that support for programs in general increases as knowledge about the WHPD .... $21. $21. Is likely to sell the home in the next 10 years. (MOVE). $21 $21 $21.
PREFERENCES FOR WASTEWATER MANAGEMENT PROGRAMS IN RHODE ISLAND: ACCOUNTING FOR SHELLFISH, DRINKING WATER, AND STRATEGIC BEHAVIOR
Chris J. Miller, Program Analyst Forest Service, United States Department of Agriculture Stephen K. Swallow, Professor Department of Environmental and Natural Resource Economics, University of Rhode Island Jon G. Sutinen, Professor Department of Environmental and Natural Resource Economics, University of Rhode Island
Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Providence, Rhode Island, July 24-27, 2005
Copyright 2005 by Chris Miller. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies
Introduction
Pollutants associated with residential wastewater, such as pathogens and nutrients, continue to take a toll on the public health, ecological integrity, and economic prosperity of coastal communities. These pollutants are generated, in part, by failing septic systems and account for a variety of damages, including:
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Seasonal closures of shellfish beds,
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Adverse impacts to marine ecosystems, and
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Contamination of aquifers serving as public drinking water sources.
Local, State, and Federal agencies have proposed, and in some cases adopted, a mixture of voluntary and regulatory programs to help mitigate these problems. An example of such a program is the adoption of wastewater management districts and wellhead protection ordinances whereby district property owners are required, or encouraged with financial incentives, to improve existing septic systems or hook-up to municipal sewer systems. The process for adopting program components such as ordinances and grants is time consuming and normally requires a sequence of town meetings, referenda on local ballots or other mechanisms for public input.
Problems occur when communities resist program conditions, and managers are unable to explain why, due to uncertainty about the relative importance of factors such as individual environmental preferences, perceptions about environmental conditions, and
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expectations about provision (e.g., treatment) responsibilities and behavior of others. It is the last factor, ‘expectations about behavior’, that accounts for sub-optimal public good provision.
Wastewater management districts and corresponding treatment requirements provide assurances about provision behavior, but in doing so, create potential for ancillary private benefits and costs that may vary across neighborhoods or types of landowners. Perceptions of program inequity may develop if private benefits and costs are not distributed consistently or if a program imposes treatment requirements on individuals within a wastewater management district but fails to acknowledge environmental beneficiaries or provision behavior (e.g., lack of) by those outside of a district. Distribution of treatment responsibility and incidence of private benefits is likely to have a significant effect on program approval, but the magnitude of this effect, relative to the impact of other factors such as environmental preferences and socioeconomic characteristics is unclear.
The goal of this paper is to describe and rank the factors affecting resistance to septic system management programs in a coastal watershed, thereby providing an opportunity to characterize the relative importance of water quality protection, homeowner perceptions and attitudes, and private onsite benefits derived from heterogeneous treatment requirements. The implications for designing acceptable wastewater management programs, as well as surveys to generate values for multiple water quality attributes will also be discussed.
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This paper relies on a model capable of estimating homeowner willingness-to-pay for septic system management programs in the coastal community of Potowomut, Rhode Island. Homeowner preferences are modeled using random utility theory and contingent choice data from a survey of Potowomut homeowners. Willingness-to-pay results are used to rank factors and conditions affecting program acceptability. The paper begins by presenting background information about the study area, followed by discussions of the modeling framework, the survey and experimental design, and model estimation. Willingness-to-pay values and factor ranking results are summarized, and the paper concludes with a discussion of management and valuation research implications.
Background
Potowomut is a community within the City of Warwick, Rhode Island and is located between Greenwich Bay (a shallow bay within Narragansett Bay) and the Hunt River. The area is primarily residential and is spread over two watersheds. The northeastern one third of Potowomut is within the Greenwich Bay watershed, while the remaining southwestern portion is located within the Hunt-Potowomut watershed. Public drinking water wells are located in the western end of Potowomut, and these wells draw water from the Hunt River aquifer. Potowomut is entirely dependent on individual septic disposal systems (e.g., septic systems and cesspools) for wastewater treatment, and there were no plans for sewer access at the time of this study. The two water quality issues addressed in this study are protection
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of public drinking water wells and protection of Greenwich Bay from residential wastewater generated by Potowomut.
