Study: Water quality has economic impact

Researchers find connection between water, tourism, housing values

Michelle Monroe

By Michelle Monroe

Executive Editor

The Facts

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SOUTH HERO — Economists from the University of Vermont (UVM) have quantified what many have long suspected – that poor water quality in Lake Champlain has an economic impact on the communities along the lake and the state as a whole.

In a report released to the public Thursday by the Lake Champlain Basin Program, Brian Voight, Julia Lees and Jon Erickson presented their analysis of the impact of water quality on tourism and housing values.

“I think it confirms many of the suspicions people had all along,” said Voight.

Jan Marinelli of the Lake Champlain Islands Economic Development Corporation said the tourism research, which focused on Grand Isle County, was not a surprise. “Businesses in Grand Isle County understand this concept quite well,” she said. “It’s not new to them.”

“It’s very clear to all of us that the lake is our jewel,” she added.

The study found a change in water quality for the better would raise the value of homes along the lake and that lower housing values were associated with poorer water quality.

Similarly, poor water quality in July and August had a negative impact on tourism, with fewer visitors to Grand Isle County and Swanton – the towns studied – when water quality was low.

Their research shows water quality is not just an environmental issue, it’s an economic one, said Voight.

Comparing data from gauges used to measure water quality with revenue from the rooms and meals tax in Grand Isle County and Swanton over a four-year period, the researchers found a direct correlation between water clarity, as measured by a Secchi disc, and tourism revenues.

In a Secchi disc test, the disc is lowered into the water and a measurement is taken of the point at which it is no longer visible from above. The more quickly the disc disappears from sight, the more nutrients, algae and sediment are in the water.

For every meter the disc remained visible, researchers found an increase in expenditures on rooms by tourists. In just the six towns studied a one-meter increase in the depth of disc visibility would result in $110,544 more in room rentals in the month of August alone.

Voight and his team then used that data along with a model of the economy along the lake, which maps how money moves from one sector of the economy to another. For example, money spent at a restaurant then becomes part of the pay for employees, which they, in turn, spend.

Vermont’s four lakeside counties generate $300 million in tourism income each year and an additional $72.75 million as that money moves through the economy. More than a thousand jobs result from tourism along the lake.

Applying the evidence from their analysis of room rentals in the five lakeside towns to the model of the regional economy, Voight, Lee and Erickson found that a decrease in water quality equal to a loss of one-meter of Secchi disc depth would lead to a loss of 195 full-time jobs, a $12.6 million reduction in tourism and a $16.8 million reduction in overall economic activity just during the months of July and August.

The impact of polluted water was already visible in the data he examined from Grand Isle county and Swanton. “We can see these changes in expenditures even now,” said Voight. “You can see an almost immediate impact.”

Rooms and lodging rentals and the tourism they represent, are “one place where the connection between water quality and the economy is quite acute,” said Voight.

His analysis did not include any look at special events such as fishing derbies and boating regattas that may attract fewer people if water quality is poor, an area researchers suggested should be looked at.

Another needed piece of research is to look at what factors influence where people decide to visit on vacation, said Voight, who expressed concern about the long-term impact of poor water quality on tourism.

“If we see continued degradation of the water and word gets out ‘oh, the beaches are frequently closed there,’ it’s devastating,” he said. Those impressions can be difficult to overcome even when water quality improves, he suggested.

Home values

Looking at the values of Vermont properties within 100 meters of the lake, Voight found a direct connection between water quality and housing values.

Lakeside properties are generally valued at 30 to 49 percent more than similar properties not located along the lake, the researchers found.

Looking at housing sales and water quality data for the month of August, Voight found that an improvement in water quality equal to one more meter of Secchi depth would lead to a three percent increase in the price of a single-family home. For seasonal homes, the impact was even greater, raising the value of the property 37 percent.

Extrapolating from their findings, the researchers determined that meeting the phosphorous reduction requirements in the TMDL (Total Maximum Daily Load) established by the Environmental Protection Agency, would increase the value of homes along the lake by an average of $15,200.

Conversely, the increased runoff of sediment and nutrients associated with climate change will lead to a decrease in lakeside housing values of $7,000 on average, unless checked.

“If we clean up the lake from its current state… there would be a rise in property values,” said Voight.

Property values, in turn, impact the distribution of the tax burden, Voight noted. When assessments of lakeside properties are lowered, as they were in Georgia last year, for lakeside properties, the property tax burden increases on other properties in the town for municipal expenses and other properties in the state for education.