previous research suggested alter-
native methods of payment would not affect willingness to pay. In a con-
trolled test of the bidding game approach to estimation of willingness to
pay, Bohm [1972] found that several hypothetical methods of payment did not
significantly affect results as compared to when actual payment was made.
The relative size of the estimated values for the two methods of payment
was nearly identical in both Denver and Fort Collins. For example, willingness
to pay additional water bill for recreation use was reported as 32 percent as
much as sales tax in Denver, and 35 percent as much in Fort Collins. This
suggests that factors influencing the cnoice of payment were general in
nature. A sales tax is collected from everyone who purchases goods and
services in the taxing district, including tourists, whereas water bills
are paid by property owners, and only indirectly by renters. This is the
free rider problem in which tourists tend to escape payment when water
quality is improved primarily through water sewer district revenues [Walsh,
Soper and Prato, 1977]. Respondents were more reluctant to participate
in the water bill value estimation procedure. This may have resulted from
perceived inequities. In portions of both cities which were not metered,
small families were required to pay the same flat fee as large families.
Also, with average water bill of $10-15 per month, an incremental willing-
ness to pay of 50 cents per month is a larger percentage of the total water
bill than ? cent in additional sales tax. Although the average willingness
to pay additional sales tax for improved water quality amounted to more
total annual dollars, it was approximately the same percentage of the
annual sales tax bill as the water bill estimates were of the annual water
bill.
RIVER BASIN VERSUS STATE VALUES OF IMPROVED WATER QUALITY
Results of this study suggest that the River Basin is an appropriate
geographic area when evaluating recreation satisfaction from improved water
quality. Residents of the River Basin were asked how much their willingness
to pay for improved water quality would change if waterways of the entire
state were improved to level A. Table 9 shows that the average willingness
to pay to improve water quality throughout Colorado was slight by comparison
to the river basin where residents live. The paired T-test showed no
significant difference at the 5 percent level. In other words, it seems
likely that residents of the River Basin are not willing to pay for improved
water quality in other river basins in the state. However, residents of
other river basins throughout Colorado may be willing to pay to improve
water quality in their own local area. The clear implication is that these
findings for the South Platte River Basin are additive to water quality
values Which .could be estimated for each major river basin in the state.
Residents of the South Platte River Basin tend to engage in water-
based recreation activity within the Basin. Denver residents reported an
average of 20 water-based recreation activity days annually of which 12 or
43
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Table 9 . Willingness of South Platte River Basin Residents to Pay an Additional Sales Tax
to Improve Waterways Throughout Colorado, 1976.
Water Qual ity Values
Denver
Metropol itan
Area
Tax
Rate
Cents
Annua 1
Dol lars
Percent
of Annu-
al Bid
Fort Col 1 ins
Tax
Rate
Cents
Annua 1
Dol lars
Percent
of Annu-
al Bid
South Platte
River Basin
Tax
Rate
Cents
Annual
Dol lars
Percent
of Annu-
al Bid
Recreation Use Value of
Improved Water Quality
in the South Platte
River Basin
95% Confidence
IntervaI
Number Reporting I )
Recreation Use Value of
Improved Water Quality
Throughout
Colorado
95% Confidence
Interval
Number Reporting ( )
Change in Willingness
to Pay
1.00 $50.18 100.0 1.63 $74.00 100.0 1.17 $56.68 100.0
($42.94-$57.42)
($51.07-$96.93)
(85)
(89)
(174)
.99 $48.88 97.4 1.70 $76.10 102.8 1.18 $56.32 98.9
($41.45-$56.31)
(86)
($52.70-$99.50)
(89)
(175)
-.01 -1.30 -2.6 .07 2.10 2.8 -.01 -.38 -1.1
-------
some 60 p -_J,T, were within the River Basin. Fort Collins residents reported
an average of 26 water-based recreation activity days annually of which
21 or about 80 percent were within the River Basin. Still, with 20-40
percent of annual water-based recreation activities outside of the River
Basin, it is surprising that residents were unwilling to pay for improved
water quality at these other locations. This may be related, in part, to
the opinions' respondents hold concerning who should pay for water quality
improvement.
Nearly 40 percent of the residents of the River Basin were of the
opinion that the community as a whole should bear the primary responsibility
for paying the costs of water quality improvement. An additional 15 per-
cent reported the opinion that the polluting industries should pay the
costs, while 30 percent favored sharing the costs between polluting indus-
tries and the people benefiting.
