An Assessment of the Economic Impact of the
Proposed Stoneco Gravel Mine Operation on
Richland Township
August 15, 2006
George A. Erickcek
Senior Regional Analyst
W.E. Upjohn Institute for Employment Research
An Activity of the W.E. Upjohn Unemployment Trustee Corporation
W.E. Upjohn Institute for Employment Research
300 South Westnedge Avenue
• Kalamazoo, Michigan 49007-4686 • U.S.A.
Telephone (269) 343-5541
• FAX (269) 342-0672
An Assessment of the Economic Impact ofthe Proposed Stoneco Gravel Mine
Operation on Richland Township
George A. Erickcek
Senior Regional Analyst
W .E. Upjohn Institute for Employment Research
Executive Summary/Introduction
This report, which was completed at the request of the Richland Township Planning
Commission, provides an estimation of the economic impact of the proposed Stoneco
Gravel Mine Operation on Richland Township.
1 The following impacts are assessed in
this study:
1. The potential impact on residential property values in Richland Township.
2. The potential employment impact of the proposed gravel mine on the area's
economy.
In
addition, we carefully reviewed the economic impact reports provided by Stoneco for
consideration.
In the preparation of this impact analysis we used nationally-recognized modeling
techniques that are the standard for academic research.
We estimate that the proposed gravel mine will have a significant negative impact on
housing values in Richland Township. Once in full operation, the gravel mine will
reduce residential property values in Richland and Richland Township by $31.5 million
dollars, adversely impacting the values of over 1,400 homes, which represent over 60
percent of the Richland residences.
In
addition, the mining operation will have an insignificant impact on area employment
and personal income. At most, we estimate that only 2 additional jobs will be created in
Kalamazoo County due to the mining operation. The mining operation serves the local
market, and analysis based on the Institute's econometric regional model for the
Kalamazoo region shows that it will bring in an insignificant amount of new income into
the area's economy, $58,000. Although the mine will employ an estimated 5 to lO
workers and require drivers to haul an estimated 115 to I 20 truck loads of gravel per day,
1
The report was completed without charge as part of the W.E. Upjohn Institute's community service
commitment. The Institute has prepared requested reports and analyses for the City of Kalamazoo, theCity
of Hastings, the City ofBattle Creek, the City of Grand Rapids as well as other local governmental units
and school districts.
2
most all ofthesejobs would simply "displace" any employment growth in the county's
15 existing gravel pits.
Stoneco has not established a need for new aggregate capacity. Kalamazoo County is
currently serviced by 15 gravel operations, and in recent years, employment in the county
has been shrinking and the population has been stagnant. Consequently, there is no
prima facie
case that new capacity is needed. To definitively determine whether such a
need exists, we would need to have information on projected demand for aggregated
material in the county and capacity of the gravel pits currently servicing the county.
Finally, a careful evaluation of the five impact studies presented by the Stoneco finds that
their methodologies are seriously flawed, and thus conclusions drawn from the analyses
are invalid.
Qualifications
The W.E. Upjohn Institute for Employment Research is an internationally-recognized
independent, non-profit economic research organization established in 1945 for the sole
purpose of conducting research into the causes and effects of unemployment and
measures for the alleviation of unemployment. The Institute currently has a staff of 60
including I 0 senior-level economists, and its research agenda includes issues on the
international, national, state, and local levels.
For the past 20 years the W .E. Up john Institute has maintained a strong research focus on
west Michigan which includes
o The publication of its quarterly economic report:
Business Outlookfor West
Michigan.
o The preparation of short- and long-term employment forecasts for all ofthe
metropolitan areas in west Michigan including Kalamazoo, Battle Creek, Grand
Rapids, Muskegon, and Holland.
o The completion of numerous economic impact reports and economic development
strategies for communities in Michigan.
George Erickcek, the Institute's Senior Regional Analyst, was the lead researcher for this
study. He received his Masters of Economics at the University of Pittsburgh and has
been with the Institute since 1987. George has prepared numerous economic impact,
benchmarking, and forecasting studies for the west Michigan region, and has conducted
research on the national and international level.
