Estimating the impact of water quality on surrounding property values in Upper Big Walnut Creek Watershed in Ohio for dynamic optimal control

Non-point source pollution and its impact on water quality are of great importance to policy makers, residence and farmers. This paper uses a hedonic property value model to investigate the marginal implicit values of water quality change in Hoover Reservoir in the Upper Big Walnut Creek (UBWC) watershed, Ohio. The estimates are fed into a simple dynamic optimization model which maximizes social welfare while taking into account the damage from production as well as the production profits. This paper uses the Soil and Water Assessment Tool (SWAT) to simulate the quality and quantity of the surface and ground water and uses ArcGIS to link housing transactions in Franklin County and Delaware County with disaggregated flow of nutrient runoff in the watershed. The econometric results indicate that the marginal damage for a one mg/L increase in nitrogen (N) and phosphorus (P) loadings are $7,713.41 and $27,624.05 respectively, and the increase of property value of a one meter increase of secchi depth water clarity is $95,132.07. This paper investigates the effects of multiple water quality parameters on both waterfront and non-waterfront properties, using the yearly maximum loading, sediment, and dissolved oxygen, as well as yearly average secchi disk depth as measurement. A simple dynamic optimization model is included to show the tradeoff between production profits and water quality.