DELAY TO YEAR 2000
The measures of willingness to pay for improved water quality through-
out this report were based on the premise that all bodies of water in the
River Basin would be cleaned up by 1983 and then maintained in a clean
state indefinitely. If circumstances such as postponement of environmental
quality objectives resulted in delaying the improvement of water quality in
the South Platte River Basin to the year 2000, the proportion of respon-
dents willing to pay some amount of additional sales tax for improved water
quality declined from 170 to 151 or by 11 percent. If it is not possible
to improve water quality in the South Platte River Basin until the year
2000, annual willingness to pay for recreation use may fall by an average
of $10.51 per household or 18.5 percent. Table 10 shows the relative
values for Denver and Fort Collins. As water pollution abatement is
delayed, water quality values in Fort Collins fall at a rate about twice
as fast as Denver. The differences in values reported in the two cities
are significant at the five percent level.
Understanding the effects of a delay in the improvement of water
quality on recreation values is important. It appears that the goals
established for water quality will not be met by 1983 in the South Platte
River Basin. The Environmental Protection Agency [1977] reports that:
Current water quality in the South Platte River and
its tributaries is generally poor. Relatively good water
quality is found in streams' headwaters at the fringes of
the urbanized Denver region, but water quality deteriorates
as the streams flow through the urban area. By the time the
South Platte reaches Henderson downstream of Denver, water
quality closely resembles the treated discharge from a sewage
treatment plant. The alternative strategies evaluated in the
EIS all result in improved water quality by 1983, but the goals
established for water quality are not met.
45
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Table 10 . Effects of Delay to the Year 2000 on Willingness to Pay an Additional Sales Tax
to Improve Water Quality in the South Platte River Basin, Colorado, 1976.
Water Quality Values
Denver
Metropol itan
Area
Tax
Rate
Cents
Annua I
Do I lars
Percent
of Annu-
al Bid
Fort Co I I i ns
Tax
Rate
Cents
Annua 1
Do) lars
Percent
of Annu-
al Bid
South Platte
River Basin
Tax
Rate
Cents
Annua 1
Dol lars
Percent
of Annu-
al Bid
JS.
O\
Recreation Use Value of
Improved Water Quality
by 1983
95% Confidence
IntervaI
Number Reporting ( )
Recreation Use Value of
Improved Water Quality
Delayed to the Year
2000
95% Confidence
IntervaI
Number Reporting ( )
Change in Willingness
to Pay
1.00 $50.18 100.0 1.63 $74.00 100.0
($42.94-$57.42)
(85)
<$51.07-$96.93)
(89)
.89 $43.37 86.4 1.22 $53.64 72.5
($35.59-$51.15)
(86)
-.11 -6.81
($37.73-$69.55)
(89)
13.6 -.41 -20.36 27.5
1.17 $56,68 100.0
(174)
.98 $46.17 82.60
(175)
-.19 -10.51 17.40
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LEVEL OF WATER QUALITY
Table 11 shows the relationship between level of water pollution
control and willingness to pay additional sales tax for improved water
quality. This is the willingness to pay for enhanced recreation use, as
respondents were not asked for the value of option, existence and be-
quest demand attached to an intermediate level of water quality. With
only the three data points shown, it is perhaps heroic to generalize
about the nature of the slope of the benefit curve [Green ley, 1977],
The average values suggest that recreation use benefits from water quality
improvement increase at a decreasing rate, which is consistent with de-
creasing marginal utility of consumption observed for private consumption goods.
In Fort Collins, improving polluted water to an intermediate water
quality level (from C to B on the photographs) accounted for 63 percent
of total recreation use benefits from clean water. This is similar to
research results concerning benefits of air quality improvement. It has
been shown that improving air quality to an intermediate level accounts
for 57 [Brookshire, Schulze and Ives, 1976] to 59 percent [Randall, 1974]
of total aesthetic benefits from clean air.
Even more of the benefits to residents of Denver are realized by
improving water quality from the worst condition of pollution to an inter-
mediate level, from C to B. The intermediate level of water pollution
control depicted accounted for 74 percent or $37.12 annually of total
values reported for improving water quality from polluted to clean levels.
This is consistent with recent experience in the Denver Metropolitan Area.
