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Water quality affects property values

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Residents of Potato Lake, convening for the annual meeting, reviewed a study on the relationship between lakeshore property values and water quality in the Mississippi Headwaters Region.

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Bottom line: While properties on "prestige lakes" with lawns down to the shoreline currently bring the highest prices, they are likely to degrade water quality.

"Fine lawns can foul lakes," former Bemidji State University professor Dr. Charles Parson told his audience.

And in the long run, a water clarity change will cause a significant decrease in property value. The study concluded a one-meter clarity change on 3,700 lakes in Minnesota (a third of the total) could result in a $100 billion property value drop.

At present, the overall lakeshore values are endangered by the actions of property owners who wish to maximize their personal gains, the study states.

Dr. Patrick Welle, who holds a Ph.D. in economics, and Parson, with a Ph.D. in alpine geomorphology, said the question they were asked to address was "if water quality declines, what does it do to lakeshore property values?"

Secchi disc readings, measuring water transparency on lakes, were a key tool in the study.

"How much more are people willing to pay for a five-foot reading as opposed to 15?" Parson asked. "Water clarity is the only measure of lakes we have over time," he said, as opposed to dissolved oxygen, eutrophic indicators or the quality of fishing.

The study sample included 37 lakes with property sold between 1996-2001, just over 1,200 properties. Lakes were assigned to six groups that best approximated market areas, similar to a pilot study in Maine.

The region included lakes within the Park Rapids, Walker, Bemidji, Brainerd, Aitkin and Grand Rapids areas.

A shared resource

"We found the market was rewarding predominantly damaging land use practices," Welle said. People tend to look at economics from a personal impact, Welle said. "But lakes are a shared resource... That's why we need lake associations."

The challenge, he said, is to move from thinking individualistically (this is my property) to considering water bodies as a shared resource.

Water clarity was found to have a positive influence on property values, but site quality also had a significant impact. "More damaging lakeshore practices increased sales prices in most cases," the study found.

The carefully manicured, "prestige" lakeshore sends fertilizer into the lake. The lakeshore often is damaged by wave erosion and lack of shaded water, which is amenable to "undesirable species," all of which is potentially damaging to clarity.

One of the first hedonic pricing studies was conducted in Chicago neighborhoods, with air quality as the variable, Welle said. "The study found a substantial market reward for better air quality."

Water quality is a variable people can relate to," Welle said of a walk on the dock. "Lakeshore is individual property, but a critical part of the eco-system."

BMPs critical

Professors and students from BSU studied Beauty Lake in northern Hubbard County in regard to implementation of best management practices (BMP).

The study models "what can happen when lakeshore development is not done using current knowledge of landscaping impacts."

The lake, Parson said, was pristine up until a decade ago when Pan o' Gold sold it and a developer platted it into lots.

The BSU research process involved developing a shoreland erosion potential model, based on an established one. Global information system base files were created for future evaluation and to run simulations of the effects caused as development took place.

The study found if the lake were left in a heavily forested natural state, the lake would fill in over a 37,000-year lifecycle to become a wetland.

"Normal landscaping," removing some canopy trees and planting grass, would decrease the lake's lifespan to 370 years, due to erosion.

"But what if we clear more of the trees and clear the beach and add a path that leads to the water?" which is "pretty much business as usual." The study concludes the lake will fill in 90 years, nutrient loading will shift the lake quickly to eutrophic, and finer sediment will cloud the water.

"Environmental quality is the big loser," the study concludes, "from a real beauty to a soupy pond in a few decades.

"Academically, it's an interesting site; otherwise it's a pending disaster," the study states, warning, "Property values may plummet."

Lessons from the model: A single lot with poor practices and significant erosion can offset 100 lots using BMPs.

"It won't take many lots with insensitive management to decrease everyone's property values as the lake's quality declines," the study states.

Lakeshore associations should exert peer pressure, Parson said.

Lakes may experience a loss in market among people who shun constraint, but there's security in knowing your neighbors abide with restrictive covenants, Welle said.

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