SUBSTITUTE COSTS: A METHOD FOR DETERMINING ECOLOGICAL

SERVICE VALUES IN STORMWATER MANAGEMENT

For:Dr. Mindy Lalor – Committee Chair

Dr. Robert AngusDr. Paul D. Blanchard

Dr. Sarah CulverDr. Alan Shih

1

Introduction Development pressures are increasing Stormwater runoff characteristics are changed by

development Stormwater runoff models exist that compare pre-

and post- development stormwater characteristics Models produce complicated scientific/engineering

data A methodology is needed to derive a common

metric to aid in comparing the value of an ecological service to the value of planned development

The Ecological Services Value (ESV) method provides an approach to deriving a common metric

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Points of Interest

The ESV method:was successfulis reproduciblecan be used by policy makers

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WHAT IS THE PROBLEM?

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Stormwater Runoff Impacts It is often difficult for decision makers and political

officials to understand complex scientific and engineering analysis, as it relates to stormwater runoff

The desire for economic development and sources of new revenue is creating intense pressure on decision makers to allow development of lands

Without a common metric, it is difficult to compare the value of the environmental services currently provided (which may be lost) with the value of the potential development

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WHY IS IT A PROBLEM?

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Decisions Will Be Made Development decisions are often made without

respect to impacts of stormwater runoff

Few tools are available to evaluate complex development decisions with well recognized, simplistic terms

Without a common metric, decision makers may not consider the impacts of development on stormwater runoff

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WHY IS IT IMPORTANT TO SOLVE IT?

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Ecosystem Deterioration Assuming that predevelopment conditions are

optimal for downstream areas, if impacts are not mitigated, significant damage can occur in the form of pollution and/or flooding

Without the appropriate comparisons between the costs of impact mitigation and the financial benefits or other value derived from development, leaders may make poor decisions that could have negative impacts on society

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WHAT IS “VALUE”?

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What is “value”?

Webster’s Dictionary Defines Value as:

1 : a fair return or equivalent in goods, services, or money for something exchanged

2 : the monetary worth of something : marketable price

3 : relative worth, utility, or importance <a good value at the price> <the value of base stealing in baseball> <had nothing of value to say>

7 : something (as a principle or quality) intrinsically valuable or desirable <sought material values instead of human values -- W. H. Jones>

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Utility in Value

Utility is defined as the level of happiness or satisfaction associated with alternative choices.

Economists assume that when individuals are faced with a choice of feasible alternatives, they will always select the alternative that provides the highest level of utility.

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What is Environmental Economics?

A mechanism using economic theories and empirical analyses that characterizes relationships between the performance of the economy and environmental pollution control;

OR It can be defined as the study and in-depth

analyses of economic and policy issues relating to economic costs and benefits of environmental pollution control programs, policies, and guidance.

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Why do we need to consider Environmental Economics?

To perform analyses of the economic impacts of environmental pollution control programs.

To address the development dimensions of environmental policy – evaluating the social and economic impacts, in particular the impacts on poverty, and designing policies that are both cost-effective and equitable.

To examine the environmental implications of development policy – making tradeoffs between poverty reduction and environmental protection.

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Concepts of Value

Non-Utilitarian Concept(Typically Intangible

Values)

Utilitarian Concept(Typically Tangible Values)

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Total Economic Value

Total Economic Value (TEV)

Concept is attributed to Pearce and Warford 1993, World Without End

Theoretical structure for assessing ecosystem value as a whole

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TEV

CAT

EGO

RIE

S

CO

MM

ON

LY U

SED

VALU

ATIO

NM

ETH

OD

S

USE VALUE NON-USE VALUE

TOTAL ECONOMIC VALUE(TEV)

Direct use value

ConsumptiveNonconsumptive

Indirect use value Option value

Bequest valueQuasi-option value

Existence Value

1. Changes in productivity

2. Cost-based approaches

3. Hedonic prices4. Travel costs5. Contingent

valuation

1. Changes in productivity

2. Cost-based approaches

3. Contingent valuation

1. Changes in productivity

2. Cost-based approaches

3. Contingent valuation

1. Contingent valuation

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TEV CategoriesDirect Use

Direct use values are based on consumptive or nonconsumptive uses.

Consumptive use is a use that reduces the overall supply of resource, while nonconsumptive use causes no reduction in quantity or supply of that resource

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TEV CategoriesIndirect Use Indirect use values can be described as support and

protection provided to economic activity by regulatory environmental services.

Many ecosystem services are used as intermediate inputs for the production of goods, while other services indirectly contribute to consumption of goods.

An example of indirect use value of services through intermediate inputs would be pollination in food production, while indirect contribution to consumption would be water purification.

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TEV CategoriesOption Value

Option value is about the value of preserving the choice to use ecosystem services in the future by not taking actions on the environment that are irreversible

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TEV CategoriesExistence Value Existence values are non-use values often referred

to as conservation values, or passive use values. These are values applied to a resource that

individuals do not intend to use, but would feel a “loss” if the resource were to disappear.

This could be stated as value ascribed to the knowledge of existence.