3
Methodological Approach to Estimating the Impact on Housing Values of the
Proposed Gravel Mine
Many factors influence housing prices. These include, of course, the characteristics of
the house or dwelling unit, such as size, age, lot size, number of bedrooms and
bathrooms, as well as its upkeep. In addition, the house's proximity to amenities such as
a lake or pleasing neighborhood or "disamenities" (e.g. landfills, pollution sites) can have
a substantial impact on its price.
2
Economists have found that "hedonic pricing models" are extremely useful in isolating
the contribution of specific factors on the price of housing, as well as other goods. First
developed by University ofChicago economist Sherwin Rosen in 1974, hedonic pricing
models use a statistical regression technique that allows the researcher to estimate the
impact of one factor, e.g. the proximity of a neighborhood park, on the value of a house
while holding all of the other factors impacting the house's value constant. There is an
extensive literature applying hedonic pricing models to study the effects of environmental
disamenities on residential property values. These studies generally show that proximity
to landfills, hazardous waste sites, and the like has a significant negative effect on the
price of a residential property .
3
Professor Diane Hite, an economist who has published widely in the area of property
value impact analysis, has recently applied hedonic pricing methodology to study the
effects of a gravel mine on nearby residential values. This appears to be the only
rigorous study to date of gravel mine impacts on property values.
4 Her study is based on
detailed data from Delaware County, Ohio that were collected by the Ohio State
University for the purposes of studying land use planning.
Hite examines the effects of distance from a 250-acre gravel mine on the sale price of
2,5 52 residential properties from 1996 to 1998. Her model controls for a large set of
other factors that determine a house's sale price, including number of rooms, number of
bathrooms, square footage, lot size, age of home, sale date, and other factors specific to
the locality, so that she can focus solely on the effect of proximity to the gravel mine on
house values. She finds a large, statistically significant effect of distance from a gravel
mine on home sale price: controlling for other determinants of residential value,
proximity to a gravel mine reduces sale price. Specifically, Hite reports that the elasticity
of house price with respect to distance from a gravel mine is .097, implying that a 10
percent increase in distance from the gravel mine is associated with slightly less than a I
percent increase in home value, all else the same (Appendix A).
5 Conversely, the closer
the house to the proximity to the mine, the greater the loss in house value.
2
In a recent study of the impact ofhousing programs in the City of Kalamazoo, we found that moving a
house from one neighborhood to another can add or subtract as much as $20,000 from its value.
3
For reviews of some of this literature, see Arthur C. Nelson, John Genereux, and Michelle Genereux,
"Price Effects of Landfills on House Values,"
Land Economics, 1992 68(4): 359-365 and Diane Hite, Wen
Chern, Fred Hitzhusen, and Alan Randall, "Property-Value Impacts of an Environmental Disamenity: The
Case ofLandfills,"
The Journal of Real Estate Finance and Economics 22, no. 2/3 (2001): 185-202
4
Diane Hite, 2006. "Summary Analysis: Impact of Operational Gravel Pit on House Values, Delaware
County, Ohio," Auburn University.
5
This estimate is based on a constant elasticity model specification. At the Upjohn Institute's request,
Professor Hite tested the sensitivity of these findings to model specification, and in all specifications finds a
large, statistically significant negative effect of proximity to gravel pit on house prices. The simulations for
Richland Township reported below are based on the estimates from the constant elasticity specification and
yield slightly lower estimated negative property value impacts than those based on models using other
functional fonns. We consider this number to be a conservative estimate.
4
Figure I displays the estimated effects of distance from the gravel pit on house price. A
residential property located a half mile from the gravel mine would experience an
estimated 20 percent reduction in value; one mile from the mine, a 14.5 percent
reduction; 2 miles from the mine, an 8.9 percent reduction; and 3 miles from the mine, a
4.9 percent reduction. These estimates are similar to estimates published in academic
journals on the effects oflandfills on nearby property values.
35
30
c
0
:6:1
I.) 25 :s -
"C
Q)
0:::
-20 -
c
Q)
~
a
Q.)
