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Economic Benefits of Reducing Harmful Algal

Blooms in Lake Erie


Submitted to the International Joint Commission
October 2015

Prepared by:

Veritas
Economic Consulting

Thispageintentionallyleftblankasthisreportismeanttobeprinteddoublesided.

ACKNOWLEDGEMENTS
This study was contracted with funding from the International Joint Commission (IJC) to evaluate the
effects of harmful algal bloom (HAB) to the regional economic welfare in western Lake Erie. The study
estimated costs by identifying the economic benefits of reductions in future HABs. Its results are limited
in scope to the specific range of effects that were considered, the lack of data available for many
parameters, and the geographic scope of the study. These limitations are carefully discussed in the
report.
Environmental Consulting & Technology, Inc. (ECT) and Veritas Economic Consulting, LLC (VEC) wish to
extend our sincere appreciation to the IJC for funding this project. In addition, thanks are due to Steven
Renzetti (Professor of Economics, Brock University, Ontario) for reviewing and commenting on early
versions of this report, and to three anonymous reviewers for their comments on the draft report.
For purposes of citation of this report, please use the following:
Economic Benefits of Reducing Harmful Algal Blooms in Lake Erie, M. Bingham, S. K. Sinha,
and F. Lupi, Environmental Consulting & Technology, Inc., Report, 67 pp, October 2015.
Lastly, any related communications can be directed to Sanjiv Sinha at ssinha@ectinc.com.

Economic Benefits of Reducing Harmful Algal Blooms in Lake Erie

TABLE OF CONTENTS
Section

Page

1.0

EXECUTIVE SUMMARY--------------------------------------------------------------------------------------------1

2.0

LAKE ERIE: OVERVIEW OF ITS ECOSYSTEM AND ALGAL BLOOMS ----------------------------------------6


2.1
GENERAL BACKGROUND--------------------------------------------------------------------------------- 6
2.1.1 Harmful Algal Blooms (HABs) & Nuisance Algal Blooms (NABs) --------------------- 7
2.1.2 Water Levels in Western Lake Erie --------------------------------------------------------- 8
2.1.3 HAB Drivers and History -------------------------------------------------------------------- 10

3.0

METHODOLOGY TO CALCULATE ECONOMIC BENEFITS OF HAB REDUCTIONS ----------------------- 13


3.1
INTRODUCTION ------------------------------------------------------------------------------------------ 13
3.2
ECOLOGICAL SERVICES AND ECONOMIC BENEFITS --------------------------------------------- 14
3.2.1 Economic Values and Behavior ------------------------------------------------------------ 15
3.2.2 Economic Activity and Benefits------------------------------------------------------------ 16
3.3
HAB SCENARIOS STUDIED IN THIS REPORT-------------------------------------------------------- 17
3.3.1 Quantifying Ecological Service Reductions --------------------------------------------- 17
3.3.2 The 2011 HAB --------------------------------------------------------------------------------- 18
3.3.3 The 2014 HAB --------------------------------------------------------------------------------- 19

4.0

IMPACTS OF HABS ON RESIDENTIAL PROPERTY VALUES ------------------------------------------------- 21


4.1
RESIDENTIAL PROPERTY VALUES -------------------------------------------------------------------- 21
4.2
VALUE AT RISK ------------------------------------------------------------------------------------------- 22
4.3
POTENTIAL FOR IMPACTS ----------------------------------------------------------------------------- 29
4.4
SUMMARY OF PROPERTY VALUE RESULTS AND NEXT STEPS --------------------------------- 31

5.0

IMPACTS OF HABS ON TOURISM AND COMMERCE ------------------------------------------------------- 33


5.1
OHIO TOURISM ------------------------------------------------------------------------------------------ 35
5.1.1 Characterization of Expenditures --------------------------------------------------------- 35
5.1.2 The Economic Impact of Tourist Days --------------------------------------------------- 36
5.1.3 Ohio Tourism at Risk ------------------------------------------------------------------------- 38
5.1.4 Ohio Tourism Benefits ----------------------------------------------------------------------- 39
5.2
MICHIGAN TOURISM ----------------------------------------------------------------------------------- 40
5.3
CANADA TOURISM -------------------------------------------------------------------------------------- 41
5.4
SUMMARY AND NEXT STEPS-------------------------------------------------------------------------- 43

6.0

IMPACTS OF HABS ON FISHING, BEACH-GOING, AND BOATING ---------------------------------------- 44


6.1
HAB EFFECTS ON RECREATION ----------------------------------------------------------------------- 44
6.2
METHODS FOR IDENTIFYING RECREATIONAL BENEFITS OVERVIEW ---------------------- 44
6.3
METHODS FOR IDENTIFYING RECREATIONAL BENEFITS --------------------------------------- 45
6.4
BEACH RECREATION BENEFITS ----------------------------------------------------------------------- 47
6.5
FISHING BENEFITS --------------------------------------------------------------------------------------- 50
6.6
BOATING BENEFITS ------------------------------------------------------------------------------------- 50
6.7
NEXT STEPS ----------------------------------------------------------------------------------------------- 51

7.0

POTENTIAL IMPLICATIONS OF HABS FOR FARMING, INDUSTRIAL, MUNICIPAL AND PRIVATE WATER
WITHDRAWERS ------------------------------------------------------------------------------------------------ 52

Economic Benefits of Reducing Harmful Algal Blooms in Lake Erie

ii


7.1
IMPORTANTDRINKINGWATERSERVICESANDTHEIRRELATIONSHIPTOHABS52

7.2
FARMINGANDINDUSTRIALUSES52

7.3
MUNICIPALANDPRIVATEUSES53

7.3.1 EffectstoPWS53

7.3.2 PWSAdaptationCosts54

7.3.3 PrivateWellEffects54

7.4
BENEFITSOFREDUCINGFUTUREHABS54

7.5
SUMMARYANDNEXTSTEPS56

8.0
NEXTSTEPS
57

8.1
PROPERTYVALUES57

8.2
TOURISM58

8.3
RECREATION58

8.4
FARMING,INDUSTRIAL,MUMICIPAL,ANDPRIVATEWATERWITHDRAWERS59

8.5
OTHERVALUES59

9.0
WORKCITED 61

ListofFigures

Figure21
Landuse/landcoverfortheLakeErieBasin6
Figure22
CatchmentarealanduseinLakeErie7
Figure23
LakeEriewaterlevelvariationoverthelastdecade9
Figure24
Seasonalvariationofwaterlevelsovertheyears9
Figure25
HABinWesternLakeErie,201111
Figure26
HABinWesternLakeErie,201211
Figure27
HABinWesternLakeErie,201312
Figure28
HABinWesternLakeErie,201412
Figure31
Economicrelationships15
Figure32
Baselinerecreationdemand15
Figure33
Qualityimprovedrecreationdemand16
Figure41
Potentialforpropertyvalueimpacts22
Figure42
LucasCountyTract97,BlockGroup324
Figure43
ExampleofZillowdatafromZestimateDatabase25
Figure51
OhioCounties,UnitedStates35
Figure52
MichiganCounties,UnitedStates40
Figure53
EssexCounty,Canada41
Figure61
Baselinesitedemand44
Figure62
SitedemandwithreducedHABs45

ListofTables

Table31
Benefitsandcostsrelatedto2011HABevent13
Table32
SeverityratingforHABsintheWesternBasinofLakeErie,July201118
Table33
SeverityratingforHABsintheWesternBasinofLakeErie,August201118
Table34
SeverityratingforHABsintheWesternBasinofLakeErie,September201119
Table35
SeverityratingforHABsintheWesternBasinofLakeErie,October201119
Table36
SeverityratingforHABsintheWesternBasinofLakeErie,July201419

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

iii

Table37
Table38
Table39
Table41
Table42
Table43

Table44
Table45
Table46
Table47
Table48
Table49
Table51
Table52
Table53
Table54
Table55
Table56
Table57
Table58
Table59
Table510
Table61
Table62
Table71

SeverityratingforHABsintheWesternBasinofLakeErie,August201420
SeverityratingforHABsintheWesternBasinofLakeErie,September201420
SeverityratingforHABsintheWesternBasinofLakeErie,October201420
RangesofpropertyvaluesusedintheAnalysis,U.S.CensusReportB2507523
Estimatedvaluesofhomeson/neartheshorelineinWesternBasinofLakeErie24
PropertyvalueanddescriptionfromZillowsZestimatedata:LakeErie
shorelinezonepropertyvalues,OttawaCounty,Ohio26
Propertyvaluestudies27
Studiesofpropertyvaluesandnaturaldisasters28
Valueofproperty(stock)atrisk30
Propertyvalueflowatrisk30
Ecologicalservicevalue(flow)31
Propertyvalueattributabletolake31
BreakdownofOhiovisitorspending35
Expendituresbydayandtriptype36
Midvalueexpendituresbytriptype,indirectexpenditures37
Midvalueexpendituresbytriptype,inducedexpenditures37
Visitproportionandeconomicimpacts38
Visitproportionandeconomicimpacts38
Midvalueofdollarsatrisk,tripstakentoLakeErie39
Highendvalueofdollarsatrisk,tripstakentoLakeErie39
Lowendrevenuelost39
Highendrevenuelost39
LakeEriebeacheslocatedinthestudyarea48
Fishingsiteslocatedinthestudyarea50
ExpensesofmonitoringandmitigatingHABsreportedbyPWSinOhio54

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

iv

1.0 EXECUTIVE SUMMARY


TheInternationalJointCommission(IJC)
sponsoredthisstudytobetterunderstandthe
socioeconomicandpolicyimplicationsof
HarmfulAlgalBlooms(HABs)inwesternLake
Erie.ThisstudyisthesecondphaseofanIJC
fundedstudy(WeickselandLupi,2013)and
furtherexaminestheimplicationsofextensive
HABeventsliketheonesthatoccurredin2011
and2014.Thepreviousstudyidentifiedmany
importantissues,andquantifiedsomebutnot
allofthesocioeconomicimplicationsof
westernLakeErieHABs.
ThisprojectextendsthatPhase1studyby
furtherevaluatingHABeffectstoregional
economicwelfareincludingeffectsto
recreation,waterwithdrawals,tourism,and
propertyvalues.ResultsofthePhaseIstudy
indicatedthatwesternLakeErieHABscanaffect
interrelatedeconomicsystemsoverabroad,
geographicarea,andthatlittleinformationhas
beencollectedtospecificallysupporteconomic
benefitstudies.Thisstudyhasbenefitedfrom
thepreviousworkconceptuallyand
methodologically,however,theproblemof
informationlimitationspersists.Forexample,
certaininformationsuchastimingandseverity
ofHABsatamicrolevel(beach,marina,
neighborhood,etc.)aswellasshortrun
responsesofpeople(suchasrecreatorsand/or
tourists)andmarkets(rental,hotel,housing,
restaurants)totheHABsarenotavailable.
Anadditionalchallengehasbeenthatcertain
responsesofpeopleandmarketsmaynot
resultdirectlyfromanyspecificHABincident.
Rather,theseresponses(termedlaggedand
haloeffectsinthePhase1report)occurin
differentplacesandtimeperiodsthanHABs,
andresultfrommorecomplexcognitiveand
economicprocessesthanthecomparatively
easytomeasure(withappropriatedata)
economiceffectsthatarisefromecological
servicereductions.Asaresultofthesetwo
factors,itisnotcurrentlyfeasibletoquantify

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

This project strives to identify the economic


benefits of reductions in future HABs and does
so by evaluating the benefits of avoiding a
recurrence of certain, previous HAB events. Thus,
although the scenarios considered are based on
past events (i.e., ex post), these events are
considered as they would occur in the future.

theeconomiceffectsofHABsusing
statisticallysignificantparameterswithin
rigorouseconometricmodels.Nothavingthat
capability,thiseffortreliesonavailable
secondarydataandstudies.Tofurther
illustratepossibleeffects,thisinformationis
incorporatedbyanevaluationofvalueat
risk,whichemploysscenariosandsensitivity
analysestocharacterizeecologicalservice
interruptionsandtheirimmediateeconomic
effects.Inaddition,thisstudypresentsaHAB
severityindex,createdfor2011and2014
events,thatvariesbyweekandcounty.This
constructisusedtogenerateestimatesof
economiceffectsfortheseyears;itcouldalso
beemployedtoevaluatefutureHABsevents
onLakeErie.Lessimmediate(i.e.,laggedand
halo)effectsarediscussedandquantifiedin
thecontextoftheseeffects.
Thisstudyisnotamarginalanalysisofthe
benefitsofreducingHABsbysomeamount.
Rather,itstrivestoidentifytheeconomic
benefitsofreductionsinfutureHABsanddoes
sobyevaluatingthebenefitsofavoidinga
recurrenceofcertain,previousHABevents.
Thus,althoughthescenariosconsideredare
basedonpastevents(i.e.,expost),theseevents
areconsideredastheywouldoccurinthe
future.Thisexante(forwardlooking)viewpoint
wasappliedbecauseofitspolicyrelevance.A
resultofapplyingthispolicyrelevantapproach
isthatpreviousmitigationactionsaffect
whetherornotimpactsareevaluated.For
example,in2014,HABsresultedineconomic
damagesduetointerruptionofwaterservicesin

This study presents a HAB severity index, created


for 2011 and 2014 events, that varies by week
and county. This construct can easily be
employed to evaluate future HABs events on
Lake Erie.

Toledo,Ohio,andonPeleeIsland,Ontario.In
Toledo,themunicipalwatersystemwas
disruptedleadingtosevereeconomiceffectson
householdsandbusinesses.Thecityhassince
initiatedpreventativemeasures,sowater
servicesareunlikelytobesimilarlyinterrupted
inthefutureduetoHABs.WellwateronPelee
Islandwasaffected,butthereisnoindication
thatstepshavebeentakentoavoidinterruption
ofwaterservicesinthefuture.Consequently,
whenevaluatingthebenefitsoffutureHAB
reductions:a)pastdamagesincurredonPelee
Islandaremeasured,andb)pastdamages
incurredinToledoarenotmeasured,although
ongoingexpenditurestoprotectToledoswater
systemfromHABsarecounted.
Asummaryoftheprojectsfindingsrelatedto
propertyvalues,tourism,recreation,andwater
withdrawals(inU.S.dollars)areoutlined
below.
PropertyValues:Thisstudyquantified
$3.458billioninresidentialhousingstock
thatarelocatedontheshoreorinthe
nearshore(within0.5mileofthe
shoreline)ofthewesternbasinofLake
Erie.Partofthisvalueisatriskforbeing
impactedbyHABevents.BecauseLake
ErieHABsareunique,itischallengingto
identifythedegreeoftheseimpacts.This
effortdidnotlinkmarketpricesdirectlyto
the2011and2014HABevents.Even
thoughtheimpactisunknown,giventhe
valueofthenearbystock,HABscausinga
5percentimpacttonearshorevaluesand
a10percentimpacttoshoreline
propertieswouldresultin$242.1million
inpropertyvalueimpacts.
Foranotherperspective,thisstudy
evaluatedspecificimpactsfrom2011and
2014HABeventsbyapplyingalost
propertyvalueservicesapproach.This

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

approachidentifieseconomiceffects
basedoninterruptionstoLakeErie
ecologicalservices.For2011,this
approachestimateslostpropertyvalue
servicesof$9.781millionforshoreline
propertyownersand$7.087millionfor
nearshorepropertyowners.Forthe2014
HABevent,shorelinepropertyownersare
estimatedtohavelost$10.05millionin
propertyvalueservices,whilenearshore
ownerslost$7.864million.
Tourism:Everyyear,millionsofoutof
towntripsaretakentocountiesadjacent
towesternLakeEriewithbillionsof
dollarsinexpendituresboostingthose
communitieseconomies.Althoughnotall
ofthisisdirectlyrelatedtoLakeErie,and
onlyaportionoccursduringprime,
potentialHABtimeperiods,itisclearthat
significanttourismrevenueisatriskdue
toHABs.Aportionofthisrevenueis
profits.Retainingtheseprofitswould
constituteadirectbenefit,whichwould
alsobereflectedinthevalueof
businessesandcommercialproperty.
This study quantified $3.458 billion in residential
housing stock that are located on the shore or
within the nearshore (within mile of the
shoreline) of the western basin of Lake Eriethat
are potentially at risk for being impacted by HAB
events. To further get an idea of the scale, a 5
percent impact to near-shore values and a 10
percent impact to shoreline value translates into
a total of $242.1 million impact in property
values.

Verylittlespecificandusefuldataregarding
LakeErierelatedtourismandtheeffectsof
HABsisavailableandmorethorough
researchisrecommended.Theapproach
usedtoassesstourismimpactsinthis
reportapportionsaggregateestimatesof
tourismtoidentifytourismdollarsthatare
atrisk.ThisapproachindicatesthatOhio
tourismdollarsatriskrangefrom$66
millionto$305million.Associatedhighend
lostprofitsare$20.79million,andlowend
lostprofitsare$165,000.InMichigan,a
totalof$24.78millionintourismincomeis

atrisk.Thisisassociatedwithhighendlost
profitsof$1.685millionandlowend
estimatesof$124,000.Similarly,Canadian
tourismeconomicimpactstotalof$17.3
millionwithhighandlowprofitability
impactsrangingfrom$1.6millionto
$59,000.Becauseofthelackofinformation
thatdirectlylinkstourismtoHABs,these
estimatesareindicativeofthesortof
effectsthatcouldhaveoccurredwiththe
2011or2014HABs;however,the
estimatesarenotspecificallyassociated
withthe2011or2014eventsthrough
quantification.Rather,theyarepreliminary
indicationsofhowHABscouldaffect
incomefromtourismandthepotential
magnitude.Inyearsandareaswithout
significantblooms,laggedandhaloeffects
mayneverthelessresultintourists
foregoingtrips.Currently,thereisno
informationavailabletoquantifysuch
effectsandtheyarenotdistinguishedfrom
thehighlevelcharacterizationsummarized
above.
Recreation:Benefitslosttorecreation
activitiesincludedbeachgoing,fishing,
andboating.Althoughnostudieswere
availabletodirectlylinkHABstolost
recreation,benefitswerederivedby
transferringinformationfromrelated
literature.Quantifiedlossofbenefitsfor
beachgoingare$14millionfor2011,and
$11millionfor2014.Forfishing,the
benefitsareestimatedat$10millionfor
2011,and$7millionfor2014.For
boating,thebenefitsare$7millionfor
2011,and$5millionfor2014.Theoverall
benefitstorecreationfromthelackofa
HABeventare$31millionfor2011,and
$23millionfor2014.Specificstudies
directlyquantifyinghowrecreation
activitiesrespondtoHABsare
recommended.
PotentialimplicationsofHABsforwater
treatment:Theonlyinformationavailable
identifyingthecostsforwatertreatment
indicatesthatapproximately$3million
peryearisbeingincurredtodealwith
HABs(OhioEPA,2014).These

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

expenditureswillensureasteadywater
supply,evenduringsevereHABevents.In
otherwords,repeatsofthe2011and
2014eventsarenotexpectedtocause
serviceinterruptionsforthese
municipalities.Forthisreason,thisstudy
didnotconsiderthewelfareimpactsof
futureinterruptioneventsinToledo.
PeleeIslandswellwater,however,is
actuallyLakeEriewater,andthereisno
indicationthatexpenditureshavebeen
undertakentomovewellownersto
municipalwater.Consequently,anHAB
eventsimilarto2014wouldresultin
similareffects.Theavailabilityof
Informationtoassessthiseffectislimited;
however,theseareestimatedat
$750,000.
Overallimpacts:Overall,underthe
scenariosdevelopedhere,thetotal
impactofecosystemserviceinterruptions
duetothe2011HABeventisfoundto
costroughly$71million($16millionfor
propertyvalue,$20millionfortourism,
$31millionforrecreation,and$4million
forwatertreatment).Forthe2014HAB
event,theestimateisroughly$65million
($18millionforpropertyvalue,$20
millionfortourism,$23millionfor
recreation,and$4millionforwater
treatment.

This study developed scenarios that indicate


nearly $71 million in lost economic benefits from
the 2011 HAB event, and an additional $65
million in lost benefits from the 2014 event.
In addition, applying the commonly used 3%
discount rate, for recurring HABs similar to 2011,
the 30-year present value of lost benefits is
$1.463 billion. Similarly, if the 2014 event were
to be repeated over 30 years, also using a 3%
discount rate, the 30-year present value of lost
benefits is $1.339 billion.

Theseestimatesoflostbenefitsarisefrom
thewelfareeconomicmeasuresof
producersurplusandconsumersurplus.
Producersurplusisquantifiedasprofits,
whileconsumerssurplusisquantifiedas
resourceuserswillingnesstopay.For
example,expenditurechangesaffecting
tourismareidentified,butonlylossesin
profitsareconsideredintotalbenefits.In
addition,thisreportsestimatesdonot
includethewillingnesstopaytoreduce
HABsbynonusers,namelypeoplewho
dontuseLakeErieorlivenearit,
althoughthesenonusevaluescouldsum
toasubstantialtotal.Insummary,
tourismrelatedexpenditurediversions
andimpactstononusevalues(bothof
whichcouldbesubstantial)arenot
included.
BusinessasusualscenarioHABs
recurringeveryyear:ProjectTeam
evaluatedtheeffectofannuallyrecurring
HABssimilarto2011and2014bypresent
valuecalculationsthatassistin
characterizingcontinualeffects.Present
value,alsoknownasdiscountedpresent
value,isthevalueofanexpectedincome
streamdeterminedasofthedateof
valuation,andisagoodmeasureof
understandingpolicyimplications.
Applyingthecommonlyused3%discount
rate,forrecurringHABssimilarto2011
the30yearpresentvalueoflostbenefits
is$1.463billion.Similarly,ifthe2014
eventweretoberepeatedover30years,
alsousinga3%discountrate,the30year
presentvalueoflostbenefitsis$1.339
billion.
Asindicatedpreviouslyandrepeatedthroughout
thisreport,theseestimatesarebasedonsound
methods,butarepreliminaryduetothelackof
data.Theprojectteamproposesthefollowing
pointsareinvestigatedfurther:
Developaneconometricmodelthatlinks
dataonthepresenceandseverityofHABs
withsalesdataonthepropertiesatriskto
scientificallyquantifytherelationship

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

betweenthepresenceandseverityofHABs
andpropertyvaluelosses.Suchastudy
wouldreplacethetransferandscenario
basedevaluationsconductedforthis
analysiswithaparametrizedevaluationof
thepropertyvalueeffectsofHABs.
IdentifyifpropertyeffectsofHABs,which
differintheirimpacteveryyear,more
closelyresembleshorttermdisastersor
eventswitheffectsspanningseveralyears.
Futureworkcouldalsoinvolveamore
detailedstudythataccessestaxassessor
dataandmorefullydescribesallthe
propertyvaluesalongtheshoreandinthe
nearshoreareaswhereHABsarearisk.
Arelatedlineofresearchcouldalso
incorporatehomeownerpreferencedata
fromsurveys.Sinceshorelineand
nearshorepropertyownersareimportant
stakeholders,aviableoptionforaddressing
theimpactsofHABsonpropertyvaluesis
tocombinesurveybasedresearch
approacheswithformalpropertyvalue
models,aswasdoneforcontaminated
sedimentremediationinWaukeganHarbor
(Bradenetal,2004).
Therearenumerousparametersrelating
thepresenceandseverityofHABsto
changesintouristactivitythatarenotwell
understoodandwerespecifiedasdefined
scenariosforthisanalysis.Akeynextstep
wouldbetodevelopscientificallybased
evaluationsofthefollowing:
o

Theproportionoflatesummerandearly
falltripstocountiesthatborderwestern
LakeErieandareLakeErierelated.
Developascientificevaluationofthe
relationshipbetweenthepresenceof
HABsanddivertedtouristtrips.
Therelationshipbetweenthetypesof
tripsthataredivertedbecauseofthe
severityofHABs,wherethosetripsare
divertedto,andtheamountofspending
onthosedivertedtrips.

Thereiscurrentlynostudythatlinksthe
presenceandseverityofHABswith
changesinrecreationdemand.Theanalysis
conductedforthisreporttransfersresults
fromotherrelationshipstoparameterize
theeffectthatHABshaveonbeachuse,
fishing,andboating.However,akeynext
stepwouldbetoundertakearecreation
demandstudytoquantifytheeffectthat
changesinthepresenceandseverityof
HABshasonrecreationalbeachuse,
fishing,andboatingdemand.Thestudy
wouldalsobetterquantifythebaseline
levelofbeachuse,fishing,andboatingtrips
towesternLakeErie.

ofHABreductionsonfishing,boating,and
beachgoingareevaluatedinSection6.Thisis
followedbyanevaluationofpotential
implicationsofHABsforwaterwithdrawersin
thewesternLakeEriebasininSection7.The
reportconcludesbypresentingasummaryof
proposednextstepsinSection8.

Ifcurrentavertingandtreatmentcostsdo
notadequatelyprotectagainstHAB
interruptionstopotablewatersupplyordo
notchangeindividual,consumerbehavior,
furtherdocumentationonandresearch
intolossesofsucheventsarehighly
warranted.
Lastly,akeynextstepmayalsoinvolve
gatheringbehaviorspecificandcostdata
onwhatresidentsofPeleeIslanddidto
mitigatethe2014HAB,howmuchthey
spentontheirmitigationefforts,and
identifywhethertheyhavemadeany
capitalinvestmentsorbehavioralchanges
toavoidhavingtoundertakethose
mitigationactivitiesunderfutureHAB
events.
Inwhatfollows,Section2presentsa
backgroundofLakeErie,discussesHABsandits
variousdrivers,andconcludeswithasummary
ofrecentHABevents.Section3presentsa
summaryofeconomicmethodologyadoptedin
thisreport,anddescribesthenovelapproach
usedtoquantifyHABseveritybycounty/island
andweek.Ananalysisofvalueatriskandvalue
lostduetoecosystemserviceinterruptionsfor
residentialpropertiesinshorelineand
nearshoreareasispresentedinSection4;
Section5evaluateseconomicbenefitsofHAB
reductionsforthree,interrelatedsectors,
namelytourism,businessprofitability,and
commercialpropertyvalues.Theimplications

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

2.0 LAKE ERIE: OVERVIEW OF ITS


ECOSYSTEM AND ALGAL BLOOMS
2.1

GENERALBACKGROUND

LakeErieplaysavitalroleintheoverallhealth
ofthesurroundingecosystem.Itisalsointegral
tonumeroussectorsincludingtourismand
commercialandrecreationalfishing,andisa
municipaldrinkingwatersource.Ithasa
surfaceareaof9,900squaremilesandamean
depthof62feet,makingittheshallowestof
theGreatLakes.Thelakeiscomprisedofthree
separatebasinstheeastwithanaverage
depthof79.3feet,thewestwithanaverage
depthof24.1feet,andone,centrallylocated
basinwithanaveragedepthof60.1feet(IJC
LEEP2014).Thewesternbasinsshallowdepth
makesitmuchmoresusceptibleto
temperaturefluctuations,andistheoriginof
someofthemostintensealgaegrowth.
Morethan90percentofthedischargeinLake
ErieflowsinfromtheSt.ClairRiver,which
conveyswaterfromlakesHuron,Michigan,and

Superior.Thesecondmajorcontributoristhe
MaumeeRiverwatershed,whichstretchesall
thewaytoIndiana.LakeEriehasalandbasin
of22,700squaremilesofwatershedspanning
fivestatesandoneCanadianprovince.This
watershedsustainsahumanpopulationofover
11.6millionpeople,makingitthemostdensely
populatedoftheGreatLakes(LakeErieLaMP
2011).Themajorityofthepopulation,
includingoverthreemillionOhioresidents,
dependsonLakeEriefordrinkingwater.
Millionsmorerelyonthewaterforagriculture
useasover63percentofthewatershedis
currentlycultivated(Figures21and22),
whichisalargepercentagecomparedtoother
lakesinthebasin.Landusealongitsshoreline
isdominatedbyresidentialuses(45percentin
theU.S.and39percentinCanada),agricultural
uses(14percentand21percent,respectively),
andcommercialuses(12percentand10
percent,respectively)(EnvironmentCanada
andUSEPA1995).

