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51.1241 (Deer Creek:) B, ES

SUMMARY OF RECREATION BENEFITS AND COSTS DEER CREEK PROJECT

--6 A LEVELn STUDY ~ SUBMITTED TO: S -dWYOMI NG WATER DEVELOPMENT COMMISSION ~ u '0 S 0_ ~ ~ BiB ~~~~~ O~t.ilO. ~ ca."c ~ I' A.~~~~

WYOMING STATE lIBRAR)' DOCU~1ENTSDIV'SION CHEYENNE. WYOMING

PREPARED BY: WYOMING RECREATION COMMISSION APRIL 1984 SUMMARY

RECREATION BENEFITS AND COSTS OF THE PROPOSED DEER CREEK RESERVOIR

by Karen Z. Andrews April 1983 Cheyenne, Wyoming INTRODUCTION

Past events in the recent history of Wyoming dictated the need for proper benefit evaluations of proposed Wyoming reservoirs. As a result, a Memorandum of Agreement was signed between the Wyomi ng Water Development Commission and the Wyoming Recreation Commission in September 1983. It was agreed that evaluation procedures from the Water Resource Council document, Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies, would be used and the proposed Deer Creek project near Casper would serve as a test case for the procedures. The primary objective of this first evaluation was to assess the recreational potential and value of Deer Creek reservoir.

Major emphasis was placed on determining the net willingness to pay of all the potential Deer Creek visitors. Willingness to payor net benefits can be defined as the amount recreation users would be willing to pay beyond what they now pay rather than forgo a gi ven amount and type of recreation activity at Deer Creek. This net benefit may be calculated for each year over the life of the project and translated into the cumulative present worth of recreation benefits at Deer Creek. This present worth of recreation benefits, as well as cost, may then be incorporated into the overall project benefit-cost ratio. Such an incorporation could ultimately help or hinder the economics of a water project. 2

It must be stressed that net recreation benefits is not a measure of the recreation-related expenditures which are induced by a recreation site such as Deer Creek. As a result, the impact of the site on the local or reg i ona 1 economy is not determi ned. Addi ti ona 11 y, the benef it fi gure is not indicative of the revenues or reimbursement the state will receive as the result of its investment. It is simply an estimation of the dollar value recreation users place on Deer Creek. To assume this value will translate into a dollar return is incorrect.

METHODOLOGY

Three methods for recreation benefit evaluation are outlined in Principles and Guidelines. They are the travel cost method, the contingent valuation method, and the unit day method. Of the three, the regional trvel cost approach was selected for the Deer Creek project for a variety of reasons. The location of the proposed site in relation to large Bureau of Recl amation reservoi rs and several Wyom; ng State Parks, as illustrated in Figure 1, was the primary justification. Visitor use data from 1981 was available from Seminoe, Glendo, Guernsey, , and Boysen reser­ voirs. This data included a sample of visitors and their origins; infor­ mation which is necessary to utilize the travel cost method. Additionally, the location of Deer Creek could cause substantial competition. Present visitors at reservoirs such as Glendo and Guernsey could be drawn away due to the creation of Deer Creek, thereby transfering use and benefits from 3

WYOMING

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LEGEND

I. Alcova Reservoir 1 6. Guernsey State Pork 2. Big Horn Notional Forest 17. Hot Springs Stote Pork 3. Big Horn Canyon National Recreation 1 8. Keyhole Stote Pork Area 19. Lake De Smet 4. Black Hills National Forest 2 O. Laramie Plains Lakes 5. Boysen State Park. 2 I. Medicine Bow National Forest 6. Bridoer-Teton National Forest 22. Ocean Loke 7. Buffalo Bill State Pork 23. Pathfinder Reservoir 8. Curt Gowdy State Park 24. Pinedall Area Lokes 9. Oevil'. Tower Notional Monument 2 5. Seminal Stote Pork. I Q Flaming Gorge Notional Recreation Area 2 6. I I. Fontenelle Reservoir 27. I 2. Fort Bridoer Sta.. HIStoric Site 28. Torrinoton Area Lake. 13. Fort Loramie National Monument 29. Wheatland Area Lokes 1 4. Glenda Slate Pork 3 O. Wheatland Reservoir I 5. Grand Teton Natlonol Park 3 I. Vellow,tone National Pork

Figure 1. Location of the proposed Deer Creek reservoir. 4

the existing sites to Deer Creek. Thus, in determining the benefits of Deer Creek, such competitive relationships must be considered. The recreation use estimation model derived in the travel cost approach enables a representation of this relationship.