15 -
10
5
0
0
Figure 1: Impact of Gravel Pit on Residential
Property Values:
(Percent Reduction by Distance from Mine)
~
\
\
\
~
~
~
'
'
0.5
1 1.5 2 2.5
Distance from Mine (in miles)
3
3.5
The loss in property value results from the negative consequences of the mining
operation and reflects the deterioration in the area's quality of life due solely to the
operation of the gravel mine.
In other words, the loss in house value is a way to quantify
in dollars the deterioration ip quality of life, as capitalized in the price of the house. It
captures the price reduction the homeowner would have to offer to induce a new buyer to
purchase the property. Even if homeowners do not move as a result of the gravel mine,
they will lose homeowner equity as the potential sale price of their house is less.
6
Therefore, regardless of whether or not a person actually sells their property, it measures
6
Only those owning property at the time of the establishment of the gravel mine would experience a loss in
equity. Those purchasing property near an established mine would not experience an equity loss because
any negative effects from the mine's operation would have been incorporated into the purchase price. By
implication, few property owners near long-established mines could claim loss of property value from the
mine because few would have owned the properties at the time the mine went into operation.
5
the adverse effects in their quality of life in being subjected to the disamenities
introduced into the area by the gravel mine.
The policy implications ofHite's study are clear: because property value losses are
higher the closer to the gravel mine, all else the same, new sites should be located far
from existing residences so as to minimize adverse consequences for homeowners.
Simulation of Gravel Mine on Residential Property Values in Richland
Utilizing the estimates from the Hite study and data on 2006 assessed values provided by
Richland Township, the Upjohn Institute simulated the effects of the proposed gravel
mine on residential property values in Richland Village and Richland Township. Our
analysis is based on 2005 assessed values of single-family homes in Richland Township
and Richland Village obtained from the Township's assessor office in June and July. In
total 2,319 single-family homes, 88.7 percent of all single-family residences in the
township and village, were geo-coded using the Arc View© mapping program, manually
matched using Yahoo© maps and, finally, through drive-by inspection of addresses.
Once all of the homes were mapped, the distance between each ofthe residences and the
closest boundary of proposal Stoneco gravel mine was determined.
As shown in Table
I, more than 1,400 homes will be negatively impacted by the
proposed gravel mine with the total cost reaching $31.5 million dollars.
Table 1
Estimated I
mpact on Housing Values of the Proposed Stoneco Gravel Mine
Distance
(miles Number of Distance (miles Number of
from Stoneco Houses Estimated Loss in from Stoneco Houses Estimated Loss i
n
Site
) Affected Value Site) Affected Value
0.1 2 $211,703 1.6 73 $1,207,011
0.2 3 $106,428 1.7 128
$2,500,456
0.3 2 $134,894 1.8 99 $1,630,14
9
0.4 9 $522,981 1.9 70 $1,146,761
0.5 3 $389,319 2 34 $633,720
0.6 8 $598,518 2.1 105 $952,068
0.7 24 $831,338 2.2 98 $1,311,040
0.8 25 $798,108 2.3 99 $2,843,845
0.9 27 $1,085,190 2.4 72 $2,699,584
1 22 $918,374 2.5
34 $912,133
1
.1 75 $2,428,602 2.6 12 $377,548
1.2 62 $1,688,031 2.7 23 $373,873
1.3 45 $1,146,920 2.8 80 $939,861
1.4 32 $824,928 2.9 55 $944,061
1.5
30 $712,731 3 70 $655,846
Total
1,421 $31,526,020
6
While Hite's original study covered a 5-mile radius from the gravel mine in Ohio, we
chose to examine only a 3-mile area from the boundaries ofthe proposed Stoneco site.
7
Only properties located in Richland and Richland Township are included. Property
values in other townships, notably Prairieville Township, also could be adversely affected
by the location of a gravel mine near its border with Richland Township but were not
included in the study. In addition, the analysis does not consider possible effects on
commercial property. Our estimates do not factor in the likely negative impact on
property values along the truck routes used for the mine. Finally, although Stoneco has
proposed to reclaim some of the land for a lake and residential development, its proposed
timeframe for this development would occur too far into the future to mitigate adverse
property value impacts for current Richland area residents.
Employment and Personal Income Impact
Stoneco estimates that
5 to 10 permanent jobs will be created at the proposed mine. In
addition, truck drivers will be required for the 115 to 120 truck loads of gravel that will
be hauled from the mine daily.
