“Of course, the river and its tributaries offered drink, food, and safe harbor for early settlers. But its greatest value for the native tribes of the area was as the key to a system of water routes that connect the flowing waters of the mid-continent to the open waters of the Great Lakes.”[i]
—Dr. David Solzman
Northeastern Illinois has from earliest times, benefited from and been dependent on its river geography and the natural wealth of its environment for the ecosystem services it provides.
As settlers came to the region, they modified the Chicago River, dug channels, and established trade routes that ensured the region’s future commercial development. Today we recognize the economic value of the river, one of the nation’s busiest commercial and recreational waterways. More than 50,000 vessels, 900,000 passengers, and 200,000 tons of cargo pass through the Chicago Harbor lock annually.[ii]
What is less widely understood: the huge, untapped economic potential that a strong and healthy ecosystem holds for the region, specifically the direct economic benefits that improving the Chicago River’s aquatic health can bring. While no comprehensive effort to date has provided a complete valuation study of Midwestern ecosystems, improved economic methods allow us to provide some conservative estimates. These estimates are important: ignoring the economic contributions our natural systems make often results in a balance sheet that rewards traditional economic growth over the preservation of our natural assets. In the six-county Chicago metropolitan region, a recent study for Chicago Wilderness estimated the value of the ecosystem services at $1.69 billion annually.[iii]
Do the direct economic benefits to the region of improving the water quality in the Chicago River exceed the direct costs? To answer the question we identified and examined three benefit areas: flood control, property value increases, and recreation. While the linkage between the costs of our policy recommendations and the economic benefits of enacting them is not a direct one, it is important to recognize that a cleaner river does provide substantial economic benefits and that those benefits must be included in the discussion.
In the past we have lacked the tools and understanding necessary to make the valuations, and so we have undervalued these natural assets, or assigned them no monetary value. Today it is exactly this innovative kind of thinking and analysis that will allow us to build public support necessary to invest in a cleaner Chicago River.
The combined direct economic benefit to Illinois if our recommendations are instituted over the next 20 years is $688 million annually. This is several times the estimated $112 million annual costs of completing TARP and disinfecting the effluent from the water reclamation facilities.
FLOOD CONTROL
Each year, the Chicago area suffers significant economic damages from flooding. The U.S. Army Corp of Engineers has estimated that in the combined sewer areas of Cook County, flooding from sewer backup is a $150 million annual problem.[iv] Flooding is also a problem in the separated sewer areas, and has related economic impacts as well, like transportation delays on the roads and reduced Lake Michigan recreation.
TARP was designed to address the flooding problem, and now that its first phase has been completed, it has already had a tremendous impact by capturing and holding water in its tunnels until it can be processed and returned to the river.
The direct economic benefits to the combined sewer areas in Cook County by completing TARP Phase Two reservoirs represent $130 million annually.[v] This number is calculated from an evaluation of 10 benefit categories:
1. Reduction in sewer backup flooding: 80% of this type of flooding occurs along the Mainstream section of the sewer system. This affects 166,000 homes annually.
2. Reduction in basement seepage flooding: structures that experience seepage flooding often have a combined problem of seepage and sewer backups, depending on the drainage area.
3. Reduction in sub-annual flooding: some homeowners experience more than one flood event each year. These events are smaller and involve cleanup costs, rather than structural or material damages.
4. Reduction in flooding from separate sewer areas that are tributaries to the combined system: In certain separate sewer system areas that are adjacent to the combined sewer area, the sanitary sewers connect to the combined sewer system. Flooding in these adjacent areas affects more than 2,300 structures annually.
5. Increased basement use due to reduced flooding: basement flooding reduces the use of significant potential living areas and negatively affects the property’s value.
6. Reduction in transportation delays: during heavy rainfall periods, streets can fill with water and reduce traffic speeds.
7. Water quality enhancement: if CSOs don’t occur, they don’t impair water quality.
8. Reduction in pumping costs at MWRD pumping stations: completion of the reservoirs will reduce some of the pumping stations’ operation and maintenance costs.
9. Improved Lake Michigan recreation opportunities: Backflow to Lake Michigan results in beach closures because of elevated bacteria levels. Reducing CSOs will reduce beach closures.
10. Water supply benefits: water quality improvements provide the opportunity to reallocate water that’s withdrawn from Lake Michigan. Instead of being diluted for sanitary functions, this water can be used for drinking water and other domestic purposes.
PROPERTY VALUES
Today it’s commonly understood that property close to parks, greenways, bodies of water, and open space will command a higher price than other, similar property. In Chicago, this idea was formally championed by Frederick Law Olmsted, who in 1868 told the future developers of Riverside, IL, that based on his experience with developing Central Park in New York, there was “a vast increase in value of eligible sites for dwellings near public parks.”
The Chicago River historically provided much of the impetus for increasing land values as factories and industry developed along its banks. Maps of land values from 1892, show ridges of high property value on both the north and south branches of the river.