Figure21:LandUse/LandCoverfortheLakeErieBasin

Note:ThemapisbasedonharmonizedCanadianFundamentalDrainageAreas(FDA)andtheU.S.Watershed
BoundaryDataset(WBD).TheCanadianUnitsare4digitSubBasinsandtheU.S.Unitsare8digitSubBasins.
Source:IJCLEEPReport,2014.
EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

Besidesitsuseasadrinkingwaterandfarming
source,LakeErieplaysavitalrolein
contributingtotheeconomyinthearea.Inthe
LakeErieregionofOhioalone,over$11billion
ayearcomesfrommoneyspentontourism
(TourismEconomics2014).Commercialfishing
ofwalleye,yellowperch,andotherspeciesin
LakeEriebringsinmorethan$5millionayear
(OhioDepartmentofNaturalResources2012).
Thereisalsoaconsiderablemarketfor
recreationalfishingbringinginover$9.6billion
inrevenuein2010throughboatingandother
expenditures(Lucenteetal2012).

Overall,HABsandNABsresultintwoprimary
concernswithinLakeErie.Thefirstisthe
formationofanenlarged,deepwaterhypoxic
zoneinthecentralbasinthathasledtolarge
fishkillsandnoxiousodors.Thesecondisthe
productionofneurotoxinsthataredifficultto
detectandcostlytoremovefromdrinking
watersources.HypoxicissueswithinLakeErie
likelypredatedhumanhabitation,andrecords
datingbacktothemid1900sshowlargeareas
(upto4,000squaremiles)becominghypoxic
duringthesummermonths.
Catchment area land use in Lake Erie has a
drastically higher agricultural focus than most
other Great Lakes.

2.1.1 HarmfulAlgalBlooms(HABs)&
NuisanceAlgalBlooms(NABs)
Algaeareoneofthemostdiverseformsoflife
onearth,andtheyrangeinsizefromlarge,
multicellularorganisms,suchasgiantkelpon
oneendofthespectrum,tounicellularalgae
likediatomsontheother.NABsaregenerally
nontoxic,andimpacthumanhealthand
economicactivitythroughdamaging
aesthetics.Theyalsoimpactecosystemsby
creatingzonesofhypoxia.HABs,ontheother
hand,producetoxicsubstancesthatare
capableofresultinginillnessesordeathamong
humansandanimals.

RecentalgalbloomissuesinLakeErieclosely
mirrortheoriginalenvironmentalissuesthat
emergedinthe1970s.Theneedtoaddress
theseissuesprecipitatedthefirstU.S.Canada
GreatLakesWaterQualityAgreementin1972.
Intheoriginalagreement,theprimary
pollutantofconcerncitedwastotal
phosphorus(TP)loadenteringLakeErie.In
oligotrophiclakessuchasLakeErie,
phosphorusavailabilityisusuallytheresource
thatlimitstheproductivityofthesystem.

Figure22:CatchmentAreaLandUseinLakeErie
showsadrasticallyhigheragriculturalfocusthanmostotherGreatLakes(Wangetal.2015)
100%
90%

%LandCover

80%
70%
60%
50%
40%
30%
20%
10%
0%

Erie
grassland

Michigan
wetland

Huron
urban

Ontario
forest

Superior

agriculture

Wang,L.,etal.,Aspatialclassificationanddatabaseformanagement,research,andpolicymaking:TheGreatLakes
aquatichabitatframework,J.GreatLakesRes.(2015),http://dx.doi.org/10.1016/j.jglr.2015.03.017

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

Accordingly,thatagreementsoughttoaddress
theproblemprimarilybytargeting
contributionsfromfacilitiesliketheDetroit
WastewaterTreatmentPlant.Between1970
and1977,theDetroitWastewaterTreatment
Plantmadetremendousstridestoaddress
phosphorusloading.Sinceitbegantotake
action,thefacilityreduceditsphosphorus
contributiontotheDetroitRiverbyover90
percent.Bytargetingpointsources
simultaneouslyacrosstheLakeEriebasin,after
1980,theTPloadenteringLakeEriereduced
significantlyenoughthattheextentand
frequencyofalgalbloomsdroppedmarkedly.
Unfortunately,therehasbeenresurgencein
thefrequencyofHABsandNABseventhough
phosphorusloadshasremainedconsistently
low.ArecentpaperbySmithetal.(2015)
attributedthistobioavailablephosphorusfor
whichtheyarticulatetheuniverseofdrivers
suchasclimatechange,commodityprices,
croppingsystem,cropnutrientefficiency,
ethanolproduction,fertilizer
placement/rates/source/timing,largerfarms,
manure,rentalagreements,etc.Insummary,
TPisameasurethatencompassesseveral
chemicalformsofphosphorusand,whilethe
overallamountofphosphorusenteringLake
Eriehasremainedrelativelyconstant,the
percentageofthattotalthatisbioavailable
phosphorushasbeensteadilyincreasing.This
formofphosphorus,referredtoasdissolved
reactivephosphorus(DRP)orsolublereactive

phosphorusistheformmosteasilyusedby
photosyntheticorganismstocarryout
biologicalprocesses.
Predicting the exact size and location of algal
blooms is very difficult.

Therearetwoprimarywaysphosphorus
loadingoccursinLakeErie,externalloading
andinternalloading.Externalloadingincludes
nonpointsources,pointsources,and
atmosphericdepositionofphosphorus.
Internalloadingistheresultofthewater
columnrecyclingphosphorusfromorganic
sources(feces,decompositionofdeadmatter,
etc.)andthereleaseofphosphorusthatis
alreadystoredinlakesediments.Thekeytake
awayisthatanyactiontakentoreducethe
overallloadmaytakeafewyearstomanifest
asthephosphoruscurrentlyinthesystem
cyclesthroughthebiologicallinkages.Inother
words,theloadingtrendscombinetocreatea
complexinteraction,whichmakespredicting
theexactsizeandextentofalgalbloomsvery
difficult.
2.1.2 WaterLevelsinWesternLakeErie
WaterleveldatafromFairportHarborgage
(locatedroughly30milesnortheastof
Cleveland,Ohio),collectedbyNationalOceanic
andAtmosphericAdministration(NOAA),
illustratetheannualandseasonalfluctuations
inherenttoLakeErieshydrologicregime.
Figure23showstheannualaveragelakelevel
fluctuationsoverthepastdecadewith
generallyincreasingwaterlevelsfromyearto
year.

DeadFishinWesternLakeEriein2011,

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

Figure23:LakeErieWaterLevelVariationOvertheLastDecade
574

Elevation(ft)

573

572

571

570

569
Jan02

Jan03

Jan04

Jan05

Jan06

Jan07

MonthlyAverageinFeet

Jan08

Jan09

Jan10

Jan11

Jan12

AnnualAverageinFeet

Source:(NOAAwaterleveldashboard.(http://www.glerl.noaa.gov/data/dashboard/info/opLevels.html)Fairport,Ohiomastergauge
station)

fluctuationofnearlytwofeet.Thechangesare
largelyconsistentexceptforin2012,whenthe
waterlevelspeakedinJanuaryandcontinued
todeclinethroughouttheyear.Another
exceptionis2011when,aidedbyintense
springrain,thewaterlevelscontinuedto
increasefromFebruarythroughJune.

Figure24,ontheotherhand,illustratesthe
waterlevelchangesobservedwithinthelake
onamonthtomonthbasis.Thechart
illustratesageneraltrendofalowwaterlevel
intheearlyspringmonthsreachingapeak
fromMarchtoJulyandthenafallinglakelevel
untilNovember,withayearlywaterlevel

Figure24:SeasonalVariationofWaterLevelsOvertheYears

MonthlyAverageHeight(ft)

574

573

572

571

570

569
Jan
2002

Feb
2003

Mar
2004

Apr
2005

May
2006

Jun
2007

Jul
2008

Aug
2009

Sept
2010

Oct

Nov
2011

Dec
2012

Source:(NOAA,2015.FairportOhiomastergaugestation)

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

2.1.3 HABDriversandHistory
Theobjectiveofthisstudyistoinvestigatethe
economicbenefitsofreducingfutureHABs.
Doingsorequiresdevelopingarepresentationof
futureHABrelatedecologicalservicereductions
toinformscenariodevelopment.Thissection
considersHABdriversandrecenthistoryto
informthisprocess.
HABDrivers
Phosphorousloadsareincreasinginall
watershedsofLakeErie;loadsfromthe
MaumeeRiverhaveincreasedby218percent
since1995(Michalaketal.2013).Inaddition,
agriculturaltrendsandpracticesindicatethese
trendsarelikelytocontinue.Forexample,corn
isaparticularlyphosphateintensivecrop(36
percenthigherthansoybeans)andbetween
2011and2012alone,cornacreageincreasedby
15percentinOhioand4percentinMichigan
(Michalaketal.2013).Moreover,autumn
applicationsandbroadcastfertilizingremain
commonpractices.Theseconditionsare
consistentwithapotentialforhighernutrient
loading(Smithetal.2015,Michalaketal.2013).
Consideringphosphorousloadingalone,this
analysisanticipatesthatfuturebloomsmaybe
aslargeandcommonasintherecentpast.
Givensufficientphosphorouslevels,warmwater
temperaturesandsunlightcancombineto
createconditionsthatareidealforalgalgrowth.
Becausethesesunlightandwatertemperatures
conditionstypicallyoccurduringlatesummer
andearlyfall,extensiveHABsaremostprevalent
duringthesetimes(Koslow,Lillard,andBenka
2013).Thesefactorsaremosttypicallyprevalent
inthewesternbasinofLakeErieduetothe
proximityofphosphoroussourcesand
shallownessofthisportionofthelakerelativeto
theotherbasins.Accordingly,thisevaluation
indicatesthatfuturephosphorousbloomswill
belimitedtoLakeErieswesternbasinandthat
theywilloccurinthelatesummerandearlyfall.
Althoughphosphorousisarequirementfor
HABs,thisphosphorousmustbesuspendedin
thewatercolumn.Agriculturalphosphorous
becomesavailabletoproduceHABsinwestern
LakeErieviarunoffandresuspension.Runoff

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

Key meteorological factors that lead to HAB


events, include rainfall, water temperatures,
sunlight, water levels, wave, and wind actions.

relatedbloomsoccurwhenheavyrainsduring
theearlyspringandsummermobilizelarge
phosphorousloadsfromfarmlands.Whilethese
aresuspendedinthewatercolumn,theyare
availabletofuelblooms.Resuspensionoccurs
whenwindandwaveactionstirsup
phosphorousthathadpreviouslysettled,making
itoncemoreavailableforbloomformation.
Unlikeexternalloading,theweathereventsthat
leadtosuspensiontendtoberather
unpredictableoverlongtimeperiods.
Overall,thesedriversindicatethatintermittent
HABsofvaryingsizesareanticipatedinthe
future.TheseHABsareexpectedtooccurinthe
westernbasininthelatesummerandearlyfall.
ThelocationoftheHABsisuncertain;depending
uponwheretheHABsform,andwindandwave
actiontheycouldbealmostanywhereinthe
westernbasin.
TheimplicationofthisreviewisthatfutureHABs
willbemuchliketheHABsoftherecentpast.As
aresult,inconsideringthereductionsin
ecologicalservicesandeconomicbenefitsof
reducingfutureHABs,itisinstructivetoconsider
HABsoftherecentpast.Thenextseveral
subsectionsprovideabriefoverviewofHABs
from2011through2014.
2011HAB
During2011,severalheavyflowsfromthe
MaumeeoccurredfromMarchMay,followed
bylowwaterflowsfortherestofthesummer
(Figure24).TheDetroitRiverusuallyprovides
dilution,butlittleoccurredduringthatsummer
(Dolanetal.2014).TheInternationalJoint
Commission(2014)notedthattheheavyspring
rainsof2011flushedalargeamountof
phosphorusintoWesternLakeErie.Thiswas
soonfollowedbywarmtemperatures,creatinga
massofalgaethatextendedmorethan1,930
mi2ofLakeEries9,900squaremilesurface
area.OhioDepartmentofAgricultureetal.
(2013)rankedspringdischargeandloadsfor38

10

yearsandfound2011rankedfirstamongthose
yearsinbothdischargeanddissolvedreactive
phosphorus(DRP),andthirdinTP.Richards
(2013)andStumpfetal.(2012)concluded:
SpringdischargeoftheMaumeeRiverfrom
MarchJune2011wasmorethan5cubic
kilometers.
TotalphosphorusloadfromtheMaumee
RivertoLakeErieduringthespringwas
2,240metrictons.
SpringDRPloadfromtheMaumeeRiverto
LakeEriewas419metrictons.
Figure25showstheextentoftheHABin
westernLakeErieduring2011.Onthe1to10
scaledbloomseverityindex,the2011bloom
wasranked10(Winslow2015).

kilometer,20percentofthe2011discharge.
TotalphosphorusloadfromtheMaumee
RivertoLakeEriewasnearly381metrictons
duringspring2012,about17percentofthe
loadfor2011.
SpringDRPloadfromtheMaumeeRiverto
LakeErieduring2012wasabout60metric
tons,15percentoftheloadfor2011.
Figure26showstheextentoftheHABin
westernLakeErieduring2012.Monitors
unexpectedlyfoundabloomincentralLakeErie.
UsingtheNOAAbloomseverityindexforLake
ErieHABs,the2012bloomwasranked2.5
(Winslow2015).

Figure26:HABinWesternLakeErie,2012
Source:NOAA

Figure25:HABinWesternLakeErie,2011
Source:NOAA

2012HAB
During2012,withminimalrainthroughoutmost
oftheyear,thedischarge,TP,andDRPfromthe
MaumeeRiverrangedfrom1520percentof
2011stotals.Thespringdischargeandloadsfor
2012rankednearthebottomofthe38year
rankings,andtheHABduring2012wasa
fractionofthesizeofthe2011HABinLakeErie
(OhioDepartmentofAgricultureetal.2013).
Richards(2013)andStumpfetal.(2012)
concluded:
SpringdischargeoftheMaumeeRiverfrom
MarchJune2012wasabout1cubic

2013HAB
During2013,dischargefromtheMaumeeRiver,
totalphosphorusload,andspringDRPloadwere
higherthanin2012.Richards(2013)andStumpf
etal.(2012)concluded:
SpringdischargeoftheMaumeeRiverfrom
MarchJune2013was2.77cubic
kilometers.
TotalphosphorusloadfromtheMaumee
RivertoLakeErieduringthespringwas
1,099metrictons.
SpringDRPloadfromtheMaumeeRiverto
LakeErieduring2013was238metrictons
(RichardsandBaker2013).

Using NOAAs bloom severity index for Lake Erie


blooms, the severity numbers for blooms
between 2011 and 2014 are:
2011 = 10
2013 = 8.5
2012 = 2.5
2014 = 6.5

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

11

2014HAB
AsofJune2015,the2014springdischarge,total
phosphorusload,andspringDRPloadhadnot
beenpublishedfortheMaumeeRiver.During
earlyAugust2014,windandwatercurrents
pushedtheHABfromLakeErieswesternbasin

totheareawhereToledo,OhiosCollinsPark
WaterTreatmentPlanttakesinwaterfromthe
lakeaffectingdrinkingwatersafety.TheHAB
alsothickenedaroundPeleeIsland,Ontario,
leadingtobeachandwellclosuresaswellas
warningsagainstswimming,cooking,bathing,
andeatingfishfromLakeErie.Figure28shows
theextentoftheHABinwesternLakeErie
during2014.UsingtheNOAAbloomseverity
indexforLakeErieHABs,the2014bloomwas
ranked6.5(Winslow2015).

Source:NOAA

Source:NationalAeronauticsandSpaceAdministration(NASA)

Figure27:HABinWesternLakeErie,2013

Figure28:HABinWesternLakeErie,2014

Figure27showstheextentoftheHABin
westernLakeErieduring2013.UsingtheNOAA
bloomseverityindexforLakeErieHABs,the
2013bloomwasranked8.5(Winslow2015).

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

12

3.0 METHODOLOGY TO CALCULATE


ECONOMIC BENEFITS OF HAB REDUCTIONS
3.1

The economic methods employed in this study are


based on the concept of willingness to pay for
improvements in ecological services. These
improvements impact values which result in changes
to behaviors, activities, and economic benefits.

INTRODUCTION

LakeErieisuniqueamongtheGreatLakes,with
itsshallowwatersandsouthernmostlocation,
resultinginthehighestbiologicaldiversityand
fishproductionofalltheGreatLakes(Pearsallet
al.2012).Theecologicalservicesprovidedby
LakeErieincludedrinkingwater,biodiversity,
recreation,wildlifehabitat,thewatercycle,
primaryproductivity,nutrientcycling,senseof
place,aesthetics,andclimateregulation
(Pearsalletal.2012).HABscaninterruptthese
servicesonabroadscaleforsignificanttime
periodsand,consequently,theeconomic
implicationsofHABsinwesternLakeErieare
farreachingandcomplex.

InthefirstphaseofHABeconomicsstudies
conductedbytheIJC,WeickselandLupi(2013)
studiedthecostsandcertaineconomicbenefits
ofreducingthe2011HAB.Categoriesstudied
andcost/benefitestimatesaredepictedinTable
31.Inadditiontothese,adiscussionofcritical
informationgapsandrecommendationsfor
additionalresearchefforts(thathaveguidedthis
study)werepresented.

Table31:BenefitsandCostsRelatedto2011HABEvent(WeickselandLupi2013)
BENEFITORCOSTCATEGORY
Coststopublicwatersystems

ESTIMATEOFANNUALBENEFIT
ORCOST
$417,200

Costsofreportedillnesses

$2,128

Costsofunreportedillnesses

$16,720

Propertyvalues
LosstobeachrecreationfromadvisoriesatMaumeeBay
StatePark
Losstobeachrecreationfromadvisoriesatotherbeaches

Notestimated
$1.3M

Losstobeachrecreationfromexcessalgaeatany
impactedGreatLakesbeach

Notestimated

LosstobeachrecreationfromcleanupofHABs
Losstorecreationalfishing

Notestimated
$2.4M

Losstorecreationalboating(nonfishingrelated)
Losstocommercialfishing

Notestimated
Notestimated

Losstotourismindustry

Notestimated

Losstocharterboatindustry

Notestimated

BenefitsoutsideofOhio

Notestimated

DissolvedReactivePhosphorus(DRP)reductionfromall
othersources
CostofDRPreductionfromAgriculture

Notestimated

ADDITIONALCOMMENT
Recentcostsarelikely
higher

Notestimated

Medianvalueofestimatedranges
approximately$30M

CostofDRPreductionfromareasoutsideofOhio

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

Economicvaluesmeasured
inWeicksel(2012)butnot
yetavailableinmonetary
ImpactfromHABsmayonly
beapparentovertime
ImpactfromHABsmayonly
beapparentovertime
ImpactfromHABsmayonly
beapparentovertime

Basedonassumedmixof
bestmanagementpractices
adoption

Notestimated

13

ThiseffortextendsthePhase1studybyfurther
evaluatingHABeffectstoregionaleconomic
welfareincludingeffectsonrecreation,water
withdrawals,tourism,andpropertyvalues.
ResultsofthePhaseIeffortindicatethat
westernbasinHABscanaffectinterrelated
economicsystemsoverabroad,geographicarea
andthatlittleinformationhasbeencollectedto
specificallysupporteconomicbenefitstudies.
Thisstudyhasbenefitedfromthepreviouswork
conceptuallyandmethodologically,however,
theproblemofinformationlimitationspersists.
Forexample,certainpotentiallyobservable
information,suchastimingandseverityofHABs
atamicrolevel(beach,marina,neighborhood),
aswellasshortrunresponsesofpeople
(recreators,tourists)andmarkets(rental,hotel,
housing,restaurants)totheHABsarenot
available.
Anadditionalchallengeisthatcertainresponses
ofpeopleandmarketsmaynotresultdirectly
fromanyspecificHABincident.Rather,these
responses(termedlaggedandhaloeffectsinthe
Phase1report)occurindifferentplacesand
timeperiodsthanHABsandresultfrommore
complexcognitiveandeconomicprocessesthan
thecomparativelyeasytomeasure(with
appropriatedata)economiceffectsthatarise
fromecologicalservicereductions.Asaresultof
thesetwofactors,itisnotcurrentlyfeasibleto
quantifytheeconomiceffectsofHABsinthe
scientificsenseofidentifyingstatistically
significantparameterswithinrigorous
econometricmodels.Nothavingthatcapability,
thiseffortreliesonavailablesecondarydataand
studies.Forcertaineffects,thisinformationis
incorporatedintoanevaluationofvalueatrisk
thatemploysscenariosandsensitivityanalyses
tocharacterizeecologicalserviceinterruptions
andtheirimmediateeconomiceffects.Less
immediate(i.e.,laggedandhalo)effectsare
discussedandquantifiedinthecontextofthese
effects.

althoughthescenariosconsideredarebasedon
pastevents(i.e.,expost),theseeventsare
consideredastheywouldoccurinthefuture.
Thisexante(forwardlooking)viewpointapplies
becauseofitspolicyrelevance.Aresultof
applyingthispolicyrelevantapproachisthatthe
degreetowhichpreviousmitigatingactions
havebeentakenaffectswhetherornotsome
impactsareincludedintheevaluation.
Forexample,HABsresultedineconomic
damagesduetointerruptionofwaterservicesin
Toledo,Ohio,andonPeleeIsland,Ontario.In
Toledo,themunicipalwatersystemwas
affectedandexpendituresforpreventive
measuresweremadesothatwaterservices
wouldnotbeinterruptedinthefuture.OnPelee
Island,wellwaterwasaffected,butthereisno
indicationstepshavebeentakentoavoid
interruptionofwaterservicesinthefuture.
Consequently,whenevaluatingthebenefitsof
futureHABreductions:
PastdamagesincurredonPeleeIslandare
measured.
PastdamagesincurredinToledoarenot
measured,althoughongoingHABrelated
expendituresforToledoswatersystemare
counted.
Thepolicyrelevant(forwardlooking)model
usedinthisstudy:
considersfutureevents,
considersmitigatingactions,and
doesnotpredictHABs
Theeconomicmethodsemployedinthisstudy
arebasedonwillingnesstopayforecological
services.Reductionsintheseservicesimpact
values.Thatresultsinchangestobehaviorsand
activities,ultimatelyaffectingeconomic
benefits.ThisprocessisdepictedinFigure31.

3.2 ECOLOGICALSERVICESAND
ECONOMICBENEFITS
Thisstudyadoptsaforwardlookingperspective,
whichisintendedtoidentifytheeconomic
benefitsofreductionsinfutureHABs.Thus,

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

14

Behaviors/Activities

Benefits/Costs

Recreate

Satisfaction

EnjoyProperty

PropertyValue

IncurCosts

Expenditures

Tourism

Jobs

Commercial

Profits

Scenic

Fishing

Drinking
Boating

Swimming

IJC-0001

Figure31depictsanumberofimportant
featuresofthisanalysis.Thefirstrelatestothe
ecologicalserviceswhichareinterrupted.There
areanumberofthese,andtheyarepotentially
interrelated.Changesintheseservicesleadto
changesinbehaviorsandactivitiesthatarealso
interrelated.Thus,changesinfishingquality
couldconceptuallyaffectlocalfishingtrips,
touristtrips,commercialactivityandprofits,
commercialpropertyvalue,andresidential
propertyvalue.Itisimportantandchallengingto
capturechangesinbenefitswithoutdouble
counting(countingthesamebenefitin
differentcategories)andthisstudyendeavorsto
doso.
3.2.1 EconomicValuesandBehavior
Theconceptualfoundationsofthisstudyrelyon
individualpreferences.Peopleexpress
preferencesthroughthechoicesandtradeoffs
thattheymake,givenconstraints,suchas
incomeoravailabletime.Economicvalueis
measuredbythemaximumthatsomeoneis
willingtogiveupinothergoodsandservicesto
obtainadifferentgood,service,orstateofthe
world.Thisismeasuredforanindividualby
consumersurplus,whichis,conceptually,the
amountthatheorsheiswillingtopay,beyond
whatisactuallypaid;ifsomeoneiswillingtopay
$5foranitem,butthemarketpriceis$3,then
theconsumersurplusforthatitemis$2.
Aparticularlyimportantconsiderationrelatesto
distinguishingbetweenthedollarvaluesthatare
associatedwiththebehaviorsandactivitiesof

Figure32:BaselineRecreationDemand
250

Baseline

225
200
175

Population

Ecological
Services

thesecondcolumnofFigure31andthe
economicbenefits/costsofthefinalcolumn.
Whereastheeconomicbenefitslistedinthe
thirdcolumncanbethoughtofaswhatan
individual,orindividualsaggregateduptothe
societallevel,wouldbewillingtopayfora
differentstateoftheworld.Theeconomic
impactslistedinthesecondcolumnreferto
changesinexpenditures.Thefollowingfigures
depictrelatedconcepts.Figure32depictsa
recreationsitesdemandcurve.Inthisfigure,
theredcurverepresentsboththetotalvalue
individualrecreatorsreceiveandthenumberof
tripstherecreatorswouldtakeatanyparticular
cost.

Travel Cost ($)

Figure31:EconomicRelationships

150
125
100
75
50
25
0

10

Trips per Person


IJC-0003

Asdepicted,arecreatorincurscostsof$25per
tripandtakesfourtripsperyearfortotal
expendituresof$100peryear.Themonetized
measureofvalueistheareabelowthedemand
(orwillingnesstopay)curvebutabovethe$25
cost(thegreyshadedarea).
Figure33depictsachangeinvalue,behavior,
andexpendituresthatwouldoccurwith
improvedecologicalservices.Inthisfigure,the
demandcurvehasshiftedoutward;becausethe
qualityofecologicalserviceshasimproved,the
recreatoriswillingtopaymoreforanygiven
numberoftrips.Theeconomicvalueofthe
improvementisthechangeinthearea
underneaththedemandcurve.When
economistsspeakoftheeconomicbenefits
associatedwithachangeinrecreationsite
quality,thisisthequantitytowhichtheyrefer.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

15

Figure33:QualityImprovedRecreationDemand
Baseline

250

With Reduced HABs

225

Travel Cost ($)

200
175
150
125

Change in
consumer surplus

100

Number of trips
taken at $25 per trip

75
50

Trip cost

25
0

10

restrictedtogasstation,beach,andbaitshop
owners,this$25isstillnotaneconomicbenefit.
Rather,itisachangeinrevenue.Understanding
thechangeinbenefitsthataccompaniesthis
changeinrevenuerequiresfurtherevaluations.
Theseincludebothquantifyinghowthese
expendituresripplethroughalocaleconomy
leadingtorevenuechangesinothersectorsand
identifyingtheeconomicbenefitthat
accompaniestheserevenuechanges.

