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Restore a River, Boost a Tax Base

Buffalo study finds still more gains from cleanups

November 2, 2006 | By Andy Guy
Great Lakes Bulletin News Service

Andy Guy/MLUI
  A new study finds that cleaning up of the heavily polluted Buffalo River would dramatically boost property values near the river.

BUFFALO — Richard Markel doesn’t need an academic study to tell him property values are depressed in the Old First Ward. The landlord has owned, maintained, and rented several homes in the neighborhood for more than a decade and, during that time, he's seen the housing market stagnate if not decline.

"People ask $30-35,000 for a house," Mr. Markel said. "They're lucky to get $20-25,000."

Real estate typically gets more expensive the closer you get to the waterfront. But that is not always the case in grey and gritty Buffalo, the second-largest city in the state of New York, situated along the rocky shores of Lake Erie. In neighborhoods like the Old First Ward, located beside the Buffalo River, property actually depreciates due to extensive pollution buried beneath the waterway, according to a study recently released by a group of local officials, economists, and scientists.

That's the bad news for this de-industrializing city trying to kick its Rust Belt image.

The good news is that the study, which was funded by the U.S. Environmental Protection Agency, also found that prospective homebuyers would be willing to pay 15 percent more for homes near the Buffalo River if the contamination was eliminated. That could trigger as much as an additional $543 million in taxable value for the properties near the degraded river in downtown Buffalo.

"It appears that reversing this 'quality of the river' effect could have appreciable effects on property values and hence on the tax base in the area," said Dr. John Braden, the University of Illinois economist who led the study, which is based on an extensive review of real estate sales, homeowner surveys, and GIS mapping. "And it appears that, with a clean river, residents believe that properties could be appreciably more valuable than the conditions in the current marketplace."

Another Kind of Green
Until recently, the case for investing in a major Great Lakes restoration program hinged primarily on its environmental merits. Modernizing outdated sewers systems, the argument holds, prevents raw sewage from contaminating rivers. Stopping the spread of invasive species helps sustain native fish populations. And conserving coastal wetlands ensures natural habitats for rare plants and animals.

Each point is backed by decades of expert scientific research from the region's top universities. But, since government officials throughout the Great Lakes Basin adopted the Strategy to Restore and Protect the Great Lakes in December 2005, the one-dimensional environmental case for funding the $20 billion plan has struggled to gain traction with elected officials, especially federal lawmakers. Many Washington legislators fear that the proposed public works project will yield only a nominal financial return on such a steep investment.

So proponents of funding the restoration strategy have begun adding an economic component to their campaign. The goal is to demonstrate in dollars and cents that fully funding the ambitious public works project will have sweeping benefits that reach far beyond the environmental goals of securing a globally unique freshwater ecosystem. Indeed, restoration supporters now are building the case that decisive action to execute the cleanup strategy is essential to the region's future economic competitiveness.

"It's relatively easy to get a sense of what the costs of environmental cleanup are," said Dick Munson, the executive director of the Northeast-Midwest Institute, the organization coordinating Dr. Braden's work. "You can certainly go and figure out the cost of dredging chemicals out of a river, for example. But the benefit side is much tougher to understand, particularly the economic gains. Understanding those benefits of environmental cleanup is critical to garner local enthusiasm and acquire financial support” for cleanup projects.

The thesis now emerging is that an investment in Great Lakes restoration will have a direct economic influence in four key areas, at both the regional and national scale.

First, in a region hit hard by manufacturing job losses, the program will immediately put people back to work on projects such as reconstructing sewers and other outdated infrastructure.

Second, it will secure the existing industries in the region that rely on access to clean, robust water supplies, a resource that's increasingly scarce worldwide.

Third, cleaning up pollution, reclaiming wetlands, and other complicated projects will require new skills and technologies. So the restoration spending can act as seed funding that drives workforce development, product manufacturing, commercialization of new ideas, and the expansion of globally significant economic sectors organized around water resource improvement.

And fourth, as Dr. Braden's recent study suggests, it will enhance quality of life, attract developer interest to disinvested urban areas and, by extension, strengthen the region's ability to retain and attract talented workers—the key commodity in the knowledge economy.

"Understandably, the desire to reside by the Buffalo River would improve dramatically following the removal of pollutants that have been present for generations," said Buffalo Mayor Byron Brown.

Big Problem, Big Opportunity
In Buffalo, Dr. Braden's study found that toxic contamination beneath the surface of the Buffalo River depresses property values in adjacent residential areas by as much as $140 million. It also reveals that property often depreciates based on its proximity to the river.

"There's a huge effect from being really close to the river," Dr. Braden said. "Say you had a house 1.5 miles from the river that was worth $100,000. If you move that same house one-tenth of a mile closer to the river its worth would be about $99,000. But if you had a home worth $100,000 two-tenths of a mile from the river, and you moved it one-tenth of a mile closer to the river, it would lose $10,000 in value."

Dr. Braden's Buffalo report, released here on September 8 of this year, is the second of three, first-of-a-kind, in-depth looks into the link between pollution and property value along Great Lakes waterways. His first study, released in July 2003, revealed that eliminating PCBs and other toxic contamination from Waukegan Harbor, located north of Chicago, could add as much as $800 million to owner-occupied residential property values in Waukegan.

And a forthcoming study of the Sheboygan River in Wisconsin indicates that pollution buried in that river is depressing property values in Sheboygan and surrounding townships by perhaps as much as $108 million.

All three study areas – the Buffalo River, Waukegan Harbor, and the Sheboygan River – are classified as severely degraded areas and listed among the 26 Areas of Concern in the Great Lakes region. The federal government estimated in a 2003 study that cleaning up those sites would require $7.4 billion.

Experts said it's difficult to put a price tag on cleaning up the Buffalo, a waterway that was declared dead in the 1920's, caught fire in the 1960's, and today remains laced with mercury, lead, arsenic, and other toxic chemicals. Federal, state, and local governments have invested $89.3 million in restoration efforts since 2003. Most agree the cost of remediation requires hundreds of millions more dollars.  

But Dr. Braden's study suggests ramping up that investment could lead to significant economic rewards. In addition to restoring property values, completing the cleanup also would reduce harbor maintenance costs, encourage tourism, and safeguard public health. Dr. Braden also suggested cleaning up the Buffalo River would unleash a wave of new economic development around the waterway. But his study did not look closely at those possible additional gains; it was narrowly focused on understanding the latent value trapped in nearby residential properties.

"We measured just a very small part of what might follow cleaning up the Buffalo River," Dr. Braden said, noting that the report did not account for the far-reaching benefits related to human health, improved fishing, and increased recreational opportunities. "It looks like there's considerable upside for property owners in the vicinity of river and perhaps more broadly in the Buffalo area."

"Makes sense to me," said property owner Richard Markel. "If the river is cared for, the houses will be cared for. It all works together."

Journalist Andy Guy directs the Michigan Land Use Institute’s Water Works project and writes about Smart Growth issues from Grand Rapids. He is also managing editor at Rapid Growth Media and maintains a blog at http://greatlakesguy.blogspot.com/. Reach him at aguy@mlui.org.
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