Iowa Lakes Project
Iowa Lakes Project

About

Frequently Asked Questions

What is the Iowa Lakes Valuation Project and what are its objectives?

The Iowa Lakes Valuation Project is an economic study of the use of Iowa’s lakes, the economic value of Iowa lake water quality, and the potential economic and social impacts of improvements to the water quality of Iowa’s lakes. The data for this study have been collected over a four-year period via annual surveys of a random sample of Iowa residents. By gathering recreational lake usage and other information from the same individuals over a four-year period, we have generated a unique data set for analyzing the impact of water quality on visitation and usage patterns over time.

To assess the value of water quality improvements to Iowans, we employ the economic concept of "maximum willingness to pay" (MWTP). MWTP is the dollar amount individuals are willing to pay and, in doing so, forgo other goods and services they could have used that money to purchase. The MWTP is a standard concept of economic value for any type of good, environmental or otherwise, and is commonly used by policymakers and analysts to assess how to spend limited public monies.

What do you mean by the "economic value" or "benefit" of improving water quality in Iowa’s lakes?

The economic definition of the value of a good, say, a pair of shoes, is the amount of other goods and services individuals would be willing to do without if they absolutely had to in order to have the pair of shoes. So, if Laura has a pair of shoes that Jane wants and Jane is willing to give up other goods and services worth up to $300 for that pair of shoes then the value of that pair of shoes to Jane is $300. It is convenient to measure this in dollars rather than in quantities of the exact goods and services as this makes comparisons much simpler. For this reason, economists often use the term "maximum willingness-to-pay" ("MWTP") to refer to this economic value. Of course, what a consumer actually has to pay can be quite different from their MWTP. A consumer who can find the pair of shoes on sale for only $20 will enjoy a great deal -- he receives what economists refer to as a "surplus" (or "net-benefit") of $280.

The economic value of water quality improvements in Iowa lakes can be analogously defined as the maximum amount individuals are willing to pay to obtain those improvements. Policymakers can use this MWTP concept to decide how to spend limited public resources. By identifying which public goods and services consumers most highly value, policymakers can identify which public projects are likely to improve the quality of life for their citizens the most, that is, which projects are the "best deals." For this reason, the economic value just described is the concept used by the federal government for cost-benefit analyses of government regulations.

While these values are difficult to measure, economists and limnologists at Iowa State University have undertaken a large research project to estimate these values for water quality improvements at over 130 lakes in the state.

Who funded the project, who are the research partners, and where did the data come from?

The Iowa Lakes Valuation Project is a collaborative study involving economists and ecologists from Iowa State University’s Department of Economics, Center for Agricultural and Rural Development (CARD), and Department of Evolutionary Ecology and Organismal Biology. Dr. John Downing and other members of the Iowa State University Limnology Laboratory recently completed a five-year project to provide the Iowa Department of Natural Resources (DNR) with a lake database that includes water chemistry, biological analysis, and watershed GIS data for 132 of Iowa’s principal recreation lakes. The Lakes Valuation Project was designed to complement the research being done by the Iowa State University Limnology Laboratory by collecting use and valuation data for the same set of recreational lakes over a comparable time period (both projects collected data through 2005). Some lakes on the website have been updated with more recent data.

A STAR grant from the Environmental Protection Agency augments work begun with funding from the Iowa DNR and support from CARD. DNR provided for the first year of the survey and the STAR grant provided the necessary funding to continue the survey for the full four years, thereby allowing the collection of this unique multi-year data set and interdisciplinary study.

A four-year panel data set of survey responses was collected, including actual trip behavior and future expected trips for the years 2001 through 2006, water quality scenarios measuring willingness to pay for quality improvements, and knowledge and perceptions regarding lake quality for over 4,000 households.

The three most recent waves of survey work (2009, 2014, and 2019) were funded by Iowa DNR. From 2014, a set of urban lakes were included in the lake set and three previous lakes were excluded, which brought the number of lakes to 139 in the 2014 and 2019 survey.

How does economic value (MWTP) compare to the expenditures and jobs generated by economic activity?

In addition to the economic value of water quality improvements, local communities and regions are often interested in another measure of the economic impact of environmental improvements, namely, the impact that that those improvements bring to their local economy. Typically, this "expenditures impact" is measured in total dollars of spending generated locally by the environmental improvement and/or the number of local jobs these expenditures create. This type of information is particularly relevant for those interested in promoting and maintaining the viability of local communities and those interested in generating support from a local community for local investment in a good.

Income and employment associated with expanded visitation can be estimated using an input-output (I-O) model for the region. An I-O model is essentially a general accounting system tracking expenditures and purchases among sectors in the local economy. Using the IMPLAN data and a modeling system, we can configure an I-O model that allows us to estimate the increased visitation and expenditures generated by a water quality project. The new visitors and the purchase they make stimulate the local economy, and the I-O model takes these estimates of new tourism spending, tracks them through the rest of the economy, and summarizes the secondary and overall purchases.

