Milton Freewater Economic Impacts of Water Allocation

1
Milton Freewater Economic Impacts of Water
Allocation

• February 20, 2006
• Note When we presented these findings,
  additional information on employment was offered.
  We are incorporating that information into the
  study and we believe the employment impact will
  modestly increase.

2
Purpose of the Analysis

• Look to the future and its potential impacts on
  the Milton Freewater/Walla Walla regional economy
• Profile the Milton Freewater economy.
• Summarize direct effects of reallocating an
  additional 25 cfs of the Walla Walla River for
  in-stream and away from irrigated agriculture.
• Estimate the economic impacts that the
  reallocation of water away from irrigated
  agriculture might be in the community of Milton
  Freewater.
• Questions or Suggestions Contact
• Bruce Sorte
• OSU Rural Studies Program
• Phone [phone]
• Email bruce.sorte_at_oregonstate.edu

3
Major Factors Affecting the Short Run (next 10
years)

• Oil Recreation, Construction and
  Communications/Software
• Construction remains important though not as
  important as it has been - Portland Housing
  Prices Increased 22.5 last year
• Manufacturing to Service Sector Employment in
  Recreation Based Economies (Extremely
  Competitive) Hours Worked, Work Cycles, Per
  Capita Income, Health Care and Crime
• Baby Boomers Retiring Healthy People Looking
  for Ways to Spend Their Money and Communities to
  Join, Jobs Opening, and Consultants

4
Major Factors Affecting the Long Run (10 years)

• Convergence of Real Wages Internationally Low
  and High Paying Jobs, Work Schedules and
  Discretionary Income, Trade Protection with More
  Expensive Consumer Goods, Education
  Delphi/GM/Ford
• More Stressed and Less Caring Society
  Environment, Grants, Schools, and Roads
• Health Care becomes the Dominant Public Policy
  Issue
• Oil Alternative Fuels/Ethanol/Biodiesel/Biomass
  and Mass Transit
• Interest Rates Baby Boomers Excess Capital is
  Gone and Migrate Back to Metro Areas to Be Close
  to Children/Friends, Lots of Housing Stock Turns
  Over with a Net Impact of Reduced Construction,
  Taxes Decline
• Recreation Even More Inward increase from 40 to
  60 leisure time at home

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Milton Freewater
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Walla Walla River Basin
Source Walla Walla Basin Watershed Council 2006.
http//www.wwbwc.org/ and USDA
Natural Resources Conservation Service 2005.
ftp//ftp- c.sc.egov.usda.gov/OR/HUC/basins/johnda
y/17070102_12-05-05.doc
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Needs and Constraints?
Source USDA Natural Resources Conservation
Service 2005. ftp//ftp-fc.sc.egov.usda.gov/OR/HUC
/basins/johnday/17070102_12-05-05.doc
8
Population
Source Portland State University Population
Research Center 2005. http//www.pdx.edu/prc/annu
alorpopulation.html U.S. Census Bureau.
9
Income
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Umatilla County
Source Smith, Gary 2006. Northwest Income
Indicator Project, Washington State University
Extension Service. http//niip.wsu.edu.
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Approach

• Purchased a zip code level model for Milton
  Freewater 97862. Zip code models require
  interpolation/ estimation to protect the
  confidentiality of individual businesses.
• Constructed an IMpact PLANning (IMPLAN)
  input-output basic model for the Milton Freewater
  economy using IMPLANs 1999 data adjusted to 2006
  dollars.
• Ground-truthed the model visiting with
  agricultural producers, other business owners,
  and Tom Darnell and using data bases that reach
  to the zip code level.
• Categorized and aggregated the expenditures by
  IMPLAN sector.
• Estimated the output or sales, employment and
  value-added economic impacts to the community for
  the irrigation dependent agricultural industry.
  Tried to predict ways people and the economy may
  adapt to the changes.
• Limitations scale/estimation, static and linear

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Milton Freewater Economy
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Milton Freewater Export Base
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Types of Economic Effects

• Direct Effects Producers of goods or services
  that are exported outside the region
• Indirect Effects - Suppliers
• Induced Effects Expenditures by directly and
  indirectly affected businesses and agencies
  employees or households (e.g. food, medical
  services, etc.)

