Coastal Erosion Management from a Community Economics Perspective: The Feasibility and Efficiency of User Fees

Journal of Agricultural and Applied Economics, Aug 2005 by Kriesel, Warren, Landry, Craig E, Keeler, Andrew

Coastal communities cannot depend on funding from the state or federal government to maintain high-quality beaches that benefit the public and attract tourist revenues. This article investigates the feasibility and efficiency of beach improvement projects at two Georgia barrier islands through the alternative funding mechanisms of general-revenue financing and user fees. Benefits are calculated from an intensive, on-site survey of beach visitors, and the costs are calculated from observable sources. The analyses presented support beach improvement as an effective policy on both islands under all scenarios considered.

Key words: beach nourishment, coastal erosion, relocation, user fees

JEL Classifications: Q26, R51, R53

Coastal erosion is a major concern among all parties involved in managing coastal lands. Eighty to 90% of the sandy beaches in the continental United States are receding (Leatherman), but erosion and accretion patterns can vary tremendously over both space and time. Developed coastlines are often armored with concrete and rock structures to prevent property losses associated with shoreline erosion. A common result of this approach to management is narrower sandy beaches that often disappear at high tide. These poor-quality beaches may drive tourists away. Sandy beaches are a vital input to tourism in coastal communities, and the tourism industry is often an important part of the local economy.

Public policy makers are faced with two markedly different strategies for managing erosion: (1) artificially nourishing the beach with more sand and (2) permitting nature to take its course by relocating threatened property improvements. Each alternative has different effects on coastal user groups. Beach nourishment offers some protective value for property improvements, plus it increases the amenity value associated with sandy beaches. However, this alternative can disrupt natural accretion patterns and cause serious side effects. The relocation alternative primarily affects property owners, who may, however, benefit if they are well compensated for their losses. Visitors may also benefit from relocation if the resulting pattern of businesses and services is an improvement upon the status quo and if beach amenities are improved.

Regardless of the management approach chosen, costs are likely to be considerable; beach-management projects are typically large scale, encompassing miles of shoreline. In the past, funding from local, state, and federal sources has been used for beach improvements (Stronge). Economic efficiency requires the project provide a level of benefits that exceeds costs. A primary task is to estimate these benefits, in the form of willingness to pay (WTP), against which cost estimates can be compared. However, the fact that a project has high net benefits is no guarantee that it will be funded, because the federal government has shown increasing reluctance to support beach-improvement projects (Marlowe). Increasing skepticism about the overall public benefits of large-scale water projects of all kinds, combined with general budgetary pressure, have led to a situation where the beach communities themselves are much more likely to provide financing for beach management.

In this fiscal environment, the field of community economics offers appealing insights. The field places special emphasis on the community as another economic agent (Shaffer, Deller, and Marcouiller). Rather than analyzing the beach strictly as a natural resource and a public good, professionals in the field examine the importance of public infrastructure for the well-being of a community. Infrastructure is analyzed as an exclusive or a nonexclusive good. From this insight, the primary financing options that emerge for beach improvement projects are (a) user fees and (b) general-revenue financing. User-fee financing has been popular for infrastructure such as bridges and roads because it is a type of tax that is paid by the direct beneficiaries of a specific project. Also, it is usually agreeable to all parties along the political spectrum. If user-fee financing is to be used, then the rule in deciding whether a project is financially viable for the local government is that expected user-fee revenues should be sufficient to cover the project's cost (Randall). Choosing a user fee requires an understanding of how changes in fee affect the level of usage and resulting overall revenue.

This community-economics approach to analyzing beach improvements was employed by Kriesel, Keeler, and Landry, where they examined the case of Jekyll Island, GA. Located 8 miles from Brunswick, GA, Jekyll's land area is about 5,000 acres, all of which is owned by the State of Georgia and managed by the Jekyll Island Authority. The state legislature voted in 1955 to restrict development to 35% of the land area, and redevelopment of existing structures is not permitted. There are about 200 private, ranch-style homes, most built in the 1950s and 1960s, 10 motels, and a small condominium development. A historical district and golf courses occupy the remaining developed land. Within this context of low-density development, it was found that both beach nourishment and relocation were economically feasible management alternatives under either general-revenue or user-fee financing. That study noted, however, that these results may be limited to low-development cases such as Jekyll. In areas with higher development densities, the costs of a relocation policy could be prohibitively high.