Cost/Benefit Analysis of Planting Trees

Transue 1 Michael Transue Environmental Economics 624-01 Pratt School of Architecture April 2012 Dollar Amount Quantification and Analysis of the Benefits and Costs of Sweet Gum Trees A 2006 US Department of Agriculture Forest Service publication pronounced the then-existing 5.2 million urban trees of New York City covered 20.9% of the land area with their various canopies (USDA 2006). The trees of New York City provide multiple public benefits to society such as carbon sequestration, pollution reduction, energy savings, stormwater runoff reduction, increased property values as well as structural values. One of the most common and abundant tree species found within the urban New York City canopy is the sweet gum as 7.9% of the total tree area in 2006 consisted of the species, ranking third overall (USDA 2006).

Sweet Gum trees are naturalizing and most often utilized in street applications, as they are approved for urban use by the City of New York Parks and Recreation Department (Parks 2012).

The deciduous species ranges in height from 50’- 75’ and spread from 35’- 50’ (Trees USA 2006). Sweet gum trees attract birds and other small animals with edible fruit blooms, while humans are drawn by the “attractive foliage and fall colors” (Trees USA 2006). The dense leaf system is ideal for urban shading as the Importance Value (IV), relative leaf area and relative abundance, of Sweet Gum trees ranks 3rd out of over 50 species studied with an IV rating of 16.2 (USDA 2006). The proposed project is to plant 1,000 new sweet gum trees along the streets of New York City where possible. The program schedule consists of planting 200 sweet gum trees each year for 5 total years. The dense urban environment of New York City could benefit greatly from the services sweet gum trees render. Yet to determine the feasibility of the sweet gum tree project, the total costs of the trees must be weighed against those benefits. The development of a benefit/cost analysis offers a tool to assist in ascertaining the net benefit to society by examining the complex environmental and economic issues involved.

Transue 2 Costs

Tree Purchase Costs The initial cost is the retail (wholesale prices were not available) price of the sweet gum tree from a distributor or nursery. The sweet gum trees utilized in this project come from a nursery in Tifton, Georgia. The retailer is selling 7’- 8’ tall sweet gum trees for approximately $90 each, or $18,000 for 200 total trees per year (TyTy 2012).

Tree Transport Costs The transport costs of the sweet gum trees are based on distance required to travel, truck haul capacity assumptions, truck fuel efficiency, and fuel pricing. Assuming the delivery trucks can haul 40 trees per trip then only 5 trucks are required per year (200 trees). Large trucks run on approximately 8 miles per gallon (Rowe 2012) while the price of diesel is currently at $4 per gallon (US EIA). The distance from Tifton, Georgia to New York City totals approximately 973 miles, or 1,946 roundtrip miles (Google Maps 2012), therefore the total cost of transport per year (5 trucks and 200 trees) is $2,433. Assuming the trucks will have to return to Georgia with empty trucks, the roundtrip total is $4,866 per year.

Although this cost is not necessarily compensated by the purchaser of the tree, some of this financial burden may appear in the form of taxes, fees or high shipping costs. This report did not include taxes, fees and shipping costs in the retail price of the sweet gum trees, therefore the roundtrip amount should be considered a fair estimate. Regardless of the assignment of the tree transport costs, the return-trip financial burdens must be considered in the benefit/cost analysis on the basis that they exist. Moreover, society could suffer an additional cost due to the emissions of the delivery trucks. The utilization of the trucks could compound poor air quality and contribute to health issues such as asthma. Unfortunately, data quantifying a dollar amount for these impact ‘costs’ is unavailable and is not included in the analysis.

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Tree Planting Costs The cost of planting sweet gum trees require assumptions due to the lack of standardized pricing methods for tree planting. The project assumes 2 member teams are required to plant each tree at a rate of $20 an hour compensation for each worker. Assuming that each tree takes one half hour to completely plant, the yearly expenditure for labor (200 trees) is $4,000.

Tree Maintenance Costs The maintenance cost for large trees like the sweet gum is $93 per tree per year (Kane 2009). The annual cost to maintain 200 trees is $18,600. Maintenance costs are the only costs that continue into the future, and are aggregated annually for 20 years in the analysis. Again, as previously noted, any public cost of potential emissions as a result of trucks and machinery required to maintain the trees is ignored in the analysis.