To measure the potential employment and income impact of the gravel mine, we used the
Institute's econometric regional model ofthe Kalamazoo area.
8 Because of its weight
and low-value, gravel is hauled for only short distances.
It is not a part of the area's
economic base that brings new monies into the area. Therefore, it is an activity that does
not generate any significant new income or employment opportunities. We estimate that
only 2 additional new jobs will be created in Kalamazoo County due to the gravel mine
and personal income in the county will increase by only $58,000. In short, the jobs
created at the gravel mine will displace jobs elsewhere in Kalamazoo County or the
immediate region. The proposed mine would not result in any significant net benefit to
the area from job or income creation.
Need for the Proposed Mine
Adverse economic effects of the proposed gravel mine to the Richland community must
be balanced against the county's broader needs for aggregate material for road
construction. Currently, 15 gravel mines operate in Kalamazoo County according to the
Kalamazoo County Planning Department (Table 2). Stoneco's application materials do
not provide any evidence for the need for additional capacity. Statistics were cited on
projected needs, but no evidence was presented as to whether existing capacity could
cover anticipated needs.
The need for additional capacity of gravel production is not supported by current and
projected population or employment trends in Kalamazoo County. Population growth in
Kalamazoo County has been modest during the past five years, and well below the
national rate. From 2000 to 2005, population in the county increased annually at a rate of
7
Hite's statistical analysis intentionally includes homes at a distance deemed unaffected by the gravel
operation. Our choice to study the impacts up to 3 miles is based on Nelson, et al. (1992) and the fact that
estimated impacts for individual homeowners are still relatively large out to three miles in all ofHite's
models
.
8
The Upjohn Institute maintains a regional economic impact and forecasting model for the Kalamazoo
metropolitan area which was built
by Regional Economic Models Incorporated (REMI) especially for the
Upjohn Institute. The REMI modeling approach, which incorporates an input-output model with a
forecasting model and a relative cost of production model, has been repeatedly reviewed and upheld as the
industry standard.
7
below 0.2 percent, compared to 0.9 percent nationwide.
9 An analysis of the individual
components of population change-births, deaths, net migration-shows that individuals
and households, on net, are leaving the county. From 2000 to 2005, the county's
population increased by 6,342 individuals due to number of births surpassing the number
of deaths. However, on net, 4,150 individuals moved out of the county.
10
Table2
K
alamazoo County Gravel Pits
Owner Name
.I Site Address I Site Township
Aggregate Indus
tries C Ave. Near 6th St Alamo
Art
Austin 6287 K Avenue Comstock
T
riple B Aggregates 2702 Ravine Rd. Kalamazoo
Thompson
McCully Co 3800 Ravine Rd. Kalamazoo
Byholt
, inc. 1600 Sprinkle Rd. Brady
Byholt
, Inc. 4th St Prairie Ronde
Fulton
Brothers Gravel 4th St Prairie Ronde
Balkema
Excavating 8964 Paw Paw Lk. Prairie Ronde
Balkema
Excavating 6581 E. KAve Comstock
Baikema
Excavating 427 4 Ravine Rd Kalamazoo
Balkema
Excavating 40th St. & 1-94 Charleston
Ba
lkema Excavating 14500 E. Michigan Charleston
Baikema
Excavating 15600 E. Michigan Charleston
Consume
r Concrete 10328 East M-89 Richland
Consumer
Concrete 700 Nazareth Rd Kalamazoo
Source: Kalamazoo County Planning Department July 2006
During the same time period, employment declined by 3.4 percent, a loss of 5,000 jobs.
The Michigan Department of Labor and Economic Growth estimates that from 2002 to
2012, total employment in Kalamazoo and St. Joseph counties will increase at a rate of
0.8 percent-substantially below the 1.3 percent rate of growth projected for the nation as
a whole. If this rate of employment growth holds true for the future,
it will be not until
2010 that the county will reach its 2000 employment level.
Thus, economic projections do not, in and of themselves, indicate a need for expanded
aggregate capacity. However, we emphasize that any defmitive determination of need
would require information on the capacity and life expectancy of existing area gravel pits,
to which the Institute does not have access.