Studies have linked these applied values to the knowledge of maintaining a resource for one’s descendents and the knowledge of assured survival for a resource like habitats or species

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TEV

CAT

EGO

RIE

S

CO

MM

ON

LY U

SED

VALU

ATIO

NM

ETH

OD

S

USE VALUE NON-USE VALUE

TOTAL ECONOMIC VALUE(TEV)

Direct use value

ConsumptiveNonconsumptive

Indirect use value Option value

Bequest valueQuasi-option value

Existence Value

1. Changes in productivity

2. Cost-based approaches

3. Hedonic prices4. Travel costs5. Contingent

valuation

1. Changes in productivity

2. Cost-based approaches

3. Contingent valuation

1. Changes in productivity

2. Cost-based approaches

3. Contingent valuation

1. Contingent valuation

Substitute Cost Method is the focus of this research

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Substitute Costs Method

This approach is based on the principle that the value of the resource may be assigned based on the cost of replacing or finding a substitute for the resource, or the cost of repairing damage caused by the use of the resource.

The central premise of substitute cost determination is that a “substitute” can be found for the resource in question and that a cost can be determined for that substitute.

Therefore substitution is technologically limited within the context of ecosystem valuation.

For the cost determination to be valid, the substitute must be equal to or greater than its predecessor.

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RESEARCH

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Research Question

How can the monetary value of the natural services provided by undeveloped lands with respect to stormwater runoff impacts be determined?

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Hypothesis

The proposed methodology produces the required inputs for the ESV equation.

n

iOCES iiCCV

1

)(

Where:

VES = Ecological Services Value

CC = Capital costs of the construction of the stormwater control

CO = Operations and maintenance costs of the stormwater control26

RESEARCH METHODS

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Approach Summary Geoprocessing

Definition: the use of GIS to manipulate data Used in this approach to derive the input variables and data for

stormwater modeling.` Modeling

The use of a modeling software to determine the pre- and post-development stormwater characteristics of a site

WinSLAMM was selected for this research ESV Calculation

Use of the Ecological Services Value equation with the results of the stormwater model to determine value of the stormwater management services by the undeveloped site

Amortization of the “Year One ESV” for 20 years at 6%

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GeoprocessingTerrain Data

Source Data1ft. dispersion LiDAR

Derived DataMean Aspect Surface

ModelMean Slope Surface

Model Purpose of data

To ascertain the inclination direction and severity

Generate surface using IDW

interpolation

Calculate the mean slope for the

area of interest using zonal

statistics

Calculate the mean aspect for

the area of interest using zonal

statistics

Use surface model to generate aspect

model

Use surface model to generate slope

model

Surface Model

Aspect Model

Slope Model

Mean aspect Mean slope

Boundary for each

AOI

Define extent for extracting LIDAR by selecting each

AOI

AOI

Extract LIDAR by AOI extent

LIDAR

LIDAR of AOI

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GeoprocessingHydrologic Data

Source Data6 in. resolution aerial

photographySite observations

Derived DataSource areas

Purpose of dataDescribes the sizes,

divisions, and surface characteristics of the land cover types

Define maximum symmetrical extent

Extract aerial photography

Define AOI

Define Source Areas

Add Source Area type attributes

Dissolve by Source Area type

Add area fields

Calculate area

Convert area to model units

Maximum extent

Color ortho photography

Ortho photos by maximum

extent

AOI

Source Areas 30

GeoprocessingSoils Data

Source DataNRCS 1:24,000

SSURGO Derived Data

Hydrologic GroupsType distribution

Purpose of dataDescribe the type,

distribution, and ability of the soil to infiltrate stormwater

Define AOI

AOI

Extract soils data by AOI

AOINRCS

SSURGO Soils

Soils by AOI

Dissolve by Map Unit Symbol (MUSYM)

Add area and percentage fields

Calculate area

Convert model units

Calculate percentages

Soils

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Geoprocessing Model Parameter

ConsolidationSource areas and

soils were combinedDistributions of

source areas and soils types were calculated

Units converted to match requirements for WinSLAMM

Union Source Areas and Soils

Source Areas

Soils

Source Areas with

Soils

Add area field

Convert to model units

Output area per soil type by Source

Area

Model Parameters

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ModelingWinSLAMM

WinSLAMM (Source Loading and Management Model) is a simulation model used to determine the volume and constituents of a stormwater runoff from a site

First, for the pre-development condition, the total site area is entered specifying the area of each soil hydrologic group

Next , for the “base condition”, is the entry of the “source areas” of a site without any stormwater controls.

Last , for the “control condition”, is the design, sizing, and input of stormwater controls to reach the targeted reductions in volume and particulate discharge

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ModelingWinSLAMM

The ability to calculate the construction and operations costs of the stormwater controls inputted occurred as of version 9.2. These are the sources of costing data.

1. Costs of Urban Nonpoint Source Water Pollution Control Measures prepared by Southeastern Wisconsin Regional Planning Commission, 1991.

