UC Irvine

In addition to irrigation and consumption, water provides recreational, aesthetic, and ecosystem services. These services are not traded in traditional markets and thus do not have an observable market price. Assigning monetary values to environmental goods and services allows policy makers to compare the costs and benefits of waterbodies to the economic value of alternative uses. This monetization is especially important given the precarious state of waterbodies all over the world, which are subject to drastic declines in water levels and persistent pollution from urban and agricultural runoff. Given these conditions, waterbodies will require costly remediation efforts in the near future.

The goal of this dissertation is to evaluate the monetary values of two such waterbodies in the Southwestern United States (US): the Salton Sea in southeast California, and Lake Mead in Clark County, Nevada, which is also the primary water source for Las Vegas and for other large urban centers in the Southwest. Typically economic valuation methods include hedonic pricing, travel costs, and contingent valuation techniques. After examining all three methods and reviewing preexisting economic valuation studies on waterbodies, I use the hedonic price method and recent residential sales near both waterbodies to determine the economic costs of environmental degradation at both waterbodies.

In general, hedonic studies find that both proximity and environmental quality of waterbody sites are positively capitalized within the housing market. Although this is a consistent result in much of the economic valuation literature, even among travel costs and contingent valuation studies, these case studies suggest that this effect is vulnerable to worsening climate conditions and unstable economic conditions. With regards to the Salton Sea, I find that the severe environmental degradation of the Sea has transformed this one-time amenity to a disamenity. Homes located farther from the Sea sell at higher values than those located closer. With regards to Lake Mead, the economic dynamics of the Las Vegas Metro Area dominate the housing market such that proximity to the Lake Mead National Recreation Area, in spite of its size and millions of visitors, does not seem to have an impact on the local real estate market. Taken together, results indicate that declining waterbodies have heterogeneous effects on adjacent real estate values. Results from the Salton Sea analysis, however, indicate that other declining waterbodies worldwide may adversely affect the regional economy.