11
Review of Stoneco's Property Value Impact Analysis
The Environmental Study submitted by Stoneco in connection with its special use permit
application concludes that gravel mining operations have no adverse impact on the value
of nearby properties. This conclusion is based on five reports included in Appendix J of
Stoneco's Environment Study:
9
U.S. Census Bureau.
10
U.S. Census Bureau. Furthermore, Internal Revenue Service (IRS) data from 2000 to 2004 shows that
the majority of the individuals leaving the county are moving ouiSide the greater Kalamazoo region.
11
Note that whether there is a public need for additional capacity and whether it is in Stoneco's interest to
develop a new mine are distinctly different issues. Stoneco has indicated that
it would reduce its
transportation costs by operating at the proposed Richland location. The degree to which any lower
transportation costs translate into lower prices of aggregate material-and hence broadly benefit the
public-versus increased company profiiS will depend on the competitive structure of the industry in this
region
.
8
l. "Impacts of Aggregate Mine Operations: Perception or Reality?" Anthony Bauer,
2001.
12
2. "Social, Economic
, and Legal Consequences of Blasting in Strip Mines and
Quarries," Bureau ofMines
, 1981.
3. "Impact of Rock Quarry Operations on Value ofNearby Housing," Joseph
Rabianski and Neil Cam, 1987.
4. "Impacts of Rock Quarries on Residential Property Values, Jefferson County,
Colorado," Banks and Gesso, 1998.
5. "Proposed Fuquay-Varina Quarry: Analysis of Effect on Real Estate Values,"
Shlaes
& Co., 1998.
These reports,
in fact, fail to show that mining operations have no adverse impact on
property values. None uses the standard methodology (the hedonic pricing model,
described above) for evaluating property value impacts. Four of the five reports are
based on flawed logic (as explained below) and hence cannot be used to draw any
conclusions about property value effects. Only one report, commissioned by the U.S.
Bureau of Mines, used a defensible methodology, although this report also suffers from
serious limitations. Notably, this study found some evidence of adverse impacts of
gravel mining operations on property values
in six out of the seven sites examined.
The Bauer, Rabianski and Carn, Banks and Gesso, and Shlaes
& Co. reports rely on one
or both of the following types of observations to argue that gravel mining operations have
minimal adverse impact on nearby property values:
• Over time, housing and commercial developments have moved closer to and
sometimes adjacent to aggregate mine operations.
• For property values in the vicinity of mining operations that have existed for
many decades, the rate of growth in property values does not increase with
distance from the mining site.
In
neither case do such observations have any bearing on the impact of aggregate mine
operations on nearby property values.
1. Residential and commercial developments have located closer to and sometimes
adjacent to mines over time.
Economic or real estate analysis does not predict that properties near mines have no
value or no development potential. Rather, one would expect that nearby property
values would be lower to compensate for any costs (e.g. noise, pollution, unsightly
landscapes, and traffic congestion) associated with the mine. This reflects the
common sense observation that property that is near sources of noise, pollution,
traffic congestion, and blight will (all other things being equal) be less valuable. Of
course, these lower property values, in turn, will help lure development, especially
12
Bauer (200 1) is a two-page statement that in large part summarizes the results of a 1984 study by a
Michigan State University student.
9
over time, but the development more than likely will include non-residential
activities, which are not affected by the disamenities generated by the mine.
Two studies (Bauer 200 1; Banks and Gesso 1998) examined aerial photographs taken
over the course of several decades that showed housing and commercial
developments moving closer to mining operations. As the population has expanded,
land values near central cities have increased, and transportation infrastructures have
improved, development has fanned out all across the country. Any study would
inevitably fmd that over the course of the last 20, 30, or 40 years, housing
developments have moved closer to mines (and any other less desirable location), and
such observations have no relevance to the question posed by Stoneco's applicationwhether
the establishment of mining operations will lower nearby property values.
2. Near well-established mines, the year-to-year change of property values is no less for
properties located close to mines than for those located somewhat farther away from
mines.
The adverse impact that a mine will have on nearby property values will occur within
a short period oftime following the establishment or announcement of the mine.
