Estimating a Payment Vehicle for Financing Nourishment of Residential Beaches using a Spatial-Lag Hedonic Property Price Model

Abstract

Beach nourishment projects are common methods for coastal states to protect beaches and property from the natural erosive process. However, while the beneficiaries of beach nourishment tend to be local property owners and recreators, projects are typically funded at the state level. Based on the benefit principle, as local residents receive more of the erosion protection benefits of the nourishment projects, we estimate a value capture tax, designed to levy the financing burden in a manner that approximates the distribution of benefits. The benefits of nourishment projects to coastal property owners are estimated using the results from a spatial-lag hedonic model that controls for viewshed effects.

Keywords:

• beach nourishment
• hedonic model
• spatial dependence
• value capture tax
• viewshed

Notes

Not all households adjacent to the shoreline perceive beach nourishment to provide benefits. Two groups (Save Our Beaches and Stop the Beach Renourishment, Inc.) in Walton County, FL, took a legal battle to the Florida Supreme Court, arguing that renourishment infringed on their property rights as the state was placing renourishment sand on their property without their consent. In September 2008, after a four-year battle, the Florida Supreme Court ruled that the State's Beach and Shoreline Preservation Act is constitutional.

As the site of interest is a residential beach and the focus of the article is to provide an equitable property tax, we do not include a beach access fee as part of the tax policy.

As there is little formal evidence regarding the choice of weighting matrix (Anselin, 2002), we chose a contiguity matrix that identifies non-zero elements for properties within a 100-meter distance based on our knowledge and observations of the study area and comparing the fits of a range of model specifications with different weighting distances.

For example, properties five rows back from the shoreline have an average viewshed angle of 23.6 degrees compared to 12.6 degrees for properties four rows back.

Random utility models and willingness to pay estimates provide evidence of recreational benefits for users of wider beaches [Parsons et al. (1999); Landry et al. (2003).]

The authors thank the Pensacola Association of Realtors for allowing access to their property transactions database.

Robust LM tests showed spatial-lag dependence (χ² = 12.995; p-value = 0.000) but indicated no spatial-error dependence (χ² = 0.985; p-value = 0.321).

Block 5 is the omitted block in the model.

The spatial autocorrelation estimation was implemented within the GeoDa v.0.9.5-I (2005) environment. GeoDa is a geospatial analysis software package developed at Arizona State University for spatial process modeling.

χ² = 13.123; p-value = 0.000

The total length of the beach renourishment is 8.2 miles. The cost of nourishing the 2-mile residential strip is then estimated as ((2/8.2)∗$15million).

All figures are in dollars for the year of the project. For presentation purposes, annual payments are calculated on a linear basis as the tax per-household in Block k divided by the assumed life of the project, thus ignoring potential compounding interest rate issues.