The implementation of this method involved several steps. Initially, two recreation use prediction equations were created and incorporated in a benefit estimation computer program adapted from the Forest Sevice. The prediction equations correlated use at the five forementioned parks with site characteristics, the distance each user traveled to reach that site, and the proximity of competing recreation sites. Future use was then esti­ mated for the five parks and Deer Creek using approximations of future county populations and site characteristics. From these estimations the net benefits of Deer Creek were assessed using travel cost as a proxy for the site price. The result was the annual recreation value of Deer Creek for the years 1990 to 2018.

THE VALUE OF DEER CREEK

Table 1 provides a detailed presentation of the dollar value of the annual recreation benefits of Deer Creek, the cost of displaced use attri­ butable to Deer Creek, and the annual present worth of the difference bet­ ween the two or the adjusted net benefits. Both the annual benefits and 5

TABLE 1 NET BENEFITS OF DEER CREEK

Average Infl ated Net Benefits Real Net I nfl ated Displacement Adjusted For PW PW PW Benefit Net Benefit Cost Cost 8i% 10% 12% YEAR (000' s) (000' s) (000 IS) (000 IS) (000 IS) (000' s) (000 IS)

1990 346 552 90 462 426 ~20 412 1991 346 585 95 490 416 ~05 390 1992 346 620 101 518 406 390 369 1993 346 657 107 550 397 376 350 1994 346 696 113 583 388 362 331 1995 346 738 120 618 379 349 313 1996 346 782 127 655 370 336 296 1997 346 829 135 695 362 324 281 1998 346 879 143 736 353 312 265 1999 346 932 151 780 345 301 251 2000 425 1215 190 1025 418 359 295 2001 425 1288 202 1086 408 346 279 2002 425 1365 214 1152 399 334 264 2003 425 1447 226 1221 390 321 250 2004 425 1534 240 1294 381 310 236 2005 425 1626 254 1372 372 299 224 2006 425 1724 270 1454 363 288 212 2007 425 1827 286 1541 355 277 200 2008 425 1937 303 1634 347 267 190 2009 425 2053 321 1732 339 257 180 2010 524 2680 429 2250 406 304 208 2011 524 2840 455 2385 396 293 197 2012 524 3011 482 2528 387 282 187 2013 524 3192 451 2680 378 272 177 2014 524 3383 542 2841 370 262 167 2015 524 3586 575 3011 361 253 158 2016 524 3801 609 3192 353 243 150 2017 524 4029 646 3384 345 235 142 2018 524 4271 684 3587 337 226 134

29 Year Cumulative PW Benefits 10,944,888 9,003,588 7,107,690

All figures are rounded to the near~st thousand dollars (OOO's) These are total benefits assuming no fee is charged at Deer Creek 6

displacement costs were escalated by 6% a year to create the inflated versions. The inflated differences or adjusted net benefits were then di scounted by each respecti ve interest rate. Three separate rates were used as the future is unknown. The summation of each discounted annual net benefit for the 29 year analysis period resulted in the cumulative present worth of recreation benefits at Deer Creek. The three separate benefit totals are $10,944,888 at 8i%, $9,003,588 at 10%, and $7,107,690 at 12%.

It must be emphasized that these benefits were determined assuming a degree of recreation development at Deer Creek. A preliminary suggestion of 50 campsites, 13 picnic sites, a boat ramp, and several roads was made. These improvements were chosen as a starting point for estimating benefits and are not necessarily the Recreation Commission1s final suggestions for development. A need does exist for additional camping and picnicking faci­ lities in the southeastern segment of the state, however a thorough recreation needs analysis must be performed before the decision is made as to where these facilities should be placed. However, the reader must realize that if no recreation development is placed at Deer Creek the above benefits will be of a lower-magnitude. It would be totally incorrect to

assume 7 to 10 million dollar in recreation benefits if the site is left undeveloped or maintained.

