Economic Values of the Verde River: An Introduction, and a Suggested Look Ahead

1. Economic Values of the Verde River: An Introduction, and a Suggested Look Ahead Prepared for: A Community Conversation: The Verde River -An Economy for a Sustainable FutureSupported by: The Nature Conservancy Prepared by: Bob Raucher, PhDJim Henderson, MS Stratus Consulting Boulder, COMay 19, 2011

2. Presentation Outline • A brief overview of the economic value to the region of the Verde River and associated groundwater resources • Based on work funded by The Nature Conservancy

3. Economic Values to the Region • Many ways to consider economic values from a regional perspective • “Gross Regional Product” approach • Traditional accounting of the market value of goods and services produced annually • For Verde Valley, perhaps $1 billion annually • Other traditional, market-based metrics • Value of all the property assets • Housing stock: perhaps $6 billion, Valley-wide

4. Additional Economic Values to the Region • Many other important “values” originate outside of the market -- “Nonmarket” goods and services • Recreational activity and scenic vista enjoyment • Agrarian character of portions of the Valley • Habitat for wildlife (including special status species) • Challenging (and very unusual) to assess the total value provided to a region by a natural asset (such as the Verde River) • Which types of values can be quantified? • How to estimate change in value-added from potential changes in natural asset (e.g., changes in streamflow or aquifer levels)?

5. Focus on Economic Value to the Region • Values measured are the “direct” values • Output-oriented perspective (i.e., economic activity) • There are also “multiplier effects” for some uses, where business revenues and payments to employees are re-spent in the local economy • Does not include all the inherent value of the Verde River and groundwater

6. Categories of Water Use We Could Value • Recreation and Tourism • State Parks, National Monuments, Fishing, Verde Canyon RR; • Agriculture • Production agriculture and wine industry • Municipal / Residential • Municipal water utility use, exempt wells, privately-owned public water systems • Commercial / Industrial • Sand and gravel / cement, and golf • Ecological • Threatened and endangered species

7. Recreation and Tourism as an Example • Growth sector, with high annual economic value at baseline (current) conditions • More than $87 M direct revenues, plus $14 M in multiplier impact, creating 737 local jobs • Not all values included (e.g., bird watching and boating, due to lack of data on visitation)

8. Recreation and Tourism – Direct Revenue, Regional Impact and Employment M = million, * Not estimated State Parks = Dead Horse Ranch State Park, Red Rock State Park, and Slide Rock State Park National Monuments = Tuzigoot National Monument, Montezuma’s Castle State Park

9. Agriculture • Mostly production agriculture including livestock and livestock products • For Middle Verde: $29 million per year in sales ($33 million in expenses) • Local sales of organic and other locally grown produce is increasing • Small relative monetary value • Important noneconomic benefits • Preserves open space and agricultural heritage • Promotes local sustainable values

10. Wine Industry • Rapid growth sector (doubling every year for last 3 years) • Wine industry direct revenue – $5.5 M /year • Additional wine industry regional economic impact – $3 M per year • Potential change in annual values depends on increasing local grape production

11. Summary of Estimated Annual Economic Values M = million * In addition to direct values, there are multiplier effects for these sectors ** Commercial/industrial values are generally believed to be large but cannot be estimated

12. Conclusions from Economic Values • Regional water resources (Verde River and aquifer system) provide significant “economic value” to the region • At least $150M/yr in direct value • Probably considerably higher • Not all types of values could be considered • Multiplier effects not included in total

13. Some Key Observations • Having an idea of the economic value of the River provides many important insights on economic value, and what value might be gained (or lost) due to water resource impacts • “Not everything that can be counted counts, and not everything that counts can be counted.” (Albert Einstein, attributed)

14. The Triple Bottom Line (TBL) Approach: Aligning Economics with Sustainability Three bottom lines, to reflect: • Financial results (cash flow, output, revenues, costs) • Social outcomes (e.g., community values, fairness) • Environmental(e.g., ecosystems, water quality, carbon footprint)

15. A Typical Triple Bottom Line Depiction(implying a mythical “Bliss Point” shown in white)

16. TBL Graphic: Choosing the Least Cost Option May Not Deliver Social and Environmental Values to the Community

17. Options that Meet Broader Goals May Increase Financial Costs, but Yield Larger Net Benefits to the Community

18. TBL of Philadelphia’s Green Stormwater Control SOCIAL (> $2.3B) = FINANCIAL ENVIRONMENTAL (> $400M) • Recreation ($525M) • Property values/aesthetics ($575 M) • Green Jobs ($125 M) • Public health: Heat stress ($1.1 B) • Energy cost savings ($36M) • Air quality ($222 M) • Water quality ($147 M) • Carbon footprint ($27 M) • Ecosystems (+) • Cost of Green = cost of Grey CSO control

19. Parting Thoughts • The economic information provides useful insights • Recreation and tourism contribute significant economic value to the region • In the agricultural sector, the growth of the wine industry is significant • Ecologic values are significant, but challenging to quantify • Looking forward, a Triple Bottom Line perspective may be a useful way to evaluate alternative future paths • Look beyond the financial outcomes, and include important social and environmental values

20. Thank You! Bob Raucher braucher@stratusconsulting.com 303-381-8000 (ext 216) Jim Henderson jhenderson@stratusconsulting.com 303-381-8000 (ext 266)