After the adverse effects of being located near a mine have been capitalized into the
property value-that is, after the negative effects of being close to a mine operation
has resulted in a decrease in property values-we would not expect the future rate of
change of nearby properties to be different from those of other properties, all else the
same.
The analyses in Rabianski and Cam (1987), Shlaes
& Co. (1988), and Banks and
Gesso ( 1998) look at whether the relative difference in property values between
properties close to and farther from a mine continue to widen 30,
50, even 100 or
more years after the mine was established. All of these studies conclude that because
we do not see continued widening of these differentials many decades after the
establishment of mines, mines have no adverse effect on property values. This
argument makes no sense: the adverse impact on property values would have
occurred decades before. These studies shed no light on possible adverse impacts of
mining operations on property values.
Figure 2 illustrates this point. This figure depicts the prices of two hypothetical
homes over a 20-year period. Home B is affected by the opening of a gravel mine in
the middle of the time period; otherwise the homes are identical. Except in the year
when the gravel mine is introduced, the annual
percentage changes in the prices of
the two homes are the same. The methodology used in the reports cited in the
Stoneco environmental study compared the percentage change of homes near the
gravel mine (percent change from
B to B' in Figure 2) to the percentage change in
home prices farther from the gravel pit (percent change from A to A' in Figure
2).
But even with adverse property value effects, these percentage differences should be
approximately equal. To capture any adverse impact, one must measure the
difference in values of otherwise comparable properties close to and farther from the
gravel mine at a point in time. In Figure 2, the difference between points A and B or
between A' and B' measure the true property value impact, which conceptually is
what is measured in the hedonic pricing model used in the analysis reported above.
10
Figure 2: Methodology for Evaluating Gravel Mine Impact on House Prices:
180
1
60 -(!! .! 140
0
'tJ
120
Q
S5
100
-
I Cl> .g 80 a. j_
Cl>
60 s 0 40-1 J:
2:
!L_
1990
r
1995
Hypothetical Case
2000
Year
,
·
2005 2010
Only the study commissioned by the U.S. Bureau of Mines attempted to assess how the
value of comparable homes varied with distance from the mine. However, the Bureau of
Mines study suffered from several serious shortcomings:
• The sample size at each of seven sites was very small, and hence no statistically
valid conclusions could be drawn.
• Homes were classified into rough typologies, and hence controls for other factors
affecting home prices were crude.
• The study was based on assessed values rather than on more accurate sale price
data.
• The study only examined potential property value impacts within approximately a
half mile of the mine site. More recent research shows that
~roperty value effects
may be significant up to two or three miles from such sites.
1 Limiting analysis to
properties within a half mile of the mine site could lead to a significant
understatement of any property value impacts.
• Researchers used subjective assessments to discount fmdings of adverse impacts
on property values.
With these shortcomings in mind, the Bureau of Mines study found some evidence that
the value of comparable homes increased with distance from the mine site in six of the
report's seven
case~study sites. In some cases, the differences in values were described
as large.
13
See, for example, Arthur C. Nelson, John Genereux, and Michelle Genereux, "Price Effects ofLandfills
on House Values,"
Land Economics, 1992 68(4): 359-365.
11
Appendix A
This report's estimation of the potential impact on residential property values in
Richland Township of a proposed gravel mine is based on the following regression
model developed by Diane Rite, Professor of Economics, Auburn University. The
model is based on a study of2,552 homes in Delaware County, Ohio.
The results of the model are shown below. It is important to note that the model
controls for house characteristics-bath, rooms and age, as well as location from
the gravel pit.