Trips
IJC-0002

Ascanbeseeninthisfigure,thereisahigher
valuefortrips1through4,andtherecreator
experiencesawelfareimprovementwithoutany
correspondingchangeinbehavior.However,
withtheimprovementinsitequality,thereis
alsoachangeinbehavior;therecreatortakesan
additionaltrip.Thisadditionaltripistaken
becauseecologicalservicequalityhasimproved.
Thevalueoftakingthistripisnowgreaterthan
itscost.Additionalexpendituresof$25are
incurredandsomeadditionaleconomicbenefits
arecaptured.
Regardingthe$25inadditionalexpenditures,in
conventionalenvironmentaleconomicanalyses
thisquantityisonlyconsideredinthatitis
subtractedawayfromthechangeinvalue.Thus,
althoughthe$25mayhavebeenspentatfor
exampleagasstation,beach,orbaitshop,this
expenditureisnotvalued.Thereareanumber
ofreasonsforthis.Forone,oftentimesresource
evaluationsconsideraparticularpopulation.For
example,ifthestudyconsidersbenefitsto
recreators,the$25canbeforgottenbecause
recreatorsdonotreceivethismoney,rather
theyspendit.Althoughitmayseemappropriate
tobroadenthepopulationbeingconsidered,
thisbringsinanadditionalcomplicationinthatit
requiresasomewhatarbitraryrestrictiontothe
populationthatcanreceivebenefits.Ifthisisnot
donethebenefitsaredilutedintotransfers.
Considerincludingbenefitstolocalmerchants.
Inthiscase,notethattakingthefifthtripimplies
someotheractivityisnotundertaken.The
implicationisthe$25gainedbythegasstation,
baitshop,orbeachstoreislikelylosttosome
otherretailer,suchasabowlingalleyowner.
Moreover,evenifthepopulationwere

The policy focused (forward looking) model


used in this study:
considers future events,
considers mitigating actions, and
does not predict HABs.

3.2.2 EconomicActivityandBenefits
Althoughenvironmentaleconomicsstudies
oftendonotconsidertheseeffects,insome
casesdoingsoisappropriate.Consideringthe
currentcase,HABshavethepotentialfor
dramaticeffectsonlocalpopulationsthatrely
extensivelyontheecologicalservicesthatLake
Erieprovides.Forexample,touristscometo
LakeEriefromallovertheU.S.toenjoythe
fishing.Astouristsforegothesetrips,many
otherdestinationswouldexperiencemarginal
visitationimprovements,however,communities
nearLakeEriemayexperiencepronounced
lossesbothineconomicactivityandeconomic
benefits.
Thisstudycapturesthiseffectusingatechnique
calledinputoutputanalysis.Inputoutput
analysisisamathematicaleconomictechnique
thatassessestheeffectsofeconomicimpactsin
aparticulareconomicsystem(e.g.,town,
county,state,region,ornationallevel).Input
outputanalysismeasuresdirecteffects(suchas
the$25describedearlier)aswellasindirect
effects,whicharechangesininterindustry
transactionsassupplyingindustriesrespondto
increaseddemandsfromthedirectlyaffected
industries,andinducedeffects,whichreflect
changesinlocalspendingthatresultfrom
incomechangesinthedirectlyandindirectly
affectedindustrysectors.Moreinformation

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

16

aboutthisisprovidedinthesectionthat
evaluatestourismeffects.
Theserevenueandjobchangescanhave
benefits.Increasesinrevenueoftenincrease
profitsandjobscanimprovewelfare.As
describedelsewhereinthissection,identifying
thesechangesrequiresdefiningapopulationfor
whichimpactsaremeasured.Thefollowing
sectionsdescribehowtheseeconomic
considerationsarecombinedwithecological
effectsandeconomicconceptstoidentify
scenariosandpopulationsthatarestudied.

3.3 HABSCENARIOSSTUDIEDINTHIS
REPORT
Basedonthereviewofthefactorsthatunderlie
HABs(Section2),itappearslikelythatHABsof
varyinglevelsofseveritywillcontinueto
manifestinLakeErie.Similarto2011and2014
andtheyearsbetween,themagnitudeand
locationoftheseHABswillberelatively
unpredictablebutwillcontinuetohavethe
potentialforrelativelylargeandfarreaching
economiceffects.Consequently,when
consideringtheimmediate(i.e.withinyear)
effects,evaluationofpastHABsisadoptedas
theapproachforidentifyingtheeconomic
effectsthatwouldaccompanyreductionsin
futureHABs.
Laggedbenefitsaredefinedasbenefitsthat
occuroutsidetheyearoftheevaluatedHABs,
butarerelatedtothem.Becauselaggedeffects
wouldbeassociatedwiththemostimpactful
HABs,themostdamagingrecentHABs(2011
and2014)areevaluated.
3.3.1 QuantifyingEcologicalServiceReductions
Conductingthisapproachrequiresspecifying
servicereductionsfor2011and2014.
However,althoughinformationaboutclosures
ofbeachesandwatertreatmentfacilitiesis
available,therearenodatarelatedtoless
dramaticreductionsintourism,recreation,and
propertyvalue/enjoyment.Moreover,
quantitativeinformationthatisusefulfor
inferringtheseimpactsdoesnotexisteither.
WhilepicturesofHABsthatdepictecological
servicereductions(contaminatedshorelines,

cloggedmarinas)arereadilyavailable,no
reliablequantitativeorwritteninformation
thatindicatesthedate,location,andseverity
ofHABscouldbeidentified.
As a part of this study, the Project Team
converted satellite images from NOAA to
numeric representations of HAB severity by
week and county/island for the HABs of
2011 and 2014.

Giventhislimitation,theteamdevelopedthis
informationbyconvertingsatelliteimagesand
otheravailableinformation,suchasnews
reports,intoanumericrepresentationofHAB
severitybydateandlocationfor2011and
2014.Theseimagesandotherdatahelp
establishwhereandwhenHABspotentially
affecttheusesofLakeErie(NOAAGreatLakes
EnvironmentalResearchLaboratory[GLERL],
2015).AlthoughmanyoverheadimagesofLake
Eriesalgalbloomsarepubliclyavailable,most
arenotpreciselydated.Thisstudyreliedon
datedsatelliteimagesfromNOAA.
Forseveralyears,NOAApostedMedium
SpectralResolutionImagingSpectrometer
(MERIS)imageryofLakeErieuntiltheMERIS
satellitestoppedcommunicatingduring2012.
Sincethen,NOAAhaspostedimagesofLake
ErieHABsfromtheModerateResolution
ImagingSpectroRadiometer(MODIS)onthe
AQUAsatellite.BothMERISandMODIS
imageryaredatedweeklyoroftener.
HABseverityratingsusedinthisstudyareas
follows:
0meansthattheHABwasabsentornot
visibleinthatarea
0.25meansthattheHABwasvisible
withinoraffectedasmallpartofthearea
0.50meansthattheHABwasvisible
withinoraffectedabouthalfofthearea

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

17

0.75meansthattheHABwasvisible
withinoraffectedmostofthearea
1meansthattheHABwassevereand
visibleoraffectedtheentirearea
Thefinestdegreeoftemporalandspatial
specificitydeemedpossibleisweeklyandat
county(mainland)shorelinesandthreeisland
groupings,asdescribedinthefollowing
sections.
3.3.2 The2011HAB
During2011,LakeEriesHABformedinthe
westernbasinbymidJuly,atthattime
coveringabout600km2.Thebloomwas
composedalmostentirelyofMicrocystis.On
July16,satelliteimageryshowedthebloom
huggingtheshorelineofEssexCounty,Ontario
andmostoftheshorelineofWayneCounty,
Michigan.Thebloomhuggedtheshorelinesof
MonroeCounty,Michigan,andthewestern
halfofLucasCounty,Ohio,aswellasspreading
milesoffshoreintoLakeErie.DuringlateJuly,
theMicrocystistoxinlevelmeasuredmore
than1000ug/latToledoLight#2inLakeErie,
14.5nauticalmilesfromthemouthofthe
MaumeeRiver,Ohio(Michalaketal.2013;
NOAAGLERL2015).ThemonthofJuly2011is
representedinTable32.
Table32:SeverityRatingforHABsintheWestern
BasinofLakeErie,July2011
CountyorIsland

WeeksofJuly2011

Essexmainland
PeleeIsland
Wayne(southerntip)
Monroe

1
0
0
0
0

2
0
0
0
0

3
4
0.25 0
0
0
0
0
0.50 0.50

Lucas

0.50 0.25

Ottawamainland

BassIslands

Sandusky

Eriemainland

0.50 0.25
0

KelleysIsland,ErieCounty
0
0
0
0
Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
InternationalJointCommission(2014);Michalaketal.
(2013)

ByearlyAugust,thebloomremainedinthose
watersandspreadtothe:
entirecoastlineofLucasCounty,Ohio
PeleeIsland,Ontario

OttawaCounty,Ohio,includingtheBass
Islands
SanduskyCounty,Ohio(bythistimeand
infollowingmonthsPlanktothrixspp.
dominatedthebloominSanduskywaters)
DuringmidAugusttoAugust23,thebloom
waspresentinthewatersoftheentirewestern
basinofLakeErie(NOAAGLERL2015).The
monthofAugustisrepresentedinTable33.
Table33:SeverityRatingforHABsintheWestern
BasinofLakeErie,August2011
CountyorIsland

WeeksofAugust2011
1

Essexmainland

0.25 0.50 050

PeleeIsland

0.25 0.25 0.50

0.25 0.25 0.50

Wayne(southerntip)
Monroe

0.25 0.50 0.50 0.75

Lucas

0.50 0.75

Ottawamainland

BassIslands

Sandusky

0.25 0.50 0.75


0

0.25 0.50

0.25 0.50 0.50 0.50

Eriemainland

KelleysIsland,ErieCounty

0.25

0.25 0.50

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
InternationalJointCommission(2014);Michalaketal.
(2013)

BySeptember3,satelliteimageryshowsthe
bloommovingawayfromtheEssexCounty,
Ontario,shoreline.Thebloommovedaway
fromOhiocountyshorelines,remainedon
Michiganshorelines,andreturnedtoEssex
CountybySeptember14.Satelliteimagery
fromSeptember16showstheMicrocystis
bloomontheshorelineoftheentirewestern
basin,exceptforasmallportionofEssex
County,Ontario.NOAAs
ExperimentalLakeErieHarmfulAlgalBloom
Bulletin2011015statedthatthe
concentrationsoftheMicrocystisbloomwere
greatlyreducedbywindstressthatcaused
mixingandmuchofthebiomassislikelytobe
subsurface(>1meter)(NOAA2011).On
September27,satelliteimagerystillshowed
theMicrocystisbloomontheshorelineofthe
westernbasin,exceptforportionsofEssex
County,Ontario(NOAAGLERL2015).
September2011isrepresentedinTable34.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

18

Table34:SeverityRatingforHABsintheWestern
BasinofLakeErie,September2011
CountyorIsland

WeeksofSeptember2011
1

Essexmainland

0.75 0.50 0.50

PeleeIsland

0.75

Wayne(southerntip)

0.25 0.50 .075 0.25

Monroe
Lucas
Ottawamainland

0.75 0.75

0.50 0.75 0.50

0.50 .075 0.50

0.50 0.25 0.50 0.50

BassIslands

Sandusky

0.75 0.25

0.50 0.75 0.50

Eriemainland

0.25 0.25 0.50 0.75

KelleysIsland,ErieCounty

0.25 0.50 0.75

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
InternationalJointCommission(2014);Michalaketal.
(2013)

issuedaRecreationalPublicHealthAdvisory.
BytheendofJuly,thebloomspread
northwardupthecoastofMonroeCounty,
Michigan,eastwardalongtheOttawaCounty,
Ohio,shoreline,andmilesintoLakeErie(NOAA
GLERL2015;Shuchmanetal.2015).July2014
isrepresentedasinTable36.Tables36
through39arebasedinpartonAlgalToxin
ResultsfromLakeErie,OhioStatePark
Beaches,andPublicWaterSupplies(2011
Present)fromOhioEPA(2015),asreleasedto
thepubliconMay29,2015.
Table36:SeverityRatingforHABsintheWestern
BasinofLakeErie,July2014
CountyorIsland

WeeksofJuly2014
1

Essexmainland

ByOctober11,satelliteimageryshowedthe
bloomneartheshorelineoftheentirewestern
basin.OnsatelliteimageryfromOctober17,
mostshorelinesofthewesternbasinshowed
noMicrocystisbloom.BytheendofOctober,
thebloomhaddissipatedfromLakeErie
(NOAAGLERL2015).October2011is
representedinTable35.

PeleeIsland

Eriemainland

Table35:SeverityRatingforHABsintheWestern
BasinofLakeErie,October2011

KelleysIsland,ErieCounty

0.25

CountyorIsland

WeeksofOctober2011
1

Essexmainland

0.50 0.75 0.25

PeleeIsland

0.50 0.50 0.25

Wayne(southerntip)
Monroe
Lucas
Ottawamainland

0.25 0.75
0

0.50

0.25 0.50

BassIslands

0.25

0.25

Sandusky

0.25 0.50 0.25

Eriemainland

0.75

KelleysIsland,ErieCounty

0.75

0.25

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
InternationalJointCommission(2014);Michalaketal.
(2013)

3.3.3 The2014HAB
During2014,LakeEriesHABformedbyJuly14
neartheMaumeeRiver.Bythethirdweekof
July,OhioEPAobserved7.1ppbof
MicrocystinsatMaumeeBayStateParkand

Wayne(southerntip)

Monroe

Lucas

0.50 0.75

0.25 0.25 0.75

Ottawamainland

0.25

0.5

BassIslands

Sandusky

0.25 0.50 0.50 0.75

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
CTVWindsor(2014);Dierkes(2014);Dolan(2014);
Kisonas(2014);SonichMullin(2014);ToledoBlade(2014)

DuringearlyAugust,theHABintensifiedand
spreadnorthwardtoincludeMonroeCounty.
TheHABalsospreadtomostofOttawa
County,Ohioscoastlineandmovedtoward
PeleeIsland,Ontario.Windandwatercurrents
pushedthe
HABfromLakeErieswesternbasintothearea
whereToledo,Ohioswatertreatmentplant
takesinwaterfromthelake.Windsduring
AugustmixedsomeoftheHABintothelake
watersothatlessoftheHABwasvisibleon
satelliteimagery.BytheendofAugust,the
HABextendedwellpasttheislandsinLakeErie
andalongmostofthewesternbasins
southerncoastline(NOAAGLERL2015;Dierkes
2014;Dolan2014;SonichMullin2014).August
2014isrepresentedinTable37.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

19

Table37:SeverityRatingforHABsintheWestern
BasinofLakeErie,August2014
CountyorIsland

WeeksofAugust2014
1

Essexmainland

PeleeIsland

Wayne(southerntip)

Monroe

Lucas
Ottawamainland
BassIslands

0.25 0.25
0

1
0

0.50 0.50 0.50


1

0.50 0.50 0.50 0.50


0

0.25 0.50

Sandusky

0.75 0.50 0.25 0.50

Eriemainland

0.25 0.25 0.25 0.25

KelleysIsland,ErieCounty

0.25 0.25 0.50 0.50

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
CTVWindsor(2014);Dierkes(2014);Dolan(2014);
Kisonas(2014);SonichMullin(2014);ToledoBlade(2014)

WindsduringSeptemberkeptthemostintense
areaoftheHABinMaumeeBay,butalsokept
thebloomaroundtheLakeErieislands.For15
daysduringlateAugustintoSeptember,
residentsofPeleeIsland,Ontario,werewarned
nottousewellwaterbecauseelevatedlevels
ofmicrosystinweredetectedinthewater.
WindsalsomovedtheHABsothatitcollected
ontheshorelineofOntariointhecentralbasin
ofLakeErie.Calmwindslaterinthemonth
promotedtheformationofscumontheHABs
aroundtheLakeErieislandsandinMaumee
Bay(NOAAGLERL2015;CTVWindsor2014;
ToledoBlade2014).Septemberisrepresented
inTable38.
Table38:SeverityRatingforHABsintheWestern
BasinofLakeErie,September2014
CountyorIsland
Essexmainland

WeeksofSeptember2014
1
0

2
0

3
4
0.25 0.50

PeleeIsland
Wayne(southerntip)
Monroe
Lucas

1
1 0.25 0.50
0.25 0
0
0
0.75 0.50 0.50 0.75
0.75 0.75 0.50 0.75

Ottawamainland

0.50 0.50 0.50 0.25

BassIslands

DuringearlyOctober,windspusheda
substantialportionoftheHABtotheOntario
shorelineinthewesternbasinofLakeErie,and
aportionofthebloomintensifiedinthecentral
basinofOntariowaters.TheHABgrewnear
MaumeeBayandthewatersofMonroe
County,Michigan.TheHABweakened
throughoutthewesternbasinanddissipated
fromthecentralbasinbymidOctober.Asmall
bloompatchremainedoffshoreofMonroe
County,Michigan,onOctober22,butbythat
timethewatertemperaturedroppedbelow
59F,whenMicrocystisstopsgrowing.Bythe
endofOctober,onlySanduskyBayshoweda
HABonsatelliteimagery(NOAAGLERL2015).
OctoberisrepresentedinTable39.
Table39:SeverityRatingforHABsintheWestern
BasinofLakeErie,October2014
CountyorIsland

WeeksofOctober2014
1

Essexmainland

0.50

PeleeIsland

0.25

Wayne(southerntip)
Monroe

0.50 0.25

Lucas

0.50 0.50 0.25

Ottawamainland

0.25

BassIslands

0.25 0.25

Sandusky

0.25 0.25 0.50 0.25

Eriemainland

0.25 0.25

KelleysIsland,ErieCounty

0.25

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
CTVWindsor(2014);Dierkes(2014);Dolan(2014);
Kisonas(2014);SonichMullin(2014);ToledoBlade(2014)

Thisinformationisincorporatedintothe
evaluationofeffectstorecreation,water
withdrawals,tourism,andpropertyvaluesas
describedwithineachsection.

0.50 0.75

Sandusky

0.50 0.50 0.75 0.50

Eriemainland

0.25 0.25 0.50 0.25

KelleysIsland,ErieCounty

0.50 0.50 0.50 0.25

Sources:NOAAGLERL(2015);Shuchmanetal.(2015);
CTVWindsor(2014);Dierkes(2014);Dolan(2014);
Kisonas(2014);SonichMullin(2014);ToledoBlade(2014)

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

20

4.0 IMPACTS OF HABS ON RESIDENTIAL


PROPERTY VALUES
4.1

RESIDENTIALPROPERTYVALUES

ThePhaseIeffortnotedthateffectsto
residentialpropertyvaluesareapotentially
importantareaforstudy.However,information
relatedtothevalueofpropertiesthatcouldbe
impacted,aswellasthenatureandmagnitude
ofthiseffectfromHABswasnotreadily
available.Consideringtheformer,theinitial
effortdemonstratedtheexpectedresultthat
propertiesclosertotheLakeErieshoreare
expectedtogenerallyhaveahighervalue.In
particular,a2001studybySeileretal.useda
hedonicpricingmodelofhomesnearCleveland,
Ohio,andestimatedthatallelseequal,houses
thathaveaviewofLakeErieareanaverageof
56percentmorevaluablethanhousesthatdo
nothaveaviewofLakeErie.
WithrespecttothenatureofHABeffectson
propertyvalues,HABscanproducestrongodors
andcanmaketypicallyclearandcleanlooking
waterappearcloudy,murky,andpolluted.In
thisway,thepresenceofHABscanadversely
affecttheaestheticsofnearbyproperties(ODH,
OPEAandODNR2012).HABeffectshavenot
beenexplicitlystudied;however,severalstudies
havelookedattherelationshipbetweenhousing
valuesandLakeEriewaterquality.Thesestudies
typicallyemployhedonicanalysis.Forwater
quality,thiseconometricapproachobservesthe
valuesofhomespurchasednearwaterbodiesof
varyingenvironmentalqualities,andallows
statisticallyidentifyingthevaluethatmarkets
assigntoenvironmentalcharacteristics.
Araetal.(2006)useahedonicpricinganalysisof
thevalueofhousesnearLakeErieandfound
thatchangesinwaterqualityinLakeEriehave
significantimpactsonthevalueofnearby
houses.Themodelpredictsthatanincreasein
waterqualityatLakeEriebeachescomparable
toaonemeterincreaseinsecchidiskdepth
couldincreasehousingvaluesinthatbeachs
countyfrom$221to$2,379(1996USD)per

house,dependingonthebeachnearesttothe
homeinquestion.Thismodelalsoestimates
thathomesintheareaofbeachesexperiencing
unsafelevelsoffecalcoliformcountswould
benefitfromareductioninfecalcoliformtosafe
counts(i.e.,200countsper100mL)inthe
amountof$88to$2,692(1996USD)perhouse.
Seiler et al. (2001) used a hedonic pricing
model of homes near Cleveland, Ohio, and
estimated that all else equal, houses that
have a view of Lake Erie are an average of
56 percent more valuable than houses that
do not have a view of Lake Erie.
HABs can produce strong odors and can
make typically clear and clean-looking
water appear cloudy, murky, and polluted,
adversely impacting the aesthetics of
nearby properties.

Thisreviewindicatesseveralimportant
outcomes:
1. Otherthingsbeingequal,propertiesthat
areclosertotheshorelineofLakeErieare
morevaluablethanpropertiesthatare
furtherfromtheshoreline.
2. The2011and2014HABsclearlyhadthe
potentialtodiminishecologicalservice
relatedqualitiesofshorelineandnear
shoreproperties.
3. Nearshorepropertiesexperiencea
proportionatelygreaterreductionin
propertyvaluefromlowerwaterquality
thantopropertiesthatarefartheraway.
Withtheseconsiderationsinmind,anattempt
atvaluingimpactswasundertakenaspartofthis
effort.Thiseffortcanberoughlydescribedas
attemptingtoidentifythemarketvalueof
propertiesthataremostlikelytobeaffectedby
HABs(valueatrisk)andthepotentialeffectof
HABsonthevalueofthoseproperties.Areas

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

21

studiedarewithinthecountiesdepictedin
Figure41.
Figure41:PotentialforPropertyValueImpacts

ourinvestigationindicatedthatassessorsdata
areavailableatthecountyorcitylevelinOhio
andMichigan.UsersofthedataneedaparcelID
oranaddresstoaccessthedata.(Ontario
propertiesusearollnumber.)Asaresult,
withoutanaddresslevelbreakdownorunique
identifier,thedatacannotbeusedtoidentify
propertyvaluesbytheirlocation.Thismakesit
costlytoaccountfortheproximityrelated
effectsdescribedinfactors1and3above.
Value at risk was estimated for shoreline
properties as well as for nearshore
properties (the latter are defined as those
within one-half mile of shore).

4.2

VALUEATRISK

Animportantfirststepincharacterizingthe
potentialforpropertyvalueimpactsis
developinganunderstandingofthevalueofthe
housingstockthatislikelytobeaffectedby
HABs.ForCanada,therearenosuitabledata
sourcesavailable.FortheU.S.therearea
numberofpotentialdatasourcesforidentifying
residentialpropertyvalues.Multiplelisting
service(MLS)dataaretheprimarydatatypically
usedforhedonicanalysis.Thisdataconsistsof
salepricesandpropertycharacteristicsfor
homessoldinagivenareaandoveracertain
timeperiod.Althoughthesedatawouldbe
usefulforaneconometricevaluationofeffects
ofenvironmentaldisamenitiesonhomevalues,
itwasdeterminedthatitisnotusefulfor
identifyingbaselineresidentialpropertyvalues
thatareatrisk.Thereasonforthisisthatthe
MLSdatatypicallyonlycontainsalesandare
thereforetoosparseforidentifyingthetotality
ofpropertieswhosevaluecouldbeaffected.
ThePhaseIeffortnotedthepotentialforusing
assessordatatoidentifytheamountofhome
valuesexposedtotheeffectsofHABs.Because
theseassessedvaluesdonotrepresentmarket
values,suchdataarerarelyifeverusedin
publishedhedonicanalysis.Foridentifyingvalue
atrisk,thisisnotagreatdetriment.However,

Theteamalsoevaluatedtheviabilityofdata
fromtheU.S.CensusBureau(2015).Census
Bureaudataonvalueareavailablefromreport
B25075.ThisreportarisesfromHousing
Question19intheAmericanCommunitySurvey
whichasksAbouthowmuchdoyouthinkthis
houseandlot,apartment,ormobilehome(and
lot,ifowned)wouldsellforifitwereforsale?"
Thisquestionwasaskedathousingunitsthat
werevacantandoccupied,includingthosethat
areowned,beingbought,andforsale.Valueis
therespondent'sestimateofhowmuchthe
propertywouldsellforifitwereforsale.Ifthe
houseormobilehomewasownedorbeing
bought,butthelandonwhichitsitswasnot,the
respondentwasaskedtoestimatethecombined
valueofthehouseormobilehomeandtheland.
Forunitsthatwereforsale,valuewastheprice
beingaskedfortheproperty.
TheU.S.CensusBureauuseddatafromthe
20092013AmericanCommunitySurveyfive
yearestimatestocompilethemostrecent
reportB25075.Thisreportisavailableatvarious
censusgroupingsandconsistsoftheestimated
numberofpropertieswithin24rangesof
propertyvalues(Table41).

