Preserving Farms and Forests in Sussex County, Delaware: Public Value Sussex Communities: Growing Better A Workshop Sponsored by the University of Delaware Coastal Community Enhancement Initiative Georgetown, Del. June 28, 2007 Supported by the National Research Initiative of the Cooperative State Research, Education and Extension Service, USDA, Grant # and the University of Delaware Coastal Community Enhancement Initiative Joshua M. Duke Department of Food and Resource Economics University of Delaware Robert J. Johnston Tammy W. Campson Department of Agricultural and Resource Economics University of Connecticut

Question: If farms and forests are so valuable to society, why are we losing them so fast? Answer: Actions of the private market do not always promote the best public choices

 Market forces undervalue farmland and lead to excess conversions  Benefits and costs of farmland loss are realized by different groups of people  Most farmland benefits are non-market, public good benefits –Examples: scenic views, outdoor recreation, wildlife habitat, rural character, existence of historic farms, etc. Market Value ≠ Total Economic Value

But what is the true value of farmland to Sussex County residents? Are non-market values actually large?

Valuation Survey & Matrix Calculations  Choice experiment methodology simulates a market where residents could “buy” preservation  Random sample mail survey in Georgetown and Smyrna/Clayton  Mixed logit statistical analysis  Calculate mean willingness to pay for many possible land types  Identify typical farm types and target communities –Dagsboro, Georgetown, Laurel, Millsboro, Milton, Seaford  Aggregate over all households in a community  Capitalize using 6% discount rate  Conservative assumptions –No value beyond community, no value from public access

Example: Average Community Values for a Sussex Poultry Farm Value per acre per year CAPITALIZED VALUE PER ACRE (6% Disc. Rate) $1,662$27,707 These are big numbers! Annual flow of non-market values per acre can exceed the net value of market products

Land Parcel is used for Poultry 10 Acres** Vegetable 100 Acres Forest 50 Acres Grain 150 Acres Forest 100 Acres Grain 200 Acres Per Acre Value of Preservation in Georgetown* Parcel likely to be developed in next 10 years Preserved using State PACE Parcel likely to be developed in years $4,708 $42,932 $40,233 $43,273 $17,293 $55,517 $37,037 $28,349 $36,143 $39,184 $32,659 $18,107

Parcel likely to be developed in next 10 years Preserved using outright purchase by land trust Parcel likely to be developed in years $1,455 $39,679 $24,549 $27,589 $14,040 $52,264 $17,209 $8,521 $20,459 $23,500 $10,759 negligible Land Parcel is used for Poultry 10 Acres** Vegetable 100 Acres Forest 50 Acres Grain 150 Acres Forest 100 Acres Grain 200 Acres Per Acre Value of Preservation in Georgetown*

Land Parcel is used for Poultry 10 Acres** Vegetable 100 Acres Forest 50 Acres Grain 150 Acres Forest 100 Acres Grain 200 Acres Per Acre Value of Preservation in Georgetown* Parcel likely to be developed in next 10 years Preserved using conservati on zoning Parcel likely to be developed in years negligible $22,407 $16,073 $19,113 negligible $34,991 $11,665 $2,978 $11,983 $15,024 $6,681 negligible

An Illustration  Recently, a farm of 52 acres was preserved by State PACE  State paid $375,147 ($7,214 per acre) –Above historical average of $1,452 per acre  Was it worth it?  Yes, benefits of preservation almost certainly exceeded costs –If it was a high-development-risk forested parcel in Seaford, then the benefits to the community would be $1,492,296 –Hence, preservation would have net benefits over $1 million –Net benefits would be larger if benefits outside Seaford were included

What do Sussex Residents Value Most?  Land maintaining agricultural areas and farming as a way of life  Land offering public access (for hunting or for walking)  Land offering high aesthetic value  Land with benefits for other environmental attributes such as water quality  Land preserved by state agencies  Specific type of farmland is often less important

Closing Messages  Understanding economic incentives leading to farmland loss is a primary step in prevention  Economics is not all about dollars in someone’s pocket –It is about making the best decisions possible with regard to our scarce resources  Sometimes, the best economic decisions involve few dollars changing hands –What matters is the well-being of Sussex County residents  Evidence suggests that preserving farms and forests promote this well-being