Effect of Gravel Mine Operation 011 House Values Less tlra11 5 Miles
Delaware Coutrty, OH 1998-Log Distm1ce Specijicatioll
N
onlfuem· OLS Summary ot;ResidualEI·•:ors
DF DF
Adj
Equatibu
,
~
M
odel' Enot SSE MSE RootMSE R-Squ.."lre I~ R-Sq 1tnbel
I
~PRICE 8 2544 25816929 10148.2 100.7 0.2564 0.2544 PRICE
N
onlinear GJ,.S Pat'ametet· E.stimntes
_.o\pprox A:pprox
Pat'ameter
~tilg;ate, 1 Std El'l' tValue Pr >ftl, Label
aO
4.981671 2.2279 2.24 0.0254 intercept
3'1
0.097358 0.0162 6.00 <.0001 log~.files from Gro•:el Pit)
'3:2
0.00045 0.000056 8.00 <.0001 Sale Date
a3
0.03527 0.00594 5.94 <.0001 Distance to Delaware CitY
a4
-4.67E-6 4.204E-6 -1.11 0.2664 FAR (House Size/Lot Size)
ao
0.248225 0.0384 6.47 <.0001 Total Baths
a1
0.078881 0.0139 5.69 <.0001 Total Rooms _,. ...J
a9
~ -0.00376 0.00110 -3.43 0.0006 Year Built
~
..oJ
~umber
of
Ofise•
·va~ons Statistics for Syste~
Us
ed 2552 Objectiwe 10116
~liSSing
0 Objective"'N 25816929
The key finding ofthe model is
al which can be interpreted as showing that a 10 percent
increase in distance from the gravel mine is associated with slightly less than a I percent
(0.97358) increase in home value, all else the same. Moreover the parameter is highly
statistically significant.
In other words, the chance of the gravel mine not having an
adverse effect on housing values is one in a thousand.
12
Property Value Losses from Quarrying Operations
The Centre for Spatial Economics produced an extensive analysis of many studies done on the impacts
of quarrying and other undesirable industries on property values. It can be found here:
http:/lwww.town.caledon.on.ca/contentc/townhall/departments/planningdevelopment/Schedule B
to CAO Report 2009-001.pdf
The Centre's analysis is titled,
"The Potential Financial Impacts of the Proposed Rockfort Quarry." The
work of the following researchers is included:
A.
Professor Diane Hite of Auburn University in Alabama is an economist who has published
widely in the area of property value impact analysis. Using a hedonic pricing model
1 procedure
which separately accounts for the relative impacts on house values of a variety of attributes,
Professor Hite examined the effects of distance from a gravel mine in Delaware County, Ohio
on the sale price of more than 2,500 residential properties in the late 1990s.
2
A.
George E. Erickcek of the W.E. Up john Institute for Employment Research recently used
Professor Hite's model to assess the potential impacts of the proposed Stoneco Gravel Mine in
Richland Township, Michigan on property values in the area.
3
CONCLUSION: Properties closest to the gravel mine faced the largest value declines, and
property value declines diminished with distance from the mine.
A.
Properties within 0.31 miles of the mine dropped in value by 25 percent or more.
A
The decline 0.625 miles away was between 15 and 20 percent.
A.
The decline 1 mile away was just under 15 percent.
A.
The decline 1.25 miles away was just over 10 percent.
A.
The decline 2 miles away was just under 10 percent.
A
The decline 2.5- 3.1 miles away was between 5 and 7 percent.
It is important to note that these impacts are permanent. While it is true that properties within
these ranges will increase in value in the future in line with increases in average property values
in general in the broader area, it is equally true that the gap in values resulting from the negative
impact of the quarry persists over time. Dr. Hite's further studies have shown that these drops in
1
A model identifying price factors according to the premise that price is determined both by
internal characteristics of the good and external factors affecting it.
2
Diane Hite, 2006. "Summary Analysis: Impact of Operational Gravel Pit on House Values,
Delaware County, Ohio,"
Auburn University.
3
George A. Erickcek, 2006. "An Assessment of the Economic Impact of the Proposed
Stoneco Gravel Mine Operation on Richland Township,"W.E.
Upjohn Institute for Employment
Research.
value are true regardless of the type of quarry.
A few quotes found in this extensive analysis:
A
"the chance of a gravel mine not having an adverse effect on housing values is one in one
thousand."
A
"There is an extensive literature applying hedonic models to study the effects of environmental
disamenities on residential property values. These studies generally show that proximity to
landfills, hazardous waste sites, and the like has a significant negative effect on the price of a
residential property."
