Economic Values of the Verde River:
An Introduction, and a Suggested
Look Ahead
Prepared for: A Community Conversation:
The Verde River An Economy for a Sustainable Future
Supported by: The Nature Conservancy
Prepared by:
Bob Raucher, PhD
Jim Henderson, MS
Stratus Consulting
Boulder, CO
May 19, 2011
STRATUS CONSULTING
Presentation Outline

A brief overview of the economic value to the
region of the Verde River and associated
groundwater resources

Based on work funded by The Nature
Conservancy
STRATUS CONSULTING
Economic Values to the Region
 Many ways to consider economic values from a
regional perspective
 “Gross Regional Product” approach
– Traditional accounting of the market value of
goods and services produced annually
– For Verde Valley, perhaps $1 billion annually
 Other traditional, market-based metrics
– Value of all the property assets
– Housing stock: perhaps $6 billion, Valley-wide
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Additional Economic Values to the Region
 Many other important “values” originate outside of
the market -- “Nonmarket” goods and services
– Recreational activity and scenic vista enjoyment
– Agrarian character of portions of the Valley
– Habitat for wildlife (including special status
species)
 Challenging (and very unusual) to assess the total
value provided to a region by a natural asset (such
as the Verde River)
– Which types of values can be quantified?
– How to estimate change in value-added from
potential changes in natural asset (e.g., changes
in streamflow or aquifer levels)?
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Focus on Economic Value to the Region
 Values measured are the “direct” values
– Output-oriented perspective (i.e., economic
activity)
– There are also “multiplier effects” for some uses,
where business revenues and payments to
employees are re-spent in the local economy
– Does not include all the inherent value of the
Verde River and groundwater
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Categories of Water Use We Could Value
 Recreation and Tourism
– State Parks, National Monuments, Fishing, Verde
Canyon RR;
 Agriculture
– Production agriculture and wine industry
 Municipal / Residential
– Municipal water utility use, exempt wells, privatelyowned public water systems
 Commercial / Industrial
– Sand and gravel / cement, and golf
 Ecological
– Threatened and endangered species
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Recreation and Tourism as an Example
 Growth sector, with high annual economic value
at baseline (current) conditions
– More than $87 M direct revenues, plus $14 M
in multiplier impact, creating 737 local jobs
 Not all values included (e.g., bird watching and
boating, due to lack of data on visitation)
STRATUS CONSULTING
Recreation and Tourism – Direct Revenue,
Regional Impact and Employment
Category
Annual Direct
Expenditures/Sales
State Parks
$35.3 M
National Monuments
$33.7 M
Fishing
Verde Canyon RR
Multiplier Effect
Employment
$14.0 M
575
$8.0 M
$2.6 M
112
Approx. $10 M +
*
Approx. 50
$87.0 M
$16.6 M
737
Total
M = million, * Not estimated
State Parks = Dead Horse Ranch State Park, Red Rock State Park, and Slide Rock State Park
National Monuments = Tuzigoot National Monument, Montezuma’s Castle State Park
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Agriculture
 Mostly production agriculture including
livestock and livestock products
– For Middle Verde: $29 million per year in
sales ($33 million in expenses)
 Local sales of organic and other locally grown
produce is increasing
– Small relative monetary value
– Important noneconomic benefits
• Preserves open space and agricultural
heritage
• Promotes local sustainable values
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Wine Industry
 Rapid growth sector (doubling every year for
last 3 years)
 Wine industry direct revenue – $5.5 M /year
 Additional wine industry regional economic
impact – $3 M per year
 Potential change in annual values depends on
increasing local grape production
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Summary of Estimated Annual Economic Values
Sector
Current Annual
Value, $M
Recreation and Tourism
87 *
Production Agriculture
Wine Industry
29
5.5 *
Municipal/Residential
13 – 17.5
Commercial/Industrial
**
Ecological
Total
19 – 29
154 – 168 +
M = million
* In addition to direct values, there are multiplier effects for these sectors
** Commercial/industrial values are generally believed to be large but cannot be estimated
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Conclusions from Economic Values
 Regional water resources (Verde River and
aquifer system) provide significant “economic
value” to the region
– At least $150M/yr in direct value
– Probably considerably higher
• Not all types of values could be considered
• Multiplier effects not included in total
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Some Key Observations
 Having an idea of the economic value of the
River provides many important insights on
economic value, and what value might be
gained (or lost) due to water resource
impacts
 “Not everything that can be counted counts,
and not everything that counts can be
counted.” (Albert Einstein, attributed)
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The Triple Bottom Line (TBL) Approach:
Aligning Economics with Sustainability
Three bottom lines, to reflect:
– Financial results (cash flow, output, revenues, costs)
– Social outcomes (e.g., community values, fairness)
– Environmental (e.g., ecosystems, water quality, carbon
footprint)
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A Typical Triple Bottom Line Depiction
(implying a mythical “Bliss Point” shown in white)
Environment
Economy
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Society
TBL Graphic: Choosing the Least Cost Option May
Not Deliver Social and Environmental Values to the
Community
Social
1
Environmental
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Financial
Options that Meet Broader Goals May Increase
Financial Costs, but Yield Larger Net Benefits to
the Community
Social
2
1
Environmental
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Financial
TBL of Philadelphia’s Green Stormwater Control
SOCIAL (> $2.3B)
•
•
•
•
•
•
•
•
•
Air quality ($222 M)
Water quality ($147 M)
Carbon footprint ($27 M)
Ecosystems (+)
ENVIRONMENTAL (> $400M)
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Recreation ($525M)
Property values/aesthetics ($575 M)
Green Jobs ($125 M)
Public health: Heat stress ($1.1 B)
Energy cost savings ($36M)
• Cost of Green = cost
of Grey CSO control
=
FINANCIAL
Parting Thoughts
 The economic information provides useful insights
– Recreation and tourism contribute significant
economic value to the region
– In the agricultural sector, the growth of the wine
industry is significant
– Ecologic values are significant, but challenging to
quantify
 Looking forward, a Triple Bottom Line perspective may
be a useful way to evaluate alternative future paths
– Look beyond the financial outcomes, and include
important social and environmental values
STRATUS CONSULTING
Thank You!
Bob Raucher
braucher@stratusconsulting.com
303-381-8000 (ext 216)
Jim Henderson
jhenderson@stratusconsulting.com
303-381-8000 (ext 266)
STRATUS CONSULTING