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

22

Table41:RangesofPropertyValuesUsedinthe
Analysis,U.S.CensusReportB25075
LucasCounty,Ohio:CensusTract97,BlockGroup3
Numberof
Marginof
RangeofValues
Properties
Error
Less than $10,000
0
+/-11
$10,000 to $14,999
7
+/-12
$15,000 to $19,999
0
+/-11
$20,000 to $24,999
0
+/-11
$25,000 to $29,999
0
+/-11
$30,000 to $34,999
0
+/-11
$35,000 to $39,999
0
+/-11
$40,000 to $49,999
17
+/-20
$50,000 to $59,999
9
+/-14
$60,000 to $69,999
32
+/-30
$70,000 to $79,999
39
+/-28
$80,000 to $89,999
32
+/-29
$90,000 to $99,999
53
+/-55
$100,000 to $124,999
11
+/-16
$125,000 to $149,999
37
+/-28
$150,000 to $174,999
0
+/-11
$175,000 to $199,999
0
+/-11
$200,000 to $249,999
0
+/-11
$250,000 to $299,999
25
+/-23
$300,000 to $399,999
10
+/-15
$400,000 to $499,999
0
+/-11
$500,000 to $749,999
7
+/-11
$750,000 to $999,999
0
+/-11
$1,000,000 or more
0
+/-11

Thisinformationisavailableatthecensustract
andblockgrouplevel.TheU.S.CensusBureau
(2012,1994)publishesitsrulesfordeveloping
variousgroupings.Theseruleswereevaluated
toidentifythevalueofusingcensusdatato
identifypropertyvalues.Althoughproperty
valueinformationisnotavailableattheblock
level,theprocessfordevelopingblockswas
considered.Censustractsareintendedto
provideastablesetofgeographicunitsforthe
presentationofstatisticaldata.Censustracts
usuallycoveracontiguousarea;theyhavean
optimumpopulationsizeof4,000peopleand
canrangebetween1,200and8,000people.
Theirsizecanvaryaccordingtopopulation
density.Censustractboundariesaredelineated
withtheintentionofbeingmaintainedovera
longtimesothatstatisticalcomparisonscanbe
madefromcensustocensus.Censustracts
occasionallyaresplitduetopopulationgrowth
ormergedasaresultofsubstantialpopulation
decline.Censustractboundariesgenerally
followvisibleandidentifiablefeatures.Stateand

countyboundariesalwaysarecensustract
boundaries(U.S.CensusBureau2012).
Blockgroupsarestatisticaldivisionsofcensus
tracts,aregenerallydefinedtocontainbetween
600and3,000people,andareusedtopresent
dataandcontrolblocknumbering.Ablockgroup
consistsofclustersofblockswithinthesame
censustract.Ablockgroupusuallycoversa
contiguousarea.Eachcensustractcontainsat
leastoneblockgroup,andblockgroupsare
uniquelynumberedwithinthecensustract.
Withinthestandardcensusgeographic
hierarchy,blockgroupsnevercrossstate,
county,orcensustractboundariesbutcancross
theboundariesofanyothergeographicentity.
Mostblockgroupsweredelineatedbylocal
participantsintheCensusBureau'sParticipant
StatisticalAreasProgram(U.S.CensusBureau
2012).
Censusblocksarethesmallestgeographicarea
forwhichtheBureauoftheCensuscollectsand
tabulatesdecennialcensusdata.Theminimum
sizeofacensusblockwas30,000squarefeet
(0.69acre)forpolygonsboundedentirelyby
roads,or40,000squarefeet(0.92acres)for
otherpolygons.Althoughthereisnomaximum
sizeforablock,itmustbethesamesizeor
smallerthantheblockgroupitiscontainedin,
whichmustbethesameorsmallerthanthe
correspondingtract.Blocksareformedby
streets,roads,railroads,streamsandother
bodiesofwater,othervisiblephysicaland
culturalfeatures,andthelegalboundaries
shownonCensusBureaumaps.Patterns,sizes,
andshapesofcensusblocksvarywithinand
betweenareas.Factorsthatinfluencethe
overallconfigurationofcensusblocksinclude
topography,thesizeandspacingofwater
features,thelandsurveysystem,andtheextent,
age,type,anddensityofurbanandrural
development.Atleastonesideofacensusblock
isaroadfeature.Thecensususesextensions
fromdeadendroads/streetstosplitoversized
polygonsintoseparateblocks;suchextensions
weremadewhereverroadfeaturesprotruded
intoalargepolygonandendedwithin300feet
ofnonroadfeatures,suchasshorelinesand
railroads(U.S.CensusBureau1994).

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

23

Theseconsiderationsindicatethatcensus
designationsmayformpropertygroupingsthat
areusefulindelineatingpropertythatmay
experiencedifferentialeffectsfromLakeErie
HABs.Tofurtherconsiderthispossibility,census
groupingswerevisuallyinspected.

4. Compiledatatocalculateestimated
aggregatevaluesforresidentialproperty
values.
Thisprocessisvisuallydepictedforblockgroup
zeroofcensustract97inLucasCounty,Ohio,
below(Figure42).

TheU.S.CensusBureaupublishesamapofeach
countydepictingthecensustractsforeach
county.Mapsshowingblockgroupsare
availablefromvarioussources;forsimplicity,
thisstudyexaminedblockgroupmapsprovided
byUSA.com(2015)andmappingsfromtheU.S.
CensusBureau.Themapsforcensustracts
borderingLakeErieincountiesbeingconsidered
werevisuallyevaluatedtodevelopan
understandingoftherelationshipbetween
proximitytoLakeErieandthedifferentcensus
groupings.Thisevaluationindicatedcensus
blockswerespecifiedalongLakeErieandcensus
blockgroupsgenerallyconsistofgroupsof
blocksthatrunalongshorelines.Furthervisual
inspectionidentifiedconfirmedthesecoastal
blockgroupstendtoextendinshoreabouthalfa
mile.

Figure42:LucasCountyTract97,BlockGroup3

Figure42alsoshowsblockgroup3within
censustract97.Aftercompilingthisdata,we
havedataforeachidentifiedblockgroup.An
exampleforblockgroup3,censustract97for
LucasCounty,Ohio,isdepictedinTable41.

Thisoutcomesuggestsaprocessforcollecting
baselineresidentialpropertyvaluedatafor
propertieswithinapproximatelyhalfamileof
LakeErie,whichisto:
1. IdentifycensustractsthatcovertheLake
Erieshorelineinaffectedcounties.
2. Identifycoastalblockgroupswithineach
ofthesecensustracts.
3. Collectthedataavailablefromreport
B25075reflectingestimatedproperty
valuesbycategoryforeachcoastalblock
group.

Thisprocessresultsinadatabasecontainingthe
numberofowneroccupiedhomesineachvalue
categoryforaffectedU.S.countieslocated
withinapproximatelyonehalfmileofLakeErie.
ThedataissummarizedinTable42,and
indicatesresidentialpropertyintheseblock
groups(thatreachtheLakeErieshoreline)hasa
totalvalueofmorethan$3billion.

Table42:EstimatedValuesofHomesOn/NeartheShorelineinWesternBasinofLakeErie
LowerRangeof
PropertyValue

UpperRangeof
PropertyValue

Wayne,Michigan

$138,680,000

$174,254,103

897

Monroe,Michigan

$491,735,000

$600,380,669

4,331

Lucas,Ohio

$449,355,000

$547,690,996

4,004

$1,086,455,000

$1,262,229,625

5,479

104

$57,895,000

$68,879,406

594

County

Ottawa,Ohio
Sandusky,Ohio

Number
ofHomes

NumberofHomesValued
at$1MorMore

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

24

County
Erie,Ohio
Totals

LowerRangeof
PropertyValue

UpperRangeof
PropertyValue

Number
ofHomes

NumberofHomesValued
at$1MorMore

$731,085,000

$879,555,265

4,768

33

$2,955,205,000

$3,532,990,064

20,073

137

Note:TableincludesonlythesoutherntipofWayneCounty,Michigan,andtheportionofErieCounty,Ohio,thatliesinthe
WesternBasinofLakeErie.Upper(lower)rangesaretheproductofthenumberofhomestimespertheupper(lower)rangeof
categoryfromthecensus.

Thereareanumberofshortcomingstothis
data.Thequalityoftheselfgeneratedestimates
isunclear,thecensusapproachtoextrapolating
thesevaluesinducesuncertainty,the
implicationsforhomesthatarenotowner
occupiedisunclear,propertiesvaluedatover$1
millionareonlyidentified(notvalued),andthe
datadoesnotdifferentiatebetweenproperties
neartheshoreandthosethatarefartheraway.

Giventhesedrawbacks,andtheapparent
importanceofthesepropertyvaluestooverall
estimates,anadditionalapproachwasexplored.
Thisapproachrelieduponanonlinedatabase
availableathttp://www.zillow.com.Usingthe
ZillowZestimateinterface,itispossibletoobtain
estimatesofnearbypropertyvalues.Without
streetaddresses,thisisonlypossiblebyvisual
inspectionofdata,asdepictedinFigure43
below.

Figure43:ExampleofZillowDatafromZestimateDatabase(http://www.zillow.com)

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

25

Duetolimitationsofthewebsite,thisapproach
wasonlyappliedforshorelineproperties.In
additiontoidentifyingshorelinepropertyvalues,
thisapproachwasusedforcrossvalidationwith
censusestimates.Thewebsite
http://www.usa.comprovidesmapsofcensus
tractsandblockgroupsthatwereusedtohelp
resolvethisvisuallycollecteddatatothecensus
blockgrouplevel.Thisprocesscanbe
summarizedas:
1. Identifygeographicfeaturesandroads
thatmarkblockgroupboundariesusing
thewww.usa.comwebsite.

2. LocateblockgroupboundariesinZillow
propertyvalueinterface.
3. Proceedeasttowest,recording
Zestimatepropertyvaluesandhouse
characteristicsforshorelineproperties.
4. Terminateatwesternboundary.
5. Repeatforadditionalblockgroups.
Usingthisapproach,thevisualdatadepicted
abovewouldbe(forexample)convertedto
datathatappearsinTable43.

Table43:PropertyValueandDescriptionfromZillowsZestimateData(http://www.zillow.com):LakeErie
ShorelineZonePropertyValues,OttawaCounty,Ohio
CensusTract
508(00)Ohio

Block
Location
Group
1
NorthofOakHarbor

508(00)Ohio

NorthofOakHarbor

508(00)Ohio

NorthofOakHarbor

508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor

BordersofCensusTract

Property
Type

West:BigSand
Bay/ParkRd1/
NBensonCarrollRd
East:CountyRd26/N
Carroll
Westernborderof
State
508(00)

Federal

Private
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential
Residential

PropertyValue

$0
$0
$0
$91,000
$135,000
$145,000
$119,000
$13,000
$137,000
$244,000
$124,000
$175,000
$120,000
$208,000
$124,000
$117,000
$110,000
$5,000
$117,000
$170,000
$123,000
$93,000
$111,000
$79,000
$80,000
$202,000
$268,000
$248,000
$318,000
$25,000

PropertyDescription

CraneCreekState
Park
OttawaNational
WildlifeRefuge
TurtleCreekMarina
2bd/1ba
2bd/2ba
2bd/1ba
1bd/1ba
2bd/0.5ba
2bd/1.5ba
2bd/2ba
2bd/1ba
2bd/1.5ba
1bd/1ba
3bd/2ba
2bd/1.5ba
2bd/1ba
1bd/1ba
3bd/1ba
2bd/1ba
1bd/1ba
2bd/1ba
1bd/1ba
2bd/0.5ba
1bd/1ba
1bd/1ba
3bd/2ba
2bd/2ba
3bd/2ba
4bd/4ba
3bd/2.5ba

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

26

CensusTract
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio
508(00)Ohio

Block
Group
1
1
1
1
1
1

Location

BordersofCensusTract

NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor
NorthofOakHarbor

Property
Type
Residential
Residential
Residential
Residential
Residential
Residential

PropertyValue
$412,000
$185,000
$74,000
$121,000
$26,000
$200,000

PropertyDescription
3bd/2.5ba
2bd/1ba
1bd/0.5ba
1bd/1ba
Lot
1bd/2ba

HavingestimatesofthevalueofU.S.
residentialpropertythatispotentiallyexposed
toHABimpactsitremainstoquantifythevalue
ofthoseimpacts.However,doingsorequires
developinganunderstandingofthelikely
magnitudeofHABsimpactsonresidential
propertyvalues.Table44listsanumberof
studiesthatdescriberelationshipsbetween
waterqualityandpropertyvalue.

Thereareanumberofshortcomingstothis
approachaswell.Themanualrequirements
addeffortandalsothepotentialforhuman
error.Regardingthedataitself,theZestimate
algorithmsusedtogeneratethevaluesare
proprietaryandthereforenotavailablefor
inspection.Also,thevaluesareupdated
frequently,meaningthatreturningforspecific
validationisnotanoption.

Table44:PropertyValueStudies

Title

Author

Publication
Data

Similarity
Magnitude
WaterQuality
Distanceto
Lake
ScenicView
Dissolved
Oxygen
Nonpoint

TheInfluence
ofWater
Qualityonthe
HousingPrice
AroundLake
Erie

Lakeshore
Property
Valuesand
WaterQuality:
Evidencefrom
PropertySales
inthe
Mississippi
Headwaters
Region

Evidenceof
theEffectsof
WaterQuality
onResidential
LandPrices"

Leggettand
Bockstael
(2000)
Submittedto Journalof
Journalof
theLegislative Agricultural
Environmental
Commissionon andAllied
Economicsand
Minnesota
Economics
Management
Resources
27(1):212223 39:121144

Ara,Irwin,and Kryseletal.
Haab(2006)
(2003)
Presentedat
theAmerican
Agricultural
Economics
Association
Annual
Meeting,Long
Beach,
California,July
2326
Yes
Yes
Yes
Yes

MarginalPrice
ofLake
Recreationand
Aesthetics:An
Hedonic
Approach

Lansfordand
Jones(1995)

Exploringthe
HedonicValue
ofAmbient
WaterQuality:
ALocal
Watershed
BasedStudy

ALoonon
EveryLake:A
Hedonic
Analysisof
LakeWater
Qualityinthe
Adirondacks

TheSpatial
Extentof
WaterQuality
Benefitsin
UrbanHousing
Markets

Poor,
Pessagno,and
Paul(2007)
Ecological
Economics
60(4):797806

Tuttleand
Heintzelman
(2011)
Clarkson
University
https://www.
ecn.ulaval.ca/
sites/ecn.
ulaval.ca/
files/loon
lake.pdf

Walsh,Milon,
andScrogin
(2010)
Land
Economics
87(4):628644
(2012)

Yes
Yes

Yes

Yes

Yes

Yes
Yes

Yes
Yes

Yes

Yes

Yes

Yes

Yes

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

27

Title

TheInfluence
ofWater
Qualityonthe
HousingPrice
AroundLake
Erie

Lakeshore
Property
Valuesand
WaterQuality:
Evidencefrom
PropertySales
inthe
Mississippi
Headwaters
Region

MarginalPrice
ofLake
Recreationand
Aesthetics:An
Hedonic
Approach

Evidenceof
theEffectsof
WaterQuality
onResidential
LandPrices"

Exploringthe
HedonicValue
ofAmbient
WaterQuality:
ALocal
Watershed
BasedStudy

ALoonon
EveryLake:A
Hedonic
Analysisof
LakeWater
Qualityinthe
Adirondacks

TheSpatial
Extentof
WaterQuality
Benefitsin
UrbanHousing
Markets

Studiesimplicit
pricesofwater
qualitythe
effectson
lakeshore
property
pricesfor
lakegroups
andindividual
lakes

Studyincludes
distanceto
lakeandscenic
view

Study
examines
waterquality
andproperty
value

Study
examines
waterquality

Study
examines
waterquality

Study
examines
proximity
effects

Source
Pollution
Studiesthelink
betweenlake
qualityand
residential
Reasonfor
development
Considering
nearLakeErie
ThisWork

Whenconductingsecondaryresearch,a
potentialapproachforidentifyingthe
magnitudeofimpactsistotransferresults
fromastudyofsimilareffectsandproperties.
Forexample,theresultsofAraetal.which
estimatedtheeconomicvalueofchangesin
waterclarityandfecalcoliformasachangein
housingvalues,couldbetransferredto
estimateavalueforsimilarimpactsonhousing
values.Adifficultywiththisapproachinthe
currentcaseisthatitchangesinsecchidisk
depthorfecalcoliformcounts(the
environmentalqualitychangesvaluedin
previousresearch)maynotberelevantfor

HABs.Theotherstudieswecouldidentifyare
similarinthattheyfocusonenvironmental
conditions,butnonehasthedramaticimpact
thatispossiblefromHABsinLakeErie.An
additionalimportantdifferenceresultsfrom
theintermittencyanduncertaintythat
characterizeLakeErieHABs.Bycomparison,
theeffectsstudiedaboveareforlongerterm
qualitydifferences.Studiesthatevaluatethe
impactofmoredramatic,intermittentand
uncertaineventsonpropertyvaluesare
describedinTable45.

Table45:StudiesofPropertyValuesandNaturalDisasters

Title

DoNearbyForestFires
CauseaReductionin
ResidentialProperty
Values?

Author

Loomis(2004)

TheEffectsofWildfire
andEnvironmental
AmenitiesonProperty
ValuesinNorthwest
Montana,USA
Stetler,Venn,andCalkin
(2010)

Hedonic

TroyandRomm(2007)

ClearSkies,DarkWaters:
TheGulfOilSpillandthe
PriceofCoastal
Condominiumsin
Alabama
Siegel,Caudill,and
Mixon,Jr.(2013)

JournalofForest
EcologicalEconomics
Economics10:149157 69:22332243

Chapter6inLivingontheEdge, EconomicsandBusiness
Letters2(2):4253
Volume6:Economic,
InstitutionalandManagement
PerspectivesonWildfireHazard
intheUrbanInterface,pp.
10101119.GreenwichCT:JAI
Press

Yes

Yes

Yes

No

Wildfire

Wildfire

Wildfire

Oilspill

Yes

Yes

No

Publicationdata

Disastertype

TheEffectsofWildfire
DisclosureandOccurrenceon
PropertyMarketsinCalifornia

Distancedecay No

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

28

Title

DoNearbyForestFires
CauseaReductionin
ResidentialProperty
Values?

TheEffectsofWildfire
andEnvironmental
AmenitiesonProperty
ValuesinNorthwest
Montana,USA

TheEffectsofWildfire
DisclosureandOccurrenceon
PropertyMarketsinCalifornia

ClearSkies,DarkWaters:
TheGulfOilSpillandthe
PriceofCoastal
Condominiumsin
Alabama

Changein
Forestamenityvalue;
Aestheticandrecreation Noneincludedinthisvaluation Noneincludedinthis
aestheticandrecreation opportunities
valuation
qualityof
environmental
amenities
Hedonicstudy;
Reasonfor
homeowners'revised
consideringthis
perceptionofrisk
work

Hedonicstudy;
Hedonicstudy;salepriceof
Estimatedchangein
reductioninsalesprice homedecreasedwithproximity propertyvaluefrom
environmentaldisaster
ofhomeindisaster
toalargefireoccurringin
area;distancedecay
recentyears

AscanbeseeninTable45,mostofthese
studiesareabouttheimplicationsof
intermittentnaturaldisastersonproperty
value.Althoughthenarrativeofthesestudies
isinformative,thereareanumberofimportant
differencesbetweentheseandHABs,including
heightenedpotentialforpersonalinjuryand
thedestructionand(ofteninsurance
compensated)rebuildingthatcanaccompany
floods,earthquakes,andhurricanes.
Thisliteraturereviewrevealstheimportanceof
bothwaterqualityandintermittentnegative
eventsonpropertyvalues.However,noneof
theavailablestudiesappearsuitablysimilarto
thecaseofHABstosupporttransfer.
Nevertheless,consideringtherelativelylarge
valueofpropertythatisexposedtoHABs,itis
importanttodevelopatleastapreliminary
estimateofvalueeffects.Giventhelackof
suitabletransferinformation,theteam
adoptedavalueoflostservicesapproachto
characterizeimpactstopropertyvalues.
Specifically,homevaluesareviewedasbeing
composedofthevaluesarisingfromtheflow
ofservicestheyprovide.WhenHABs
intermittentlyinterrupttheseservices,
propertyownerslosevalueaccordingtothe
importanceoftheserviceslost,andthelength
andseverityoftheinterruption.

4.3

POTENTIALFORIMPACTS

Implementingthisapproachrequireslinking
LakeErieservicestohomevalues.Asidentified
earlier,astudybySeileretal.indicatesthat
otherwiseidenticalpropertieshavea56
percenthighervalueiftheyhaveaviewofLake

Erie.PresumingthatviewproxiesforallLake
Erieservices,approximatelyonethirdofthe
valueofpropertiesproximatetoLakeErieis
explainedbyLakeErieservices.Stepsinthis
processincludethefollowing:
1. Developestimatesofbaselineproperty
valuesfordifferentlocationsalongLake
Erieanddistancesfromtheshoreusing
ZillowandtheU.S.Census.
2. Calculateanannualcostforeach
baselinepropertyvalue.
3. AssignaLakeErieEcoServicepercentage
toeachdistancefromshorebasedon
literatureandprofessionaljudgment.
4. Developamonthlyrepresentationof
EcoServicevaluebasedonprofessional
judgment.
5. Specifyserviceinterruptionsassociated
with2011and2014scenarios.
6. Calculatetheproducttoidentifythe
valueoflostresidentialproperty
ecosystemservices.
Total value of residential housing stock
most likely to be impacted due to future
HAB events is calculated to be over $3B.
Applying a 10 percent impact to on-shore
property values and a 5 percent impact to
near-shore values will result in $138.4
million for shoreline properties and $103.7
million for near-shore properties.

Theprocessusedtodeveloppropertyvalue
estimateswasdescribedearlierandresultsin
theestimatesshowninTable46.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

29

Table46:ValueofProperty(Stock)atRisk
CountyorIsland

Propertyabout
Shoreline
MileorLessfrom
Property:Zillow
Shore:U.S.Census
Data
Data
Notavailable
Notavailable

EssexCounty
mainland,Ontario
PeleeIsland,
Notavailable
Ontario
WayneCounty,
$120M
Michigan(southern
tip)
MonroeCounty,
$200M
Michigan
LucasCounty,Ohio
$55M
OttawaCounty
$236M
mainland,Ohio
BassIslands,
$176M
OttawaCounty
SanduskyCounty,
$1.59M
Ohio
ErieCounty
$369M
mainland,Ohio
KelleysIsland,Erie
$226M
County

reductions(asopposedtoelimination)ofthese
impacts.Toaccomplishthis,thevalueofthe
housingstockisconvertedtoanannualflowby
identifyingannualmortgagepayments
calculatedfora30yearmortgageat4.13
percent.ThisresultsinTable47showtheflow
ofannualcosts:

Notavailable

Table47:PropertyValueFlowatRisk
$150M

$550M
$500M
$1,000M
$176M
$62M
$800M
$226M

Note:ShorelineZillowvaluesforBassandKelleysislands
exceedallpropertyvalueestimatesfromcensus.For
islands,onehalfmilevaluesarespecifiedasshoreline
values.

Doublecountingofshorelinepropertyvaluesis
removedbytakingthedifferencebetweenthe
twotoidentifyvaluesthatarenearshorebut
notontheshore.Afterapplyingthisprocess,
summingtheindependentareasresultsina
totalvalueofresidentialhousingstockof
$3.458billionthatcouldbeimpacted.Effects,
suchasthosefromTable44canbeappliedto
thisvaluetounderstandthepotentialfor
impactstothevalueofthishousingstock.For
example,applyinga10percentimpacttoon
shorevalueanda5percentimpacttonear
shorevaluesresultsin$138.4millionfor
shorelinepropertiesand$103.7millionfor
nearshorepropertiestototal$242.1millionin
value.Theappropriateimpacttoapplytothese
propertieshasnotbeenstudiedscientifically
anddoingsoisarecommendednextstep.
Anobjectiveofthisstudyistoidentifyimpacts
fromthe2011and2014scenarios,andtodo
soinarepresentationthatallowsevaluating

CountyorIsland

Shoreline
Property
Notavailable

EssexCounty
mainland,Ontario
PeleeIsland,
Notavailable
Ontario
WayneCounty,
$119.90M
Michigan(southern
tip)
MonroeCounty,
$200.00M
Michigan
LucasCounty,Ohio
$55.29M
OttawaCounty
$235.60M
mainland,Ohio
BassIslands,
$176.00M
OttawaCounty
SanduskyCounty,
$1.59M
Ohio
ErieCounty
$369.00M
mainland,Ohio
KelleysIsland,Erie
$226.60M
County

NearShorenot
Shoreline
Notavailable
Notavailable
$30.11M

$350.00M
$444.70M
$764.40M
0
$53.41M
$431.002M
$0

InStep3,theecosystemservicevalueis
specified.BasedonresultsfromSeileretal.an
averageofonethirdofapropertysvaluecan
beexplainedbyhavingaviewofLakeErie.
Thereareacoupleofcomplicationsto
employingthisempiricalresultinthe
specificationbasedapproachemployedhere.
Conceptually,viewisexpectedtoproxyfora
numberoflakeattributesandtheestimated
averageeffectofviewisexpectedtovary
withpropertiesclosertothelakehavingmore
oftheirvalueexplainedbylakeservicesthan
thosethatarefartheraway.Toaccountfor
this,theannualvalueoftheproperty(proxied
byitsannualcost)ismultipliedby0.5for
shorelinepropertiesand0.2forpropertiesthat
arenearshore,butnotshoreline.Theresults
aredepictedinTable48.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

30

Table48:EcologicalServiceValue(Flow)
CountyorIsland

Shoreline
Property
Notavailable

EssexCounty
mainland,Ontario
PeleeIsland,
Notavailable
Ontario
WayneCounty,
$7.043M
Michigan
(southerntip)
MonroeCounty,
$11.75M
Michigan
LucasCounty,Ohio
$3.248M
OttawaCounty
$13.84M
mainland,Ohio
BassIslands,
$10.34M
OttawaCounty
SanduskyCounty,
$93K
Ohio
ErieCounty
$21.68M
mainland,Ohio
KelleysIsland,Erie
$13.31M
County

PercentofPropertyValue
AttributabletoLake

AugustWeek2

0.08824

AugustWeek3

0.08824

Notavailable

AugustWeek4

0.08824

SeptemberWeek1

0.08824

SeptemberWeek2

0.05882

SeptemberWeek3

0.02941

SeptemberWeek4

0.02941

October

0.02941

November

0.02941

December

0.02941

$1.769M

$20.56M
$26.13M
$44.9M
$0
$3.14M

Conductingthisapproachrequiresspecifying
serviceinterruptionscenariosfor2011and

$25.32M
$0

Anadditionalconsiderationarisesfromthe
fluctuationinlakeservices.Overthecourseof
ayear,ecosystemservicesfluctuate.For
example,althoughicefishingispopular,the
greatmajorityoffishingoccursoutsidethe
wintermonths.Becauseofthis,services
interruptionsduringsomemonthsare
presumablyworsethanthoseoccurringin
othermonths.Toaccountforthis,inStep4,a
weeklyrepresentationisdevelopedtoaccount
fortheexpectationthatvalueoflakeservices
fluctuatesoverthecourseofayear,as
depictedinTable49.
Table49:PropertyValueAttributabletoLake
Month

Month

NearShorenot
Shoreline
Notavailable

PercentofPropertyValue
AttributabletoLake

January

0.02941

February

0.02941

March

0.02941

April

0.02941

May

0.02941

June

0.02941

JulyWeek1

0.02941

JulyWeek2

0.02941

JulyWeek3

0.02941

JulyWeek4

0.02941

AugustWeek1

0.05882

Applying the service interruption concept


and HAB severity index to the 2011 HAB
event results in estimated lost property
value services of $9.781 million for shoreline
property owners and $7.087 million for
nearshore property owners.
For 2014 HAB event, shoreline property
owners are estimated to lose $10.05 million
in property value services and nearshore
owners are estimated to lose $7.864 million.

