Funding Mechanisms for Restoring and Maintaining a Healthy Nisqually Watershed

Funding Mechanisms for Restoring
and Maintaining a Healthy Nisqually
Watershed

Prepared by
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iEARTH ECONOMICS
Acknowledgments
Earth Economics would like to thank all who contributed valuable information to this project: David Troutt
from the Nisqually Tribe, Justin Hall from the Nisqually River Foundation and the members of the Nisqually
River Council.
We deeply appreciate those who helped review and edit this document: Cathy Lear, Jeff Mitchell and Leah
Eaton Mitchell.
We would also like to thank the Earth Economics Board of Directors for their continued support: David
Cosman, Josh Farley, Ingrid Rasch and Josh Reyneveld.
Earth Economics project team members for this study included: Tedi Dickinson, TaNeashia Sudds, Tricia
Baran; Angela Fletcher for layout; and our wonderful interns and volunteers: Quentin Morse and Can
Huynh.
Cover photo by Tyler Buntain
Images credited in this report are licensed under http://creativecommons.org/licenses/by/2.0/.
The authors are responsible for the content of this report.
February 2014
Authors
Tracy Stanton, Lola Flores and David Batker
Suggested Citation
Stanton, T., Flores, L., Batker, D. 2014. Funding Mechanisms for Restoring and Maintaining a Healthy Nisqually
Watershed. Earth Economics: Tacoma, Washington.
©2014 by Earth Economics. Reproduction of this publication for educational or other non-commercial purposes is authorized without prior written permission
from the copyright holder provided the source is fully acknowledged. Reproduction of this publication for resale or other commercial purposes is prohibited
without prior written permission of the copyright holder.

TITLEii
WHO WE ARE
Earth Economics
Earth Economics is a non-profit organization located in Tacoma, Washington, dedicated to researching and
applying the economic solutions of tomorrow, today. Earth Economics provides robust, science-based,
ecologically sound economic analysis, policy recommendations and tools to positively transform regional,
national, and international economics and asset accounting systems. Working with leading ecologists,
economists and modelers, we serve a large circle of businesses, non-profit organizations, government
agencies, policy makers and media channels with research, reports, presentations, workshops and
investigations. Our goal is to help communities shift away from the failed economic policies of the past,
towards an approach that is both economically viable and environmentally sustainable.
Mission Statement
Earth Economics applies new economic tools and principles to meet challenges of the 21st century:
achieving the need for just and equitable communities, healthy ecosystems, and sustainable economies.
The Nisqually Tribe
The Nisqually Indian Tribe are the people of the river, the people of the grass. The tribe is a sovereign
government of the original peoples of the Pacific Northwest, and one of the principal native societies
around the Puget Sound. The tribe envisions the Nisqually as a place where spirits are strong and good. It
is a place where all people, interconnected with all things, can live in harmony. We believe in families that
are united and healthy. Elders pass on their wisdom and our traditions to our youth. But we walk proudly
into the future. Our people honor, support and encourage each other to grow and find their own way.
Mission Statement
The Nisqually Tribe’s mission is to perpetuate our home and our culture, by helping our people thrive.
The Nisqually River Council
The Nisqually River Council is a collaborative Council of governments and engaged citizens that works
to preserve, promote, and protect the Nisqually Watershed. Since 1987, the Nisqually River Council
has been a locally-based management partnership of state and local governments, business, and
individuals working to protect the health of the Nisqually River. During that time, we have helped to
resolve watershed planning issues surrounding salmon restoration and timber harvesting. We have also
established education and stewardship programs aimed at raising awareness of its unique qualities, both
for the local communities and those who visit.
Mission Statement
To create sustainability in the Nisqually Watershed for current and future generations by developing a
common culture of environmental, social, and economic balance.