Benefits have accrued to residents from partial improvement of water quality
from year to year. In Central Denver, the quality of the South Platte
River has been improved from a level which would not support fish life to
a level which now can sustain lower levels of fish life such as catfish
and bullheads. This may be considered an improvement from a classification
of polluted to an intermediate level of water quality (from C to B), for
the river does not yet contain sufficient dissolved oxygen to sustain game
fish such as trout. When the highest level of improvement is eventually
achieved, it may be considered an improvement from intermediate water
quality to clean water (from B to A). When the South Platte River becomes
clean, the additional recreation use benefits to Denver residents will
increase by $13.06 annually representing 26 percent of the total value
of water quality reported by Denver residents in 1976.
Since an improvement in water quality from situation C to situation B
accounts for a larger reduction in pollution than from B to A, these esti-
mates appear to be reasonable. Heavy metal pollution was used as a proxy
of water pollution rather than the more general indices of dissolved oxygen
and biochemical oxygen demand. Heavy metal content was selected since in
many areas of Colorado it has resulted in irreversible degradation with
prohibitively high cost of pollution control. Irreversible consequences
from mineral and energy development was an essential assumption in the
estimation of option value. Heavy metal effluent results in many of the
47
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Table 11 . Effect of Level of Water Pollution Control on Willingness of Residents to Pay an
Additional Sales Tax to Improve Water Quality for Recreation Use in the South
Platte River Basin, Colorado, 1976.
Water Quality Values
Denver
Metropo! itan
Area
Tax
Rate
Cents
Annua 1
Dol lars
Percent
of Annu-
al Bid
Fort Col 1 ins
Tax
Rate
Cents
Annual
Dol lars
Percent
of Annu-
al Bid
South Platte
River Basin
Tax
Rate
Cents
Annua 1
Dol lars
Percent
of Annu-
al Bid
00
Improvement from Polluted
Water to an 1 ntermed i -
ate Level of Water
Quality (C to B)-7
95% Confidence
Ij i
nterva 1
Number Reporting ( )
Improvement from an
Intermediate Level
to Clean Water^/
(B to A)
Number Reporting ( )
Total Improvement from
Po 1 1 uted Water to
Clean Water (C to A)3/
95% Confidence
11 i
nterva 1
Number Reporting ( )
.73 $37.12 74.0
($30.62-$43.62)
(86)
.27 $13.06 26.0
(86)
1.00 $50.18 100.0
($42.94-$57.42)
(86)
1.13 $46.63 63.0
($33.45-$59.8l )
(89)
.50 $27.37 37.0
(89)
1.63 $74.00 100.0
($51.07-$96.93)
(89)
.83 $39.72
(175)
.34 $16.96
(175)
1.17 $56.68
(175)
70.1
29.9
100.0
g/
—Levels A, B and C refer to water qualities associated with photographs presented on page 26
of Section 3, above.
-------
same problems as do other effluents, such as fish kills. Some metals, such
as the presence of iron which results in acid formation, have a more pro-
nounced effect on water quality and adjacent wildlife community. However,
an objective basis for weighting was unavailable. Although situations B
and A are quite close together in metals content relative to situa-
tion C, there is a significant change in the level of water quality.
Fish and wildlife are still limited by the toxic effects of the water in
situation B while the water in situation A is pure and non-toxic. Situa-
tion B is representative of areas with approximately 1,158 micrograms of
heavy metals per liter of water, situation C with approximately 181,250 mi-
crograms of heavy metals per liter of water, and situation A where undetected
trace elements remain represents clean water. Situation C depicts the
worst water quality level within the South Platte River Basin where metalic
content exceeds recommended drinking water standards and biological limits
for fish survival. The proportion of waterways polluted to this extent
was not specified. Thus respondents provided estimates of benefits based
on their personal experience and judgement of the actual amount of pollution
in the River Basin.
INTER-CITY COMPARISONS
The t-test showed there was no significant statistical difference
between values reported in +he two cities at the 95 percent level of signif-
icance. Tables 5 and 6 show the average willingness to pay addi-
tional sales tax for improved water quality in Denver and Fort Collins.
Annual average values are higher in Fort Collins than Denver with the
exception of the sub-sample of non-users where existence and bequest values
are slightly higher in Denver. This would suggest that as size of city is
increased, the recreation use value of water quality in the South Platte
River Basin may tend to decrease relative to preservation value. Resident
households in Fort Collins were willing to pay $108.05 annually in addition-
al sales tax for improved water quality for recreation use compared to
about $68.49 for resident households in Denver, or nearly 60 percent more.
However, a non-user sub-sample of Denver residents were willing to pay
an average of $42.46 annually in additional sales tax to preserve water
quality for existence and bequest demands compared to $40.59 for residents
of Fort Col I ins.