2014.Theserviceinterruptionrepresentations
ofSection3areapplied.Thisapproachresults
inestimatesofmonetizedlostpropertyvalue
servicesof$9.781millionforshoreline
propertyownersin2011,and$7.087million
fornearshorepropertyowners.Forthe2014
HABevent,shorelinepropertyownersare
estimatedtolose$10.05millioninproperty
valueservicesandnearshoreownersare
estimatedtolose$7.864million.

4.4
SUMMARYOFPROPERTYVALUE
RESULTSANDNEXTSTEPS
Thereisnospecificstudyavailablethatidentifies
thenumberofpropertieswithvalueatriskfrom
thepresenceandseverityofHABs,norarethere
anystudiesthatscientificallyexaminethe
relationshipbetweenthepresenceandseverity

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

31

ofHABsandtheamountofpropertyvaluelosses.
TheresearchpresentedinSections3and4only
beginstoquantifythepresenceandseverityof
HABsandidentifytheamountofpropertiesthat
havevalueatriskanddoesnotfullyexaminethis
relationship.Arecommendednextstepwouldbe
todevelopaneconometricmodelthat
scientificallyquantifiesthepresenceandseverity
ofHABsandpropertyvaluelosses.Suchastudy
wouldreplacethetransferandscenariobased
evaluationsconductedforthisanalysiswitha
parametrizedevaluationofthepropertyvalue
effectsofHABs.
Usingmultiplemethods,thissection
demonstratedthattherearelikelyover$3
billionworthofresidentialpropertiesthatareat
riskofdamagesfromHABs.However,thereisno
singlestudyexistingthatexaminesthepotential
forHABstonegativelyimpactLakeErieproperty
values.
Areviewofthecurrentliteraturesuggeststhat
lowwaterqualitycanhavelongtermimpactson
propertyvalues,anddisasterscansubstantially
affectpropertyvaluesfortimeperiodsaround
thesignificantevent.Whethertheeffectsof
HABs,whichdifferinimpacteveryyear,are
shorttermorlongerterm,theeffectsoflow
waterqualityisanimportant,openquestion
thatwarrantsfuturestudy.Takingsomevalues
fromtheliteratureonthepercentageimpact
thatenvironmentalharmscanhaveonproperty
valuesservestoillustratethemagnitudethat
damagesfromLakeErieHABsmightbe:a5
percentimpacttonearshorevaluesanda10
percentimpacttoshorelinepropertiesresultsin
$242.1millioninpropertyvalueimpacts.Togive
anotherperspective,anotherapproachwas
takentoillustratepotentialresidentialproperty

lossesduetoHABs.Byconsideringwhenand
whereresidentialpropertyservices,suchas
views,areimpairedbyHABsandusingthe
spatialandtemporalscenariosdescribedin
Section3forthe2011and2014HABevents,
andmakingsomeexploratoryassumptions
aboutthetemporalpatternofhousingservice
flows,pereventlossesnear$17million.Clearly,
therangeofimpactsremainsuncertain.
Futureworkcouldinvolveamoredetailedstudy
thataccessestaxassessordataandmorefully
detailspropertyvaluesalongtheshoreandin
thenearshoreareaswhereHABsarearisk.
Similarly,commerciallyavailable,butcostly,
dataexistsonhousingsalessuitablefor
identifyingtherelationshipofsalepricestoHAB
events,HABrisks,andproximitytoHABs.A
relatedlineofresearchcouldalsoincorporate
homeownerpreferencedatafromsurveys.Since
shorelineandnearshorepropertyownersare
importantstakeholders,aviableoptionfor
addressingtheimpactsofHABsonproperty
valuesistocombinesurveybasedresearch
approacheswithformalpropertyvaluemodels,
aswasdoneforcontaminatedsediment
remediationinWaukeganHarbor(Bradenetal,
2004).
Inthecurrenteffort,althoughlesstime
consumingandcoarsermethodswereused,this
studywasabletoclearlydemonstratethe
substantialvalueofthehousingstockat
potentialriskofdamagefromHABs.Coupled
withthepublishedevidencethatenvironmental
harmsaffectpropertyvaluesinavarietyof
similarcases,itisalsoclearthatpropertyis
damagedbyHABsandtheirexpected
occurrence.Thesubstantialpotentialfor
damagesmakesthisakeyareaforfuturestudy.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

32

5.0 IMPACTS OF HABS ON TOURISM AND


COMMERCE
HABscanpotentiallyaffectthecloselyrelated
areasoftourism,businessprofitability,and
commercialpropertyvaluesinareascloseto
westernLakeErie.Forexample,awell
publicizedHABeventwouldalmostcertainly
causesometouriststonottaketripstoan
affectedarea.Thiswouldresultinreduced
revenueforbusinessesdirectlyrelatedto
tourism(e.g.hotels,restaurants,charterboat
operators).Thesebusinesseswouldlose
revenueandotherbusinessesupstreaminthe
supplychainwouldpotentiallysufferasthese
directlyaffectedbusinessespurchasedfewer
inputs(e.g.hotelandrestaurantsupplies).
Moreover,thesedirectlyandindirectly
impactedbusinesseswouldbeexpectedto
purchaselesslabor.Thiscouldbereflectedas
reducednewhiring(permanentortemporary)
andlayoffs.Thiseffectleaveslessincome
availableinthelocaleconomyleadingtoa
secondary(induced)effectonlocalbusinesses
fromlostlocalwages.
Ultimately,thesesortsofeffectswouldbe
reflectedinbusinessbalancesheetsasreduced
grossrevenuesandprofitability.Anadditional
considerationisthatthevaluesofbusinessthat
aremostlikelytobeaffectedaretiedtotheir
assetsandtherealestatetheyoccupy.For
example,businessessuchasmarinas,and
waterfronthotelsandrestaurantsarenoteasily
convertedtosomeotheruse.Asaresult,on
goingbalancesheeteffectswouldultimately
leadtoreductionsincommercialrealestate
values.
Inthepreviouseffort,WeickselandLupi(2013)
reviewedavailableinformationoneconomic
impactstothetourismandcharterboat
industries.Inparticular,WeickselandLupi
compared20082011direct,indirect,and
inducedimpactsfromTourismEconomicsinthe
StateofOhioandtheLakeErieRegionofOhio

toalgalbloomevents.Theyfoundthatdespite
thehistoricallyseverealgalbloomeventinthe
summerof2011,thetourismindustrystatewide
andintheLakeErieregionbothexperienced
growthfromrecentyears.WeickselandLupi
commentthatotherfactors,suchasthe
weatherandthemodestbutsteadyrecovery
fromtheeconomicrecession,couldhave
influencedtheincreasedvisitationinthe
summerof2011.Theycouldidentifyno
immediateeconomicimpactstothetourism
industrycausedbyHABs,butnotedthatlonger
termordelayedeffectsmayoccurinthefuture.
WeickselandLupialsofoundthereisno
immediatelinkbetweencharterboatrevenue
trendsandchartercaptainpermitsalesandHAB
events.Withinboththetourismandcharter
boatindustry,WeickselandLupistatethatmore
researchontheeffectofHABsonthetourismis
necessary.
In this report, tourists are defined as people
coming from outside a shoreline county for
single or multiple-day trips.

Thereareanumberofchallengesto
understandingtheimplicationsofchangesin
tourismfromHABs,aslistedbelow:
1. Datasourcesthatindicatetheamountof
tourismatriskarenotavailable
2. InformationabouttheeffectsofHABson
tourismisnotavailable
3. Expendituresrelatedtotourismare
economicimpacts(i.e.notbenefits)
4. Impactsandbenefitsfromtourismare
generallytransfersfromoneregionto
anotherratherthanimpactsorbenefitsin
aglobalsense.
5. Asdescribedinthissectionsintroduction,
thereisoverlapbetweenchangesin
tourism,businessprofitability,and
commercialpropertyvalue.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

33

Consideringthefirstchallenge,thereareno
directestimatesoftourismatriskintheexisting
literature.Forexample,althoughestimatesof
totalexpendituresontourismareavailableat
thecountylevel,theseincludeallvisits,manyof
whichareduringtimeperiodsorforpurposes
thatwouldnotbeaffected.Thislimitsourability
toreliablycharacterizetheimplicationsofHAB
impactsontourismusingthisdata.Toaccount
forthis,anapproachthatstartswithan
aggregateestimateandparesitdownto
estimateeffectsisapplied.
Thesecondchallengeisthatalthoughitseems
selfevidentthatsometouristswouldforgotrips
tothewesternbasin,therearenoavailable
estimatesofhowtourismhasbeenaffectedby
HABs.Giventhislackofinformation,ascenario
approachisappliedwhereinreductionsintrips
toaffectedareasduringtimeswhenHABswere
prevalentisapplied.
Thethirdchallengerelatestothingsthatare
detailedinSection3.Tobrieflyrecap,
economicsmakesanimportantdistinction
betweeneconomicbenefitsandeconomic
impacts.
Economicbenefitscanbethoughtofas
whatanindividual,orindividuals
aggregateduptothesocietallevel,would
bewillingtopayforadifferentstateof
theworld.
Economicimpactsrefertochangesin
expenditures.Therelationshipbetween
benefitsandimpactsisnotalwaysreadily
apparent.
Ontheproducerside(whichthissection
studies),considerarestaurateurwhohaslost
$1,000inrevenueduetoaHAB.The
restaurateurwouldhaveawillingnesstopayto
recoverthatrevenue;however,thewillingness
topayisnotthelostrevenue,but(roughly
speaking)thelostprofitonthatrevenue.Here
again,thelostprofitisnotgenerallyeasily
identifiable.Understandingwhatwaslost
requiresknowingwhatexpenditureswere
foregone,whichdependsontheoperations
variablecostsituationwithrespectto
employees(salariedornot)alreadypurchased

foodstuffs(perishableornot)andutilities.To
addressthisissue,theapproachtakenhereisto
identifyeconomicimpacts(i.e.changesin
expenditures)undervariousscenariosfirstand
thentocharacterizebenefitsassociatedwith
thosechanges.
Thefourthenumeratedchallengewith
identifyingtheeconomicbenefitsofchangesin
tourismnotesthatinmostcases,changesin
tourismaretransfersinactivityfromoneareato
another.Forexample,atouristwhoforgoesa
triptothewesternbasincouldgoinsteadtothe
centralbasin,MountRushmore,oranynumber
ofotherplaces.Theclearimplicationisthat
whatsomebusinessesloseothersgain.To
addressthis,wedefineanaffectedregionwhere
benefitsoccur.Asdefinedforthisinvestigation,
economicimpactsoccurwhenvisitorsfrom
outsidewesternbasincoastalcountiesvisitand
spendmoneywithinthesecounties.Benefits
accruefromthesevisitorsdirectand
downstreamexpendituresinthelocaleconomy.
Thefinalenumeratedchallengereferstothe
previouslydescribedlinkbetweentourism,
businessprofitability,andcommercialproperty
values.Changesintourismaffectrevenues,
whichaffectbusinessprofitability,whichaffects
commercialpropertyvalue.Aschallenge3
describes,changesinbenefitsinonesector
enablesachangeinbenefitstoarelatedsector.
Itisusefultodisentanglebenefitsfromchanges
inexpenditures,andtheapproachtakenhereis
toidentifyboth.Wejudgethereisahighrisk
thatidentifyingbothimpactstoprofitabilityand
tocommercialpropertyvaluewillresultin
doublecounting;thefocusisinsteadto
characterizepotentialimpactstobusiness
profitability.
Theremainderofthissectionpresentsthe
detailedmethodsandresults.Dueto
differencesinavailabledata,slightlydifferent
methodsareappliedforOhio,Michigan,and
Canada;thuseachofthesearedescribed
individually.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

34

5.1

OHIOTOURISM

Asdifferentsortsofinformationisavailableby
region,varyingapproachesareapplied.Thissub
sectionexplorespotentialeffectsinLucas,
Ottawa,Sandusky,andEriecounties,whichare
depictedinFigure51.
Theapproachreliesonestimatesof
expenditurespertripandabreakdownofthese
expendituresbywhattheyarespentoninOhio.
Figure51:OhioCounties,UnitedStates

5.1.1 CharacterizationofExpenditures
Understandingpotentialimpactstotourism
requirescharacterizingperdayexpendituresby
triptype.ExpenditureandtripdatainOhiois
collectedfromtwoprimarysources:Longwoods
International(2014)andTourismEconomics
(2014).Since1999,LongwoodsInternationalhas
conductedaprogramoftourismresearchfor
theOhioDivisionofTravelandTourism.This
programincludesannualestimatesofthe
volume,characteristics,andprofileofovernight
anddaytraveltoandinOhio.Tourism
Economicstakesthevisitorexpendituresby
sectorfromLongwoodsInternationalssurvey
andadjuststhelevelsbasedonknownmeasures
oftourismactivity.TourismEconomicsalsouses
datafromU.S.DepartmentofCommerceOffice
ofTravel&TourismIndustriesSurveyof
InternationalAirTravelers.
AccordingtoLongwoodsInternationaland
TourismEconomics,Ohiodayvisitorsspent

$110pervisitorin2013.Thisvisitorspending
accountedfor57.4percentoftotalOhiovisitor
spending,whilethesevisitorstripsaccounted
for80percentoftotalOhiovisitors.Of
marketableOhiodaytrips,33percentcome
fromToledoandCleveland,whichareLakeErie
shorelineareas.
Ohioovernightvisitorsspentapproximately
$335perdayin2013.Thisspendingaccounted
for42.6percentoftotalOhiovisitorspending.
Overnightvisitorsaccountedfor20percentof
totalOhiovisitorsin2013.Oftheovernight
visitors,20percentofmarketabletripsarewith
friendsandrelatives.Theaverageforovernight
tripsin2013was3.2nightspertrip,andthe
averagenumberofvisitorspertravelpartyin
2013was3.4visitors.In2013,18percentof
overnightvisitorsstatedthattheywenttoa
lakesidebeach.
Table51presentsthebreakdownofspending
byOhiovisitorsin2013(TourismEconomics
2014).Transportationandfoodandbeverage
expenditurescomprisethemajorityofspending.
Thisisbecausebothdayandovernightvisitors
spendmoneyinthesecategories.Lodgingonly
accountsfor11percentofspending,whileretail
andrecreationexpendituresisalmostonethird
ofOhiovisitorspending.
Table51:BreakdownofOhioVisitorspending
ExpenditureCategory
Lodging
FoodandBeverage
Retail
Recreation
Transportation
Air

PercentofTotalSpending
11%
25%
14%
16%
31%
2%

Thisbreakdownisthebaseofspendingforall
visitors.Forthisanalysis,theseexpenditure
ratesarefurtherbrokendownbytriptypeand
averageperdayexpenditures.Forexample,day
visitorsspend$110pervisitor.Becausethese
visitorscomefromnearby,this$110doesnot
includelodgingorairtravelexpenditures.
Overnightvisitorsspendanaverageof$335per
visitperperson,withcostsvaryingbetween
whethervisitorsstaywithfriends/familyorin

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

35

commerciallodging.Forthepurposesofthis
study,wepresumeovernightvisitorswhostay
withfriendsandfamilydonotspendmoneyon
lodging.Inaddition,theyspendslightlylesson
eachoftheotherspendingcategoriesthanwhat
isdemonstratedinTable51.Whenthese
specificationsaremade,overnightvisitorswho
staywithfriendsandfamilyspendanaverageof
$243.90.
Overnightvisitorswhostayinhotels,bedand
breakfastestablishments,andatother
commerciallodgingplacesarenotonly
impactedbylodgingcosts,butarealsomore
likelytospendabout10percentmoreonfood
andbeveragesthanovernightvisitorswhostay
withfriendsandfamily.Thisresultsinan
averageof$357.58perdayperovernightvisitor
(whopaysforlodging).
Table52presentstheexpenditurebreakdown
bytriptype.Dayvisitorsspendthemoston
transportation,followedbyfoodandbeverage
andrecreation.Overnightvisitorswhostaywith
relativesandfriendsspendthemoston
transportation,followedbyfoodandbeverage.
Overnightvisitorswhostayathotelsandbed
andbreakfastestablishmentsspendthemoston
lodging.Thethreegroupsofovernightvisitors
spendalmostthesameontransportationas
theydofoodandbeverage.Theaverage
spendingacrossthethreeovernighttrip
categoriesis$335pervisitorperday.
Table52:ExpendituresbyDayandTripType
OvernightVisitorsStayAt
Expenditure
Category
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Air
Average
Spendingper
Visitor

Day
Relatives/
Bedand
Visitors
Friends
Hotel Breakfast
$105.20

$105.20
$32.03

$76.28 $84.76

$84.76

$18.10
$20.76
$39.11

$38.32 $38.32
$43.95 $43.95
$82.81 $82.81
$2.53
$2.53

$38.32
$43.95
$82.81
$2.53

$110.00

$243.90 $357.58

$357.58

5.1.2 TheEconomicImpactofTouristDays
AsdepictedinTable52,perdayexpenditures
varybytypeofvisit.Inordertocharacterizethe
ultimateimplicationsofchangesintourismand
touseavailabletourisminformation,these
expendituresmustbefurtherevaluatedinterms
oftheirimplicationsforadditionalexpenditures.
Todoso,weapplyamathematicaleconomic
techniquecalledInput/OutputAnalysis(Leontief
1986).Input/OutputAnalysiscanbeusedto
assesstheeffectsofdirectchangesin
expenditures(suchasthoseinTable52)ina
particulareconomicsystem(e.g.,town,county,
state,region,ornationallevel)intermsof
indirectandinducedchangesthatresult.Input
outputanalysisincludeseffectsacrossthe
followingthreecategories.
Directimpacts,whichrepresentthe
impactsfromtheindustrybeingevaluated
(e.g.,salesathotels).
Indirectimpacts,whicharetheinter
industrytransactionsbetweenthe
supplyingindustriesandthedirectly
affectedindustries(e.g.,maintenanceand
repairofhotels).
Inducedimpacts,whichreflectthelocal
spendingfromthedirectlyandindirectly
affectedindustrysectors(e.g.,purchasesat
localrestaurantsandgrocerystoresby
employeesworkingathotels).
Toestimatethedirect,indirect,andinduced
impacts,theanalysisusesIMPLAN(IMPLAN,
2014)withdataandequationsfromshoreline
ZIPcodesinLucasCounty.IMPLANcontains
detailedinputoutputinformationonmorethan
500economicsectorsatthenational,state,
county,andZIPcodelevel.
EachexpenditurecategoryinTable52
comprisesavarietyofsectors.Lodgingincludes
hotels(NAICS721110)orbedandbreakfast
(NAICS721191)expenditures.Thefoodand
beveragecategoryincludesfullservice
restaurants(NAICS722511),limitedservice
restaurants(NAICS722513),andallotherfood
anddrinkingplaces(e.g.,mobilefood
concessionstandsNAICS722330).Retail
expendituresarespentatfoodandbeverage
stores(e.g.,fishandseafoodmarketsNAICS

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

36

445220),healthandpersonalcarestores(e.g.,
CVSNAICS446110),motorvehicleandparts
dealers(e.g.,boatdealersNAICS441222),
clothingstores(e.g.,familyclothingstores
NAICS448140),andgeneralmerchandisestores
(e.g.,WalmartNAICS452112).
Recreationexpendituresincludeexpendituresat
placeslikeperformingartscompanies(NAICS
711110and711130),museums(NAICS712110),
zoos(NAICS712130),parks(NAICS712190),
amusementparks(NAICS713120),gambling
industries(NAICS713290and713210)(which
arepresentinshorelineZIPcodesinLucas
County),andmarinas(NAICS713930).
Transportationincludesexpendituresatgas
stations(NAICS447110and447190),water
transportation(e.g.,GreatLakespassenger
transportationNAICS483114),transitand
groundpassengertransportation(e.g.,bus
operationsNAICS485210),andscenicand
sightseeingtransportation(NAICS487210).
TousetheIMPLANmodel,pertripexpenditures
bycategoryfromTable52areapportionedover
thesesectorsattheratethattheyappearinthe
IMPLANdataandthensimulationsare
conductedusingIMPLANtoidentifypertrip
indirectandinducedeffectsasdepictedin
Tables53and54,respectively.
Table53:MidValueExpendituresbyTripType,
IndirectExpenditures
Expenditure
Category
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Other
Commercial
Average
Spendingper
Visitor

OvernightVisitorsStayAt
Day
Relatives/
Bedand
Hotel Breakfast
Visitors
Friends

0.3206
0.3206
0.4711
2.706
0.3258
0.6556

1.122

1.247

1.247

5.729
5.729
0.6897 0.6897
1.43
1.43

5.729
0.6897
1.43

15.65

34.71

50.89

50.89

19.81

43.68

60.3

60.3

Table54:MidValueExpendituresbyTripType,
InducedExpenditures
Expenditure
Category
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Other
Commercial
Average
Spendingper
Visitor

Day
Visitors

0.9595
6.171
0.3168
0.1967

OvernightVisitorsStayAt
Relatives/
Bedand
Friends
Hotel Breakfast
0.4134
0.4134
2.285

2.539

2.539

13.07
13.07
0.6707 0.6707
0.4291 0.4291

13.07
0.6707
0.4291

12.88

28.56

41.88

41.88

20.53

45.01

58.99

58.99

Asthesetablesindicate,indirectandinduced
effectsarecomparableinmagnitudefor
equivalenttriptypes.Thesumoftheseisa
fractionofdirecteffects.Forexampleindirect
andinducedeffectssumtoapproximately$120
perdayforovernighttripswhereasthe
comparabledirectexpendituresareover$350.
Thelargestcategoryforindirectandinduced
impactsisothercommercialsectors.This
categoryincorporatesalargenumberof
categorieswithlowimpactsincludingthe
following:
Realestate
Owneroccupieddwellings
Hospitalsandofficesofphysiciansand
dentists
Postalservice
Advertising,publicrelations,andrelated
services
Wastemanagementandremediation
services
Trucktransportation
Automotiverepairandmaintenanceshops
Maintenanceandrepairofresidential
structures
Landscapingandhorticulturalservices
Warehousingandstorage
Legalservices
Financialservices(e.g.,bookkeepingand
payrollservices).

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

37

Impactsoccurinthesecommercialsectors
accordingtoexpenditurerelationshipswith
directeffects.Forexample,therealestate
sectorincludescommercialpropertymanaging.
Withadecreaseinspendingatfoodand
beverageplaces,aswellashotels,the
commercialpropertymanagingsectorwillincur
adecreaseinoutputaswell.
Owneroccupieddwellings,dwellingsownedby
thehouseholdsthatliveinthem,experiencethe
highestinducedeffects.Thisisbecauseoflower
householdspendingduetodecreaseinoutput
fromthedirectlyaffectedindustries(e.g.,hotels
andrestaurants).Hospitalsandofficesof
physiciansanddentistsexperiencethesecond
highestinducedimpacts.Thiscouldbebecause
householdshavelessmoneytospendonthings
likeroutinemedicalcheckups.
5.1.3 OhioTourismatRisk
Theapproachforestimatingtouristtripsand
dollarsatriskinOhiobeginswithestimatesofby
countytourismeconomicimpactsin2013.
TheseareavailablefromTourismEconomics
(20014).AccordingtoTourismEconomicsin
2013:
LucasCountyreceived$1.16billionto
$2.08billionintourismrelatedsales
(midpoint$1.62billion).
OttawaCountyreceived$243millionto
$569millionintourismrelatedsales
(midpoint$406million).
SanduskyCountyreceived$5.3millionto
$243millionintourismrelatedsales($124
million).
ErieCountyreceived$1.16billionto$2.08
billionintourismrelatedsales(midpoint
$1.62billion).
ToconsiderthepotentialimplicationsofHABs,it
isusefultorepresenttheseeconomicimpactsas
anumberoftripsbytype(i.e.daytripor
overnight).Todothis,acompositetripis
developed.Thisistheeconomicimpactofan
averagetripthatrepresentsthedirect,
indirect,andinducedeffectsofalltriptypes.
Table55presentsthepercentoftripsbytype
andtheiraverageeconomicimpactperday.

Table55:VisitProportionandEconomicImpacts
VisitorType
DayVisitors
Relatives/Friends
Hotel
BedandBreakfast

Percentof
TotalDays
80%
4%
15%
1%

Economic
Impact
$150.30
$332.60
$476.90
$476.90

Asidentifiedearlier,dayvisitorsaccountfor80
percentoftotalvisits,andovernightvisitors
accountfor20percentoftotalvisits.Ofthe
total,4percentstaywithfriendsandfamily.
Usingthisapproach,theeconomicimpactofan
averagetouristday(whichiscomposedofthe
informationinTable55)isestimatedtobe
$209.90.Thisisconsistentwiththefollowing
tripsbycountyandtypeinTable56.
Table56:VisitProportionandEconomicImpacts
County
Lucas
Ottawa
Sandusky
Erie

Day
6.175M
1.548M
472.7K
6.175M

Friends
308.80K
77.38K
23.63K
308.80K

Hotel
1.158M
290.2K
88.62K
1.158M

B&B
77.19K
19.35K
5,908
77.19K

Thisapproachprovidesestimatesoftouristtrips
fromoutsideOhioswesternbasinshoreline
counties.Thesearefurtherevaluatedtoidentify
tripsthatwouldpotentiallybeaffectedbyHABs,
whichwouldbetripsthatarerelatedtoLake
Erieandoccurringduringthetimeperiodwhen
theycouldbeaffectedbyHABs.Longwoods
International(2014)reportsthat18percentof
Ohiotouristtripsarevisitstolakesidebeaches
andthathotelstaysforbusinessandpleasure
areevenlydistributedthroughouttheyear.In
thiscase,thelatesummerandearlyfallaccount
for12percentofannualdays.Assumingthat
lakesidetripsarerelatedtoLakeErieandthat
tripsrelatedtoLakeErieoccuratthesamerate
ashotelstays,thesecanbeusedasfactorsto
predicttouristdaysthatareatriskfromHABsby
multiplyingtripsby2.16percent(0.18*0.12=
0.0216).However,ofgreaterinterestisthe
percentoftotaltripstoshorelinecountiesthat
occurduringlatesummerandearlyfallandare
insomewayrelatedtoLakeErie.The
appropriatepercentageisnotavailableand10
percentisspecifiedastheupperendinthe
sensitivitybasedapproach.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

38

AscanbeseeninTable57and58,thisprocess
resultsinestimatesofOhiotouristdollarsatrisk
thatrangefrom$66millionto$305million.
Table57:MidValueofDollarsatRisk,TripsTakento
LakeErie
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Other
Commercial
Totals

Lucas Ottawa
2.826M 708.2K

Sandusky
216.3K

Erie
2.826M

5.884M 1.475M

450.4K

5.884M

4.315M 1.082M
3.424M
858K
6.479M 1.624M

330.3K
262.1K
495.9K

4.315M
3.424M
6.479M

5.447M 1.365M

416.9K

5.447M

28.37M 7.111M

2.172M

28.37M

Table58:HighEndValueofDollarsatRisk,Trips
TakentoLakeErie
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
OtherCommercial
Totals

Lucas Ottawa
13.08M 3.279M

Sandusky
Erie
1.001M 13.08M

27.24M 6.827M

2.085M

27.24M

19.98M
15.85M
30M
25.22M
131.4M

1.529M
1.213M
2.296M
1.93M
10.06M

19.98M
15.85M
30M
25.22M
131.4M

5.007M
3.972M
7.517M
6.32M
32.92M

5.1.4 OhioTourismBenefits
Giventhisestimatedamountoftourismatriskit
remainstocharacterizedivertedtourism
trips/dollarsandtoquantifytherelatedlost
profits.Losttourismisquantifiedforthe2011,
2014,andlagged/haloscenarios.Forthewithin
yearscenarios,thereisnoinformationavailable
todeterminetheamountthatwasdiverted(or
wouldbedivertedinsimilaryears).Unlike
impactstopropertyvalueandrecreation,these
arespecifiedtobelessdirectlyaffectedandthe
general,sensitivitybasedapproachisapplied.
Here,itisassumedthatwesternbasintourists
becomeawareofthebloomandareableto
changeplansandreservations.Forthesimplest
calculation,thepercentofdivertedtripsis
specifiedas5percentforthelowendand10
percentforthehighend.Novariationacrosstrip
typeisspecified.Thisprocessresultsinthe
estimatesoflossesspecifiedinTables59and5
10.