iiiEARTH ECONOMICS
CONTENTS
EXECUTIVE SUMMARY....................................................................................................................................... 1
Purpose of this Report..........................................................................................................................4
Project Objectives..................................................................................................................................6
THE NISQUALLY WATERSHED......................................................................................................................... 7
NISQUALLY WATERSHED MANAGEMENT...................................................................................................10
Brief History...........................................................................................................................................10
Current Management Challenges.......................................................................................................11
Watershed Scale Governance ............................................................................................................12
Further Efforts.......................................................................................................................................13
ECOSYSTEM SERVICES IN THE NISQUALLY WATERSHED......................................................................14
The Value of the Nisqually Watershed.............................................................................................16
THE BENEFICIARIES AND PROVISIONERS OF THE NISQUALLY WATERSHED...................................18
Beneficiaries..........................................................................................................................................20
Provisioners ..........................................................................................................................................20
Water Provisioning................................................................................................................................21
FUNDING MECHANISMS OVERVIEW............................................................................................................22
Types of Funding Mechanisms .........................................................................................................22
Sources of Revenue.............................................................................................................................23
Allocation Tools....................................................................................................................................28
Markets....................................................................................................................................................31
Proposed New Allocation Structure.................................................................................................31
PROPOSED FUNDING MECHANISMS FOR NISQUALLY............................................................................33
The Process for Choosing Funding Mechanisms..........................................................................33
Watershed Protection Fees................................................................................................................35
Watershed Stewardship Fees ............................................................................................................36
Special Watershed Assessments...................................................................................................... 37
Watershed Investment District..........................................................................................................38
Puget Sound Regional Restoration Fund .......................................................................................39
Corporate Voluntary Give Back Fund ............................................................................................ 40
CONCLUSIONS, RECOMMENDATIONS, AND NEXT STEPS.......................................................................41
REFERENCES.....................................................................................................................................................43

TITLEiv
1. Summary table of three funding mechanism options viable for the Nisqually
Watershed ....................................................................................................................................3
2. Description of 21 ecosystem goods and services...............................................................15
Watershed ...................................................................................................................................16
4. Funding mechanism strategy used in the City of Bellingham........................................27
5. Results of the voting workshop (July 19, 2013).................................................................34
6. Kilowatt hours generated by each dam and their annual revenue...............................35
7. Three different scenarios of a rate increase for both dams and the additional $
yielded by each increase .........................................................................................................35
Watershed ..................................................................................................................................37
1. Map of the Nisqually Watershed ............................................................................................ 7
2. Relationship between beneficiaries and provisioners......................................................18
3. Water provisioning within the watershed............................................................................21
4. Funding Sources and Allocation Tools ................................................................................22
TABLES
FIGURES

EARTH ECONOMICS 1
The health of our natural environment directly impacts the health of people and our
economy. A healthy watershed and the ecosystem services it supports provides a
steady stream of benefits to residents, and is essential for creating a stable, resilient
and prosperous economy. Treating our watersheds as valuable natural capital assets
provides the foundation for further investments by assuring that it continues to
sustainably provide ecosystem services.
The Nisqually Watershed is a leading example of the effective cooperation between
governmental, private and nonprofit institutions for early action to restore listed
salmon species. Over the past several years, major projects have made steady
improvements in the salmon habitat, particularly in the Nisqually estuary. There
is a sound governance model and a track record of best practices for watershed
restoration, both of which have been recognized internationally.1
In 2009, Earth Economics estimated a value of Nisqually Watershed ecosystems
services between $275 million and $3.9 billion each year. Improving this sizable
asset increases the cultural, economic, and ecological benefits the Watershed
provides, justifying tens of millions of dollars in ongoing investment. This
investment is required to restore salmonids, as well as ensure and enhance the
continued provision of other valuable ecosystem services.
The Nisqually River Council has developed a plan for watershed restoration.2
To
fully implement the watershed recovery program across the Nisqually requires
dedicated funding mechanisms that generate revenue averaging $10 million to
$15 million each year for many years to come. Current annual funding for salmon
recovery averages between $2 million and $3 million in operating expenses and $1
million to $6 million in capital expenses; approximately $3 million is needed to fully
implement and support watershed maintenance and natural asset improvement
recovery projects to meet 2055 goals.
Executive Summary