It was expected that differences between annual water quality values
for recreation use would be related to differences in the number of days of
recreation use of the South Platte River Basin. Denver residents reported
fewer days of water-based recreation use of the River Basin than Fort
Collins residents. Average household use days were reported as 12.8 in
Denver compared to 20.7 in Fort Collins. When annual water quality values
were divided by the number of days the River Basin was used, there was
no appreciable difference between value of water quality for recreation
49
-------
use in the two cities (Table 5 ). Average total recreation use value
(including option value) was $5.35 per day in Denver and $5.22 in Fort
Collins. However, the variable, days of water-based recreation use of
the River Basin, was not statistically significant in explaining willing-
ness to pay for improved water quality, as will be shown in the following
section.
50
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SECTION 5
EFFECT OF SOCIOECONOMIC VARIABLES ON WILLINGNESS
TO PAY FOR IMPROVED WATER QUALITY
A total of 30 variables representing socioeconomic attributes of re-
spondents were tested with multiple regression analysis for significance
in explaining willingness to pay for improved water quality. Of these,
15 variables were found to be significant at the 5 percent level. Together
they explained as much as 47 percent of the variation in willingness to
pay for improved water quality, although some of the equations explained
less. The results are summarized in Table 12. A discussion of the signif-
icant socioeconomic variables is included in this section, along with tables
showing a simple cross tabulation of average values for the more important
socioeconomic variables including: household income, sex, employment,
permanence of residence, previous residence, reasons for moving, number of
children, age and recreation activities.
HOUSEHOLD INCOME
Table 13 shows household income and willingness to pay additional sales
tax for improved water quality. The cross tabulation of the two variables
suggests that average income may be positively related to the average value
of water quality. As income increases, the value of improved water quality
in the South Platte River Basin also tends to increase. The trends is not
always consistent. For example, households with incomes at the mean of
$15,000-15,999 were willing to pay less for recreation use than households
below the mean with incomes of $8,500-10,999. However, households with
even lower incomes were willing to pay even less. Moreover, households
with incomes of $21,000 and above (estimated average of $32,000) were
willing to pay substantially more by nearly every measure. This suggests
that general prosperity which resulted in increased real personal income
for Colorado residents would increase the value of improved water quality
in the South Platte River Basin.
Level of household income was significant at the 5 percent level in
the regression analysis of variables associated with the value of improved
water quality for recreation use. For example, in Fort Collins a $1,000
increase in household income was associated with a $3.66 increase in annual
willingness to pay for improved water quality via a sales tax. Income levels
and the willingness to pay by Denver residents may be associated with the
family life cycle. As age increases, the value of water quality increases
per $1,000 of added family income, but the effect is slight. Table 14
shows that as age increases by 10 years, the marginal effect of a $1,000
51
-------
Table 12 . Regression Coefficients of Significant Socioeconomic Variables, Denver
and Fort Collins, Colorado, 1976.
a/
Significant Independenl —
Variable (5 percent level)
Recreation Use Value
Sales Tax
Denver
Fort
Col 1 ins
Water Bi 1 1
Denver
Fort
Col 1 ins
Option Value
Sa 1 es Tax
Denver
Fort
Col 1 ins
Water Bi 1 1
Denver
Fort
Col 1 ins
Ul
X. Family Income
X22 1/Family Income
X2g Family Income X Age
X7 Sex-Ma Ie
Xig Employer-Government
X5 Education
Xq Previous Residence
(5,000-25,000)
X4 Age
X^ Occupation-Professional/
Business Owner-Manager
X2« 1/Years Lived in City
X2Q Number of 'ChiIdren
Xn Previous Residence
(100,000+)
Xj4 Occupation-Housewife
X15 Occupation-Retired
X17 Employer-Small Business
.00001
26.55
28.44
-21.67
20.91
-30.03
25.08
.00366
56.45
45.62
Regression Coefficient
.00068
6.92
28.01 7.18
8.44
3.19
7.70
-.66
-14.07
15,176
38.04 3.65
5.02
-.15
.34
-10.45
2.71
.4721
.2141
.3518
Fraction of Explained
Variance (R2)
— See the Statistical Appendix for coding of variables.