While the "expenditures impact" of a water quality project (or other environmental improvement) is not a measure of the value or benefit of that project to society as a whole, it measures activity of potentially great interest to local communities and stakeholders. Thus, while its appropriate use differs from that of "economic value" (maximum willingness to pay), it is still a useful concept.

When should the expenditures impact be used to evaluate a project and when should the economic value (maximum willingness to pay) be used?

Whether one wants to use the economic value (maximum willingness to pay/MWTP) of a water quality improvement, the expenditures impact, or both, depends on the policy question that is being asked. If the purpose of the evaluation is to determine whether the benefits from investing in a project are worth the costs, the appropriate measure to use is MWTP. The MWTP measures what people are willing to give up (if they had to) to obtain the project. If this value exceeds the costs of the project, then policymakers know that by undertaking the project, they have provided people with a valuable good -- the product they have provided is worth more than the cost. The MWTP measure is the standard measure used in cost-benefit analysis.

If the question of interest is whether a local community should support a water quality improvement project, then how much increased economic activity a town or region might experience as a result would be of interest. One can imagine that this measure might be particularly important to a town council or local citizens group considering whether to provide partial funding or other form of support to a water quality project.

How do changes in property values and local real estate taxes fit into this discussion?

In addition to the "expenditures impact," an environmental improvement project can affect the value of real estate in a local region and therefore alter the tax base and level of real estate taxes collected. Like the increased market activity that generates more revenue to local businesses and jobs to local inhabitants, increased tax revenues may be a strong incentive for a community to support an environmental project. However, like the "expenditures impact" of a project, these tax revenues do not measure the value of the project from a societal prospective, that is, it would not be a component of benefits in a cost-benefit analysis.

The increase in the property value itself is, however, a component of these changes in real estate values that does measure part of the economic value of the project. If the project makes a lake or region more desirable to live in, then people will be willing to pay more for homes in the area than they would be in absence of the project. The increased demand raises the prices of homes in the area, and the increased prices are basically reflective of the value of the project, rather than the innate value of the home (the same house sold for less before the project was built than afterwards, so the difference in price can be attributed to the value of the project).

What are ecosystem services? Can they be valued using the economic value (maximum willingness to pay) concept?

The term "ecosystem services" is used to describe a wide variety of services that ecosystems and the environment as a whole provide to people. These services range from the provision of flood control to water cleaning capability to provision of habitats for hunting opportunities, and many more. Different sets of services are associated with different ecosystems; thus, a tidal wetland may provide a very different set of services than a prairie remnant in the Northern Plains. While the concept of maximum willingness to pay as a way to value ecosystem services is equally valid as for any other good or service, in practice these services are challenging to value since it can be difficult to describe their full range of attributes and products.

Glossary of Terms

Algae

A simple organism that that produces chlorophyll through photosynthesis. An overabundance of these organisms (so-called algal blooms) may discolor the water and use up available nutrients.

Chlorophyll

A green pigment produced by green plants including algae that is essential to photosynthesis, or the conversion of light, carbon dioxide, and water to oxygen. Chlorophyll concentration is often used as an approximate index of algal biomass. Measured in µg/L or ppb.

Cyanobacteria

Photosynthesizing, single-celled organisms that live mostly in fresh water, sometimes referred to as blue-green algae but they are classified as bacteria. In overabundance, they can use up oxygen and block sunlight in a body of water.

Ecosystem Service

A term used to describe a wide variety of services that ecosystems and the environment as a whole provide to people.

Eutrophic

A nutrient-rich lake. It tends to be shallow, "green," and has limited oxygen.

Expenditures Impact

Spending in total dollars generated locally by an environmental improvement and/or the number of local jobs these expenditures generate.

Maximum Willingness-to-Pay (MWTP)

An economic value measure, the MWTP is the amount an individual is willing to pay for a good or service and, in so doing, forgo other goods and services that are available for purchase.

Mesotrophic

A lake with nutrients that fall between eutrophic and oligotrophic levels, or mid-level nutrient concentration.

Nonpoint Source Pollution

Unlike pollution that can be traced to a single point or points, such as an industrial waste spill, nonpoint source pollution comes from many diffuse sources. Nonpoint pollution is picked up as water moves over or through soil and is finally deposited in lakes, rivers, coastal waters, or even watersheds. Pollutants can include pesticides, herbicides, and fertilizers from agricultural lands and nutrients from livestock operations.

Oligotrophic

A lake that is nutrient poor, usually clear and deep, with high concentrations of dissolved oxygen.

Phosphorus

A chemical element and nutrient important in water quality measures. Its quantity controls the extent of algal growth in a lake. Too much phosphorus in a lake causes more algae to grow, which in turn reduces the amount of light that can penetrate the water and reduces oxygen.

ppb

Parts per billion.

Secchi Disk

A flat, black and white disc used to measure the transparency of water. The disk is lowered into water by a rope until a pattern on the disk is no longer visible.

Secchi depth

The depth at which the Secchi disk disappears from sight when lowered into a body of water.