GRASSLAND ECOLOGICAL AREA/
MERCED COUNTY, CALIFORNIA
Economics of Merced County Wetlands and the Impact of Urban Growth
SUMMARY
Wetlands and wildlife habitat have more economic value than most people realize. These lands contribute to the local and regional economy through direct expenditures by public and private entities for habitat management and enhancement and by the money spent for recreation of all types in the resource areas. These areas are worthy of protection for more than just their ecological values. Protection from encroachment of non-compatible uses is most important when the wetlands are embedded in a rapidly growing region such as the Central Valley of California.
This Land Use and Economics Study, jointly funded by the Grassland Water District, the Packard Foundation and the Great Valley Center, may be the first of its kind to provide a comprehensive picture of the economic values of wetlands in the County, and their impact on the local economy. These non-urban land uses produce a net economic benefit to the local economy whereas urban development, particularly sprawl type residential development, produces a net economic loss to local government. The reason is that it costs local government more to provide public infrastructure (water supply, sewer, roads, storm drains, schools) and services (police, fire, mosquito abatement, other local services) than the revenue a city and/or county receive from the residential development. Wildlife habitat and agriculture contribute to the local economy but require very little in the way of urban services.
The wildlife
habitat resource areas of Merced County include the Grassland Ecological Area
(GEA) of about 178,000 acres which includes two federal wildlife refuges,
three state wildlife areas and a large number of private duck clubs. In addition,
wildlife habitat resource areas in the County include another 23,000 acres
of state wildlife areas and 33,400 acres of state parks and recreation areas.
The typical total annual value of habitat maintenance and land acquisitions in the Grasslands is $16.4 million and the value of expenditures related to recreation in the Grasslands is about $11.4 million per year. With a multiplier of 1.41 to account for induced jobs and spending by other providing services to the wetlands users and managers, the total $27.7 million spent on the wetlands contributes $41 million per year to the local economy, and accounts for about 800 jobs. In Merced County as a whole, habitat management and wildlife-associated recreation contributes $53.4 million to the county's economy and accounts for about 1100 jobs.
The productive economy of the wetlands is threatened by burgeoning population growth. There is an inevitable conflict between urban growth and protection of open space and agricultural values. Growth introduces more roads, motor vehicles, houses, noise, urban pets, pests, vandalism, litter and the like into the pristine wetland environment. California Department of Finance projections show a growth in the total Merced County population from 198,000 to about 620,000 people by the year 2040. The number of urban acres is expected to increase from about 50,000 to as many as 94,000 to accommodate this population growth as well as the associated commercial and industrial development within the cities. The Merced Case Study looked at two growth scenarios: conventional or "sprawl" growth at a density of 5.5 persons per acre (2.2 dwelling units (DU) per gross acre) and a more compact scenario of 10.7 persons per gross acre (4.3 DU per gross acre) and 10% of the residential and job growth as infill rather than annexation of lands around cities.
The economic
impact on the wetlands of this explosive growth is difficult to predict. The
amount of urban land in a two-mile band around the wetlands complex is expected
to increase by a factor of 3 to 6 by 2040, depending upon whether growth is
compact or conventional. Broadly, if non-compatible urban development encroaches
on the wetlands so as to reduce its utilization by wildlife, then recreational
usage could be expected to decline, and public funds for habitat management
may be more difficult to obtain. The impact will depend on how closely this
growth encroaches on the boundaries of the refuges, or whether it, as in the
case of Los Banos, divides the North from the South Grasslands.
The cities of Merced, Los Banos, Gustine and Dos Palos have planning spheres of influence affecting the GEA. Growth in unincorporated areas of the county such as Volta could also adversely affect the wildlife refuge areas. Because of its size and location, Los Banos presents the greatest challenge; the city boundary and its sphere include the GEA and its two-mile band. The current Los Banos General Plan restricts growth on the eastern end of the city to protect the wetlands, and the city has the opportunity to place important lands in open space and recreation uses.
This study also addresses growth in Merced County in relation to impact on the agricultural economy. The analysis of agricultural impact of sprawl vs. compact growth follows the same methodology asthe 1995 American Farmland Trust study: Alternatives for Future Urban Growth in California's Central Valley: The Bottom Line for Agriculture and Taxpayers.
The total
value of agricultural production in Merced County in 1998 was $1.45 billion
($2.11 billion with the economic multiplier applied) from 966,200 acres of
field crops, 57,400 acres of vegetable and seed crops and 115,900 acres of
fruit and nut crops. Within the GEA the approximately 50,000 acres of agricultural
lands and 128,700 acres of range and wetlands had an economic value in 1998
of $114 million ($160 million with the economic multiplier effect). Thus the
GEA accounts for 5.3% of the total agricultural production in the County.
Two tables summarize the economic impact of the various land uses and growth types in this study. Table S1 gives the economic picture today of the economic impact of land uses on local government. In Table S-1 net revenue is the difference between the total cost of local government to provide services and infrastructure to the various land uses and the revenue that each land use type produces. The revenue/cost ratio is total revenue divided by total cost. Net revenue per acre is the net revenue divided by the total number of acres of that land use category. It can be seen from Table S-1 that agriculture and wetlands have a highly positive revenue to cost ratio. That is, for example, agriculture produces $3.42 of revenue to local government for every dollar it costs to serve agriculture. Wetlands produce $1.70 of revenue for every dollar of cost – less than agriculture because their productivity and market value is less, but they demand very little in the way of urban services. In addition, these two land uses produce a modest net revenue per acre.