Conditional closures of shellfishing beds in Greenwich Bay, due primarily to elevated fecal coliform levels during periods of heavy precipitation, eliminates much of the revenue generated by the shellfishing industry in Warwick (WPD, 1994). Economic losses due to shellfishing closures in Greenwich Bay in 1992 were estimated to be $1 million (FDA, 1993). The city of Warwick recommended that the northeast area of Potowomut, adjacent to Greenwich Bay, be considered one of 14 areas of concern for the Greenwich Bay watershed (WDP, 1994). Rhode Island Department of Environmental Management (RIDEM) inspected septic systems in this area between 1993 and 1995 and found that 18.3% of individual systems are backing up to the ground, backing up to the house, impacting groundwater, or require pumping at least four times per year (O’Rourke, 1996).
In addition to coliform bacteria, septic systems in Potowomut are also a potential source of nitrogen, a nutrient capable of damaging the Greenwich Bay ecosystem. It has been estimated that 71 to 94 percent of the nitrogen inputs to coastal ponds in Rhode Island are derived from groundwater flow (Valiela et al., 1990). Valiela et al. (1992) also determined that septic systems and cesspools are a significant source of nitrogen in groundwater by showing that domestic wastewater from septic systems contributes more nitrogen to Buttermilk Bay, MA than precipitation or the use of fertilizers.
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In addition to Greenwich Bay impacts, it has also been determined that the public wells in the Hunt-Potowomut watershed portion of Potowomut, are threatened by residential wastewater from homes near these wells. In the late 1980’s, elevated levels of bacteria were responsible for the closure of a public well in Potowomut, and moderate to high levels of nitrates and sodium were also detected in six other wells (GZA, 1994). The exact source of the bacteria has not been determined, but the city of Warwick considers septic systems and cesspools to be a threat to the Hunt River aquifer.
In 1994, the City of Warwick developed a plan to help restore unconditional shellfishing to Greenwich Bay (WDP, 1994). The plan re-emphasized the importance of the northeast portion of Potowomut as an area of concern for bacteria and served as the basis for bond issues to fund improvements in wastewater treatment in communities surrounding Greenwich Bay. The plan also paved the way for pilot studies involving the installation of innovative septic systems with denitrifying technology in Potowomut. Management recommendations for that area of concern included maintenance, repair, and upgrades or replacement of existing septic systems or cesspools, higher standards for future land development, and education.
Warwick has also proposed a strategy for protecting public wells from residential wastewater generated by Potowomut. Engineering studies recommended a wellhead protection district (GZA, 1994), and the City of Warwick proposed an ordinance for homeowners within the district in 1996. The proposed ordinance requires all homeowners to pump their current systems every three years, and any homeowner who expands their
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floor area by 25% must install an approved sewage denitrification disposal system (also referred to as innovative or alternative systems). Approximately 100 homes are located within the proposed district, and the district does not overlap the northeast area of concern regarding Greenwich Bay impacts. At a town workshop designed to introduce the wellhead protection ordinance, a number of homeowners expressed concerns about and resistance toward the ordinance. As a result, no further action has been taken regarding the proposed district and ordinance.
