Preserving Farms and Forests in Preserving Farms and Forests in Sussex County, Delaware: Public Sussex County, Delaware: Public

ValueValue

Sussex Communities: Growing BetterSussex Communities: Growing BetterA Workshop Sponsored by the University of Delaware Coastal Community A Workshop Sponsored by the University of Delaware Coastal Community

Enhancement InitiativeEnhancement InitiativeGeorgetown, Del. June 28, 2007Georgetown, Del. June 28, 2007

Supported by the National Research Initiative of the Cooperative State Research, Education Supported by the National Research Initiative of the Cooperative State Research, Education and Extension Service, USDA, Grant # 2003-35400-1387 and the University of Delaware and Extension Service, USDA, Grant # 2003-35400-1387 and the University of Delaware

Coastal Community Enhancement InitiativeCoastal Community Enhancement Initiative

Joshua M. DukeJoshua M. DukeDepartment of Food and Resource EconomicsDepartment of Food and Resource Economics

University of DelawareUniversity of Delaware

Robert J. JohnstonRobert J. JohnstonTammy W. CampsonTammy W. Campson

Department of Agricultural and Resource EconomicsDepartment of Agricultural and Resource EconomicsUniversity of ConnecticutUniversity of Connecticut

Question:Question:

If farms and forests are so valuable to society, If farms and forests are so valuable to society, why are we losing them so fast?why are we losing them so fast?

Answer:Answer:

Actions of the Actions of the privateprivate market do not always market do not always promote the best promote the best publicpublic choices choices

Market forces Market forces undervalue farmlandundervalue farmland and lead to excess and lead to excess conversionsconversions

Benefits and costs of farmland loss are realized by Benefits and costs of farmland loss are realized by different different groups of peoplegroups of people

Most farmland benefits are Most farmland benefits are non-market, public good benefitsnon-market, public good benefits

– Examples: scenic views, outdoor recreation, wildlife habitat, Examples: scenic views, outdoor recreation, wildlife habitat, rural character, existence of historic farms, etc.rural character, existence of historic farms, etc.

Market Value Market Value ≠ Total Economic Value≠ Total Economic Value

But what is the But what is the true valuetrue value of farmland to Sussex of farmland to Sussex County residents?County residents?

Are non-market values Are non-market values actuallyactually large? large?

Valuation Survey & Matrix CalculationsValuation Survey & Matrix Calculations Choice experiment methodology simulates a market where residents could Choice experiment methodology simulates a market where residents could

“buy” preservation“buy” preservation

Random sample mail survey in Georgetown and Smyrna/ClaytonRandom sample mail survey in Georgetown and Smyrna/Clayton

Mixed logit statistical analysisMixed logit statistical analysis

Calculate mean willingness to pay for many possible land typesCalculate mean willingness to pay for many possible land types

Identify typical farm types and target communitiesIdentify typical farm types and target communities

– Dagsboro, Georgetown, Laurel, Millsboro, Milton, SeafordDagsboro, Georgetown, Laurel, Millsboro, Milton, Seaford

Aggregate over all households in a communityAggregate over all households in a community

Capitalize using 6% discount rateCapitalize using 6% discount rate

Conservative assumptionsConservative assumptions

– No value beyond community, no value from public accessNo value beyond community, no value from public access

Example: Average Community ValuesExample: Average Community Valuesfor a Sussex Poultry Farmfor a Sussex Poultry Farm

Value per Value per acre per acre per

yearyear

CAPITALIZED CAPITALIZED VALUE PER VALUE PER

ACREACRE(6% Disc. Rate)(6% Disc. Rate)

$1,662$1,662 $27,707$27,707

These are big numbers!These are big numbers!

Annual flow of non-market values per acre can exceed the net value of market Annual flow of non-market values per acre can exceed the net value of market productsproducts

Land Parcel is used for

Poultry

10 Acres**

Vegetable

100 Acres

Forest

50 Acres

Grain

150 Acres

Forest

100 Acres

Grain

200 Acres

Per Acre Value of Preservation in Georgetown*

Parcel likely to be developed in next 10

yearsPreserved using State

PACE

Parcel likely to be developed in 10 - 30

years

$4,708

$42,932

$40,233

$43,273

$17,293

$55,517

$37,037

$28,349

$36,143

$39,184

$32,659

$18,107

Parcel likely to be developed in next 10

yearsPreserved using

outright purchase by land

trustParcel

likely to be developed in 10 - 30

years

$1,455

$39,679

$24,549

$27,589

$14,040

$52,264

$17,209

$8,521

$20,459

$23,500

$10,759

negligible

Land Parcel is used for

Poultry

10 Acres**

Vegetable

100 Acres

Forest

50 Acres

Grain

150 Acres

Forest

100 Acres

Grain

200 Acres

Per Acre Value of Preservation in Georgetown*

Land Parcel is used for

Poultry

10 Acres**

Vegetable

100 Acres

Forest

50 Acres

Grain

150 Acres

Forest

100 Acres

Grain

200 Acres

Per Acre Value of Preservation in Georgetown*

Parcel likely to be developed in next 10

yearsPreserved using

conservation zoning

Parcel likely to be developed in 10 - 30

years

negligible

$22,407

$16,073

$19,113

negligible

$34,991

$11,665

$2,978

$11,983

$15,024

$6,681

negligible

An IllustrationAn Illustration Recently, a farm of 52 acres was preserved by State PACERecently, a farm of 52 acres was preserved by State PACE

State paid $375,147 ($7,214 per acre)State paid $375,147 ($7,214 per acre)

– Above historical average of $1,452 per acreAbove historical average of $1,452 per acre

Was it worth it?Was it worth it?

Yes, benefits of preservation almost certainly exceeded costsYes, benefits of preservation almost certainly exceeded costs

– If it was a high-development-risk forested parcel in Seaford, then If it was a high-development-risk forested parcel in Seaford, then the benefits to the community would be $1,492,296the benefits to the community would be $1,492,296

– Hence, preservation would have net benefits over $1 millionHence, preservation would have net benefits over $1 million

– Net benefits would be larger if benefits outside Seaford were Net benefits would be larger if benefits outside Seaford were includedincluded

What do Sussex Residents Value Most?What do Sussex Residents Value Most?

Land maintaining Land maintaining agricultural areasagricultural areas and and farming as a way of lifefarming as a way of life

Land offering Land offering public accesspublic access (for hunting or for walking) (for hunting or for walking)

Land offering high Land offering high aesthetic valueaesthetic value

Land with benefits for Land with benefits for other environmental attributesother environmental attributes such as such as water qualitywater quality

Land preserved by Land preserved by statestate agencies agencies

Specific type of farmland is often less importantSpecific type of farmland is often less important

Closing MessagesClosing Messages Understanding economic incentives leading to farmland loss is a Understanding economic incentives leading to farmland loss is a

primary step in preventionprimary step in prevention

Economics is not all about dollars in someone’s pocketEconomics is not all about dollars in someone’s pocket

– It is about making the best decisions possible with regard to our It is about making the best decisions possible with regard to our scarce resourcesscarce resources

Sometimes, the best economic decisions involve few dollars Sometimes, the best economic decisions involve few dollars changing handschanging hands

– What matters is the well-being of Sussex County residentsWhat matters is the well-being of Sussex County residents

Evidence suggests that preserving farms and forests promote this Evidence suggests that preserving farms and forests promote this well-beingwell-being