W. Bowman Cutter

Valuing Groundwater Recharge in an Urban Context

Urbanization often creates waterrelated externalities such as increased flooding and decreased groundwater recharge. Decreased recharge can lead to the diminution of potentially valuable groundwater. Groundwater’s ability to buffer water-supply shocks may be a substantial component of the value of groundwater stock. I argue that in urban contexts, autoregressive rather than i.i.d. stochastic processes are a better characterization of water supply processes. Data for the Los Angeles area suggests that an autoregressive process is a better approximation of water supply processes than alternative processes and produces economically and statistically significantly different estimates of buffer and groundwater stock values. (JEL Q25, Q32)

Activities in Models of Recreational Demand

Economists have taken divergent approaches to incorporating on-site activities into their empirical specifications of site choice models. We develop a model that explicitly allows individuals to choose both on-site attributes and site activities. This model not only conditions the marginal value of site attributes on the choice of an activity, but also explicitly recovers the marginal rates of substitution across activities. This approach reduces biases in the welfare analysis of changes in site attributes when preferences for attributes depend upon the choice of activities undertaken at the site. We test hypotheses generated by our model by comparing rival models of demand for access to beaches in Costa Rica. (JEL D1, Q2)

Costs and benefits of capturing urban runoff with competitive bidding for decentralized best management practices

[1] Urban storm water runoff is both a source of pollution and a potentially valuable resource. Centralized facilities traditionally have been used to manage runoff. Decentralized best management practice (BMP) options may be able to avoid the costs of purchasing expensive urban land needed for centralized facilities. We investigate the cost effectiveness of implementing BMPs in a Los Angeles area watershed with two voluntary incentive mechanisms: competitive bidding and a fixed subsidy. The subsidy mechanism has lower BMP placement costs but generates relatively large excess profits for landowners. The bidding mechanism has higher BMP placement costs but generates smaller excess profits and tends to be more cost effective for the regulator, particularly at higher runoff capture levels. We also compare the costs of bidding and centralized alternatives and find that the bidding alternative is significantly less costly than a centralized alternative for a range of storm water capture goals. Finally, we examine the value of infiltrated storm water and find that it is up to 38% of total BMP costs.

The uneasy case for lower parking standards

Minimum parking requirements are the norm for urban and suburban development in the United States (Davidson and Dolnick (2002)). The justification for parking space requirements is that overflow parking will occupy nearby street or off-street parking. Shoup (1999) and Willson (1995) provides cases where there is reason to believe that parking space requirements have forced parcel developers to place more parking than they would in the absence of parking requirements. If the effect of parking minimums is to significantly increase the land area devoted to parking, then the increase in impervious surfaces would likely cause water quality degradation, increased flooding, and decreased groundwater recharge. However, to our knowledge the existing literature does not test the effect of parking minimums on the amount of lot space devoted to parking beyond a few case studies. This paper tests the hypothesis that parking space requirements cause an oversupply of parking by examining the implicit marginal value of land allocated to parking spaces. This is an indirect test of the effects of parking requirements that is similar to Glaeser and Gyourko (2003). A simple theoretical model shows that the marginal value of additional parking to the sale price should be equal to the cost of land plus the cost of parking construction. We estimate the marginal values of parking and lot area with spatial methods using a large data set from the Los Angeles area non-residential property sales and find that for most of the property types the marginal value of parking is significantly below that of the parcel area. This evidence supports the contention that minimum parking requirements significantly increase the amount of parcel area devoted to parking.

The Determinants of Non-Residential Real Estate Values with Special Reference to Local Environmental Goods

This paper presents the results of an empirical study of the determinants of non-residential real estate values in Los Angeles County. The data base consists of 13, 370 property transactions from 1996 to 2005. Separate spatial econometric models are developed for industrial, commercial, retail and office properties. The study focus on the impact on property values of local amenities. Our analytical results provide insights on how amenities may affect non-residential properties values and how the impact may differ across property types. Our empirical results offer evidence that explicitly modeling spatial dependence is necessary for hedonic non-residential property models where there is interest in local amenities. We also show that it is also important to account for the temporal dimension since ignoring it can lead to misinterpretation of the real measure of spatial dependence over time. Moreover, we find that in general amenities that are jointly valuable to firms and household, such as parks or air quality have either weak or non-robust effects on nonresidential values. However, the fact that the joint amenities coastal access and crime appear to have stable correlations across specifications would be consistent with a higher firm than household valuation. In contrast, those amenities that are likely only valued by firms, such as transportation access and proximity to concentrations of skilled workers have robust and significant correlations with non-residential values. JEL codes: R52, H23