Public Good Models and Random Utility
Individual strategic or conditional behavior in the context of public good provision may help account for some of the resistance toward the ordinance. Water quality can be characterized as a public good supplied by inputs (i.e., septic systems) that also provide private benefits (i.e., healthy and safe onsite conditions at the home). Cornes and Sandler (1986) present a general model of public good provision which acknowledges the private benefits of the public good input:
U = U ⎛⎜ y, x(q), Z(q + Q o ) ⎞⎟ ⎝ ⎠
where, y is the amount of private goods consumed, Z is the characteristics of the public good consumed, x is the private characteristics associated with an individual’s contribution q to the public good Z, and Qo is the amount of public good input provided by other individuals. Acting alone, individuals will maximize utility under the assumption that Qo contributions
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by others is fixed (i.e., d Qo /dq=0) and first order conditions imply that an individual will supply amount q such that marginal benefits of q are equal to the marginal cost or price of q. Individuals are not expected to account for their impacts on others, and the corresponding provision of Z is suboptimal.
Given the general model for public good provision, homeowner utility is specified as:
Ui = Ui[ Yi, Hi( qi; ci), WQ( ti; Qo, ci),]
where, utility is derived from the consumption of private goods (Yi), the consumption of public goods in the form of water quality (WQ), and the consumption of private wastewater treatment services and household quality (Hi) associated with the homeowner’s own choice of septic system strategy (qi). Total water quality protection (WQ) is assumed to be the aggregate impact of the individual choice (qi) and the septic system strategy choices of all other homeowners (Qo). The homeowner is not likely to have an exact measure of Qo, but it is assumed that the homeowner has expectations about the condition and type of system maintained at the average home. The term ci is a vector of exogenous homeowner characteristics which affect preferences for water quality protection and private wastewater treatment services (e.g., age, education, attitudes, environmental perceptions, etc.).
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Assuming a linear tradeoff in the homeowner’s ability to purchase or obtain the set of goods,{qi, Yi }, using resources Ii 1 , substituting for Yi in utility above, and removing explicit references to WQ and H, homeowner utility can be re-specified as:
Ui = Ui (Ii-Fee, qi; Qo, ci)
where, Fee is the total cost (e.g., annualized capital cost and maintenance cost) of a given system. The homeowner’s discrete decision to install a new system is assumed to be based on utility maximizing behavior. That is, a homeowner will install a new system if:
Ui[ Ii-FeeNEW, qiNEW; Qo, ci] > Ui[ Ii-FeeSQ, qiSQ; Qo, ci]
where superscripts refer to a new system (NEW) and the current system at status quo (SQ) and recalling that Qo represents septic system conditions at other homes. In the absence of water quality protection and septic system improvement programs, the homeowner therefore acts under the assumption that their septic system decisions (qi)have no impact on the decisions of others (Qo) (i.e., d Qo /dqi = 0).
Homeowner utility can be re-specified to acknowledge septic system management programs. A program in Potowomut is likely to consist of (1) water quality protection goals, (2) septic system technology requirements for achieving the goals, and (3) annual homeowner fees to fund capital and maintenance costs. Water quality goals provide the homeowner with assurances that their own actions or contributions, qi, toward the public
TP
1
I = Y + Fee, where I is initial resources or income. 9
good (WQ), will be matched by necessary levels of action at other homes to meet desired water quality goals. The homeowner will therefore support a program if:
Ui[ Ii-FeePROG, qiPROG; GoalPROG, ci] > Ui[ Ii-FeeSQ, qiSQ; Qo, ci]
where, FeePROG is the annual program fee paid by the homeowner, qiPROG is a vector describing septic system requirements under the program, and GoalPROG is a vector describing water quality goals which replaces Qo. The individual may be interested in knowing about the program requirements imposed on others (Q’), in which case, the goals can be specified as a function of Q’, GoalPROG(Q’), thereby providing an opportunity to assess the impact of heterogeneous treatment responsibilities. The vector of exogenous homeowner characteristics, ci , may include the following groups:
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Environmental Perceptions about the severity and nature of current water quality impacts associated with septic systems in general,
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Attitudes About Treatment Responsibility such as (1) feelings about government programs and uses of tax revenues, and (2) awareness of environmental action and government assistance in neighboring communities,
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Household Characteristics including number of children as well as the age, income, and education level of the household, and
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Knowledge and understanding about septic system technology and past regulatory efforts and management programs in Potowomut.