However, with the development of elevated railroads, higher bridges that were never closed because of passing ships, and additional transportation options, river-edge property values began to decline, as 1960s studies of property values adjacent to the Chicago River reveal:
“From Ashland Avenue westward, there is no clear-cut indication that waterfront property carries any premium over the land immediately behind it. In fact, in most of the profiles, waterfront values seem to be depressed somewhat below the level of property away from the water.”[vi]
Cross-section analysis of the average value of a foot of land along the river reveals that as late as 1964, property values formed a trough of lower values as one approached the river, with overall values decreasing the farther one moved from the city center.
In the current market environment, which supports significant residential development along the river, Friends has joined with the City of Chicago’s Department of Planning and Development to determine if there was a corresponding improvement in values of river-adjacent properties as the water quality of the river has improved.
We first examined data on the Equalized Assessed Value (EAV) of river-edge properties for the last two assessment periods. EAV is the value used to assess property taxes. Since real estate property is assessed by the Cook County Tax Assessor’s office every three years, we looked at data from the 2002 and 2003 assessments.
We chose to evaluate an 800-foot corridor on each side of the river within the City of Chicago. Within the boundaries of this corridor, we found 8,920 river-edge properties in Chicago divided into nine zoning classes. Residential properties were the largest zoning class at 4365, followed by planned developments at 1301 and manufacturing and planned manufacturing with 1091 each.
Our analysis showed that among the 8,920 river-edge parcels, EAV increased by 20.1% between 2002 and 2003. River-edge parcel values improved at a faster rate than properties in the rest of the city. EAV baseline across the city increased 17.29% during the same period. This was a total dollar increase of $405 million, or a $202.5 million annual increase.
RECREATION
As the Chicago River’s water quality has improved and access to the river for recreational use has increased, paddlers, anglers, and bird watchers are finding an environmental resource that is underutilized. To quantify some of direct economic activity from current levels of recreational use of the river we looked at the contribution that birders, paddlers, and anglers make to the regional economy. While each of these benefits corresponds to a slightly different geographic region we have attempted to where possible limit our analysis to the four county Chicago metropolitan area. Our research documents $356 million in recreation related economic activity annually.[vii].
· Birding
Northeastern Illinois has a robust and diverse variety of birds. The Chicago Audubon Society has recorded more than 313 species of birds present in the Chicago Metropolitan area since 1970. Many of these stop in the area as they use the Chicago River flyway, and Lake Michigan’s shoreline as a migration route. Ornithologists at Chicago’s Field Museum of Natural History estimate that on average, more than five million migrating songbirds pass up and down the coast of Lake Michigan through Chicago each year.
The U.S. Fish and Wildlife Service has determined that Illinois is home to 1.8 million active birders.[viii] Backyard birding is the most prevalent form of birding, with 88% of birders watching from the comfort of their homes. 40% of birders travel more than a mile to bird, and they spend money on binoculars, field guides, bird food, bird houses, camping gear, and big ticket items such as boats, as well as travel-related costs.
To understand the economic benefit that birders provide to Northeastern Illinois, we focused on the four metro Chicago-area counties that contain 60% of the state’s population (Cook, DuPage, Lake, and Will).[ix]
The active birding population in this four county area is approximately 1 million. Each birder has a net economic value of $35 per day when he or she leaves home to bird. Birders average a little more than seven trips per year, which equals $257 million in the area annually. As the river ecosystem’s health continues to improve, biodiversity will be strengthened, and improved habitat areas can be developed. A 5% annual increase in birding recreation will generate an additional $257 million in economic activity over the next 20 years.
· Fishing
In Northeastern Illinois, as well as rest of the state, the most popular fishing trips are those to lakes and ponds (61%), while streams and rivers are second most popular (27%). As the Chicago River’s water quality has improved, fishing along the river has grown more popular. Anglers catching largemouth bass on the Chicago River while standing in the shadows of downtown Chicago skyscrapers are now a common sight. Other sections of the river are popular spots for catfish, bluegill, and other sport fish.
The four county Chicago Metropolitan area economy, benefits from 708,000 anglers who generate $435 million in retail sales.[x] This commercial activity ripples through the economy to generate $944 million in economic throughput for the state[xi]. Anglers spend, on average, $37 per day for fishing expenses including transportation, food, lodging, bait, and gear. Statewide, licensed anglers average 13 days a year fishing, and out-of-state licensed anglers spend an average of five days a year in Illinois. The annual economic benefit of anglers fishing in rivers and streams in the Chicago metropolitan area is $92 million. A 5% annual increase in fishing recreation will generate an additional $92 million in economic activity over the next 20 years.
· Paddling
Paddling the Chicago River is one of the fastest growing recreational activities in the area. One of the successful canoe rental companies states that it has grown 25-50% annually over the last five years. Through Friends’ canoe trips, interviews with canoe rental companies, and race registrations for the Flatwater Classic, Friends’ annual canoe and kayak race, we were able to document more than 11,500 paddling trips in the 2005 season.[xii]
There are also five organized rowing clubs in the city. Several of the high-school student teams have won national recognition, and team members have gone on to receive university scholarships. These teams, which often practice five or six days a week, are among the river’s most active recreational users.