.1949
.2857
.1678
.2390
.3809
-------
Table 13. Household Income and Willingness to Pay Additional Sales Tax for Improved (C-A) Water
Quality, Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Water Quality Values
Household Income Groups
Under
6,000
6,000-
8,499
8,500-
10,999
11,000-
13,499
1 S^OO-
IS, 999
16,000-
18,499
18,500-
20,999
21,000a/
or more
Tota I or
Average
Willingness to Pay Additional Sales Tax (Dollars per Year)
OJ
Denver Metro Area
Number Reporting (
Fort Col 1 ins
Number Reporting (
South Platte
River Basin
Option Value
Denver Metro Area
Number Reporting (
Fort Col 1 ins
Number Reporting (
South Platte
River Basin
Tota 1 Va 1 ue
Denver Metro Area
Fort Col 1 ins
South Platte
River Basin
$22,77
) (11)
31 .87
) (13)
25.29
9.35
) (12)
28.50
) (13)
14.65
32.13
60.37
39.94
$51.96
(7)
46.43
(10)
50.43
7.03
(8)
32.80
(10)
14.16
58.99
79.23
64.59
$51.08
(9)
84.88
(10)
60.44
18.36
(9)
52.80
(10)
27.90
69.44
137.68
88.34
$42.94
(8)
36.03
(16)
41.02
29.17
(8)
15.20
(16)
25.30
72.11
51.23
66.32
$42.85
(12)
78.58
(13)
52.75
17.67
(12)
16.58
(13)
17.37
60.52
95.16
70.12
$50.17
(6)
48.05
(5)
49.58
11.46
(6)
10.00
(5)
11.06
61.63
58.05
60.64
$46.33
(9)
147.42
(6)
73.93
13.53
(9)
46.50
(6)
22.53
59.86
193.92
96.46
$70.25
(23)
133.52
(16)
87.78
26.74
(24)
63.52
(16)
36.93
96.99
197.04
124.71
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(.89)
22.60
68.49
108.05
79.28
-/An average of $32,000.
-------
Table 14 . Marginal Effect of a Change of Income on
Willingness to Pay Additional Sales Tax
for Improved Water Quality, at Various
Age Levels, Denver Metropolitan Area,
Colorado, 1976.
Age of
Respondent
20
30
40
50
60
70
— Since the variab
Change in Willingness to
Sales Tax per Year per $
Added Family Income^-
$0.20
.30
.40
.50
.60
.70
Pay Added
1,000 Of
e defined as the cross-products
of age and income were significant, the marginal
effect of income on willingness to pay increased
sales tax for improved water quality was computed
by taking the derivative of the regression equation
and substituting various ages. This gives
9y
6
8X, = B26X4
where the variables are defined as in Table
and B25 is the regression coefficient of the
cross-products. Substituting the regression
coefficient and various ages into the above
equation will yield the marginal effect of
income on willingness to pay.
54
-------
increase in income is to increase the value of water quality by an additional
10 cents per household. In this calculation the variation across individ-
uals in the effects on willingness to pay of all variables shown in the
statistical appendix are adjusted for by multiple regression.
Regression analysis showed a significant relationship between house-
hold income and option value of water quality, as measured by willingness
to pay additional sales tax. The relationship was a positive one in both
the Denver Metropolitan Area and Fort Collins. There was a negative corre-
lation between household income and option value of water quality in Fort
Collins, as measured by willingness to pay additional water bill. This
is inconsistent with the findings regarding willingness to pay a sales
tax for improvement in water quality. One possible explanation for the
negative association may be a tendency for those with higher income levels
in Fort Collins to have a vested interest in the pollution of water resources
from economic development. They would be willing to pay little to post-
pone economic development merely for the option to choose a recreation
use of the South Platte River Basin. They are quite sure now they will
not choose water quality over pollution from development in the future.
A higher proportion of Fort Collins residents engage in water-based recrea-
tion activities outside of the River Basin than do Denver residents. Higher
income households are more able to travel long distances to fish in Wyoming,
northwestern Colorado and other places where recreation water resources
tend to be less polluted.
SEX OF RESPONDENT
Table 15 shows the sex of respondents and average willingness to pay
additional sales tax for improved water quality. It can be seen from the
cross tabulation that, on the average, men were willing to pay more for
water quality than women. In regression analysis of socioeconomic vari-
ables associated with the value of improved water quality for recreation
use, sex of the respondent had a significant effect. Sexual differences
were significant in both cities, but the effect was greater in Fort Collins.
There, the value of improved water quality for recreation use to male
respondents was more than double (2.4 times) the value reported by female
respondents. In Denver, male responses were nearly 60 percent greater
than those of females.
The primary reason may be that men tend to engage in water-based recrea-
tion activities more than //omen, particularly fishing and to some extent
boating. Both men and women swim in nearly equal proportions and more
women than men go sightseeing, picnicking, and walking for pleasure, much
of which occurs along lakes and streams [Adams, Lewis and Drake, 1973].