Table59:LowendRevenueLost
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Other
Commercial
Totals

Lucas Ottawa Sandusky


141K
35K
10K

Erie
141K

294K

74K

22K

294K

216K
171K
324K

54K
43K
81K

16K
13K
25K

216K
171K
324K

272K

68K

21K

272K

1.419M

356K

109K

1.419M

BasedonthisapproachOhiotouristdollarlosses
onthelowendtotalapproximately$3million.
Ohio tourist dollars at risk range from $66M
million to $305 million. Associated higherend estimate of lost profits are $20.79
million, and lower end of lost profits are
$165,000.

Table510:HighEndRevenueLost
Lodging
Foodand
Beverage
Retail
Recreation
Transportation
Other
Commercial
Totals

Lucas Ottawa
1.308M
328K

Sandusky
100K

Erie
1.308M

2.724M

683K

208K

2.724M

1.98M
1.585M
3.0M

500K
397K
751K

153K
121K
229K

1.98M
1.585M
3.0M

2.522M

631K

193K

2.522M

13.1M 3.292M

1.001M

13.1M

Onthehighend,theyexceed$30million.
Havingtheseestimatesoflostrevenue,it
remainstoconsiderthebenefitsassociatedwith
these.AsdescribedinSection5,changesin
profitarethebestavailablerepresentationof
thebenefit(willingnesstopay)forchangesin
revenue.Profitrepresentsthedifference
betweencostsandrevenues.
TheNationalRestaurantAssociation(2015)
reportedthatin20132014restaurantsearned
from4.1to6.3percentmedianincomeon
revenuebeforetaxes.Thisfigurerepresentsan
averageoverthecourseofayearandincludes
expensesthatcantbeadjusted,suchascertain

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

39

salariesandbuildingcosts.Marginalchanges
withrestaurantoperationsareexpectedtohave
muchhigherimpacts.Forexample,accordingto
the2010OperationsReportpublishedbythe
NationalRestaurantAssociationandDeloitte&
Touche,bothfullserviceandlimitedservice
restaurantsspent32percentofeverydollaron
foodandbeverages.Laborcostsaccountfor29
to33percentofsales,andrestaurantoccupancy
costsaccountedfor8percentduring2010
(Locsin2015).Animplicationisthatthelossofa
marginalcustomer(wherelaborandoperating
costsdontchange)couldhaveaprofitimpactof
only5percent(foodandbeveragecosts)oras
highas68percent.Applying68percentasthe
highendand5percentasthelowendresultsin
highendlostprofitsof$20.79millionandlow
endestimatesof$165,000.Theserough
estimatesapplyforyearswithsignificantblooms
including2011and2014.Consideringlagged
effects,thesewouldoccurastouristsforego
tripsinyearswithlesserbloomsandare
expectedtobelower.

5.2

MICHIGANTOURISM

MichigancountiesthatareadjacenttoLakeErie
includeWayneCountyandMonroeCounty.
ThesecountiesaredepictedinFigure52and
showthatasmallportionofWayneCountyis
exposedtoLakeErieshoreline.
Figure52:MichiganCounties,UnitedStates

Also,theevaluationofimpactsindicatesin
Section3thatWayneCountyhaslittleexposure
totheHABs.Forthisreason,thisassessment
focusesonMonroeCountyanddoesnot

evaluateWayne.TheevaluationforMonroe
Countybeginswiththetotalnumberofvisitors
thatmakeitadestinationannually.Thisnumber
isapproximately14millionpeople(Monroe
CountyPlanningDepartmentandCommission,
2013).SimilartoOhio,wenextdeterminethe
numberandtypesoftripsthatwouldsumto14
millionvisitorstoMonroeCounty,Michigan.To
doso,wecombinethepercentvisitorswhostay
overnightversusdaytrippers,thepercentage
comingfromoutsidetheaffectedarea,the
percentagewhogotoLakeErie,andthe
affectedtimeperiod.Datafortheseinputs
comesfromthe2010SoutheastMichiganvisitor
profiles(D.K.Shifflet&AssociatesLtd.[DKSA],
2011).DKSAconducteditsTravel
Performance/MonitorSMstudy,whichmeasures
thetravelbehaviorofU.S.residents.Since1991,
thestudyhascontacted50,000distinctU.S.
householdsmonthly.Thefollowingdataarefor
southeastMichigan,whichincludesMonroe
County.
Daytripsaccountfor41percentoftotaltourist
daysinsoutheastMichigan,whileovernight
visitorsaccountfortheremaining59percent.
Again,overnightvisitorsarecategorizedas
stayingwithfamilyorfriends,stayingatahotel,
orstayingatabedandbreakfast.
AccordingtoDKSA(2011),51percentofleisure
staysareinaprivatehome.Thisanalysis
specifiesthismeanstheystaywithfriendsand
family.Hotelstaysaccountsfor33percentof
overnighttrips,whiletheremaining16percent
isspecifiedtostayatbedandbreakfast
establishments(otherpaidandallother
accommodationsinDSKA2011).When
combined,daytripsaccountfor41percentof
totalannualvisitordays,overnighttripsspent
withfriendsandfamilyaccountfor30percent
ofannualdays,overnighttripsspentatahotel
are20percentoftotalannualdays,and
overnighttripsspentatabedandbreakfastare
over9percentoftotalannualdaystoMonroe
County.
In Michigan, a total of $24.78 million in
tourism economic impact is at risk. This is
associated with high-end lost profits of $1.685
million and low-end estimates of $124,000.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

40

AswithOhio,onlyacertainpercentageofday
tripsarespecifiedtocomefromoutsidethe
affectedarea.Weexcludetripsoriginatingfrom
Detroit,Michigan(26.0percent),andToledo,
Ohio(2.2percent)toconclude71.8percentof
daytripsoriginatefromoutsidetheaffected
area.Also,notallvisitorstoMonroeCountyvisit
LakeErie.DSKA(2011)statesonly2percentof
southeastMichiganvisitorsgotothebeachor
waterfrontand1percentboatorsail.The
analysiscombinesthesepercentagesand
specifiesthepercentageofvisitorswhotravelto
LakeErie(3percent).Inaddition,thenumberof
visitorswhotakeleisuretripsinthelate
summer/earlyfall(AugustandSeptember)to
Michiganis20percent(DKSA2011).
Multiplyingthe14millionvisitorsbythetypeof
visit(dayandovernight),thepercentagecoming
fromoutsidetheaffectedarea,thepercent
goingtoLakeErie,andthetripsduringthe
affectedtimeperiodresultsinatotalof74,288
tripsthatareatriskfromthepresenceofHABs.

breakfastinnatrisk.These74,288tripsspenda
totalof$18.2million.Tocalculateindirectand
inducedexpendituresatrisk,theratiosfrom
LucasCountyshorelineZIPcodesareapplied.
Withtheseincluded,atotalof$24.78millionin
tourismeconomicimpactisatriskinMonroe
County.Usingtheapproachandrationalefor
disentanglingprofitappliedforOhio,thisresults
inhighendlostprofitsof$1.685millionand
lowendestimatesof$124,000.Theserough
estimatesapplyforyearswithsignificantblooms
including2011and2014.Consideringlagged
effects,thesewouldoccurastouristsforgotrips
inyearswithoutblooms.

5.3

CANADATOURISM

Theprimarygeographicregionatriskfortourist
dollarlossesinCanadaisEssexCounty.As
depictedinFigure53,EssexCountyhasa
significantamountofshorelineonthenorthern
portionofthewesternbasinandPeleeIslandis
partofEssexCounty.
Figure53:EssexCounty,Canada

Tocalculatethetouristdollarsatrisk,we
multiplytripexpendituresbycorrespondingtrip
type(dayornight).Theaveragedaytripcosts
$135,whiletheaveragenumberofpeopleper
trip(party)is1.96.Tocalculatetheaverage
dollarsspentperdayvisitor,wedivide$135by
1.96,toequal$68.88.Thosestayingwithfriends
andfamilyaveragearound$437pertrip,while
theaverageofpartiesstayinginahotelis$827.
Theaverageofthosestayinginotherpaid
accommodationsis$975.Whendividedby1.96
peoplepertravelparty,thefollowingpervisitor
spendingisusedforeachtypeofovernighttrip:
Overnightstayingwithfamilyorfriends:
$222.96
Overnightstayingatahotel:$421.94
Overnightstayingatabedand
breakfast:$497.45.
Thetripsbytypearemultipliedbythe
expendituresbytypetoestimatedirecttourist
dollarsatriskinMonroeCounty.Overthe
affectedtimeperiod,thereare24,728daytrips,
25,276overnighttripsthatstaywithfamily,
16,355overnighttripsstayingatahotel,and
7,930overnighttripsstayingatabedand

Theapproachforestimatingtouristtripsand
dollarsatriskforEssexCounty,Canada,starts
withthetotalnumberofvisitorswhomake
EssexCountyanannualdestination.This
numberisapproximately4.8millionpeople
(OntarioMinistryofTourism,CultureandSport,
2014).Thefirststepistodeterminethenumber
andtypesoftripsthatwouldsumto4.8million
visitorstoEssexCounty,Canada.Todoso,we
combinethepercentofvisitorswhostay
overnightversusdaytrippers,thepercent
travelingfromoutsidetheaffectedarea,the

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

41

percentthatgotoLakeErie,andtheaffected
timeperiod.Datafortheseinputscomesfrom
the2012EssexCountyvisitorprofiles(Ontario
MinistryofTourism,CultureandSport,2014).
ThedataispartoftheOntarioMinistryof
Tourism,CultureandSportsTravelSurveyof
theResidentsofCanada,whichisasupplement
tomonthlyLabourForceSurvey,andthe
InternationalTravelSurvey,whichisdistributed
atlandandairentrypoints.
Daytripsaccountfor69percentoftotaltripsto
EssexCounty,andovernightvisitorsaccountfor
theremaining31percentoftotalvisits.This
analysiscategorizesovernightvisitorsintothree
differentcategories:
1. Overnightstayingwithfamilyorfriends
2. Overnightstayingatahotel
3. Overnightstayingatabedandbreakfast.
AccordingtotheOntarioMinistryofTourism
(2014),61.3percentofovernighttripsarein
unpaidaccommodations,likeaprivatehome.
Thisanalysisconcludesthismeanstheystay
withfriendsandfamily.Commercial(hotel)stays
accountfor26.4percentofovernighttrips.The
remaining12.3percentisspecifiedtostayat
bedandbreakfastestablishments.When
combined,daytripsaccountfor69percentof
totalannualvisitortrips,overnighttripsspent
withfriendsandfamilyaccountfor19percent
ofannualtrips,overnighttripsspentatahotel
are8percentoftotalannualtrips,andovernight
tripsspentatabedandbreakfastareover4
percentoftotalannualtripstoEssexCounty,
Canada.
Onlyacertainpercentageofdaytripsare
specifiedtocomefromoutsidetheaffected
area.Weexcludetripsoriginatingfrom
Amherstburg,Kingsville,Leamington,and
Wheatleybecausethesefourareasareadjacent
toLakeErie.Theyaccountfor17.1percentof
theEssexCountypopulation(StatisticsCanada
2015).Thismeansthat,ofthedaytrips,82.9
percentoriginatefromoutsidetheaffected
area.
Canadian tourism economic impacts total of
$17.3 million with high and low profitability
impacts ranging from $1.6 million to $59,000.

NotallvisitorstoEssexCounty,Canada,visit
LakeErie.OntarioMinistryofTourism,Culture
andSport(2014)statesapproximately13
percentofvisitorsinEssexCountyparticipatein
outdoor/sportsactivitiesandapproximately3
percentgotonationalorprovincialnature
parks.Theanalysiscombinesthesepercentages
andspecifiesthisisthepercentageofvisitors
whogotoLakeErie(16percent).Inaddition,
thenumberofvisitorswhotaketripsinthe
summer(JulythroughendofSeptember)to
EssexCountyis31percent(OntarioMinistryof
Tourism,CultureandSport,2014).Assuming
thesesummertripsareevenlydistributedacross
thethreemonthsmeansthat21percentoftrips
occurinthelatesummerorearlyfall(August
andSeptember).
Multiplyingthe4.8millionvisitorsbythetypeof
visit(dayandovernight),thepercentagecoming
fromoutsidetheaffectedarea,thepercent
goingtoLakeErie,andthetripsduringthe
affectedtimeperiodresultsinatotalof140,553
tripsthatareatriskfromthepresenceofHABs.
Tocalculatethetouristdollarsatrisk,we
multiplythetripsbytriptypeexpenditures(day
ornight).Theaveragespendingpertripforday
visitorsis$72.Theaveragespendingfor
overnightvisitorsis$212(OntarioMinistryof
Tourism,CultureandSport,2014).Overnight
visitorsspendavaryingamountdependingon
accommodations.Weassumeovernightvisitors
whostaywithfamilydonotpayforlodging,and,
therefore,spendlesspertrip.Overnightvisitors
stayinginahotelorbedandbreakfastspend
morethanovernightvisitorsstayingwithfamily
andfriendsbecausetheymustpayforlodging.
Thefollowingpervisitorspendingisusedfor
eachtypeofovernighttripandisbasedonthe
spendingpatterninOntarioMinistryofTourism,
CultureandSport(2014):
Overnightstayingwithfamilyorfriends:
$157.49
Overnightstayingatahotel:$308.47
Overnightstayingatabedandbreakfast:
$308.47
Multiplyingthetripsbytype,bythe
expendituresbytype,calculatesthetourist

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

42

dollarsatriskinEssexCounty,Canada.Overthe
affectedtimeperiod,thereare90,554daytrips,
30,649overnighttripsthatstaywithfamily,
13,200overnighttripsstayingatahotel,and
6,150overnighttripsstayingatabedand
breakfastinnatrisk.These140,553tripsspend
atotalof$17.3million.ApplyingtheLucas
Countymultipliersandprofitabilityapproach
usedpreviously,theareaseesanestimated$1.6
millionto$59,000inbenefits.Theserough
estimatesapplyforyearswithsignificantblooms
including2011and2014Consideringlagged
effects,thesewouldoccurastouristsforgotrips
inyearswithlesssignificantbloomsandare
expectedtobelower.

5.4

SUMMARYANDNEXTSTEPS

HABscanpotentiallyaffectthecloselyrelated
areasoftourism,businessprofitability,and
commercialpropertyvaluesinareascloseto
westernLakeErie,whichcandirectlytranslate
intolostincomeandprofitsandconstitutea
potentiallylargeeconomicdamageassociated
withHABs.Section5showedthatcounties
adjacenttowesternLakeErieexperience
millionsofoutoftowntripsandbillionsof
dollarsintourismexpendituresannually.
AlthoughnotallofthisisdirectlyrelatedtoLake
Erie,andonlyaportionoccursduringHAB
affectedtimeperiods,itisclearthatsignificant
tourismrevenueisatriskduetoHABs.Aportion
ofthisrevenueisprofits.Notlosingtheseprofits
wouldconstituteadirectbenefit,whichwould
alsobereflectedinthevalueofbusinessesand
commercialproperty.Section5reportedon
effortstomakesomeassumptionsanduse
existingreadilyavailabledatatoassessthese
economiclosses.However,itwasnotedthat
verylittlespecificandusefuldataisavailable
andmorethoroughresearchisrecommended.

Therearenumerousparametersrelatingthe
presenceandseverityofHABstochangesin
touristactivitythatarenotwellunderstoodand
thatwerespecifiedasdefinedscenariosforthis
analysis.Akeynextstepwouldbetodevelop
scientificallybasedevaluationsofthefollowing:
Therelationshipbetweenthepercentof
totallatesummerandearlytripsto
countiesthatborderwesternLakeErieand
thosetripsthatarerelatedtoLakeErie.
Developascientificevaluationofthe
relationshipbetweenthepresenceofHABs
anddivertedtouristtrips.
Therelationshipbetweenthetypesoftrips
thataredivertedbecauseoftheseverityof
HABs,wherethosetripsaredivertedto,
andtheamountofspendingonthose
divertedtrips.
Despitetheselimitations,Section5illustrated
thattouristdollarsinOhioatriskfromHABs
rangefrom$66millionto$305million.
Associatedhighendlostprofitsare$21million,
butcouldbeunder$1million.InMichigan,
about$25millionintourismeconomicimpact
wasjudgedtobeatrisk,whichwasassociated
withlostprofitsof$1.7milliononthehighend.
ForCanada,impactsatriskwereabout$17
millionwithhighandlowprofitabilityimpacts
rangingfrom$1.6millionto$59,000.Again,
derivingthesenumbersfromreadilyavailable
datarequiresnumerousassumptions,and,given
thelargerangesofuncertainty,warrantfurther
refinement.Moreover,theseroughestimates
applyonlyforyearswithsignificantbloomssuch
as2011and2014.Asforlaggedeffects,they
wouldoccurastouristsforegotripsinyearswith
lesserbloomsandareexpectedtobelower,but
thereiscurrentlynoavailabledatatoquantify
them.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

43

6.0 IMPACTS OF HABS ON FISHING, BEACHGOING, AND BOATING


6.1

HABEFFECTSONRECREATION

PeopleuseLakeEriewatersforavarietyof
recreationalactivities,includingfishing,beach
going,andboating.WeickselandLupi(2013)
studiedeffectstobeachrecreationandfishing,
butdidnotstudyboatingeffects.
Forbeachgoing,WeickselandLupi(2013)noted
thatin2011,theOhioDepartmentofHealth
issuedadvisoriesatfourbeachesinLakeEries
westernbasin:BatteryPark,LionPark,Kelleys
IslandStateParkandMaumeeBayStatePark.
Basedoncoefficientsfromabeachsiteclosure
modelandavailableinformationonaffected
trips,atotalof$1.3millioninlosseswas
estimatedforMaumeeBayStateParkin2011.
PhaseIstudyfurthernotedanestimateof1.8
milliondaytripsto15Ohiobeachesin1997
(fromMurrayetal.2001),butdidnotestimate
thevalueoftripslosttoothersitesbecauseofa
lackofspecificinformationaboutthenumberof
tripstothesesites.WeickselandLupi(2013)
alsonotedthatevenwithoutclosures,HABscan
resultinalgaeinthewaterandontheshore.
Empiricalevidence(Weicksel2012)wascited
indicatingrecreationistsarewillingtoincurcosts
toavoidexcessalgae.Althoughthiseffectwas
notquantified,itwascitedasevidencefor
valuesarisingfromlowerqualitytrips.

boatingtrips.WeickselandLupinotedthatThe
qualityofnonfishingboattripsonLakeErie
couldbeaffectedbyHABseitherbyspoiled
aestheticsortheriskofcontactwithalgaltoxins
fromwaveaction,windblownorsplashing
water.

6.2
METHODSFORIDENTIFYING
RECREATIONALBENEFITSOVERVIEW
ThePhaseIeffortidentifiedanumberof
recreationrelatedbenefitsofHABreductions
andalsonoteddatalimitationsprecluded
identifyingcertainotherbenefits.Forexample,
theeffectsofbeachclosureswherelosttrips
estimateswerenotavailableandtheeffectsof
reductionsintripqualitywerenotevaluated.
Thisstudysuffersfromthesameinformation
limitations.Topartiallycircumventthisissue,
thisstudyusessitechoicesimulationsforbeach
goingandfishing.Thesesimulationsuserelevant
availableinformation,includingdemand
functions,tripsinformation,knownclosures,
andthequalityreductionsidentifiedinSection
3.2.
Thisframeworkisanoperationalized
populationlevelversionofthedemand
conceptsdescribedinSection3.2.Thebaseline
demandisdepictedinFigure61.
Figure61:BaselineSiteDemand
250

Baseline

225
200
175
150
125
100
1K

75

10K
5K
8K

50
25
0

Population

Travel Cost ($)

Forfishing,WeickselandLupi(2103)notedthat
HABscouldleadtoreducedcatchratesandless
desirableeating.Thestudyfoundlossesto
recreationalfishingcausedbyincreasesinHAB
severityinwesternLakeEriewere$2.4millionin
Ohio.Thereseemstobeanegativerelationship
betweenmicrocystisbiovolumeinLakeErieand
recreationalfishingtripstakento[OhioFishing]
Districts1and2.

10

Trips per Person

WeickselandLupi(2013)wereunableto
quantifyHABrelatedimpactstononfishing

IJC-0003

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

44

Inthispopulationdepiction,thenumberof
peopleexperiencingeachtravelcostis
introducedontherightaxisandusedto
characterizeaggregatebehaviors.Specifically,
underbaselineconditions,1,000peopleaverage
onetriptothesite,10,000peopleaveragetwo
trips,5,000peopleaveragethreetrips,and
8,000peopleaveragefourtripsforatotalof
68,000tripstothissiteoverthistimeperiod.
Underthecounterfactualcondition(i.e.,the
2011and2014HABsdonotoccur),thepositive
changeinqualityresultsinoutwardmovement
ofthedemandcurve,asdepictedinFigure62.
Figure62:SiteDemandwithReducedHABs
250

Baseline

225

175
150
125
100
1K

75

10K
5K
8K

50
25
0

Population

Travel Cost ($)

200

10

Trips per Person


IJC-0004

Thisoutwardmovementonthedemandcurve
resultsinmoretripsfromeachoriginandmore
tripstothesite.AsseeninFigure62,the
populationcenterwith8,000recreationistswas
previouslyaveragingfourtripspervisitor,and
wasresponsiblefor32,000tripstothesite.This
groupisnowaveragingfivetripstothissiteper
visitorandisresponsiblefor40,000tripstothe
site.Thisoutwardshiftindemandisalso
associatedwithhigherwelfare(willingnessto
pay)foralltrips.Attheindividuallevel,
willingnesstopayiscalculatedasdescribedin
Section3.2.1(areabetweencurvesandabove
expenditures).Toidentifysocietalbenefits,itis
calculatedforallindividuals(andsites),then
summedtogetsocietalwillingnesstopay.In
additiontoidentifyingtheimpactsofmarginal
qualitychanges,thisapproachcanbeusedto
identifytheeffectsofsiteclosures.
Thisapproachalsocapturesimportanteffects
thatarechallengingtocharacterizewithaless
comprehensiveframework.Forexample,

apportioninganestimateofalltripsoversites
allowsassessingtripquantityeffectsateach
site.Specifyingthebyweekandcountyquality
reductionsallowscapturingmarginalquality
effects.Moreover,thisapproachisextendable;
forexample,differentialchangesinsitequality
(e.g.,supposefutureeffectswerehalfasbadas
2011and2014,ratherthanbeingeliminated).
Althoughthisisarelativelysophisticatedformof
transferthatemploysafunctionratherthana
pointestimate,itisstillatransferofresultsfrom
studiesofdifferentphenomena.Onlyprimary
recreationaldemandstudiescancharacterize
implicationsofanimportantanddynamic
impactlikeLakeErieHABs.Theselectionof
transferstudies,integrationofbaselinetripsand
behavior,aswellasthemodeledresponseto
theHABs,allrequireagooddealofexpert
judgment.Theapproachtotriptakingand
welfaresimulationissimilar.However,the
functionalresultsfrommethodologiesofthis
sortdonothavethescientificfoundationsofthe
impactspecificsurveyresearchand
econometricmodelbasedstudiesthattheyuse
forinputs.
To circumvent lack of data, this study uses
site-choice simulations for beach-going and
fishing. These simulations use relevant
available information, including demand
functions, trips information, known
closures, and quality reductions.

6.3
METHODSFORIDENTIFYING
RECREATIONALBENEFITS
SpecifyingthebaselinemodeldepictedinFigure
61requiresrepresentingdemandforaffected
sitesandtheirsubstitutesforeachrecreational
activity.Thefollowingninestepprocesswas
appliedforeach.
1. Characterizedemandcurveforeach
activity.
2. Identifysitesandorigins.
3. Collectsitedata.
4. Calculatetravelcostsfromalloriginsto
modeledsites.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

45

5. Identifytotaltripsfromoriginstomodeled
sites.
6. Identifytripsinmodeledtimeperiods.
7. Calibratesitedemandcurvestoallocate
tripsoversites.
8. SimulatewithoutHABconditions.
9. Scaleresultstoreflectvisitorsfrom
outsideshorelinecounties.
Thisprocesswasappliedforbeachgoingand
fishingandthefollowingtextprovidesan
overviewoftheprocess.Sections6.4and6.5
providespecificdetailsandinclude,insome
cases,detailsfrombeachgoingandfishingfor
explanatorypurposes.Theyareincludedin
Sections6.4and6.5byreferenceonly.
ConsideringStep(1),demandcurveequations
weretransferredfromthebestavailablemulti
siterecreationstudy.Informationtransferredis
thetravelcostparameterthatisresponsiblefor
thedownwardslopeofthedemandcurvein
Figures61and62,andsitedatathatare
responsibleforitslocation(Figure62).ForStep
(2),affectedsiteswereidentifiedasthosethat
areinthewesternbasinofLakeErie;substitute
sitesarehighpressuresitesthatrecreatorsfrom
originsareexpectedtouseassubstitutesites.
OriginsarethecenterofZIPcodes;theseare
limitedtocountiesaroundwesternLakeErie.As
describedinthetourismsection,anumberof
tripscomefromoutsidetheseshoreline
countiesandmanyofthesetripsarerelatedto
fishingandbeachgoing.However,itis
impracticaltoconsiderallpotentialorigins.
Effectstothesetripsareidentifiedbyscalingthe
shorelinecountyresults.
SitedatawerecollectedorspecifiedunderStep
(3).Thisisrelatedtothemodelidentifiedinthe
firststep.IdentifyingHABrelatedvariablesisthe
mostchallengingpartoftheexercise.Ideally,
thesevariableswouldmapintotherating
systempresentedinSection3andtherewould
berelatedparametersthatareeconometrically
estimated.Primaryresearchofthisnaturewas
notanobjectiveofthisstudy.Compensatingfor
thismissinginformationrequiresspecifying
coefficientsthatreflecttheimportanceofeach
HABratingforeachactivity.

