Abstract: Paper No. 186
The Economic and Fiscal Impact of Lake Remediation on Onondaga County
William Duncombe, Shannon Felt, James R. Follain, and Bernard Jump, Jr.
This is the fourth and final report to the Onondaga Lake Management Conference about the economic and fiscal implications for Onondaga County of court-mandated expenditures for sewer-related remediation of Onondaga Lake. Several major conclusions emerge from the analysis.
- Implementation of court-ordered lake remediation will likely have a small negative impact on the local economy assuming the annual environmental benefits are relatively small ($10 per household per year). When remediation related spending is expected to be at its peak during the 2010-2020 period, the effects on the Syracuse area economy would include 800 fewer jobs than would be expected without the cost of remediation, a population loss of 1800, and $25 million less in real disposable income.
- It is critical to distinguish between the cost of lake remediation and the cost of other sewer system expenditures. Estimates of these "other" waste treatment expenditures exceed the amount needed for lake remediation and/or nonremediation grow throughout the forecast period.
- The recreational and other less tangible benefits associated with lake remediation would have to equal about $120 per household per year to generate what we label as an economically neutral impact.
- Remediation will significantly increase county sewer rates during peak construction years, but the impact of nonremediation expenditures on sewer rates could be more important, especially after 2020. At the point of its maximum impact in 2015, the cost of remediation spending is estimated to increase sewer rates to a level 34 percent above the sewer rates that existed in 1995, and it will add 0.24 percentage points to the average family's sewer rate burden (relative to median family income).
- If Onondaga Count were to receive a $75 million grant from the state's Environmental Bond Act and to qualify for SRF financing for all lake remediation spending, the sewer rate increase due to lake remediation would be reduced by approximately 25 percent during the peak years between 2010 and 2020. More generally, the negative impact of remediation expenditure on the local economy and the county's financial condition will be reduced in proportion to the amount of external aid provided by the state and the federal government.
- The outlook for Onondaga County's fiscal condition is not especially robust. With a local economy that is likely to grow slowly and no reason to expect any letup in the pressures that propel the county budget upward, it will be difficult for Onondaga County to avoid a growing tax burden.
Finally, the results of this analysis are subject to a number of critical caveats and assumptions. Two are particularly important.
- First, the methods we were required to use to estimate the nonremediation waste treatment expenditures are quite simplistic. The County needs to prepare a carefully developed capital plan that takes account of its other wastewater facility needs and the cost of operating and maintaining this new capital. Without accurate information about the County's wastewater facility needs there will be great uncertainty surrounding anyone's estimates of the economic impact of these other expenditures.
- Second, our study focuses primarily on the costs associated with lake remediation. Missing from the information available to us are credible, comprehensive estimates of the value of benefits to be realized from a cleaner Onondaga Lake by the residents of Onondaga County. We believe such estimates should be developed. Although studies of these benefits are complex to conduct, expensive, and often controversial, their value must be compared to the current alternative: little or no firm, statistically-based information about the preferences of the residents of Onondaga Lake for a major effort to clean Onondaga Lake.
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