Academic journal article Contemporary Economic Policy

Does Small Dam Removal Affect Local Property Values? an Empirical Analysis

Academic journal article Contemporary Economic Policy

Does Small Dam Removal Affect Local Property Values? an Empirical Analysis

Article excerpt

I. INTRODUCTION

It is estimated that more than 400 dams have been removed from U.S. streams and rivers since the 1920s, with the majority of removals taking place after 1970 (Pohl, 2003). The nonprofit organization American Rivers reports that 185 of these have been removed since 1999. (1) The decision to keep and repair a dam or to remove the structure and restore river habitat is necessarily a complex one that involves engineering, environmental, economic, and social considerations. These decisions are frequently contentious, confounded not just by technical concerns but by social ones as well. A growing body of literature examines in detail many of the issues concerning dam removal (American Rivers, 2002; Gaylord Nelson Institute for Environmental Studies, 2001; H. John Heinz III Center, 2002, 2003; River Alliance of Wisconsin and Trout Unlimited, 2000).

One of the most vexing issues concerning dam removal is the impact on local property values. Frequently, property owners who view their property as "lake" frontage rather than river frontage fear that the value of their property will decline with the loss of the dam and its associated impoundment (Born et al., 1998). To date, though, there has been no formal study of this issue, with the exception of Lewis, Bohlen, and Wilson (2008), published concurrently with this article in Contemporary Economic Policy.

Local property values are especially important to the economics of dam removal for small impoundments because the primary and often only value of small impoundments is their aesthetic/scenic value. A 2004 estimate by the Association of State Dam Safety Officials (ASDSO) placed the total number of small dams in the United States at approximately 13,000. The locations of small dams are generally a reflection of both geography and the history of commerce in the 18th and 19th centuries, with New England heavily represented, though small dams are found in high numbers throughout the United States, as apparent from the list of the top five states: New York (3,057), Oregon (2,913), New Hampshire (2,703), Wisconsin (2,651), and North Carolina (1,938). (2)

The most common method for determining the effect on residential property values of a public project such as dam removal is hedonic analysis, which treats residential property as a set of attributes including structural attributes such as square footage and number of bathrooms and neighborhood characteristics such as crime rates and school quality. In the current context, the presence/absence of a dam and the distance between a property and the impoundment are hypothesized to be among the neighborhood attributes affecting property values. Hedonic analysis applies statistical techniques to market data to determine the relative contribution to property values of the various property attributes. This is the approach taken in the study of small dam removal presented here. The analysis includes market sales data over the period 1993-2002 for three types of sites in south-central Wisconsin: those where a small dam remains intact, those where a small dam was removed, and those where a river or stream has been free-flowing for at least 20 yr. Including all three types of sites allows us to separately identify the relative effect on property values of an intact small dam/impoundment.

II. DATA AND ESTIMATED MODELS

A. Data

Hedonic analysis of residential property requires that all properties used in the analysis are from a single residential market (see, for instance, Haab and McConnell, 2002, p. 253). Defining the geographic boundaries of a housing market is of course a subjective matter. In our study, we focus on the "Madison" housing market, defined as that portion of south-central Wisconsin within commuting distance of Madison, WI. The Madison market has seen a relatively large number of small dams removed since 1990.

Figure 1 presents the locations of the 14 sites in south-central Wisconsin used in the study. …

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