More men than women work outside the home and thus observe the condi-
tion of water quality in the streams and lakes which they pass on the way
to and from work. This may result in a greater awareness of water quality
among male respondents. Supporting this hypothesis, it can be seen in the
table that retired persons who do not leave the home on a regular basis
as employed persons have lower water quality values. Contrary to this
hypothesis, however, housewives who do not work outside the home place a
higher value on water quality. Most likely women who work outside the home
account for the lower value of water quality attributed to women respondents
55
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Table 15. Sex of Respondent and Wililingness to Pay Additional
Sales Tax for Improved (C-A) Water Quality, Denver,
Fort Collins, and South Platte River Basin,
Colorado, 1976.
Water
Va
Qua I
lues
ity
Sex
Wi 1
Fema 1 e
! inqness
|
to Pay
Male
Sa 1 es
Tax
Tota
(Dol 1
1 or
ars
Average
per Year)
Recreation Use Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Option Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Total Value
Denver Metro Area
Fort Co 1 1 i ns
South Platte
River Basin
$42.81
(47)
40.52
(33)
42.18
19.14
(47)
11.02
(33)
16.89
61.95
51.54
59.07
$59.30
(38)
93.73
(56)
68.10
17.37
(41)
47.63
(56)
25.63
76.67
141.36
94.33
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(89)
22.60
68.49
108.05
79.28
56
-------
as a group. Perhaps households in which women work outside the home tend
to be on an especially tight budget, either because no male adult is pre-
sent or two bread-winners are necessary to make ends meet.
EMPLOYMENT
Both where people work and the type of work they do have a significant
effect on the value of improved water quality for recreation use. Table 16
shows where people work and willingness to pay additional sales tax for
improved water quality. The average values suggest that employees of
government and small business are willing to pay more for water quality
than either employees of large business and manufacturing or unemployed
persons in Denver. However, in Fort Collins employees of large business
and manufacturing are willing to pay more for improved water quality than
small business and agriculture employees. Average skill levels of busi-
ness employees may be higher in Fort Collins, which has several high tech-
nology firms in close proximity.
Government employees were willing to pay more for improved water quality
in 4 of the 6 regression equations. Government employees in Denver were
willing to pay $3.91 more for option value and $28.44 more for water quality
improvement for enhanced recreational opportunities than employees of the
private sector. Denver is a center of national and regional government.
Government employees may have a greater awareness of environmental problems
in the region. In many cases these employees work in areas of environment
concern and planning. The Denver Federal Center includes employees of the
Bureau of Reclamation, Bureau of Land Management, the U.S. Forest Service,
the U.S. Geological Survey, Environmental Protection Agency and other environ-
mental research branches. The Colorado Water Quality Control Commission,
the Denver Water Board, the Division of Wildlife and state and local planning
agencies are also located in Denver.
Table 17 shows the type of work people do and average willingness
to pay additional sales tax for improved water quality. The average values
suggest that, in Denver, housewives are willing to pay more than profes-
sionals, business owners and managers, those in other occupations, and
the retired. In Fort Collins, however, professionals, business owners
and managers are willing to pay more than those in other occupations, and
housewives reported the lowest values, even lower than retired persons.
The type of work people do was significant in regression analysis
of variables associated with the value of improved water quality for recrea-
tion use, as measured by willingness to pay additional sales tax. In the
Denver Metropolitan Area, regression results show that professionals and
business owners and managers value water quality by $21.67 less than other
occupations. Retired residents value water quality by $30.03 less than
those who remain active in the work force. Housewives were willing to
pay $20.91 more than those employed in other occupations. Since this
57
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Table 16. Where People Work and Willingness to Pay Additional Sales Tax for Improved (C-A)
Water Quality, Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Water Quality Values
Emp loyer
Sma 1 1 Busi
and Agricul
ness
ture
Large Business
and Manufacturing
Government
Other9/ and
Unemp loyed
Total
or Average
Willingness to Pay Additional Sales Tax (Dollars per Year)
co
Denver Metro Area
Number Reporting ( )
Fort Co II ins
Number Reporting ( )
South Platte
River Basin
Option Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Total Values
Denver Metro Area
Fort Col 1 i ns
South Platte
River Basin
$60.02
(14)
57.96
(23)
59.45
11.46
(16)
23.04
(23)
14.76
71.48
81.00
74.12
$44.12
(13)
112.25
(10)
62.72
13.73
(13)
60.95
(10)
26.62
57.85
173.20
89.34
$66.23
(14)
103.00
(28)
76.42
23.24
(15)
44.63
(28)
29.17
89.47
1 47 . 63
105.59
$43.74
(44)
44.53
(28)
43.96
20.95
(44)
22.90
(28)
21.49
64.69
67.43
63.45
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(89)
22.60
68.49
108.05
79.28
— Other include petro-chemica I s and mining.