Thetravelcosts(4)betweenoriginsandsites
werebasedondistancesderivedfromthe
routingsoftwarePCMiler.Tocalculatedistances,
originationpointsweredefinedasthecenterof
theoriginZIPcodesandendingpointsasthe
latitudeandlongitudecoordinatesofmodeled
sites.Thesewereconvertedtotraveltimesby
dividingbyanaveragespeedof45mph.Travel
costsarethesumofvehicleoperationcostsand
timecosts.Vehicleoperationcostsaredistances
times$0.52(permileestimatefromAAA
[2013]).Timecostswerecalculatedbasedon
averageincomefromeachoriginZIPcode(taken
fromthecensus).Thisnumberisdividedby
2000tocalculatethehourlywage.Theresultis
thenmultipliedby1/3.Thisisacommon
opportunitycostoftimeadjustmentthat
reflectsdifferencesbetweenworkandleisure
time(Parsons,2003).
InaddressingStep(5),tripsfromoriginsto
specifiedsitesarebasedonestimatesoftotal
trips,tripspersite,andtripsbyrecreatortype.
Thisisbasedonacombinationofexternal
informationandexpertjudgment.Forexample,
theU.S.FishandWildlifeServiceestimatesthat
18.8percentofMichiganresidents(16and
older)fishedanaverageof17daysintheGreat
Lakesand15.9percentofOhioresidentsfished
6daysintheGreatLakesin2011(USFWS
2013b,2013c).Applyingthesetotherelevant
populationsfromcensusdataallowscalculating
totaltripsfromeachoriginZIPcode.
Specificationofthenumberoftripsoveralland
toeachsiteisalsobasedonexternal
information.Duetodifficultiesofincludingvery
largegeographiesandnumbersofsites,notall
oftripsfromoriginsgotositesthatareincluded
inthemodelsandnotalltripstositesarefrom
includedorigins.Professionaljudgmentisused
tomakeappropriateadjustments.
OhioDepartmentofNaturalResources,Ohio
DivisionofWildlife(2013),OntarioMinistryof
Tourism,CultureandSport(2014),andThomas
andWills(2013)providedestimatesoffishing
tripstothewesternbasinofLakeErie.About
565,000tripsweretakenfromOhio,163,000

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

46

fromOntario,and842,000tripsfromMichigan.
Theseestimatessumto1.57milliontrips.

thedemandcurvetomoreaccuratelymatch
pressureinparticularareas.

Theanglersandtripsperanglerprocessabove
indicatesthatthereareabout470,000tripsto
theGreatLakesbyOhioresidentsfromwestern
basinshorelinecounties.ForMichigan,this
processproduces338,200tripsfromMonroe
Countyandabout4milliontripsfromWayne
Countyalone.ExcludingtheWayneCounty
estimates,thistotals971,200trips.Someofthe
MichiganandOhiotripswouldbetoGreatLakes
sitesotherthanthewesternbasin,whichmeans
thattripestimatesshouldbeadjusted
somewhatdownward.Also,Detroit(inWayne
County)isquitedifferentdemographicallyfrom
therestofMichigan.Wejudgethataverage
MichigananglingratesdonotapplytoWayne
Countyandtheseareadjustedsignificantly
downwarduntilapproximately800,000ofthe
1.57millionwesternbasintripsarefrom
shorelinecountiesandareincludedinthe
fishingmodel.Theremainingtripsfromoutside
thesecountiesareaccountedforviascalingof
effectsfrommodeledtrips.

InStep(8),outcomesfor2011and2014are
evaluatedbydevelopinganidenticalmodelin
whichHABeffectsaresetto0.Thebyweekand
county/islandHABseveritymetricsrangefrom0
to1for2011and2014.Changingtheseto0
resultsinanew(shifted)demandcurveandre
distributionoftrips.ThebenefitsofHAB
reductionsfor2011and2014arecalculatedas
thedifferenceinwelfareacrossthetwo
scenariosasdescribedinthetextthat
accompaniesFigure62.

Step(6):BecausetheeffectsfromHABshappen
onlyduringcertaintimesoftheyear,the
recreationsitechoicemodels(whichare
developedonanannualbasis)mustbe
convertedintotheweeklytimescalesover
whichtheHABseverityvaluesoccur(seeSection
3.3.1).Externalinformationandprofessional
judgmentisusedtodothis.Consideringfishing,
theOhioDepartmentofNaturalResources
conductsannualcreelsurveysthatestimate
boatanglereffortonLakeErie.Thesesurveys
indicatethat27percentofboatbasedfishing
tripsareinJuly,15percentinAugust,10
percentinSeptember,and5percentinOctober.
Afterdividingbyfourtocalculateweekly
percentages,theseareappliedtoannualtripsto
identifytripsduringHABaffectedweeks.
ForthelastbaselineStep(7),tripsare
distributedtositesonthebasisoftravelcost
andtheotheridentifiedsitecharacteristicsand
coefficients.Wheninformationisavailablethat
indicatessitepressure,ademandshifteris
introducedtotheequations.Thisallowsmoving

AfterStep(8)iscomplete,economicbenefitsfor
recreatorsfromoutsidetheshorelinecounties
arecalculated.ThisoccursinStep(9)byscaling
resultsforrecreatorsfromoutsideshoreline
countiestothosefrominsideshorelinecounties.
Forexample,Step(5)identified1.57million
westernbasinfishingtripsfromexternal
informationandspecifiedthat800,000ofthese
werefromshorelinecountyresidents.Under
thisspecification,totalbenefitsequal1.57/0.8
timesthebenefitsfromshorelinecounty
residents.Theuncertaintyassociatedwiththis
extrapolationwasnotevaluated.
Additionaldetailsontheapplicationofthis
approachforbeachrecreationandfishingare
presentedinthefollowingtwosections.To
avoidrepetition,examplesfromthistextare
referenced.

6.4

BEACHRECREATIONBENEFITS

EconomicbenefitsfromreducingHABsat
westernbasinLakeEriebeachesareidentified
usingtheprocessindescribedinSection6.3.
Thefirststep(1)involvesidentifyingasuitable
beachrecreationsitechoicestudyfromwhichto
transferdemandparameters.Thestudyselected
isMurrayetal.(2001).Thisstudyisspecificto
LakeEriebeachgoing;inadditiontothetravel
costvariable,therearevariablesthatrelatetrip
takingbehavior(andwelfare)totheaverage
numberofadvisoriesasitehasperseasonand
averageE.colimeasurements.Noneofthese
describeHABs,however,theycanbe
informative.Forexample,asitewithhighE.coli

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

47

countsandmanyclosurescouldbeconsistent
withamoderateHABeffect.
ForStep(2)thestudyareaincludesbeaches
alongLakeErie.Table61liststhebeachesin
theU.S.countiesofthestudyarea.Thislist
includesbeachesstudiedbyWeickselandLupi
(2013).TheMichiganandOhiobeachesare
listedascompiledbytheMichiganDepartment
ofEnvironmentalQuality(MDEQ)(2015a,
2015b,2015c)andtheOhioDepartmentof
Health(ODH)(2015).
Table61:LakeErieBeachesLocatedintheStudyArea
Location
WayneCounty,MI
MonroeCounty,MI

LucasCounty,OH

OttawaCounty,OH

SanduskyCounty,OH
ErieCounty,OH

BeachonLakeErie
SouthernWayneCountyBorder
beach
EvansPierandPublicBeach(Luna
Pier)
SterlingStateParkbeach
AshcroftDriveBasinAccess
CullenPark
LakeErieCenterBasinAccess
MaumeeBayStatePark
MetzgerMarshStateWildlifeArea
CampPerryBeachPark
EastHarborStatePark
PortClintonCityBeach
PortClintonLakefrontPreserve
Noswimming/bathingbeach
CedarPointChaussee
NickelPlateBeach
SherodPark

ForStep(3),thereareanumberofothersite
variables;however,thesewerecollectedaspart
ofthestudy.Becausethisinformationisnot
available/difficulttocollect(e.g.slope,number
ofzebramussels).InformationthatrelatesHAB
severitytobehaviorisnotavailable.Here,a
moderate(i.e.0.5)HABeffectinaweekis
definedasbeingconsistentwithhistoricalE.coli
countsthatareassociatedwithahighnumber
ofclosures.
Step(4)consistsofcalculatingtravelcosts,and
wasconductedasdescribedin6.2.Step(5)
relatestotheidentificationoftripsfrom
shorelinecountiestoaffected(andsubstitute)
sites.Asdescribedin6.2,thisprocessisbased
ontheintegrationofavailablepressuredataand
triptakinginformation.Ourinvestigationfound
littleinthewayofpressureinformationfor

westernbasinLakeEriebeaches.Whatwedid
findwashighlyvariable.Forexample,theOhio
DepartmentofTransportation(ODT)statesthat
144,000Ohioansgotothebeachannually(ODT
2014).Thisnumberiscitedwithsomefrequency
(ODT2014);however,evenwithalargenumber
oftripsperperson,thisappearstobeonthelow
side.Somewebsiteshaveinformationabout
visitstospecificsites,butnotallarebeach
visitors.Thestudyusedfortransferpurposes
identifies1.8millionvisitsto15Ohiobeaches;
though,notallofthesebeachesareinthe
westernbasin,andnotallwesternbasin
beachesareinthe15.
Beginningfromtriptakingbehaviors,shoreline
countypopulationinformationisreadilyand
reliablyavailablefromthecensus.This
informationindicatesthereare2.61million
adultsinthestudyarea.ALongwoodsstudy
says43percentofOhioansgotothebeacheach
yearwith72percentofthemvisitingaLakeErie
beach.Asdescribedinthefishingsection,
Detroit(inWayneCounty)isquitedifferent
demographicallyfromtherestofMichigan.We
judgethatthepercentageoftheseresidents
whogotothebeacheachyearishalfofthe43
percentofOhioanswhogotothebeach.
ApplyingtheseresultstoOhioandMichigan
shorelinecountiesimplies702,800residentsof
thesecountiesvisitLakeEriebeacheseachyear.
Iftheseresidentstookthreetripstothesiteson
thewesternbasinofLakeErieincludedinthe
analysis,the702,800beachgoerswouldtake
approximately2.1milliontrips;triptakingrates
arespecifiedsoastoproducethisnumberof
totaltrips.
AsisthecaseforLakeEriebeachgoing
generally,littleinformationisavailabletoassist
inunderstandinghowthesetripsaredistributed
overtheyear.However,thefactorsthattendto
underliebeachgoing(sunlight,warmwater,
vacationavailability)arewellknown.Basedon
this,step(6)specifiesthat28percentofalltrips
occurinJuly(7percent/week),20percenttake
placeinAugust(5percent/week),10percent
areinSeptember(2.5percent/week)and4.5
percentinOctober(1.25percent/week).This

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

48

approachresultsin1.3milliontripsmodeledas
beingtakenbyshorelinecountybeachgoers
duringtheHABaffectedmonths.
UnderStep(7),thecoefficientsfromStep(1),
thetravelcostsfromStep(4),andthesite
characteristicsfromStep(3)wereputinamulti
sitechoiceequationswherepeoplefromorigins
ofStep(2)probabilisticallychoosesitesfrom
Step(2).Then,tripsbyZIPCodefromStep(6)
aremultipliedthroughtoproducetripstoeach
site.
Closureswereaccountedforbyintroducing
demandshifterstosettrips.TheOhioEPA
(2015)compilesAlgalToxinResultsfromLake
Erie,OhioStateParkBeaches,andPublicWater
Supplies(2011Present),whichliststhe
microcystinlevelsattestingsitesthroughout
Ohio.ARecreationalPublicHealthAdvisoryis
issuedwhenthemicrocystinlevelreaches6
partsperbillion(ppb),andaRecreationalNo
ContactAdvisoryisissuedwhentoxinlevels
exceedtherecommendedthreshold(20ppb)
andthereareoneormoreprobablecasesof
humanillnessorpetdeathsattributableto
HABs.Basedonthemicrocystinlevelsreported
intheAlgalToxinResultsfromLakeErie,Ohio
StateParkBeaches,andPublicWaterSupplies,
anadvisoryattributabletoHABswasissuedfor
thesesitesduring2014:
SouthBassIslandStateParkbeach,two
weeksfromlateAugustthroughmid
September
VillageofPutinBaybeach,twoweeks
fromlateAugustthroughmidSeptember
MaumeeBayStateParkbeach,atleastsix
weeksfromJuly23throughLaborDay.
MaumeeBayStateParkbeachistheonlyoneof
thethreesitesabovethatisincludedinthe
model.UsingtheclosureslistedforMaumee
StateParkbeach,WeickselandLupi(2013)
estimatedthat178,500tripsweretothissitein
2011.Usinganalternativebenefitfunction
transfer,PalmForster(2015)estimatesthere
are293,000tripstothisbeach,butbecausethis
tooisbasedonatransfer,theactualnumberis
unknown.Therefore,ademandshifteris

introducedinordertoestimate178,500tripsto
MaumeeBayStateParkin2011.
InStep(8),amodelisdevelopedwherethesite
characteristicsfromStep(3)areidenticalexcept
fortheHABeffects.Thesearesetto0.This
allowsidentifyinganewdistributionoftrips.The
benefitsofHABreductionsfor2011and2014
arecalculatedasthedifferenceinwelfareacross
thetwoscenariosasdescribedinthetextthat
accompaniesFigure62.
WeickselandLupi(2013)usedMurrayetal.s
resultstoestimatedamagesin2011for
MaumeeBayStateParkbeach($1.3million).
TheHABratingcoefficientiscalibratedsothat
themodelestimates$1.3millioninbenefitsfor
MaumeeBayStateParkunderthe2011HAB
reductionscenario.TheeffectofthisHABrating
calibratorisappliedtotheremainingsitesto
estimatetherecreationalbeachbenefits.
ReductionofHABsforthe1.3milliontripstaken
by702,800beachgoersduringtheaffected
monthsresultsin$7.19millioninbenefitsinthe
2011scenarioand$5.61millioninbenefitsin
the2014scenario.Scalingtoreflectlossesby
visitorsfromoutsidethecountyisbasedonthe
specificationthat50percentoftripsarefrom
outsidethecounty.ThisissupportedbyMurray
etal.andLongwoods,whichindicate20percent
oftripsareovernightandreasonablyspecified
ascomingfromoutsidethecounty.Another30
percentofdaytripscouldcomefromoutside
shorelinecounties.Thishasnotbeenvalidated
andbeachpressureoverall,bytype,andbysite
isnotedasasubstantialuncertaintyworthyof
deeperstudy.Specifyingthathalfoftripsarenot
coveredinthemodelingleadstototalbeach
impactsforthe2011scenarioof$14.38million
andfor2014of$11.22million.

Reduction of HABs for the 1.3 million trips


taken by 702,800 beach-goers during the
affected months, and noting that half of the
trips are not covered in our modeling,
results in $14.38 million in benefits in the
2011 scenario and $11.22 million in benefits
in the 2014 scenario.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

49

6.5

FISHINGBENEFITS

EconomicbenefitsfromreducingHABsat
westernbasinLakeEriefishingsitesare
identifiedusingtheprocessdescribedinSection
6.3.Thefirststep(1)involvesidentifyinga
suitablefishingsitechoicestudyfromwhichto
transferdemandparameters.Thestudyselected
isMelstromandLupi(2013).Thisstudyis
specifictoMichiganangling,butisahighquality
studysuitablefortransfertoOhio;inadditionto
thetravelcostvariable,thereareother
variablesthatrelatetriptakingbehavior(and
welfare)tocatchrate.Unfortunately,thereare
novariablestorelatefishingbehaviorstosite
waterquality;norwastheteamableto
characterizelinksbetweenHABsandcatch
rates.
Step(2)consistsofidentifyingsitesandorigins.
OriginsareagainidentifiedasZIPcodeswithin
theshorelinecounties.Consideringsites,anglers
canchooseamongmany,qualityfishingsites
nearthewesternbasin,asshowninTable62.
BesidestheRiverRaisinandLakeErie,themost
attractivefishingsitesincludeLakeSt.Clairand
theDetroit,St.Clair,andMaumeerivers.Along
withLakeErie,LakeSt.ClairandtheDetroitand
St.Clairriversarenationallyknownforthesize
andnumberofsmallmouthbassthatanglers
catch(MDNR2013a).
Table62:FishingSitesLocatedintheStudyArea
Location
WayneCounty,MI

FishingSite
LakeErie
BellevilleLake
DetroitRiver
MonroeCounty,MI LakeErie(LunaPier)
HuronRiver
RiverRaisin
LucasCounty,OH
AshcroftDriveBasinAccess
CullenPark
LakeErieCenterBasinAccess
MaumeeBayStatePark
MetzgerMarshStateWildlifeArea
OttawaCounty,OH CampPerryBeachPark
EastHarborStatePark
PortClintonCityBeach
PortClintonLakefrontPreserve
SanduskyCounty,OH Noswimming/bathingbeach
ErieCounty,OH
CedarPointChaussee
NickelPlateBeach
SherodPark

ForStep3,relevantsitedataiscatchrates.For
Steps4,5,and6travelcosts,totaltrips,and
tripsinmodeledtimeperiodswereconducted
asdescribedinSection6.3.
ForStep7,totalsforLakeEriewereidentifiedas
790,925forDistrict1,490,829forDistrict2,and
73,914forDistrict3.
Step(8)involvesthesimulationofwithout
HABconditions.Anglerscouldavoidsitesboth
becauseHABsareunpleasanttofishin,and
becauseHABscanhavedetrimentaleffectson
catchrates.ArecentsurveyofOhioanglers
suggeststheyarewillingtotraveltoavoidsites
affectedbyHABs(ZhangandSohngen,2015).
However,becausenopublishedstudiesexist
thathaveevaluatedthesespecificeffects,
considerableprofessionaljudgmentisrelied
upon.
So far as fishing benefits, reduction of
HABs are expected to lead to a $10 million
benefit for the 2011 event, and $7 million
benefit for the 2014 event.

Relevantfishingmodelstendtofocusoncatch.
Thus,HABeffectsareaddedbyexpertjudgment
andalsoviatheireffectoncatchrates.This
lattereffectalsohasscarceinformation,which
underscorestheneedforbiologicaldatathat
relatesHABstocatchratesatthelocallevel.
HABeffectsaresetintotalequaltocatcheffects
andthenscaledoverthe0to1HABseverity
ratings,whichresultsin$10millioninestimated
benefitsfor2011and$7millionfor2014.

6.6

BOATINGBENEFITS

Benefitestimatesforrecreationalboatingwere
notedasbeingareasforfurtherinvestigationin
WeickselandLupis(2013)report.Direct
estimatesofboatingpressurewerenotreadily
available.However,populationlevel
informationis.A2013surveyfoundthat30
percentofOhiovisitorsplanningatriptoLake
Erieintendedtogoboating(OhioDOT2014).
AccordingtotheOhioDOT,anestimatedthree
millionOhioansgoboatingeachyear(23.4
percentofthepopulation).TheMichigan

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

50

StatewideComprehensiveOutdoorRecreation
Plan20132017estimatesthat11percentof
Michiganresidentsparticipateinboating
(PublicSectorConsultantsInc.2012).Certain
informationisspecificbylocality.Forexample,
anestimated16,722ofMonroeCounty
residentsgoboatingeachyear,alongwithan
estimated49,826visitors(PublicSector
ConsultantsInc.2012;D.K.Shifflet&
Associates,Ltd.2011).Anestimated200,264of
WayneCountyresidentsgoboatingeachyear,
alongwithanestimated14,080visitorstothe
studyarea(PublicSectorConsultantsInc.2012;
D.K.Shifflet&Associates,Ltd.2011).
For boating, reduction of HABs is expected
to result in $10 million in benefits in the
2011 scenario, and $5 million in benefits in
the 2014 scenario.

Wefoundnodirectboatingpressureeffort
dataisavailableforboatingpressuresoan
estimatewasdevelopedbasedonrelationship
tofishingtrips.Ohioboaterscollectivelyspend
halftheirtimeonthewaterfishing.This
impliesanequalnumberofboatanglingtrips
andboattrips.Boatingpressureisspecified

consistentwiththewesternbasinpressure
describedinSection6.3as500,000tripsper
yearwiththisbeingasubstantialuncertainty.
Followingtheprocedureforbeachgoing,
approximately300,000ofthesearemodeled
asbeingoverthepotentiallyaffectedtime
period.Basedonthesetripsandontransferred
resultsfrombeachgoing,withpertripvalues
beingsetattwicethevalueofbeachtrips
theselossesareestimatedat$7millionfor
2011and$5millionfor2014.

6.7

NEXTSTEPS

RecreationisfundamentallyimportantonLake
Erie.ThepresenceofHABsdisruptsthisactivity.
Thereiscurrentlynostudyintheliteraturethat
quantitativelylinksthepresenceandseverityof
HABswithchangesinrecreationdemand.The
analysisconductedforthisreporttransfers
resultsfromotherrelationshipstoparameterize
theeffectHABshaveonbeachuse,fishing,and
boating.Akeynextstepwouldbetoundertake
arecreationdemandstudytoquantifytheeffect
thatchangesinthepresenceandseverityof
HABshasonrecreationalbeachuse,fishing,and
boatingdemand.Thestudywouldalsobetter
quantifythebaselinelevelofbeachuse,fishing,
andboatingtripstowesternLakeErie.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

51

7.0 POTENTIAL IMPLICATIONS OF HABS FOR


FARMING, INDUSTRIAL, MUNICIPAL AND
PRIVATE WATER WITHDRAWERS
7.1
IMPORTANTDRINKINGWATER
SERVICESANDTHEIRRELATIONSHIPTOHABS
Organizationsandindividualswithdrawwater
fromLakeErieforavarietyofpurposes.These
includefarming,industrialprocesses,private
householdsupply,andpublicwatersupply.
HABscaninterrupttheseimportantservices,
causingwelfarelosses.
WeickselandLupi(2013)didnotidentify
impactstofarmingandindustrialprocessesor
privatewells,butdididentifyrelatedpublic
watersystems(PWS)treatmentcostsbasedon
resultsfromtheOhioEPAsurveyofPWS.The
2009survey,thenthemostrecentdata,
includedresponsesfrom15PWSdrawingwater
fromallbasinsofLakeErie.Tenofthose
reportedusingadditionaltreatmentsin
responsetoHABeventsin2009.Respondents
reported$417,200inHABrelatedcontrolcosts,
witharangeof$400to$240,000per
respondent.Treatmentsincludedthe
applicationofpowderedactivatedcarbon,
chlorinedioxide,andpotassiumpermanganate.

7.2

FARMINGANDINDUSTRIALUSES

HABscouldpotentiallyreducewateravailability
forfarmingandindustrialpurposes.Farming
includeswateringlivestockandirrigation.Both
ofthesesectorspotentiallydrawdirectlyfrom
LakeErie.Consideringlivestockwatering,this
investigationfoundnoevidenceofsignificant
livestockwateringdirectlyfromLakeErie.This
effectisnotconsideredfurtherhere.
In1993,theInternationalJointCommission
WorkingCommittee2,LandUseand
Managementnotedthatonlyafewfarmers
usedLakeEriewaterforirrigationpurposes.
However,duringrecentyearsthishaschanged
somewhatasfarmersinsouthwesternOntario

haveadopteddripirrigationtechnologiesfor
severalcrops(TanandReynolds2003).
LeamingtonAreaDripIrrigationInc.,spentseven
yearsandmillionsofdollarstoconstructa36
kilometerpipeline(about22miles)fordrip
irrigationintheirfields.Thispipelinehas
supportedirrigationfor2,500acresoflandsince
2009.ThewaterfromLakeEriereplacestreated
drinkingwaterthatthefarmerspreviouslyused.
Ontariohasthehighestconcentrationof
vegetablegreenhousesinCanada,and78
percentofthatgreenhouseacreageisinEssex
County(IFAJ2011;TownofKingsville2015).
SomeoftheEssexCountygreenhousesalso
growfruitorflowers.Beaulieu(2007)estimated
greenhousewateruseinOntarioexceeds
22,000cubicmetersannually.Exceptforthefew
connectedtotheLeamingtonAreaDrip
Irrigationpipeline,itisunlikelythatwaterused
inEssexCountygreenhousesisdrawndirectly
fromLakeErie.RegardingbenefitsfromHAB
reductions,potentialscenariosincludereturning
totheuseofmunicipalwater,switchingtoless
waterintensivecrops,orconductingadditional
waterfiltering.
ThefirstoutcomewouldimplyLeamingtonArea
DripIrrigationmembersatleasttemporarily
returntomunicipalwaterforirrigatingcrops.
Thesystemsupportsupto7,000gallons(26,498
liters)perminute,butapermitlimitsthetotal
volumeofwaterthatcanbewithdrawnfrom
LakeErie(Hill2011;AgMedia,Inc.2010).
Coolong(undated)estimatespeakwaterusefor
tomatoes(themostvaluablecrop)would
requireusing20,555to30,836liters(5,430to
8,146gallons)peracreperday.
Farmerscoulduselesswatertogrowlower
valuedwheat,soybeans,orcorn(Wells2014;

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

52

Davidson2013).Thismayalreadybeoccurring;
however,itisnotaresultofHABs.TheH.J.
HeinzCompanyrecentlysolditsLeamington
catsupfactorytoHighburyCancoCorporation.
TheHighburyoperationwillemployfewer
peopleandwillprocesstomatojuiceandother
foods,butnotcatsup.AsofJune27,2014,only
tenof46farmersinEssexandKentCounties
havetomatocontractswithHighburyCanco
(Wells2014;Davidson2013).
Thereisnoavailableevidenceindicatingthat
reducingLakeErieirrigationusageeitherby
switchingtomunicipalwaterorbygrowingless
ordifferentcropshasoccurredasaresultof
LakeErieHABs.Thereisanecdotalevidence(IJC
meeting)thatalgaehascloggedtheLeamington
AreaDripIrrigationsystemandledtoincreased
filteringandcleaningcosts.However,this
organizationdoesnothavepubliccontact
information,themagnitudeofthesecostsis
unknown,anditisnotcertaintheseissueswere
causedbyHABs.
Industrialwateruserscouldbeaffectedas
facilitiesuseLakeEriewaterforfoodor
beveragepurposeswouldincurfilteringand
treatmentcostsThesewouldbefacilitiesthat
havetheirownwatertreatmentplantsrather
thanusingmunicipalwater.Forexample,alarge
beerbrewerymightfinditcosteffectivetotreat
itsownwater.Thisstudyincludedextensive
searchingfornonPWSintakesdrawingwater
fromwesternLakeErieforfoodorbeverage
purposesbutdidnotfindany.Forthisreason,
weexpectthecostofprovidingHABfreewater
tothesefacilitiesisbornebythepublicwater
systems.
Powerplantsaretheprimaryfacilitiesusing
waterforcoolingpurposes.TheFermi,Monroe,
Whiting,BayShore,DavisBesse,WestLorain,
andAvonLakepowerplantsalldrawcooling
waterfromthewesternbasinandcouldbe
affected.Forcoolingpurposes,thewaterwould
likelynotrequireadditionaltreatment.Filtering
isaccomplishedattheseplantsusingscreening
systems.Althoughthereisanecdotalevidence
thatatleastoneoftheseplantshasexperienced
additionalalgaerelatedfilteringcosts,thecosts

andnatureofthealgae(HABornot)is
unknown.Nopublicinformationindicatesthese
facilitieshaveincurredadditionalcosts.
Althoughthisreviewindicatesthepotentialfor
effectstofarmingandindustrialusesfromHABs
andtheirreduction,noevidenceofsignificant
costsfortheperiodcovering2011to2014was
identified.Accordingly,althoughtheremayhave
beenbenefitsofreducingHABsin2011and
2014,thesebenefitsarenotidentifiedandhave
beenquantifiedaszero.Thisextendstothe
evaluationoflaggedeffects,whichisalso
quantifiedatzero.