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Impact Measures or MetricsOutput, Employment
and Income

• Output Total sales of goods and services
• Employment Full and Part-Time Jobs
• Value-Added Salaries/wages of employees,
  proprietors incomes, rents and leases and
  business permits

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Economic Event

• Irrigators would give up an additional 25 cfs
  for a total of 50 cfs. This would result in 900
  acres(Pleasantview) using WW River water to shift
  over to wells. The District has 3,800 acres of
  which 1,900 would not get water. The 1,900 acres
  dried up would be 1,330 acres of tree fruits
  and 570 misc crops like pasture, hay, grapes (T.
  Darnell 7/20/05).

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Reduced Sales
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Net Economic Impacts
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Wine Grapes and Wineries

• Wine market is highly segmented. If real wages
  converge internationally, how will the wine
  market be affected?
• U.S. red wine demand is elastic both in terms of
  its own price and the effects of price changes in
  European wines (Seale, James, Jr., Mary A.
  Marchant, and Alberto Basso 2003. Imports versus
  Domestic Production A Demand System Analysis of
  the U.S. Red Wine Market. Review of Agricultural
  Economics, V25, No. 1, pp 187-202).
• Dr. Buccola suggests price cuts by California
  producers could hurt Oregon producers in the
  Popular Premium segmenta 10 percent drop in
  price of California red or white wine, from 10
  to 9, would lead to a 20 percent drop in the
  volume of Oregon case sales (Cross, et. al 1999.
  Wine Industry Study. Northwest Farm Credit
  Services).
• Does Walla Walla wine follow the same trends?
• What goods can you identify that have not matured
  to become commodities lack of differentiation
  and moving from price setters to price takers?

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Tax Comparisons
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City of Walla Walla issued about the same number
of new residential building permits (175) in
2004 as Umatilla County
Sources Fridley, Dallas 2005. Oregon Building
Permit Data Through November 2004. OLMIS, Oregon
Employment Department. U.S. Census Bureau and the
Port of Walla Walla/Planning Depts. Of Walla
Walla County, City of Walla Walla City of
College Place.
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Initial Findings from this Analysis

• At least one third of the Milton Freewater
  economy is dependent on the agricultural industry
  and one third to half of that industry (16.65
  million) could be eliminated by the reallocation
  of 25 cfs of Walla Walla water to summer stream
  flows.
• 90 of the economic sectors (105/116) in Milton
  Freewater will be disrupted some temperarily and
  some permanently.
• Estimating tourism impacts from fishing and
  wildlife observation that may be increased from
  enhanced fish runs is very difficult at best and
  may have minimal potential to offset the
  agricultural impacts.
• Transition to grape and wine production and deep
  water wells could offset a portion of those
  impacts. However, there is a great deal of
  uncertainty as to the income elasticity of
  premium wines. Also, the long-run impacts even
  with a strong wine market will be
  disproportionately distributed.
• Tax and zoning advantages in Washington will
  constrain Miltion Freewaters opportunities for
  residential development to significantly offset
  the impacts to agriculture.

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Considerations

• Diverse economies are more resilient than
  concentrated economies.
• Commodity agriculture, although less profitable
  than many industries is also more stable than
  many industries.
• You have an excellent reputation in both states
  and with the federal government.
• Work with Oregon to modify zoning/land use and
  tax constraints to capture residential
  opportunities and retail sales opportunities from
  Walla Wallas growth.
• Recruit and retain retirees, second home owners
  and adaptive farmers
• Develop water markets
• Create a regional strategy at least
  watershed-wide Lower Columbia Gorge example
  Dallas Fridley

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Whats next?

• Please contact me, if I can help you analyze
  issues or project impacts of economic shocks or
  opportunities.
• Let me know, if there are other groups where you
  would like me to present this information.

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Rural Studies Program
http//arec.oregonstate.edu/ruralstudies
Oregon State University 213 Ballard Extension
Hall Corvallis, OR 97331 [phone] rsp_at_oregon
state.edu