Addi tionally, it must be noted that any type of development wi 11 involve an investment beyond that suggested in the Deer Creek Feasibility 7

Study prepared by R.W. Beck and Associates. For example, the construction of 50 campsites, 13 picnicking sites, and the associated roads, restrooms, and parking areas would cost $649,327 in 1989 dollars. This is assuming access roads into the area are in good condition. Operation and main­ tenance costs of a minimum of $20,000 per year would be required to police the area as well as maintain new roads and facilities. Additional facili­ ties would boost this cost. The present worth of these costs for 29 years wou 1d be between $401,000 and $591,000 dependi ng upon the interest rate. As a result, well over a million dollars would need to be invested in recreation development at Deer Creek to begin realizing the benefits esti­ mated in this study.

A final consideration involves the effects of the Deer Creek reservoir operation pl ans on the fi nal benefi t estimates. At the time of analysi s, an indication of the degree and times of drawdown at Deer Creek was unknown and thus was not included in the derivation of the benefit estimate. As a result, periods of severe drawdown may result in substantially lower bene­ fits. A Level III analysis will reveal the effects of the reservoir opera­ tion plan on these benefits. 8

CONCERNS AND RECOMMENDATIONS

Although the preliminary benefits associated with Deer Creek are posi­ tive, one must question whether dollars should be invested in recreational development at Deer Creek for several reasons. As has been mentioned, addi tiona 1 data is needed to determi ne the adequacy of the reservoi rand surrounding lands for water-based recreation activities. However, of utmos t concern is the wi sdom of such an investment ina regi on currently offering an abundance of such activities. At present five major reservoirs exist within a one to two hour drive of the proposed Deer Creek site and the towns of Casper, Glenrock, and Douglas. Each of these reservoirs offer a variety of outdoor opportunities.

According to preliminary studies, the water acreage to be provided by Deer Creek is not needed for recreational purposes. However, the surrounding lands could be used for much needed water-related camping and picnic sites. The Recreation Commission feels such land acquisition may not be needed as developme-nt potential exists at state parks such as Glendo. Additionally, each park supports facilities, camping and/or picnic sites, park personnel, and ma i ntenance shops. I n terms of i nves tment it appears more sensible to build additional camping and picnic sites at a park with existing personnel and maintenance equipment. 9

The Water Development Commission may dispute the previous viewpoint. Their primary objective is to develop water resources for municipal and agricultural purposes. The initiation of recreation benefit estimation procedures was to meet the demands of environmentalists and planners throughout the state, as well as to improve the cost-benefit ratio of pro­ posed water projects. On many projects it is difficult to justify the cost of a reservoi r based on water benefi ts alone. As a resul t, recreation benefits were considered.

Several problems arise however. Recreation benefits are identified and used in the project benefit-cost ratio, but the facilities and opera­ tions to insure the benefits may not be constructed or maintained. Hawk Springs in Southeastern Wyoming provides an example. Benefits were esti­ mated and facilities are to be constructed, however operation and main­ tenance funds are not being supplied by the state legislature. As a result, one could expect one of several scenarios to occur. The site could be left untended, resulting in slow deterioration, and thus not accrue the benefits claimed. Alternatively, the Recreation Commission could be man­ dated to maintain the site on its current budget. This would ensure some maintenance, however it would detract funds from existing state parks and rec rea t ion prog rams. Add it i ona 11 y, as more and more water proj ec ts are developed an over-emphasis may be placed on unneeded water-related recreation activities. The latter two effects would be a detriment to the current budget and goals and objectives of the Recreation Commission. 10

These scenarios are unfavorable, however several alternatives do exist. Additional funds and personnel could be provided to the Recreation Commission for the management of new reservoirs with high recreati'on poten­ tial. Similarly, the sites could be turned over to county governments or private interests with a desire to manage the recreation assets. In conclusion, it is the Recreation Commission's desire that the Water Development Commission and the legislature consider all these implications and possibilities before using these benefit figures and encouraging recreation use at new water projects.