-------
Table 17. Occupation and Willingness to Pay Additional Sales Tax for Improved (C-A) Water Quality,
Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Water Quality Values
Occupation
Prof ess iona Is,
Business Owners,
and Managers
Housew
Wi I I i ngness
fe
Reti red
Other a/
to Pay Sales Tax (Do
Total
lars per Year)
or Average
Recreation Use Value
Denver Metro Area
Number Reporting ( )
Fort Col I ins
Number Reporting ( )
South Platte River Basin
vji Option Value
"° Denver Metro Area
Number Reporting ( )
Fort Col I ins
Number Reporting ( )
South Platte River Basin
Total Value
Denver Metro Area
Fort Col I ins
South Platte River Basin
$52.44
(23)
94.00
(33)
63.95
16.66
(24)
39.64
(33)
23.03
69.10
133.64
86.98
$58.63
(17)
38.61
(11)
53.08
30.11
(17)
7.93
(11)
23.97
88.74
46.54
77.05
$29.07
(14)
41.68
(11)
32.65
$53.41
(31)
76.50
(32)
59.71
6.97
(16)
6.27
(11)
6.78
18.98
(31)
46.06
(34)
26.37
36.04
47.95
39.43
72.39
122.56
86.08
— Other includes skilled, foreman, salesman, keeper, office worker, unskilled and student.
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(89)
22.60
68.49
108.05
79.28
-------
variable entered only one of the six regressions it is difficult to con-
clude that it may effect a similar general response from the Basin popula-
tion.
EDUCATI ON
Table 18 shows years of education and average willingness to pay addi-
tional sales tax for improved water quality. The cross tabulation of the
two variables shows that average education level attained is positively
related to the value of water quality. As mean schooling increases, the
mean value of improved water quality in the South Platte River Basin tends
also to increase. While the trend is not wholly consistent and there are
few in the sample with less than a high school education, it is clear that
they valued water quality less than those who graduated from high school.
High school graduates and college graduates valued water quality less than
those with professional or graduate level education beyond the college
I eve I.
Level of education was significant at the 5 percent level in regres-
sion analysis of the factors explaining the value of improved water quality
for recreation use. In Fort Collins there was a positive correlation be-
tween level of education and the value of water quality, as measured by
willingness to pay a higher water bill. Each additional year of schooling
was associated with a $2.71 increase in option value and a $8.44 increase
in recreation use value. This suggests that educational attainment may
be associated more with concern about environmental quality. No explana-
tion is available as to why this variable was not significant in Denver.
FORMER RESIDENCE
Table 19 shows where people lived before moving to this area and
average willingness to pay additional sales tax for improved water quality.
The average values suggest the effects vary between the two cities. Rural
immigrants to Denver value water quality more highly for recreation use
than immigrants from other cities whether small or large, with the lowest
values reported for immigrants from large cities of 100,000 people or more.
In Fort Collins, immigrants from large cities valued water quality more
highly than other immigrants. There, rural immigrants reported the lowest
vaIues.
Place of former residence was significant in regression analysis of
variables associated with the recreation use and option value of improved
water quality. For Denver Metropolitan Area residents, the smaller the
place of former residence, the more they tended to value water quality.
These former residents of rural areas and small cities may have had easier
access to recreation areas hence more recreational use of lakes and streams
than those from large cities. Having developed an appreciation for the
60
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Table 18. Education and Willingness to Pay Additional Sales Tax for Improved (C-A) Water Quality,
Denver, Fort Collins, and South Platte River Basin, Colorado, 1976.
