Friday, July 8, 2016

A Benefit-Cost Analysis of the Middle Fork Greenway Trail

The Town of Boone, NC Greenway Trail is a 3.84 mile long paved trail with additional unpaved sections that attract many types of users including walkers, joggers, and cyclists. The proposed Middle Fork New River extension would add 6.5 miles to the total paved mileage. In order to estimate recreation benefits of the extension we use revealed and stated preference data to estimate the change in value of current visits and change in visits with the additional mileage. The total opportunity cost of the project includes land acquisition, construction, operation and maintenance costs. Considering only recreation benefits the Middle Fork Greenway Trail passes a benefit-cost test. The net present value is estimated to be $2.78 million. This conclusion does not change after considering a number of partial sensitivity analyses.
The baseline consumer surplus per visit is equal to $11 with a 95% confidence interval of $9 to $12 (Table 3). The consumer surplus per visit with the Middle Fork Greenway is equal to $17 with a 95% confidence interval of $12 to $21. The change in consumer surplus with the Middle Fork Greenway is $6 with a 95% confidence interval of $3 to $9. These consumer surplus estimates are significantly lower than those estimated by Siderelis, Moore and Lee (2000) and similar to those found by Betz, Bergstrom and Bowker (2003).
Based on the car counts we estimate a range of 9 to 11 cars in Greenway parking lots, on average, each hour. We assume that this visitation rate exists between 8 and 12 hours per day and for between 2 and 4 parking lots.... The average party size is assumed to range from one to three (2.78 is the survey average). The product of cars per hour, hours per day, parking lots and party size generates a wide range of 144 to 1584 trail users per day. Assuming a range of days visited during the year of 90 to 180, our estimate of the range of annual user days 12,960 to 285,120. Assuming a normal distribution with the range covering 97% of the distribution, the midpoint of 149,040 visits, is our best estimate of the annual average number of visits.1 The standard deviation of the distribution is 44,820 (this is equal to the range divided by 6). These visits are valued by the change in consumer surplus of $6 per visit.
Our estimate of the increased value of existing Greenway visits is $865,922 and the value of the increase in Greenway visits is $586,383. The total project benefit in the first year of completion (with the current population) is estimated to be $1,452,305 (Table 4). We assume that 20 percent of the project is completed in year 1 and the remaining 80% of the project is completed uniformly over the next eight years. We reduce the full project benefit by the percentage of completion in project years 2 through 9. In other words, while the greenway is under construction we assume that the benefits increase in proportion to construction. We also assume that that recreation benefits increase over time at the historic (2010-2014) rate of population growth in Watauga County (0.725%).
The estimated total expenditure for the Middle Fork Greenway is $10 million (Table 5). We assume that $2,000,000 is spent in project year 1 and the remaining $8,000,000 is spent over the next 8 years. Total land acquisition is 40 acres at a total expenditure of $1 million. We assume these expenditures accrue uniformly over five years of land acquisition. Annual operation and maintenance expenditures are assumed to be $4800 per mile of trail. Operation and maintenance expenditures accrue in proportion to the land and construction expenditures. For example, in project year three, after two years of land acquisition and construction, we assume that $3.1 million has been expended. This represents 31% of the total cost so that 2.54 miles of trail (31% of 6.5 miles) would be constructed. Operation and maintenance expenditures are estimated to be $9672 in year three and increasing to $31,200 in year 10. 
by John C. Whitehead, John Lehman and Melissa Weddell
Appalachian State University Department of Economics via REPEC Research Papers in Economics
via/hat tip  Society for Benefit-Cost Analysis Recent Newsletters and Working Papers 

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