A
"People worldwide oppose proposals for the development of new quarries or the expansion of
existing facilities in their neighbourhoods. The opposition is understandable. As the Pembina
lnstitute4 recently pointed out:
Operators of pits and quarries remove virtually all vegetation, topsoil and subsoil to
access theresource. In so doing, they remove any natural habitat that may have been on
site, and disrupt pre-existing stream flows ...
The extraction of aggregate resources changes the slope of the land and alters water
drainage patterns ... Once the aggregate is extracted ... water storage capacity is lost.
Aggregate operations
. .. are characterized by the release of significant amounts of
particular matter (i.e. dust) and noise pollution from extraction and processing activities
as well as smog precursors and greenhouse gases from the operation of heavy
equipment and machinery. The heavy truck traffic to and from aggregate sites is often a
serious hazard and nuisance affecting people over wider areas, and is a significant
source of air pollution itself.
The quality of life sought by rural residents reflects the sum total ofthe many desirable
attributes of rural settings including peace, solitude, proximity to nature, etc."
While the original study by Hite is not available online, much of her background information and work
can be found here: http://ideas.repec.org/e/phi45.html#articles
Of special interest is this study
by Sa Chau Ho and Diane Hite: "Economic Impact of Environmental Health
Risks on House Values in Southeast Region: a County-Level Analysis."
Silica Sand Mining presents health
risks related to exposure to Respirable Crystalline Silica. Few states have any regulations controlling emissions
of silica to the ambient air. There are occupational standards and regulations, but none for protecting public
health. With widespread sand mining occurring, should cancer rates or other health problems be documented at
higher levels near sand mining, this may further reduce property values. This study may be found here:
http://ageconsearch.umn
.edu/bitstream/19921/1/sp04ho05.pdf
Another site offers good commentary about property value declines R/T nearby oil and gas facilities.
While not specifically about sand mining, good points are made that may also apply to values near
.
' '.
quarries. From the website of a group fighting
a. proposed Liquid Natural Gas (LNG) facility in Vallejo,
CA and the expected effect on property values: http://www.vallejocpr.org/lng/proposal-faq.html
Benicia is a "twin city" to Vallejo. Property values in Benicia are higher than Vallejo,
even though Benicia has a refinery. The explanation from realtors there is this:
Benicia's higher property values are in spite of the refinery and because of several
unique characteristics of the town. The Vallejo refinery is over the hill and to the East of
Benicia, and not within view of the large majority of Benicia's residents. Indeed, passing
through Benicia you would not even know there is a refinery.
Another major impact on home values is the fact that most Benicia homes come with a
water view. Water views always increase the price of homes, and Benicia is no exception. While
homes with a view of the water and the refinery will sell, homes with no water view and only a
refinery view take the longest to sell and have the lowest property value. The few Vallejo
homes with water views also enjoy higher values.
Reporting on other communities with LNG facilities:
Everett, Mass. has been home to the Distrigas LNG facility for almost 30 years --so long
that most residents can't
remember what it was like without the facility. Their property values
have slowly increased over the decades, as inflation and suburbanization have reached the
town. But this increase has been markedly slower than other towns in the area.
Blight begets blight, and Everett proves it. Everett is dominated by heavy industry,
including the Distrigas LNG plant and new nearby power plant. Despite being so near to
Boston, an area rich with colleges, universities, computer, bio-tech and pharmaceutical
industries, Everett has not been able to attract any of these types of businesses.
The problems caused by tanker trucks are well-known in communities with LNG
plants and other plants where products must be shipped in or out. Trucks get a lot of
complaints-- they're noisy, dirty, polluting, unsafe, they tear up the road, and they make
it hard to cross the street.
Everett, Massachusetts struggles with nearly constant truck traffic from its LNG
and other industrial facilities.
This
is a rather old study from Wisconsin, about the added value of shoreline/waterfront
property. Would sand mining operations near such properties reduce this added value?
ttp://dnr.wi.gov/org/water/wm/dsfm/shore/documents/G3698 l.pdf
Another study from Wisconsin- Osceola Plan Commission contacted Town Assessor. Responses
were non-committal, but it looks like the best ways for nearby values to increase would be if the
mining company would buy out buffer properties:
http://www.communitvhotline.com/upload/PropertyValue GeneJohnsonResponseSummary 12
-14-0B.pdf
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