Water Quality Values
Recreation Use Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Option Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Tota 1 Va 1 ue
Denver Metro Area
Fort Col 1 ins
South Platte
River Basin
8
9-11
12 |
Will inqness to Pay
$26.00
(1)
10.42
(3)
21.68
8.88
(2)
2.83
(3)
7.20
34.88
13.25
28.88
$45.44
(4)
30.80
(5)
41.38
7.69
(4)
3.10
(5)
6.42
53.13
33.90
47.80
$46.88
(17)
67.16
(21)
52.50
13.40
(18)
40.67
(21)
20.95
60.28
107.83
73.45
Years
13-15
Add i tiona
$56.95
(28)
79.68
(21)
63.15
27.17
(28)
22.93
(21)
26.01
84.12
102.61
89.16
of Educat
1 16
on
Over 16
Total or Average
Sales Tax (Dollars per Year)
$47.30
(23)
56.70
(12)
49.90
19.04
(23)
29.92
(19)
22.05
66.34
86.82
71.95
$48.19
(12)
112.01
(20)
65.87
9.47
(13)
55.13
(20)
22.12
57.66
167.14
87.99
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(89)
22.60
68.49
108.05
79.28
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Table 19. Size of Place of Previous Residence and Willingness to Pay for Improved (C-A) Water
Quality, Denver, Fort Collins and South Platte River Basin, Colorado, 1976.
O>
Water Quality Values
Recreation Use Value
Denver Metro Area
Number Reporting ( )
Fort Co 1 1 i ns
Number Reporting ( )
South Platte
River Basin
Option Value
Denver Metro Area
Number Reporting ( )
Fort Col 1 ins
Number Reporting ( )
South Platte
River Basin
Tota 1 Va 1 ue
Denver Metro Area
Fort Col 1 ins
South Platte
River Basin
100,000+
$43.73
(41)
107.49
(30)
61.13
14.97
(41)
47.60
(30)
23.87
58.70
155.59
85.00
Size of
| 25,000-100
Will inqness
$52.20
(23)
55.51
(26)
53.12
15.62
(25)
26.49
(26)
18.63
67.82
82.00
71 .85
Dlace of Previous Res
,000 I 5,000-25,0000
to Pay Sales Tax (Dol
$54.44
(12)
85.25
(16)
62.97
32.64
(13)
48.39
(16)
37.00
87.08
133.64
99.97
idence
| Rural
Tota I or Average
lars per Year)
$63.96
(7)
31.72
(17)
55.03
7.00
(7)
8.20
(17)
7.33
70.96
39.92
62.36
$50.18
(85)
74.00
(89)
56.68
18.31
(88)
34.05
(89)
22.60
68.49
108.05
79.28
-------
natural environment, they may place special emphasis on preserving it for
recreation use in the future. For residents of Fort Collins, regression
analysis shows the larger the place of former residence, the more they
value water quality. Perhaps those who are willing to pay more for im-
proved water quality tend to migrate to smaller cities which have outdoor
recreation resources nearby, while those who are less willing to pay for
water quality tend to remain in large cities.
REASONS FOR MOVING
Table 20 shows reasons for moving to Colorado and willingness to
pay additional sales tax for improved water quality. The average values
suggest that residents who immigrated to the River Basin for environmental
reasons may value water quality more highly than those who came for other
reasons. This is not the case for residents of the Denver Metropolitan
Area, where those who moved there for family reasons value water quality
most highly. Those who moved there for economic and other reasons such as
quality of the public services valued water quality less. This is also
the case- in Fort Collins. However, Fort Collins residents who moved
there for environmental reasons place the highest value on water quality.
This is sufficient to overcome the lower values by those who moved to Denver
for environmental reasons, so that the overall South Platte River Basin
estimate of the "value of water quality for recreation use is highest for
those who moved there for environmental reasons. This is in accord with
the widespread belief that people move to Colorado because of its reputation
for a quality living environment. However, reasons for moving to Colorado
were not significant in regression analysis of variables associated with
the value of improved water quality for recreation use or for option value.
PERMANENCE OF RESIDENCE
Table 21 shows how long people live in one place and willingness to
pay additional sales tax for improved water quality. The cross tabulation
of the two variables suggests that, on average, the longer people live
in one place, the less they are willing to pay for water quality improve-
ment for recreation use. The trend is not always consistent, but newly
arrived residents of less than 5 years were willing to pay over one-fourth
more than long standing residents of 11-20 years. The same relationship
was apparent in Fort Collins. Newly arrived residents were willing to
pay more than twice as much as residents of 11-20 and 21-40 years. This
suggests that immigration of people into the state in recent decad.-; may
have increased the value of improved water quality for recreation use.
Permanence of residence was a significant variable in regression
analysis of variables associated with the value of improved water quality
for recreation use, as measured by willingness to pay additional water bill.
In the Denver Metropolitan Area, for example, additional years of residence
63
-------
fable 20. Reason for Moving to Colorado and WiI Iinnnps^ to Pay Additional bales Tax
for Improved (C-A) Water Quality, i>.-nv |