Benefits The benefits of the sweet gum tree program are measured 20 years into the future to illustrate the perpetual and lasting services trees offer society. It is important to note that with proper maintenance and care, urban tree benefits can stretch well beyond 20 years. Large, bountiful sweet gum trees offer increased benefits due to the heightened longevity, canopy coverage, leaf abundance and density, and seasonal attributes of the species. The benefits are quantified via researched data specifying annual economic dollar values, which are then extrapolated based on service per tree. Although the sweet gum tree has a greater Importance Value (IV) than all but two New York City tree species, the average tree benefit values extrapolated will be considered fair assumptions in the calculations. In addition, annual benefit values are also determined via researched equations based on the diameter of the tree at breast height (d.b.h.). The calculations below assume all new sweet gum trees planted have a d.b.h. of 18� where applicable.

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Carbon Sequestration “Trees reduce the amount of carbon in the atmosphere by sequestering carbon in new tissue growth every year” (USDA 2006). This reduction is intensified with healthier and larger diameter trees such as the sweet gum. The New York City tree stock annually sequesters 42,300 tons of carbon, with net sequestration approximately at 22,900 tons.

The equation, dollar value per tree per year = 0.027*(DBH)2 - 0.095*(DBH) + 6.85, grants a yearly economic value of $13.88 worth of carbon sequestration (Kane 2009).

The aggregate carbon reduction worth of 200 trees (1 year) is valued at $2,776.

Pollution Reduction “The urban forest can help improve air quality by reducing air temperature, directly removing pollutants from the air” (USDA 2006). Also, the leaves themselves absorb particulate pollutants such as CO, NO2, O3, PM10, and SO2, all of which are components of the beneficial values expressed. The New York City tree stock removes 2,202 tons of air pollution annually (USDA 2006). These pollutants have a direct effect on human health and well-being causing such respiratory ailments as asthma.

Neighborhood trees have the potential to reduce particulate matter, which could potentially reduce medical visits and perhaps even deaths. The additional quantification of health benefits for this project allows the potential to severely alter the outcome of the sweet gum benefit/cost analysis. However, standards of measuring health benefits in the terms of the service of street trees do not exist, and will not be included in the report.

The equation, dollar value per tree per year = 0.16*(DBH)2 - 0.334*(DBH) + 2.57, grants a yearly economic value of $48.40 worth of pollution reduction of several pollutants (Kane 2009). The aggregate pollution reduction worth of 200 trees (1 year) is valued at $9,680.

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Energy Savings “Trees affect energy consumption by shading buildings, providing evaporative cooling, and blocking winter winds” (USDA 2006). The beneficial impact and efficiency of street trees are highly contingent on the location of trees and the façade they protect (i.e. trees aligned with southern-facing concrete walls versus western-facing glazing curtains). New York City trees are estimated to reduce energy costs from residential buildings by $11.2 million annually, in terms of 2002 dollars (USDA 2006). The individual tree impact is derived by dividing the $11.2 million dollar benefit by the total amount of trees (5.2 million) to offer a dollar amount ($2.15) per tree. The aggregate energy saving worth of 200 trees (1 year) is valued at $430.

Stormwater Runoff Reduction “Tree canopies intercept large amounts of rain, reducing the amount of runoff that is discharged into streams and rivers, extending the time that a watershed has to absorb rainfall” (Kane 2009). Trees capture rain on their leaf, branch and stem surfaces and by absorbing water through their roots. Additionally, street trees also have the ability to absorb contaminants such as oils and metals in accumulated in rain water runoff, assisting in the natural treatment of stormwater before it reaches the sewer system.

The equation, dollar value per tree per year = 0.0303*(DBH)2 + 0.182*(DBH) + 2.29, grants a yearly economic value of $15.38 worth of stormwater runoff reduction per tree (Kane 2009). The aggregate runoff reduction worth of 200 trees (1 year) is valued at $3,076.

Property Value “Research has shown that homes with a tree in front sell for almost 1 percent more than similar homes without trees. The difference in sale price indirectly reflects the value buyers place on trees and their more intangible benefits, such as aesthetics” (Parks 2012).

The overall impact on the property value of New York City real estate is estimated at $52

Transue 6 million for the 5.2 million trees in the urban fabric (Parks 2012). Extrapolating this data, the benefit of each tree is $10 annually. The added property value worth of 200 trees (1 year) is valued at $2,000.

