Abstract
My research has focused on an issue of great importance to current and future generations of residents of the Sacramento region – how do we maintain a natural resource, the American River Parkway, that people treasure in a time when public funds are so hard to come by? Current funding of the American River Parkway depends substantially on the County’s general fund tax revenue sources (approximately $3 million) in a time when there are greater demands on and less of these revenues. Parkway safety patrols and maintenance activities are already being cut. To answer this question I have turned to the plethora of research on the value of green space. Based on the insights provided by prior researchers, the hedonic price function that I have developed considers over seventy variables. These variables allow me to control for price variation due to structural, neighborhood, location, and time attributes. In a departure from most other research, I did not treat distance from the Parkway as a continuous variable, but as a dummy variable. My data came from three primary sources – Multiple Listing Service (MLS) home sales data from January 2008 to June 2009 (almost 5,500 home sales), 2000 United States census data, and Parkway distance information for the homes sold provided by the Sacramento Area Council of Governments (SACOG). The MLS data included all of the information on the structural attributes of the home, the location of the home, and the time the home was sold. The 2000 census data was the source of information on median household income and the number of detached single unit homes in the study area. The SACOG information was my primary source of Parkway proximity data, although missing proximity data was filled in with Google EarthTM. This approach allowed me to determine where the effect of the Parkway was no longer statistically significant (at greater than 1/3 mile), which I could then more readily apply to my policy analysis. I was able to determine that the positive benefits of the Parkway are only statistically significant in half of the zip codes evaluated. One zip code showed a negative relationship between Parkway distance and value, which is likely due to the co-location of significant dis-amenities (e.g., railroad tracks). The combination of a high coefficient of determination (adjusted R2= 0.872); statistical significance of many of the regression coefficients; and correctly anticipated direction of key variables suggests that one can have a high degree of confidence in the results. I was able to show that a log-semilog functional form was superior, although not significantly so from a log-linear form. I was able to demonstrate a statistically significant effect on home value for properties located within 1/3 mile of the Parkway in six zip codes generally to the east of downtown and midtown Sacramento. I postulate that the lack of a significant positive effect in the other six zip codes included in the data set is due to co-located disamenities, relative lack of Parkway access, and more attractive nearby amenities that are further from the Parkway. For those homes whose value was positively affected by Parkway proximity, the increase in value was large in magnitude, ranging from $15,000 to $150,000 or a 10%-40% increase when all other variables are held constant. The total value added to single unit detached properties due to proximity the Parkway is nearly $800 million. Using conservative assumptions, I found that proximal home owners would only pay about 6% of the equivalent annual net benefit (EANB) to replace current general fund contributions or 15% of EANB to bring the Parkway up to best practice standards. A policy decision to assess these proximal properties must be made in the context of the many restrictions Californians have imposed on raising tax revenue and a political and economic environment that will make any tax increase extremely challenging. A compelling policy narrative that provides a compelling reason for changing the revenue base of the Parkway from the general fund to property owners is needed to win sufficient political support. That narrative will need to focus on the fundamental fairness of having those who benefit from the Parkway pay for its upkeep. The policy solution that I suggest is to form a Community Services District (CSD) for homes within one mile of the Parkway. The CSD would collect fees for those within one third of a mile of the Parkway as suggested by the results of my thesis. For those outside of the one third mile boundary, a smaller fee, equivalent to the cost of an annual parking pass, would be assessed. This smaller assessment will help distribute the cost by including a group of homeowners who are likely benefiting from proximity to the Parkway, but to a degree that is not reflected in their homes’ value. All property owners within the CSD would receive a free annual parking pass to ensure that they would be able to enjoy the Parkway that they are supporting. In addition, I recommend a voluntary fee be collected from cyclists who use the Parkway, but may be able to access it without living within the CSD. The evidence is compelling that homeowners living close to the Parkway are deriving a great deal of value from ensuring the Parkway is well maintained and crime kept to a minimum. The self-interest of those property owners and fundamental fairness commend those homeowners to provide the funds needed to keep this jewel of the Sacramento region shining.