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Survey Design
The survey of Potowomut homeowners is designed to gather information about preferences for septic system management and water quality. A significant number of Potowomut homeowners are likely to know about the proposed wellhead protection district and management recommendations listed in the strategic plan for restoring Greenwich Bay. Due to existing management proposals and publicized water quality problems, the survey adheres to actual conditions as much as possible. It is feared that deviations from actual conditions (e.g., asking homeowners about preferences for sewers when sewer are not an option for Potowomut) may create confusion or raise suspicions among some respondents.
Drafts of the survey were developed and pretested using input from four focus groups and four additional pretest meetings in Potowomut and other local coastal communities.
The survey mailed to Potowomut homeowners consists of four parts. Part A contains questions about the respondent’s septic system and knowledge of alternative systems and the proposed wellhead protection district. Part B contains the contingent choice questions about water quality protection programs. Each question asks the respondent if they “prefer” “Program A”, “Program B” or “Neither Program”. Each program is described by:
1. One of three alternative levels of water quality protection: A) Drinking water is protected from sewage in Potowomut. B) Greenwich Bay is protected from sewage in Potowomut.
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C) Drinking water and Greenwich Bay are protected from sewage in Potowomut. 2. One of three options for septic system replacement: A) You will be hooked up to a community system. B) An innovative septic system will be installed at your home only if you sell your home or expand the living space by 25%. C) You will not be required to change your septic system, but you will help fund septic system replacements at other homes. 3. The annual cost ($25, $50, $100, or $200) to the household (costs cover hookup, installation, maintenance and pumping for the new systems) until they sell their home (new owners continue to pay the same fee). In the case of innovative system installation (i.e., septic system replacement B above), households only pay the specified fee if they expand or sell their home.
Part C of the survey asks for opinions about issues which may have affected the respondent’s answers in Part B. Part D contains demographic questions.
Results
A total of 301 out of 491 surveys were returned (61% response rate), but data from 247 were retained for analysis after removing protest responses and responses that were not usable. Almost two thirds (62%) of the respondents indicate that they have never had problems with their septic system. One half (50%) of the respondents have repaired, modified or added on (e.g., added a leach field or dry well) to their system, while approximately one
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third (34%) of the respondents have repaired, modified, or added on to their system within the last ten years.
Approximately one quarter of respondents have heard about the proposed drinking water wellhead protection ordinance, while 77% of the homeowners, from within the proposed wellhead protection district (WHPD), have heard of the ordinance (twelve percent of the sample population lives within the proposed district). Approximately one third (37%) of the respondents have heard about innovative or community septic systems, while 50% of the respondents from within the proposed WHPD have heard about these systems.
In Part B, respondents chose “Neither Program” between 36% and 54% of the time depending on the question number.
Responses to attitudinal questions (Part C of the survey) are presented in Table 1. Respondents felt strongly that (1) more information about innovative or community systems and (2) more evidence of Potowomut impacts on Greenwich Bay and drinking water are needed. Many respondents (47%) agree strongly that they should not have to pay additional fees for water quality protection, but 28% find fees acceptable. When asked if their home is in an area where septic systems can affect Greenwich Bay or drinking water, 18% and 11% strongly agree respectively.
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Table 1 - Responses to Attitudinal Questions (Number of respondents (% of respondents)) How strongly do you feel about the following statements:
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
No Opinion
No response
138 (47%)
47 (16%)
36 (12%)
38 (13%)
23 (7.8%)
6 (2.0%)
8 (2.8%)
113 (38%)
74 (25%)
20 (6.8%)
31 (10%)
40 (14%)
13 (4.4%)
5 (1.7%)
119 (40%)
76 (26%)
30 (10%)
23 (7.8%)
27 (9.1%)
12 (4.1%)
9 (3.0%)
153 (52%)
73 (25%)
26 (8.7%)
7 (2.4%)
9 (3.0%)
19 (6.5%)
9 (3.0%)
88 (30%)
52 (18%)
39 (13%)
30 (10%)
61 (11%)
18 (6.1%)
8 (2.7%)
My home is not in an area where septic systems can affect drinking water……
85 (29%)
40 (14%)
48 (16%)
25 (8.4%)
32 (11%)
60 (20%)
6 (2.0%)
My home is not in an area where septic systems can affect Greenwich Bay…..