2. Costs of Urban Stormwater Control by Heaney, Sample, and Wright for the US EPA, 2002.

3. BMP Retrofit Pilot Program prepared by CALTRANS, 2001.

4. Engineering News Record (ENR) Cost Indices

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ESV Calculation

Model results for the predevelopment, base, and control conditions are used to identify runoff volume and particulate solids

Capital costs and operations and maintenance costs are identified from the control condition results

The ESV equation is used to calculate year one

“Year One ESV” is amortized for 20 years at 6%

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Research Sites

1. Commercial Site

2. High Density Residential Site

3. Low Density Residential Site

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COMMERCIAL SITESite 1 Results

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Source Area Delineations

FLAT ROOFS

PARKING

SMALL LANDSCAPED AREA

STREETS

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40

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45

46

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Etowah loam, 2 to 8 percent slopes

Allen fine sandy loam, 8 to 15 percent slopes

Gorgas-Rock outcrop complex, steep

Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes

Docena complex, 0 to 4 percent slopes

Allen fine sandy loam, 8 to 15 percent slopes

Docena complex, 0 to 4 percent slopes

Etowah loam, 2 to 8 percent slopes

Gorgas-Rock outcrop complex, steep

Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes

Soils Distribution by Type

HIGH DENSITY RESIDENTIAL SITE

Site 2 Results

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Source Area Delineations

FLAT ROOFS

PARKING

SMALL LANDSCAPED AREA

STREETS

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51

52

53

54

55

56

57

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Fullerton-Urban land complex, 8 to 15 percent slopes

Docena complex, 0 to 4 percent slopes

Decatur silt loam, 2 to 8 percent slopes

Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes

Decatur silt loam, 2 to 8 percent slopes

Docena complex, 0 to 4 percent slopes

Fullerton-Urban land complex, 8 to 15 percent slopes

Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes

Soils Distribution by Type

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LOW DENSITY RESIDENTIAL SITE

Site 3 Results

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Source Area Delineations

FLAT ROOFS

PARKING

SMALL LANDSCAPED AREA

STREETS

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Holston-Urban land complex, 2 to 8 percent slopesDecatur-Urban land complex, 2 to 8 percent slopes

Decatur-Urban land complex, 2 to 8 percent slopes

Holston-Urban land complex, 2 to 8 percent slopes

Soils Distribution by Type

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RESULTS

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WinSLAMM Control Condition Results

  Site 1 Site 2 Site 3

Runoff Volume (cf) 2,335,415.000 1,263,731.000 243,570.300

Particulate Solids Yield (lbs) 1290.994 573.931 21.321

Particulate Solids Concentration (mg/L) 8.862 7.281 1.403

Cost per cubic foot Runoff Volume Reduced ($/cf) $0.58 $2.15 $0.63

Cost per pound Particulate Solids Reduced ($/lb) $127.72 $49.18 $22.09

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ESV Calculation Assumptions1. Predevelopment is the optimal

condition.

2. Predevelopment can be achieved through technology.

3. If predevelopment is not available for particulate solids, then 0 is assume.

4. Land cost is not factored.

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ESV Results – Commercial Site

Control Cost to reach Predevelopment Runoff $4,766,005.00 Control Cost to reach Base or better Solids $3,852,282.98

Total Capital Costs $8,618,287.98 Operations and Maintenance Costs $1,053,491.00

Interest of a 20 year amortization @ 6% $21,358,650.32 Capital Cost + 20 years of O & M $29,688,107.98

Year One ESV $10,725,269.98 Total ESV $51,046,758.29

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ESV Results – High Density Residential Site

Control Cost to reach Predevelopment Runoff $2,782,504.20 Control Cost to reach Base or better Solids $913,715.22

Total Capital Costs $3,696,219.42 Operations and Maintenance Costs $253,225.00

Interest of a 20 year amortization @ 6% $6,302,764.15 Capital Cost + 20 years of O & M $8,760,719.42

Year One ESV $4,202,669.42 Total ESV $15,063,483.57

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ESV Results – Low Density Residential Site

Control Cost to reach Predevelopment Runoff $552,024.14 Control Cost to reach Base or better Solids $431,431.84

Total Capital Costs $983,455.98 Operations and Maintenance Costs $123,365.00

Interest of a 20 year amortization @ 6% $2,482,593.04 Capital Cost + 20 years of O & M $3,450,755.98

Year One ESV $4,975,937.98 Total ESV $5,933,349.03

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Conclusions This research produces a methodology that:

1. Leverages GIS technology for the generation of the required inputs for stormwater runoff models

2. Implements a proven, calibrated, verified stormwater model in WinSLAMM that produces the results needed for the ESV calculations

3. Provides policy makers with a functional, reproducible approach to assessing the value of the stormwater management services provided by natural systems for use in cost-benefit analysis in development decisions

Lastly, this research contributes to the greater body of knowledge on the topics of stormwater runoff impacts, environmental economics, and geographic information sciences.

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SUBSTITUTE COSTS: A METHOD FOR DETERMINING ECOLOGICAL SERVICE

VALUES IN STORMWATER MANAGEMENT

For:Dr. Mindy Lalor – Committee Chair

Dr. Robert AngusDr. Paul D. Blanchard

Dr. Sarah CulverDr. Alan Shih

75

Thank you for your patience, time, and

support.