Structural Value “Urban forests have a structural value based on the tree itself,� (USDA 2006) quantifying a benefit for the tree not requiring replacement (e.g., the cost of having to replace the tree with a similar tree). Structural values represent compensation to owners for the loss of an individual tree and can be viewed as the value of the tree as a structural asset. The structural, or compensatory, value of the urban forest in New York City is estimated at approximately $5.2 billion for the 5.2 million total trees (USDA 2006). Similar to other beneficial attributes of trees, the structural value of an urban forest tends to increase with a rise in the number and size of healthy trees. This analysis assumes the new trees planted in the project will receive best management practices maintenance operations and will function efficiently as beneficial service entities. Also, the report does not account for potential health or ecological habitat benefits of urban trees in the analysis; it is assumed that miscellaneous beneficial attributes of urban trees are considered in conjunction with structural dollar values. To determine the impact of an individual tree, $5.2 billion is divided by 5.2 million trees, giving a beneficial value of $1,000 per tree. The aggregate structural value worth of 200 trees (1 year) is $200,000.

Discounting Because the New York City sweet gum tree planting program requires governmental resources and funding, the US Office of Management and Budget mandated discount rate of 7% is utilized (Keohane 2007). Discount rates of 9% and 4% will also be applied to the benefits and costs of planting sweet gum trees on the streets of New York City. The discounting sensitivity analysis illustrates the impacts of weighing future benefits and the importance of determining an accurate

Transue 7 discount rate for analysis. Lower discount rates imply a higher weighted value to future benefits; whereas higher rates downplay future values.

Present Value (PV) is equal to the Future Value (FV) determined divided by the quantity 1 plus the discount rate chosen to the power of the number of years. This is the equation utilized to discount future benefits and costs:

note: r is the discount rate and n is the number of years

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Transue 9 Findings and Conclusion The results of thoughtful, accurate benefit/cost analysis assist in determining the feasibility of an action versus other potential actions or no action at all. A benefit/cost analysis provides a useful tool in understanding the long term beneficial values of trees compared to overall costs.

Table 1 illustrates the resultant values in per year and ‘running’ totals for the benefits and costs of the project. Table 1 also depicts the impacts of imposing various discount rates (7%, 9%, and 4%) on the aggregated ‘Raw’ future values (the term ‘Raw’ denotes values that have not been discounted).

This report concludes the beneficial services of 1,000 new sweet gum trees outweigh the overall costs of planting and maintenance, regardless of discount rate chosen for analysis. The mandated 7% discount rate resulted in a net benefit of nearly $2 million. When discounting higher than federally mandated (9%, putting less value on the future), the net benefit is still nearly $1.75 million over a 20 year span. However, utilizing a lower discount rate may respond to the inherent and currently immeasurable services trees offer; a 4% discount rate renders over $2.5 million in net benefits. “The calculated environmental benefits of the urban forest are significant, yet many environmental and social benefits still remain to be quantified” (USDA 2006).

Transue 10 Resources Google Maps (2012). Google Retrieved from: http://maps.google.com/maps?hl=en&tab=wl Kane, B. et al. (2009). “Value, Benefits, and Cost of Urban Trees,” Virginia Cooperative Extension Publication 420-181.

Retrieved from: http://pubs.ext.vt.edu/420/420-181/420-181_pdf.pdf Keohane, N. et al. (2007). Markets and the Environment, page 46. Island Press, Washington.

NYC Parks and Recreation Department (2012). “Species List,” City of New York Parks and Recreation Department.

Retrieved from: http://www.nycgovparks.org/trees/species-list#large NYC Parks and Recreation Department (2012). “Trees Count! Benefits,” City of New York Parks and Recreation Department.

Retrieved from: http://www.nycgovparks.org/trees/tree-census/2005-2006/benefits Rowe, R. (2012). “Fuel Mileage Information on Semi Trucks,” eHow. Retrieved from: http://www.ehow.com/facts_5844120_fuel-mileage-information-semi-trucks.html Trees USA (2006). “Sweet Gum (spp),” Trees USA. Retrieved from: http://www.treesusa.com/Plantinfo/Shade/Templates/Sweetgum.pdf TyTy (2012). The Nursery at TyTy. Retrieved from: http://www.tytyga.com/Sweetgum-p/sweetgum-tree.htm US EIA (2012). “Gasoline and Diesel Fuel Update,” US Energy Information Administration.

Retrieved from: http://www.eia.gov/petroleum/gasdiesel/ USDA Forest Service (2006). “Assessing Urban Forests Effects and Values,” Northern Research Station Resource Bulletin NRS-9.

Retrieved from: http://www.nrs.fs.fed.us/pubs/rb/rb_nrs009.pdf