Kaiate Falls Water Quality an Assessment of Public Preferences for Intervention Options

Kaiate Falls Water Quality An assessment of public preferences for intervention options Report prepared for Bay of Plenty Regional Council Yvonne Matthews, PhD (YSM Research) August 2018 1 Executive Summary This report presents the results of a survey about Kaiate Falls in the Bay of Plenty region. The purpose of the study is to better understand the non-market values of Bay of Plenty residents and their preferences for possible interventions to improve water quality in Kaiate Stream. 710 people completed the web survey. Just over a third of people said they knew at least a bit about Kaiate Falls, and a similar proportion could remember visiting it at some time in the past. Kaiate Stream is the 11th most popular site in the region, and six percent of people said they had visited in the past year. Respondents were asked to rank their most and least preferred intervention options given different distributions of the cost of each option. The intervention options were: 1) No additional intervention; 2) Complete fencing only; 3) Complete fencing and riparian planting; 4) Banning grazing in upstream of the falls; 5) Purchasing and retiring grazing land around the falls for public use. Options 2, 3, and 4 allowed for a distribution of costs between ratepayers and affected land-owners, while option 5 would have to be funded entirely by ratepayers. The most preferred intervention option was a grazing ban (Option 4) (37 percent of respondents), followed by retirement of land for public use (Option 5)(26 percent). The grazing ban (Option 4) was ranked last by only 6 percent of respondents. Retirement (Option 5) was the second most preferred option (26 percent), but had a larger number of people ranking it last (16 percent) compared with fencing. The no change option (Option 1) was preferred by only 7 percent of people and ranked last by 59 percent, indicating a strong overall preference for action. Figure 1 – Proportion of the time ranked highest Figure 2 - Proportion of the time ranked lowest The allocation of costs for a grazing ban (Option 4), fencing or planting (Options 2 and 3) had only a very small effect on preferences – probably because the cost per rateable unit was very small. The 2 biggest difference is for the “no change” option (Option 1), which was preferred by 3 percent of respondents if land owners pay the maximum for alternative options, up to 7 percent of respondents if ratepayers pay the maximum for alternative options. When asked about their preferred level of water quality, over half of respondents chose the highest quality grade “A”. When asked who should bear the cost of improving quality, a third of respondents said land-owners. A third said ratepayers should contribute, 14 percent said central government and 9 percent said users or tourists. A quarter of respondents want to split the cost between two or more of these categories. Two-thirds of respondents said they were personally willing to pay an annual amount to improve water quality at Kaiate Falls. Half were willing to pay more than $10 per year. Depending on how conservative the correction for hypothetical bias, Bay of Plenty residents’ total willingness to pay (WTP) to improve water quality at the Kaiate Falls may be in the order of $0.9 million to $2.9 million per year, or $9 to $29 per resident household. 3 1 Introduction The Kaiate Falls Scenic Reserve is a popular recreational area within a short drive from Tauranga, Pāpāmoa, Mount Maunganui or Te Puke. It offers a short bush walk that leads to a series of waterfalls with deep swimming holes, a picnic area and scenic views. Since 2015, a permanent health warning has been in place advising against swimming at the Falls due to high risk of infection. In spite of this advisory, the Falls continue to be popular with swimmers. Based on monitoring since 2012, water quality at the Falls is in the orange “D” attribute state for E. coli (Scholes, 2018), as defined in Appendix 2 of the National Policy Statement for Freshwater Management (Ministry for the Environment, 2014). As illustrated in Figure 4, a stream is considered to be suitable for swimming if it is in the yellow “C” attribute state or above. Figure 3 - Map showing Kaiate Falls location The main types of bacteria found are from ruminants (cows, sheep, deer or goats and can be influenced by possum), with an avian influence at several locations, probably from birds that nest and feed above the Falls. Upstream farming activities are very low intensity and may not be financially viable if a lot of additional restrictions are put in place. In recent years, landowners have invested in fencing and planting of streambanks above the Falls, with the support of local councils and the community. According to Bay of Plenty Regional Council estimates, approximately 16km of fencing is still required for the catchment to be fully fenced to exclude stock from the main streams. Riparian margins still unplanted total approximately 33.9 hectares according to these estimates. The Bay of Plenty Regional Council has set out targets to improve the suitability for swimming of popular swimming sites around the region in its Long Term Plan 2018-2028. The Kaiate Falls are currently ranked as the worst monitored site in terms of suitability for swimming in the Bay of Plenty, yet, as described below, they remain a popular swimming site. The aim of this study is to better inform land management interventions in the catchment, bearing in mind the spectrum of possible interventions, their costs and the degree of uncertainty about their effectiveness. The purpose of this study is to understand the value that the wider community (based on the sample population) would place in water quality improvements at the Falls, and the relative acceptability of different intervention options. Figure 4 - Water quality scale 4 2 Method 2.1 Total Economic Value framework Total economic value (TEV) is a framework that tries to solve the problem of how to articulate the obvious importance of natural capital and associated ecosystem services. Typically only a small proportion of ecosystem services can be captured by, and traded in markets. However, natural capital is the foundation upon which the other capitals are completely dependent (see Figure 5, below). Figure 5 – An illustration of the five capitals1 In the TEV framework, the value of a natural resource (such as Kaiate Falls) is a combination of use and non-use values held by society. Use values can be further broken down into direct use (recreation, harvesting, cultural activities) and indirect use (scenic value). A large component of non- use value is option value, which is the option to use the site in future if the type of resource becomes scarcer or personal circumstances change. In addition, people may have non-use values because they perceive a benefit to preserving the resource for use by future generations and/or other species. Researchers often try to estimate non-market total economic value in monetary terms. This can be done by (directly or indirectly) asking people how much they would be willing to pay (WTP) to improve or how much they are willing to accept (WTA) to allow degradation. However, non-market valuation methods have major limitations including: Contextual effects – “value” is hugely dependent on how the question is framed, and individual or environmental contexts. Even demand for market goods is fickle and dependent on the availability of substitutes and complements so this problem is not limited to public goods. Another contextual aspect is how the “next best alternative” is framed. Is another environmental project going to lose resources if this project is funded? If it is funded by a rates increase, what will the household have to give up? Value is an almost circular construct because it depends on the value of the next best alternative. Hypothetical bias – people may believe an environmental resource is important and say they are willing to pay a certain amount, but change their minds when the cost becomes real (and they are forced to give up their “next-best alternative”, above). 1 https://www.forumforthefuture.org/project/five-capitals/overview 5 Myopia – over longer timeframes and higher uncertainty, the value of options increases significantly and tends to be severely underestimated.2 Preference construction – people have little experience thinking about their preferences for environmental goods and have no chance to learn through feedback from previous decisions3 so are probably constructing them on the spot. Therefore, their stated WTP is likely to be unreliable. Using real-world decisions (“revealed preferences”) such as recreation trips can avoid the problems of hypothetical bias and preference construction. However, travel costs analyses are still highly dependent on the assumption of the next best alternative, and results can be highly variable due to seasonal, sampling, or other external effects. Nor can revealed preference techniques capture option or non-use values. The expectation of deriving a specific monetary non-market value that will be stable over a useful period (e.g. a 10-year council planning timeframe) seems very optimistic. With all the problems associated with measuring values, what is the best way to get results that will be useful and reliable for policy decision makers? The answer lies in the concept of incentive compatibility (Collins & Vossler, 2009). In order to maximise validity, the preference elicitation question must be as similar as possible to the policy decision that needs to be made. If the intervention options are known, it is better to ask directly about preferences for these interventions rather than indirectly by estimating WTP for fish (for example).

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