Table S-1: Economic Impact on Local Government
– Existing Revenue vs. Cost by Land Us
|
Agriculture
|
Wetlands
|
Cities Only
|
All Urban
|
County
|
|
| Revenue ($1000's) |
$12,194
|
$272
|
$86,125
|
$279,874
|
$206,215
|
| Cost ($1000's) |
$3,562
|
$160
|
$84,274
|
$289,442
|
$208,890
|
| Net Revenue |
$8,632
|
$112
|
$1,851
|
($9,568)
|
($2,675)
|
| Revenue/Cost Ratio |
3.42
|
1.70
|
1.02
|
0.97
|
0.99
|
| Area (ac) |
1,162,000
|
129,000
|
22,875
|
50,130
|
1,162,000
|
| Population |
125,232
|
198,522
|
198,522
|
||
| Net Revenue per capita |
$14.78
|
($48.20)
|
($13.47)
|
||
| Net Revenue per acre |
$7.43
|
$0.87
|
$80.92
|
($190.86)
|
($2.30)
|
Source: Appendix 2 Summary Table C, Tables 4E, 4F.
In contrast, all types of urban development are a "break even" proposition or are negative. Considering the cities only (city population and city-provided urban services) the revenue/cost ratio is very slightly positive. Also, within the cities only there appears to be a net revenue per acre of about $81. However, this is misleading because the cities populations also utilize many services provided only by the County such as District Attorney, assessor, courts and judicial services, elections etc. Looking at the entire County urban population, there is already a large net deficit in the cost per acre to provide services to its urban population – the County and cities spend $190.86 more per acre to serve their urban population than they get back in revenue. It is more expensive and inefficient to serve this far flung scattered population compared to the more concentrated population in cities.
In Table S2 net revenue per urban acre is the net revenue divided by the total number of acres that are urban under each scenario. When one now considers the effect of the two growth scenarios on local government economics, Table S2 depicts the following: at present there is a small net deficit to local governments (cities and County together) to provide infrastructure and urban services to the urban population. This impact is negative (a deficit) whether one considers the cost per capita (population) or the cost per urban acre.
Table S2: Economic Impact on Local Government – Effect of Growth to 2040 on Revenue vs. Cost
|
Existing
|
2040 "Sprawl"
|
2040 "Compact"
|
|
| Revenue ($1000's) |
$292,340
|
$943,272
|
$942,360
|
| Cost ($1000's) |
$293,164
|
$1,005,015
|
$943,988
|
| Net Revenue |
($824)
|
($62,655)
|
($716)
|
| Revenue/Cost Ratio |
1.00
|
0.94
|
1.00
|
| Urban Area (ac) |
50,130
|
144,325
|
97,228
|
| Population |
198,522
|
620,457
|
620,457
|
| Net Revenue per capita |
($4.15)
|
($100.98)
|
($1.15)
|
| Net Revenue per urban acre |
($16.44)
|
($434.12)
|
($7.36)
|
Source: Appendix 2 Summary Table D, Tables 4E, 4F.
Under the sprawl growth scenario for year 2040, the present $16.44 deficit per acre grows to $434.12. With the same population accommodated with compact growth, the deficit shrinks to $7.36 per acre. The sprawl scenario shows that continued growth at the current average density per gross urbanized acre is so inefficient that unless revenues (fees and taxes) are raised substantially, local governments will fall farther behind in their ability to provide capital improvements and services.
The improvement (from -$16.44 per acre to -$7.36 per acre) under the compact growth scenario shows that marked effect that even a modest effort at making growth more compact would have in reducing the costs of infrastructure (e.g. roads, sewer, water, storm drainage). Even with the tripling in population under either growth scenario, serving the new population at increased compact densities is so much more efficient than serving the present population that the overall cost to serve each person or each dwelling unit (or acre) drops. Note that even under the compact scenario as depicted in this study, the net impact of the growth on local government is still negative (a net loss).
Sprawl growth would also consume twice as much land over the 44 year period. The difference in net revenue between the sprawl and compact scenarios is also related to: (1) the saving of 47,000 acres of farm land under the compact compared to sprawl scenario and (2) the fact that this land remaining in production continues to produce revenues for the County of some $115 million per year.
Compact
growth makes more than economic sense: keeping more of the land surrounding
the wetlands complex in some kind of agricultural use helps to preserve both
the economic viability of agriculture in the County and its value in protecting
the wetlands from the effects of urban encroachment. Preserving wetlands as
a land use includes guarantee of an adequate supply of inexpensive water of
sufficient quality, protection of a one to two mile buffer around the "core"
area with only compatible uses (agriculture, open space uses), more land in
permanent protection in easement or fee, and continuation of seasonal land
use diversification. Protection would also be enhanced by a greater level
of public expenditure for wetlands, including in lieu fees paid to local governments
for their loss of property taxes. Private landowners could also make greater
use of other federal sources of money such as the USDA Wetland Reserve and
Conservation Reserve Program or endangered species funds.
This analysis has confirmed that for Merced County, agriculture has a net positive economic impact on local government and generates over $2 billion per year in county economic productivity. Likewise, in contrast to the common view of wetlands as an economic "wasteland" suitable only as habitat for ducks, this study shows that wetlands too have a net positive economic impact on local governments and represent important public and private investment and local economic activity.
The substantial economic values of non-urban uses emphasize the importance
of their long-term protection in future land use planning decisions. This
study focuses on Merced County, California, but its results are clearly applicable
to most of California's Central Valley and to other regions where the balance
of urban, agricultural, and natural resource land uses is undergoing rapid
change. Regional planning often considers the quality of life contribution
of agricultural and natural open space; this study shows that planning also
needs to provide for the integrity and long term viability of agriculture
and natural resources as components of our economy.