7.3

MUNICIPALANDPRIVATEUSES

LakeErieanditstributariessupplywaterfor
householdandbusinessusesto13million
peopleinOntarioandstatesborderingthethree
basins(OhioEnvironmentalCouncil2014).This
waterissuppliedbothbymunicipalwater
supplierandwells.
7.3.1 EffectstoPWS
InthewesternbasinofLakeErie,atleast18
watertreatmentplantsdrawwaterdirectlyfrom
thelake:fourfromEssexCounty,Ontario;12
fromOhio;andtwofromMichigan(whichshare
anintake)(EssexRegionSourceProtectionArea
2015;MichiganDepartmentofEnvironmental
Quality2014;OhioEnvironmentalProtection
Agency[EPA]2013).
Post2009,publicwatersupplierswerestill
adjustingtoHABs.DuringearlyAugust2014,
windandwatercurrentspushedtheHABfrom
LakeErieswesternbasintotheareawhere
Toledo,OhiosCollinsParkWaterTreatment
Planttakesinwaterfromthelake.Windand
wavesmixedthecyanobacteriaintothewater
column,andtheyweresuckedintothewater
plant.
OnAugust2,2014,thetreateddrinkingwater
exceededthe1ppbthresholdforsafedrinking
waterrecommendedbytheWorldHealth
OrganizationandadoptedbytheOhioEPA.The
CityofToledoissuedadrinkingwaterbanuntil
themorningofAugust6.Nearlyonehalfmillion
peoplewereaffected.Inaddition,ToledoMayor

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

53

D.MichaelCollinsstronglyrecommendedall
restaurantscloseoperationsduringtheban
(Dierkes2014;Dolan2014;SonichMullin2014).
7.3.2 PWSAdaptationCosts
ThecyanobacteriummicrocystisfoundinLake
ErieHABscanberemovedfromdrinkingwater
drawnfromthelake.However,removing
microcystisincreasesthecostofwater
treatmentby$3,000ormoreperday(Dierkes,
2013).Watertreatmentplantsalsoincur
expensesforwatertesting.Raymond(2014)
statedthatmanyLakeEriewatersystems
routinelyaddcarbontoaddressHABs,with
Toledospendingasmuchas$200,000/month
oncarbon.CarrollTownshipupgraded
$125,000ozonetreatmentinresponseto
finishedwatermicrocystindetections.
Toledo,Oregon,CarrollTownship,Ottawa
County,Sandusky,KelleysIsland,andCamp
Patmospublicwatersystemsrespondedtoa
2014surveyconductedbytheOhioEPA.The
surveygathereddataaboutexpensesrelatedto
algaemonitoringandmitigation.Table71
summarizestheexpensesreportedbythe
surveyrespondentsinthesecategories:
Watermonitoring
Equipmentandtraining
Annualsourcewateralgaecontrol(e.g.,
algaecide,alum,oxidants,andother
reservoirorsourcewatertreatments)
Treatmentoptions(suchasPAC,GAC,
ozone,increasedchemicalcosts,increased
electricityexpenses,andincreasedstaff
time)forreducingalgaerelatedissueslike
tasteandodorcompounds,cyanotoxins,or
disinfectionbyproducts(DBPs)
Maximummonthlyexpensesrelatedto
algaemonitoringandmitigation
Capitalcostsforadvancedtreatmentused
toreducealgaerelatedissues(PACfeed,
GACtowers,ozonesystem,UVand
membranefiltration).
ThetotalsinTable71reflecttotaledannual
expenditures.

Table71:ExpensesofMonitoringandMitigating
HABsReportedbyPWSinOhio
Number
ofPWS
Five
Four
Three
Six

ExpenseCategory
Watermonitoring
Equipmentandtraining
Sourcewateralgaecontrol
Treatmentoptionsfor
reducingalgaerelatedissues

Reported
Expenses
$233,000
$110,750
$308,800
$2,028,353

Thesetotal$2,680,903inannualHABrelated
treatmentcosts.Moreover,fourrespondents
incurredatotalof$515,000incapitalcosts.
7.3.3 PrivateWellEffects
WellwatercontaminatedwithHABtoxinsisnot
availableforhouseholduses.OnAugust26,
2014,theLakeErieHABthickenedaroundPelee
Island.Someprivatewellsshowedlevelsof
microcystisabovethesafelevelfordrinking
water.Asaresult,theHealthUnitwarned
approximately500PeleeIslandwellownersto
drinkonlybottledwaterortopickupwater
fromatankeratthemunicipaltreatmentplant.
FifteendayslateronSeptember9,thebanon
usingwellwaterwaschangedtoanadvisory
(CTVWindsor2014;McCrayandHenry2014;
ToledoBlade2014;YeagerKozacek2014).
AlthoughotherprivatewellsexistnearLakeErie,
theinvestigationdidnotuncoverevidenceof
thesebeingaffected.Thereisanimportant
reasonforthis.Whereasmainlandwellsdraw
fromaquifersthatarenotconnectedtoLake
Erie,mostoftheapproximately500homeson
PeleeIsland,Ontario,useprivate,shoreline
wellswhichdrawwaterfromLakeErie(McCray
andHenry2014).

7.4
BENEFITSOFREDUCINGFUTURE
HABS
Thecharacterizationofthebenefitsofreducing
futureHABsforthisstudyasksthequestion
whatistheeconomicbenefitofeliminating
futureHABsthatarelikethe2011and2014
HABs?Italsoaskstherelatedquestionwhatis
thelagged(i.e.,intertemporal)benefitof
eliminatingfutureHABs?Thesequestionsare
usefulinthattheyareforwardlookingand
policyrelevant;theyalsohaveimportant

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54

implicationsforwhatiscategorizedasabenefit.
Inparticular,muchoftheexpendituresinTable
71arefromtheToledopublicwatersystem.
TheToledoeventwasadramaticinterruptionof
waterservicesandhadsevereimplicationsfor
economicwelfareforhouseholdsand
businesses.Theseimpactsarebeingstudied
elsewhere.Also,theseexpenditureswere
undertakentoensurethewaterinterruptionsof
2014wouldnotrecur.Asaresult,thisstudy
presumesthatafutureHABlikethe2014HAB
wouldnotresultinwatersupplyinterruptionsin
Toledoandthesignificantwelfarelossesthat
accompaniedthatevent.Incontrast,thereisno
evidencethatmitigatingmeasureshavebeen
undertakenonPeleeIsland;aneventlike2014
occurringinthefuturewouldpresumablyhave
effectssimilartothosethatoccurredin2014.
Theimplicationsofthiscontextarethatfor
serviceinterruptionstherearenohuman
welfarerelatedbenefitsidentifiedforthe2011
scenarioandthehumanwelfarerelated
benefitsfor2014arethoseassociatedwiththe
PeleeIslandwatersupplydisruption.
Regardingthe500welluserswhowereaffected
bythedonotuseorderforPeleeIsland,to
avertthelackofwellwater,usersmayhave
purchasedbottledwater,procuredwaterfroma
tankeratthemunicipalwaterplant,ormoved
temporarilytomainlandEssexCountyor
anotherarea,livingwithfriendsorrelativesor
rentingtemporaryaccommodations.
PeleeIslandbusinessesrelyingonwellwater
(suchasgreenhouses)mayalsohavebeen
affectedbythedonotuseorder,butitis
unclearhowmanywereaffected.Detailed
informationaboutthescopeofinconvenience
experiencedonPeleeIslandisnotavailable.For
purposesofthisassessment,weconsiderthat
notbeingabletousehouseholdwaterisbest
offsetbytemporarilyrelocating.If500families
spent$100pernightfor15nightsinalternative
accommodations,thisavertingexpenditure
wouldtotal$750,000.
Consideringlaggedeffectstowelfare,giventhe
relativelyobviousnatureoftheHABs,and
responsibilityofpublichealthauthoritiesfor

providingappropriateinformation,wedonot
anticipatesignificantlaggedorhaloeffects
where,forexample,peopleinareasthathave
experiencedHABimpactstotheirwatersupply
nolongerusemunicipal/wellwater.Thiseffect
iscertainlypossibleandwasmentioned
anecdotally(IJCmeeting),however,wehave
foundnoevidenceofpersistenteffects.
Regardingavertingcosts,ofatleast18western
basinplants,HABavertingcostsareonly
availableforsix.Asthesurveyonlycovered
Ohio,thisleavessixotherplantsfromOhiothat
didnotreportcosts,aswellasfourfromEssex
CountyandtwofromMonroeCounty.Whether
ornottheseplantsareincurringtreatmentcosts
isunknown.WiththeexceptionofToledo,which
incurredmostofthecosts,andinresponseto
the2014HAB,itisnotknownwhethertheseare
inresponsetoaparticularevent.
Anadditional,importantconsiderationisthat
theinvestmentandongoingannual
expendituresforHABrelatedwatertreatment
willbeconductedregardlessofwhetheraHAB
likethatof2011or2014occurs.Becausethese
expendituresdonotdependonHABs,reducing
themwillhavenoimmediatebenefitintermsof
treatmentcostreductions.Thismeansthereis
noclearbenefitrelatedtowatertreatment
costsassociatedwiththe2011and2014
scenariosfortheOhiowatertreatmentplants
thatrespondedtothesurvey.
Consequently,thesecostsappearunderthe
laggedeffectsscenario.Giventheavailable
information,OhioPWSareincurring$2,680,903
annuallybecauseofpastandanticipatedfuture
HABs.Moreover,fourrespondentsincurreda
totalof$515,000incapitalcostsand
informationisunreportedforsixpotentially
affectedOhiofacilitiesandunavailablefortwo
facilitiesinMichiganandtwofacilitiesinEssex
County.Extrapolatingtootherfacilitiesis
difficultbecauseonePWSinToledothat
experienceddramaticimpactscomprisesmost
ofthesecosts.However,costsofapproximately
$3millionareestimated.

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55

7.5

SUMMARYANDNEXTSTEPS

Organizationsandindividualswithdrawwater
fromLakeErieforavarietyofpurposesthatcan
beaffectedbyHABsandcauseeconomic
damages.WhileimpactsofHABsonpublicand
privatewatersupplywerewellpublicized,the
reviewinSection7identifiedscantevidenceof
muchimpactondirectwaterusers,suchas
agriculturalandindustrialproduction.Although
thereisanecdotalevidenceofincreasedfiltering
forsomeagriculturalusesandforsomepower
production,thereviewofevidencedoesnot
suggestthisservicewarrantsfurtherresearch.
However,thisconclusioncouldchangeifnew,
largewaterusers,suchasfoodandbeverage
processors,weretorequirewaterdrawnoutside
ofthepublicwatersupply.
Thereviewdididentifydataonavertingcostsfor
publicwatersuppliers.Arecentsurveyofpublic
watersuppliersinOhioindicatesincreased
treatmentcostsforHABs,suggestingaverting
costsofapproximately$3millionperyearare
beingincurred.Theseexpendituresareensuring
watersupplyisavailable,evenwithsevereHAB
events.Ifthesecurrentexpenditures,inpartin
responsetothe2014HABevent,ensureno
futuredisruptionofthepublicwatersupply
fromHABs,thentherearenoadditional
economicdamagesthatwouldbefurther
causedbyserviceinterruptions.However,the
Toledoserviceinterruptioncausedwell
publicizedbusinessclosuresandimpactson
households.Inaddition,someindividualsstilldo
notusethepublicwatersupplyoutofconcerns
forwatersafety.Ifcurrentavertingand
treatmentcostsdonotadequatelyprotect

againstHABinterruptionstopotablewater
supplyordonotchangeindividualsbehavior,
furtherdocumentationonandresearchinto
lossesofsucheventsishighlywarranted.
TheimpactsofpastHABshavealsoaffected
privatewellusers.Forexample,atPeleeIsland
wellwateristakenfromLakeErie;datawas
sparseastotheexactnatureoftheeconomic
damagesthe2014eventimposedonPelee
Islandresidents,butcoarseassumptionssuggest
itwasintherangeof$750,000.Muchbetter
informationcouldbeassembledforthiscaseby
doingprimaryresearchanddatacollection
aboutresidentsresponsetothe2014event.A
keynextstepwouldthereforeinvolvegathering
behaviorspecificandcostdataonwhat
residentsofPeleeIslanddidtomitigatethe
2014HAB,howmuchtheyspentontheir
mitigationefforts,andidentifywhetherthey
havemadeanycapitalinvestmentsor
behavioralchangestoavoidhavingtoundertake
thosemitigationactivitiesunderfutureHAB
events.
Longerterm,itisunknownifanychangeshave
occurredinhowhouseholdsusepublically
suppliedorprivatewaterinresponsetoHAB
events.Forexample,householdsmayswitchto
filteredorbottledwaterforsomeuses.
Understandinghowhouseholdsrespondedto
theHABeventsof2011and2014wouldrequire
moreindepthanalysesandlikelybenefitfrom
primarydatacollection,suchasahousehold
survey,which,inturn,wouldbeabletoidentify
anypersistingandasyetunquantifiedeconomic
lossesforHABsduetopotablewatersupply.

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

56

8.0 NEXT STEPS


Theanalysispresentedthroughoutthisreporthas
reliedonavailablesecondarydataandstudiesto
quantifytheeconomicbenefitsofHAB
reductions.Therelianceonsecondarydataand
studiesresultsfromthefactthatlittleprimary
datahasbeencollectedandfewstudies
conductedtoquantifytheeconomicbenefitsof
HABreductionsinthescientificsenseof
identifyingstatisticallysignificantparameters
withinrigorouseconometricmethods.However,
theanalysispresentedinthisreporthasidentified
whattheconstructoftheseeconometricmodels
mightbe,whatthedataneededtopopulate
themmightinclude,andwhichspecific
parameterswouldbemostusefultomore
accuratelyquantifytheeconomicbenefitsofHAB
reductions.Nextstepsareprovidedbelow.

8.1

PROPERTYVALUES

Thereisnospecificstudyintheliteraturethat
identifiesthenumberofpropertieswithvalueat
riskfromthepresenceandseverityofHABs,nor
arethereanystudiesthatscientificallyexamine
therelationshipbetweenthepresenceand
severityofHABsandtheamountofproperty
valuelosses.Theresearchpresentedinsections3
and4onlybeginstoquantifythepresenceand
severityofHABs,andidentifytheamountof
propertiesthathavevalueatrisk.A
recommendednextstepwouldbetodevelopan
econometricmodeltolinkdataonthepresence
andseverityofHABs,asidentifiedinSection3,
withsalesandownerpreferencedatatoevaluate
HABsandpropertyvaluelosses.Suchastudy
wouldreplacethetransferandscenariobased
evaluationsconductedforthisanalysiswitha
parametrizedevaluationofthepropertyvalue
effectsofHABs.
Forexample,Section4examinedthepotential
forHABstodamagepropertyvalues,focusingon
residentialpropertiesonorneartheshoreline.
Usingmultiplemethods,itwasdemonstrated
thattherearelikelyover$3billionworthof

residentialpropertiesthatareatriskofdamages
fromHABs.Howmuchvalueisthenatrisk
dependsontheintricaciesofthelinkbetween
propertyvaluesandHABs.Theavailable
literatureonhowlowwaterqualityandhow
disastersimpactpropertyvaluesprovidesample
andrepeatedsupportthatsucheventsimpact
propertyvalues.However,nosingleexisting
studyprovidesacloseenoughmatchtoHABson
LakeErietoserveasacompletelysuitable
sourceforbenefitstransfer.
Areviewoftheliteraturesuggeststhatlow
waterqualitycanhavelongtermimpactson
propertyvaluesanddisasterscansubstantially
affectpropertyvaluesfortimeperiodsarounda
disaster.WhethertheeffectsofHABs,which
differintheirimpacteveryyear,areshortterm
orlongertermisanimportantopenquestion
thatwarrantsfuturestudy.Takingsomevalues
fromtheliteratureonthepercentageimpact
thatenvironmentalharmscanhaveonproperty
valuesservestoillustratethemagnitudethat
damagesfromLakeErieHABsmightbe:a5
percentimpacttonearshorevaluesanda10
percentimpacttoshorelinepropertiesresultsin
$242.1millioninpropertyvalueimpacts.Togive
anotherperspective,anotherapproachwas
takentoillustratepotentialresidentialproperty
lossesduetoHABs.Byconsideringwhenand
whereresidentialpropertyservicessuchas
viewsareimpairedbyHABsandusingthespatial
andtemporalscenariosdescribedinSection3
forthe2011and2014HABevents,andmaking
someexploratoryassumptionsaboutthe
temporalpatternofhousingserviceflows,per
eventlossesareontheorderof$17million.
Clearlytherangeofimpactsremainsuncertain.
Futureworkcouldinvolveamoredetailedstudy
thataccessestaxassessordataandmorefully
describesallthepropertyvaluesalongtheshore
andinthenearshoreareaswhereHABsarea
risk.Similarly,commerciallyavailable,butcostly,
dataexistsonhousingsalesthatissuitablefor

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57

identifyingtherelationshipofsalepricestoHAB
events,HABrisks,andproximitytoHABs.A
relatedlineofresearchcouldalsoincorporate
homeownerpreferencedatafromsurveys.Since
shorelineandnearshorepropertyownersare
importantstakeholders,aviableoptionfor
addressingtheimpactsofHABsonproperty
valuesistocombinesurveybasedresearch
approacheswithformalpropertyvaluemodels,
aswasdoneforcontaminatedsediment
remediationinWaukeganHarbor(Bradenetal,
2004).
Inthecurrenteffort,althoughlesstime
consumingandcoarsermethodswereused,this
studywasabletoclearlydemonstratethe
substantialvalueofthehousingstockat
potentialriskofdamagefromHABs.Coupled
withthepublishedevidencethatenvironmental
harmsaffectpropertyvaluesinavarietyof
similarcases,itisalsoclearthatpropertyis
damagedbyHABsandtheirexpected
occurrence.Thesubstantialpotentialfor
damagesmakesthisakeyareaforfuturestudy.
8.2
TOURISM
HABscanpotentiallyaffectthecloselyrelated
areasoftourism,businessprofitability,and
commercialpropertyvaluesinareascloseto
westernLakeErie,whichcandirectlytranslate
intolostincomeandprofitsandconstitutea
potentiallylargeeconomicdamageassociated
withHABs.Section5showedthatcounties
adjacenttowesternLakeErieexperience
millionsofoutoftowntripsandbillionsof
dollarsintourismexpendituresannually.
AlthoughnotallofthisisdirectlyrelatedtoLake
Erie,andonlyaportionoccursduringHAB
affectedtimeperiods,itisclearthatsignificant
tourismrevenueisatriskduetoHABs.Aportion
ofthisrevenueisprofits.Notlosingtheseprofits
wouldconstituteadirectbenefit,whichwould
alsobereflectedinthevalueofbusinessesand
commercialproperty.Section5reportedon
effortstomakesomeassumptionsanduse
existing,readilyavailabledatatoassessthese
economiclosses.However,itwasnotedthat
verylittlespecificandusefuldataisavailable
andmorethoroughresearchisrecommended.

Therearenumerousparametersrelatingthe
presenceandseverityofHABstochangesin
touristactivitythatarenotwellunderstoodand
thatwerespecifiedasdefinedscenariosforthis
analysis.Akeynextstepwouldbetodevelop
scientificallybasedevaluationsofthefollowing:
Therelationshipbetweenthepercentof
totallatesummerandearlytripsto
countiesthatborderwesternLakeErieand
thosetripsthatarerelatedtoLakeErie.
Developascientificevaluationofthe
relationshipbetweenthepresenceofHABs
anddivertedtouristtrips.
Therelationshipbetweenthetypesoftrips
thataredivertedbecauseoftheseverityof
HABs,wherethosetripsaredivertedto,
andtheamountofspendingonthose
divertedtrips.
Despitetheselimitations,Section5illustrated
thattouristdollarsinOhioatriskfromHABs
rangefrom$66millionto$305million.
Associatedhighendlostprofitsare$21million
butcouldbeunder$1million.InMichigan,
about$25millionintourismeconomicimpact
wasjudgedtobeatrisk,whichwasassociated
withlostprofitsof$1.7milliononthehighend.
ForCanada,impactsatriskwereabout$17
millionwithhighandlowprofitabilityimpacts
rangingfrom$1.6millionto$59,000.Again,
derivingthesenumbersfromreadilyavailable
datarequirenumerousassumptions,andgiven
thelargerangesofuncertaintywarrantfurther
refinement.Moreover,theseroughestimates
applyonlyforyearswithsignificantblooms
including2011and2014.Consideringlagged
effects,thesewouldoccurastouristsforgotrips
inyearswithlesserbloomsandareexpectedto
belower,butthereiscurrentlynoavailabledata
toquantifythese.
8.3
RECREATION
Thereiscurrentlynostudyintheliteraturethat
fullylinksthepresenceandseverityofHABswith
changesinrecreationdemand.Theanalysis
conductedforthisreporttransfersresultsfrom
otherrelationshipstoparameterizetheeffect
thatHABshaveonbeachuse,fishing,and
boating.Akeynextstepwouldbetoundertakea
recreationdemandstudythatwouldquantifythe

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

58

effectthatchangesinthepresenceandseverity
ofHABshasonrecreationalbeachuse,fishing,
andboatingdemand.Thestudywouldalsobetter
quantifythebaselinelevelofbeachuse,fishing,
andboatingtripstoWesternLakeErie.Beach
useandboatingforreasonsotherthanfishing
arenotedasbeingespeciallylackinginspatial
andtemporaldataontrips.
8.4
FARMING,INDUSTRIAL,MUNICIPAL,AND
PRIVATEWATERWITHDRAWERS
Organizationsandindividualswithdrawwater
fromLakeErieforavarietyofpurposesthatcan
beaffectedbyHABsandcauseeconomic
damages.WhileimpactsofHABsonpublicand
privatewatersupplywerewellpublicized,the
reviewinSection7identifiedscantevidenceof
muchimpactondirectwateruserssuchas
agriculturalandindustrialproduction.Although
thereisanecdotalevidenceofincreasedfiltering
forsomeagriculturalusesandforsomepower
production,thereviewofevidencedoesnot
suggestthisservicewarrantsfurtherresearch.
However,thisconclusioncouldchangeifnew,
largewateruserssuchasfoodandbeverage
processorsweretorequirewaterdrawnoutside
ofthepublicwatersupply.
Thereviewdididentifydataonavertingcostsfor
publicwatersuppliers.Arecentsurveyofpublic
watersuppliersinOhioindicatesincreased
treatmentcostsforHABs,suggestingaverting
costsofapproximately$3millionperyearare
beingincurred.Theseexpendituresareensuring
watersupplyisavailable,evenwithsevereHAB
events.Ifthesecurrentexpenditures,inpartin
responsetothe2014HABevent,ensureno
futuredisruptionofthepublicwatersupply
fromHABs,thentherearenoadditional
economicdamagesthatwouldbefurther
causedbyserviceinterruptions.However,the
Toledoserviceinterruptioncausedwell
publicizedbusinessclosuresandimpactson
households.Inaddition,someindividualsstilldo
notusethepublicwatersupplyoutofconcerns
forwatersafety.Ifcurrentavertingand
treatmentcostsdonotadequatelyprotect
againstHABinterruptionstopotablewater
supplyordonotchangeindividualsbehavior,

furtherdocumentationonandresearchinto
lossesofsucheventsishighlywarranted.
TheimpactsofpastHABshavealsoaffectedprivate
wellusers.Forexample,atPeleeIslandwellwater
istakenfromLakeErie;datawassparseastothe
exactnatureoftheeconomicdamagesthe2014
eventimposedonPeleeIslandresidents,but
coarseassumptionssuggestitwasintherangeof
$750,000.Muchbetterinformationcouldbe
assembledforthiscasebydoingprimaryresearch
anddatacollectionaboutresidentsresponseto
the2014event.Akeynextstepwouldtherefore
involvegatheringbehaviorspecificandcostdata
onwhatresidentsofPeleeIslanddidtomitigate
the2014HAB,howmuchtheyspentontheir
mitigationefforts,andidentifywhethertheyhave
madeanycapitalinvestmentsorbehavioral
changestoavoidhavingtoundertakethose
mitigationactivitiesunderfutureHABevents.
Longerterm,itisunknownifanychangeshave
occurredinhowhouseholdsusepublicallysupplied
orprivatewaterinresponsetoHABevents.For
example,householdsmayswitchtofilteredor
bottledwaterforsomeuses.Understandinghow
householdsrespondedtotheHABeventsof2011
and2014wouldrequiremoreindepthanalyses
andlikelybenefitfromprimarydatacollection,
suchasahouseholdsurvey,whichinturnwouldbe
abletoidentifyanypersistingandasyet
unquantifiedeconomiclossesforHABsdueto
potablewatersupply.
8.5
OTHERVALUES
ThepresenceofHABsandtheresultingchangesin
environmentalqualityareexpectedtoaffecta
rangeindividualswhovaluetheaestheticsofLake
EriewithoutHABs.Theseincludesomevaluesthat
accruetoindividualswhodonotpartakeinwater
basedrecreationorcoastaltourism,aswellas
thosewhodonotownwaterfrontproperty.Inthat
way,thesecanbethoughtofasnonconsumptive
values:thevaluesaresimplyfortheexistenceof
theresourceinadesirablestate.ShouldHABs
continueorworsen,thesenonconsumptivevalues
woulddiminishaswell.Researcherscanapply
surveybased,statedpreferencevaluationto
estimatesuchvaluesandeconomicvaluesofthis
typehavebeendocumentedinothersettings
involvingwaterquality(Johnstonetal.2003;

EconomicBenefitsofReducingHarmfulAlgalBloomsinLakeErie

59

Viscusietal.2008).Suchnonusevaluesforthose
whopreferLakeErietohavelessHABscouldexist
acrossabroadswathoftheLakeErieregion
encompassingalargepopulation,hintingthat
modestvaluescouldtranslatetolargebenefitsfor
HABreduction.

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60

9.0 WORK CITED


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AgMedia,Inc.2010.TomatoGrowersWinProvincialAward.Availableat
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