Statement of J. Walter Milon
Professor, Food and Resource Economics Department
University of Florida
P. O. Box 110240
Gainesville, FL 32611-0240

Chairman Chafee and Members of the Senate Environment and Public Works Committee: I thank you for the opportunity to present a brief summary of research on the economic value of the Indian River Lagoon, an estuary of national significance and part of the Environmental Protection Agency's National Estuary Program. The information presented here is derived from a study I coordinated as part of a team organized by Apogee Research Inc., a nationally recognized leader in environmental and natural resource economics. This study was sponsored by the Indian River Lagoon National Estuary Program (IRLNEP) and the St. Johns River Water Management District, the state sponsor for the IRLNEP. The study is presented as one documented example of the value of estuaries nationwide.

The Indian River Lagoon, one of the nation's most biologically diverse estuaries, stretches 156 miles along Florida's east coast spanning Volusia, Brevard, Indian River, St. Lucie and Martin counties. These five counties are home to more than 1 million residents and host more than 6 million visitors each year. The number of residents in the five counties of the Lagoon is expected to increase from 1.25 million to 1.54 million between 1995 and 2005 -- a 24 percent increase in ten years.

In developing estimates of the economic value of an environmental resource such as an estuary it is important to consider the scope and extent of human activity related to that resource. The accompanying Table 2-4 (from Section 2 of the report Economic Assessment and Analysis of the Indian River Lagoon which is included as Addendum A) shows the scope of activities considered in the Indian River Lagoon study. These activities range from traditional economic uses such as the value of commercial and recreational harvests from the Lagoon to more intangible economic values such as the enhancement of land values adjacent to the resource and individuals' values for preserving the resource. The full report presents the valuation methodologies and data collection used in the study so I will not describe those here.

The results summarized in Table 2-4 show the importance of the Lagoon to the economy of the region in 1995. Recreational fishing by residents and tourists was estimated to contribute approximately $340 million per year; swimming, boating, water sports, and nature observation activities around the Lagoon contributed another $287 million annually. Commercial harvesting of shellfish such as clams, oysters, and crabs contributed nearly $13 million annually. In addition, residential land values were enhanced by the presence of the Lagoon in the amount of approximately $825 million (see Table 2-1 in Section 2) which can be expressed as an annualized value of $33 million. Collectively, the direct values associated with the Lagoon on an annual basis amounted to more than $725 million.

These Lagoon-dependent activities create additional indirect impacts on the regional economy. Businesses related to recreation, tourism, and fisheries generate nearly $4 billion or about 17 percent of total output within the region (see pp. 10 - 12 of Addendum B). Resident and tourist spending for Lagoon related activities accounted for more than 19,000 jobs in the region.

These measures of the economic contribution of the Indian River Lagoon can be compared to the costs of implementing the Comprehensive Conservation and Management Plan (CCMP) developed as part of the IRLNEP. The CCMP includes recommendations to maintain and restore the Lagoon through water quality management and habitat protection. These costs were estimated to be less than $18 million annually (see pp. 12 - 14 of Addendum B) indicating that the costs of sustaining the activities dependent on the Lagoon are modest relative to their economic contribution within the region. Properly designed funding plans could spread these costs equitably so that the average citizen in the region would pay no more than $10 per year. In addition, public surveys conducted for this study showed that residents would be willing to pay more than three times the estimated annual cost to implement the CCMP (see Addendum A, pp. 2-12 - 2-13).

The results of this study, while limited to a single estuary, help to illustrate the economic importance of estuaries in regional economies and the linkage between environmental quality and economic development. The economy of the Indian River Lagoon region depends upon the ecosystem services provided by the estuary and future development within the region will be linked to adequate maintenance of the health of this ecosystem. Studies such as the one I am reporting to you are an integral link in helping citizens and public officials understand the relationship between the health of estuaries and local economies (see Addendum C for a supporting statement from the St. Johns River Water Management District).

I hope this information will be useful to the Committee. I will gladly provide you with any details about this study or any other information about economic valuation of environmental and natural resources that would assist the Committee in its deliberations.