64 (22%)
37 (13%)
58 (20%)
34 (12%)
52 (18%)
45 (15%)
6 (2.0%)
78 (27%)
70 (24%)
38 (13%)
33 (11%)
51 (17%)
15 (5.1%)
11 (3.7%)
Resident should not have to pay additonal fees for water quality protection… I have not seen enough information to indicate that Greenwich Bay has been polluted by sewage from Potowomut……… I have not seen enough information to indicate that septic systems can contaminate drinking water in Potowomut…… I needed more information about innovative and/or community systems…… Grants for system replacement should be awarded based, in part, on income level……………
The city should help maintain septic systems even if the costs are passed on to the residents.
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Principal components analysis is conducted to identify composite attitudes and/or demographic scores that characterize groups of Potowomut homeowners. A total of five principal components are retained from a set of 14 variables:
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"Household Score" (HOUSE): Households consisting of smaller families, longer-term residents of Potowomut, and older occupants receive higher scores.
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"Wealth/Education Score"(WEALTH): Higher income, college educated households who frequently use Greenwich Bay and live near the Bay receive higher scores.
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"Knowledge Score"(KNOW): Respondents who are familiar with or knowledgeable about innovative or community systems and familiar with the wellhead protection ordinance recieve higher scores.
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"City Management Score"(CITY): Respondents who do not want the city to maintain SYSTEM and do not want sewers receive higher scores.
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"Fairness/Legitimacy" Score (FAIR): Respondents who feel that there are other important pollution sources besides existing household, that Potowomut should not be "singled out" in the abatement programs, and that there should be no more fees receive higher scores.
Discrete Choice Model Estimation
The models in this study are estimated using the multinomial logit procedures provided by the LIMDEPTM Software package (Greene, 1995). All models are linear and weighted
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to correct for discrepancies between the distribution of education levels within the sample and 1990 US Census data. The unrestricted model is specified as: U =
βPA ⋅ Program Attributes +
βPAI ⋅ Interactions Between Program Attributes + βLEP ⋅ Interactions with Local Environmental Perceptions + βCF ⋅ Interactions with Civic Factors + βHH ⋅ Interactions with Household Characteristics + βKN ⋅ Interactions with Homeowner Knowledge + βLEARN ⋅ Learning Effects where all β’s are vectors of parameters to be estimated, Program Attributes includes fees, technology requirements, and water quality goals, Interactions includes interactions between homeowner information and program attributes, and Learning Effects account for changes in preferences as the homeowner becomes more familiar with the discrete choice questions and program attributes. The unrestricted model contains a total of 73 variables. Likelihood ratio test results indicate that a simple model consisting only of septic system program attributes (i.e., no interaction terms) is rejected in favor of the unrestricted model.
The significance of groups of interaction terms are tested using likelihood ratio tests to determine what types of interactions should be retained in the model. Results are presented in Table 2.
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Table 2 - Significance of Interaction Groups in Unrestricted Model Program Attributes
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Groups of Homeowner Characteristics Local Environ. Attitudes re: Household Perceptions Factors Treatment Responsibility
Homeowner required to have a new system (SYS interactions)……………………….
Yes
Noa
Noa,d
Homeowner not required to have a new system but must help pay for others. (H interactions)………...……………………
Noa,b
---
---
•
Greenwich Bay is protected (GB)………..
Yes
---
Yes
•
Drinking water is protected (DW)……….
Yes
---
Yes
•
Program Fee (FEE)……..……..…………
No
No
No
•
ACTIONc………………………………..
---
Yes
No
•
Yes = X2 significant at P
