Economic considerations module: introduction | construction costs | operation and maintenance costs | safety and other liability risks | property value | recreational value | aesthetic value | ecological value | references | appendix

Property value

The possible effects of your decision to repair or remove a dam on the fair-market value of nearby real estate should be considered under each option. This real estate could include either commercial, industrial, or residential properties. The following paragraphs describe some guidelines to get you thinking about possible effects of dam repair or removal. You will have to do more investigation to determine effects specific to your dam.

It has been widely observed that the value of properties nearest to the water will be affected most by whatever decision you make. In addition, it has been generally observed that property adjacent to a lake or river is more valuable than property farther away from the water. Therefore, if a lake is drained, it is possible that certain properties that were on the lake would no longer be near the water, and might decline in value as a result. On the other hand, property values farther away from the shrinking lake may not be affected at all. Of course, many other factors determine property value, so full investigation is critical to determine the impact your dam decision will have on property value.
 

Figure 9. Properties near waterbodies may have greater value. (Photo courtesy of Stephanie Lindloff, River Alliance of Wisconsin.)

To determine the property-value factor, first, make your best estimation of the value changes likely for nearby properties based upon the most current information and development plans. The history of local property-value fluctuations may help you in this regard. If this estimate is still hard to make, be conservative. It may be better for your overall decision to predict small changes of a few percentage points rather than be unduly optimistic or pessimistic by predicting huge changes that may skew your ultimate repair or removal decision. Try to ascertain the general direction (up or down) that property values are likely to move after a given choice, and then make an estimate as to the size of that change.

Next, it is important that you add up the total expected price changes across all affected houses and properties. Remember, you are trying to consider total costs and benefits for your entire community. The first step in doing this is determining how many properties are likely to be affected. Obviously, if there is a major physical and visual change (good or bad) in the area around the dam, there may well be some effect on the values of the properties nearest to the water. For example, if you predict a modest 1% decrease in property values for 10 houses, and each house’s most recent assessed value was $40,000, then the total property value decrease is as follows:

(1% decrease) x ($40,000 house price) x (10 affected houses) = $4,000 total property value loss

Repair

The easiest property-value scenario to consider when estimating repair costs is no change whatsoever in values. That is, you've maintained the status quo by repairing the dam, and therefore you'd expect all surrounding property values to stay fixed. Then again, repair may also mean that your community has to pay for permanent and continuous maintenance of your dam throughout the years to come. These payments may come in the form of higher property taxes that may make property in the area less attractive.

Examples: Repair

Linnie Lac Dam, Muskego, Wisconsin

•  “Residents whose property is not adjacent to a former lake bed are trying to make sure residents of a lake management district aren’t assessed for replacing the Linnie Lac Dam and restoring the lake …. [R]esidents are circulating letters urging others to attend the session and vote to dissolve the district. At the crux of the split among district members is how to pay for an estimated $500,000 dam removal and replacement project …. Moreover, [several residents] are skeptical that the lake would add any value to their property because they would not live on the lake. ‘We’ve lived there 15 years. We can’t see the lake. We’ve never used the lake. I do not want to pay for someone to have a lake in their backyard … I say they can have their dam if it doesn’t cost us any money. If not, the lake is like an overgrown hay field. You cut the grass. You plant a few trees, and you have a nice park.’” Source: Milwaukee Journal Sentinel, 7/23/98.

Removal

In the case of dam removal, you should first consider the likely physical change due to removal. For example, if dam removal is likely to turn an attractive millpond into a sediment-clogged stream that can’t be used for any recreational purposes, it is possible that nearby property values may fall. On the other hand, and again taking an extreme situation for an example, if a stagnant, silted impoundment that holds only a few inches of water is converted into a lovely free-flowing river by removal then nearby properties may well increase in value.

For more information about the likely physical and visual consequences of removal, there are several relevant sections in this guidance document (see the Dam and River Ecosystem Basics module) that deal with hydrology and biology. Beyond these sources, it would probably be best to consult with an expert from the Wisconsin Department of Natural Resources or another agency who can give you a good idea about what the land around the old dam and impoundment will look like. In fact, some agencies will be able to generate computer-enhanced images of what the area will likely look like.

Another issue to consider with removal is the potential for the creation of new property due to the draining of the impoundment. That is, if the dam is removed, the dam lake will be replaced by a free-flowing river and land that had been previously submerged by the lake will be exposed to become the banks of this “new” river. The legal module in this guidance document contains a section that discusses ownership of this recently exposed land.

However, it is impossible to speak generally of what the condition will be of the land exposed by the receding dam pond. Remember, you will be exposing land that has been a lake bottom for many years. Perhaps it will require only a modest amount of work to be restored to usable quality. Or, on the other hand, it could prove to be a lake bottom clogged with old logs, garbage, or contaminated sediments from an up-river factory. These different possibilities would require thorough investigation before you could make a prediction about land value.
 

Figure 10. Debris left behind after draining of Oak Street Dam, Baraboo River, Wisconsin.

Figure 11. Vegetation beginning to grow in the sediments left behind after draining of the LaValle Mill Dam, Baraboo River, Wisconsin.
 

Examples: Removal

Woolen Mills Dam, Milwaukee River, Wisconsin

•  “When the Woolen Mills Dam in West Bend, Wis., was torn out in 1988, residents feared they would have to live next to a stinking mud flat. But the land exposed by knocking down the dam was made into a city park, which now attracts anglers, joggers, and families, and it has raised property values.” Source: USA Today, 11/26/97.

Indianford Dam, Lake Koshkonong, Wisconsin

• Predicted property value decrease of approximately $23,000,000 around the impoundment (based solely on the property values around the current impoundment compared with those off the impoundment and the number of properties expected to lose waterfront views without considering the numerous other factors that influence property values) (Marcouiller and others, 1999).

Ward Paper Dam, Prairie River, Wisconsin

• Needed installation of new wells slightly deeper (a few feet) than the original wells due to drop in water table.

 

Next section: Recreational value

URL: http://www.ies.wisc.edu/research/wrm00/econprop.htm