To determine how much the river’s paddlers benefit the regional economy, Friends of the Chicago River joined with The Openlands Project and the Northeastern Illinois Watertrails Council to conduct the first public opinion survey of area recreational paddlers.
The survey was mailed to 1,500 randomly selected individual households in the eight Northeastern Illinois counties who had registered their canoes and kayaks with the State of Illinois.[xiii] It was also distributed electronically to members of the Illinois Paddling Council, participants in the Flatwater Classic, and members of the public who had requested maps from the Watertrails Council.
Findings:
1. The economic activity from paddling for the eight county Northeast Illinois region in 2005 was $7 million.
2. The Chicago River represents the greatest potential for increasing paddling recreation
because of its proximity to the largest population center.
We identified several additional economic benefits to the region from recreation beyond the scope of this report. Motorized pleasure boating, river park and forest preserve use and cycling all contribute to the local economy, and it is likely that our projected recreation benefits are conservative, given the river’s growing use for recreation purposes.
The three recreation activities we identified produce a total economic regional benefit of $356 million annually.[xiv] As this economic activity works through the region, it produces a significant but undetermined multiplier effect. As policies to improve the river’s aquatic health are adopted, a conservative estimate of a 5% increase in these activities would generate approximately $356 million annually over 20 years in additional economic benefits.
Conclusion:
Why should we only have nice rivers and streams in places like northern Michigan?
-Margaret Frisbie
Ø To best control stormwater and eliminate CSOs we must complete the Phase II reservoirs and increase our use of green infrastructure.
Uncertain federal funding has delayed the completion of the Phase two reservoirs. It’s time to discuss alternative finance methods to ensure that the reservoirs are completed before the current proposed date of 2023. It will require $269 million in local funds and $455 million in federal funding.[xv] If the total cost of this project were financed locally, it would cost $36.2 million a year for 20 years.
Ø To best protect public health we must disinfect the effluent from the MWRD water reclamation facilities.
The cost of disinfecting effluent is manageable. It has been estimated that the cost of disinfection for two of the three water reclamation facilities using ultraviolet (UV) technology is $84 million annually over 20 years. (Capital cost + O&M + Debt service) The per person cost $.042 per day
The direct economic benefits of improving water quality exceed the costs. A clean Chicago River is an important component of a strong economy
The direct economic benefits to the combined sewer areas in Cook County by completing TARP Phase Two reservoirs represent $130 million annually.
Our analysis of property values showed that among the 8920 river-edge parcels, EAV increased by 20.1% between 2002 and 2003. River-edge parcel values improved at a faster rate than properties in the rest of the city. EAV baseline across the city increased 17.29% during the same period. This was a total dollar increase of $405 million, or a $202.5 million annual increase.
The active birding population in the four county metro areas of Chicago area is approximately 1 million. Each birder has a net economic value of $35 per day when he or she leaves home to bird. Birders average a little more than seven trips per year, which equals $257 million in the area annually.
The four county Chicago Metropolitan area economy, benefits from 708,000 anglers who generate $435 million in retail sales. Anglers spend, on average, $37 per day for fishing expenses including transportation, food, lodging, bait, and gear.The annual economic benefit of anglers fishing in rivers and streams in the Chicago metropolitan area is $92 million annually.
Paddling the Chicago River is one of the fastest growing recreational activities in the area. One of the successful canoe rental companies states that it has grown 25-50% annually over the last five years. The economic activity from paddling for the eight county Northeast Illinois region in 2005 was $7 million.
While each of these benefits corresponds to a slightly different geographic region we have attempted to where possible limit our analysis to the four county Chicago metropolitan area The three recreation activities we identified produce a total economic regional benefit of $356 million annually.
[i] The Chicago River: an illustrated history and guide to the river and its waterways.
[ii] www.lrc.usace.army.mil/co-o/Chi_Lock_02.htm
[iii] Bagstad, Ken. 2006. Valuing ecosystem services in the Chicago region. Chicago Wilderness Journal 4:18-16.
[iv] USACE, 1986. Chicago underflow plan final phase I GDM feasibility report and environmental assessment.
[v]Ibid (McCook = $87 m), + (Thornton = $31m), + (O’Hare = $12 m) Total= $130 million
[vi] Solzman, David M. 1966. Waterway industrial sites: a Chicago case study, p. 77.
[vii] USFS. 2001. Birding in the United States: a demographic and economic analysis.
[ix] Census data 2004 Illinois population= 12,713,634. Cook = 5,327,777. Dupage = 928,718. Lake = 692,895. Will = 613,849, Four County Total= 7,563,239 or (59%)
[xi] Ibid. $1,600,000,000 x .59 = $944,000,000
[xii] 10,000 rental trips, Flatwater Classic, Friends guided trips
[xiii] Cook, Dupage, Kane, Kankakee, Kendall, Lake, McHenry, Will
[xiv] Birding= $257m + Fishing=$92 m + Paddling= $7m. Total $356 m
[xv] The federal portion includes a $167 million reimbursement to the MWRDGC for the Thornton reservoir.
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