FUNDING MECHANISMS
FOR RESTORING AND MAINTAINING A HEALTHY NISQUALLY WATERSHED
2
This report utilizes the best practices in economic analysis. Achieving a high quality
of life for present and future generations entails attaining a prosperous economy,
social equity, tribal cultural values and objectives, and environmental sustainability
across the Watershed. This can only be achieved if the Nisqually Watershed—which
houses people, an economy and natural systems—is healthy, and sufficient funding
is provided for restoration and maintenance. We propose the following funding
mechanisms for consideration by the Nisqually Tribe.
Watershed Protection Fees
▪▪ The City of Olympia should implement a watershed protection fee to support
Nisqually Watershed health and source water protection. The fee could be
implemented by adding a flat rate of $5 per bi-monthly billing cycle (similar to
the model implemented by Bellingham, Washington, which includes both a flat
rate and volumetric charges for both unmetered and metered city residents and
those outside the city). The flat rate alone will yield $600,000.
▪▪ Tacoma Public Utilities should increase investment in watershed health to
mitigate impacts from Alder and La Grande Dams. At a current rate of $0.037/
kwh, Alder Dam generates 228 million kilowatt hours and $8.4 million in income,
and La Grande Dam generates 345 million kilowatt hours and $12.7 million in
income. Total income from both dams provides $21.1 million. Consider three
alternative scenarios for an increase in total revenue of the power generated
from both dams: A 5% rate increase yields $1 million; a 2.5% rate increase
yields $525,000; a 1.0% rate increase yields $211,000 (representing the percent
increase on total current revenue of $21.1 million). Whichever of the three
scenarios is implemented, the additional revenue should be reinvested in the
restoration of the Watershed.
Watershed Stewardship Fees
▪▪ These fees would be voluntary donations by those visiting the Nisqually National
Wildlife Refuge and Mount Rainier National Park (to be developed with those
commercial entities operating the visitors’ centers and other lodging and dining
establishments throughout the Watershed). Assuming voluntary donations of
$5/vehicle entering the Nisqually Gate yielding $990,000 and $2/entrance fee
paid at the Wildlife Refuge yielding $410,000. New revenues generated could be
shared among the facilities and the Watershed.
Special Watershed Assessments
▪▪ An additional watershed protection charge per parcel based on a flat rate of
$15 for the total number of parcels (properties) within the Nisqually Watershed
(41,775) is estimated to generate $626,625 annually.
Watershed Investment District
▪▪ The Watershed Investment District concept is being developed under a
study bill supported by Washington State Representative John McCoy (and
administratively led by WRIA 9). It is beneficial to continue to actively support
this opportunity for inter-jurisdictional collaboration on a watershed-wide view
assessment, development of a restoration planning and investment strategy,
and protection of both land and water resources.
1.
2.
3.
4.

EARTH ECONOMICS 3
Puget Sound Regional Restoration Fund
▪▪ Funding from cargo shipped goes from shippers to the systems that conveys
the cargo (roads or rail.) However, this is not the case for Puget Sound. Shipping
creates threats to the region, as it impairs Puget Sound health with invasive
species, bilge water, port facilities, and other impacts.
▪▪ A fund should be created with special fees assessed at the Ports of Seattle and
Tacoma, in the form of a cargo tax. The burden of this fee would be borne by
shippers across the world who benefit from shipping through Washington State
ports. Additionally, the fund would include redistribution of the Federal Harbor
Maintenance Tax that is paid by tax payers to the Port of Seattle, but which is
currently invested in ports in other parts of the United States that have more
severe dredging maintenance issues than in Seattle (given the naturally deep
channel from the Port through Elliott Bay).
Corporate Voluntary Give Back Fund
▪▪ A Corporate Give Back Fund involves developing a marketing strategy for the
Nisqually to promote its benefits to the likes of Patagonia, Microsoft, Nordstrom,
Amazon, Costco and Wilcox Family Farms. For example, Intel donated locally
more than $2 million in 2012 alone, much of which was invested in the Nisqually
Watershed. This donation included $180,000 through the grant matching
program (triggered when Intel employees volunteer over 20 hours), $200,000
for K–12 education in Pierce and Thurston Counties, and $435,000 for the United
Way.
TABLE 1
SUMMARY TABLE OF THREE FUNDING MECHANISM OPTIONS VIABLE
FOR THE NISQUALLY WATERSHED
Funding Mechanism $ Generated
1. Watershed Protection Fee
City of Olympia $5 bi-monthly $600,000
Tacoma Power 2.5% rate increase $525,000
2. Watershed Stewardship Fee
Mt. Rainier $5 per vehicle $990,000
Nisqually Wildlife
Refuge
$2 entrance fee $410,000
3. Special Assessment Fee Nisqually Properties $15 per parcel $626,625
Total $3,151,625
This table uses
the mid-range
calculations
of the dollars
generated with
three types
of selected
mechanisms
to equal about
$3 million,
our proposed
goal of needed
revenue.
6.
5.

FUNDING MECHANISMS
4
PURPOSE OF THIS REPORT
The Nisqually Watershed is a leading example of the effective cooperation between
governmental, private and nonprofit institutions and landowners for early action to
restore the populations of listed salmon species. Over the past several years, steady
improvements have been made in salmon habitat as major projects have been
completed, particularly in the Nisqually estuary. Sound governance by the Nisqually
River Council is in place and provides a model track record of best practices for
watershed restoration. The work in the Nisqually has been recognized locally,
nationally, and internationally. However, the resources that restore and maintain
watershed health are insufficient. This report provides suggestions for additional
funding sources to support the ongoing exemplary work and restore critical
watershed ecosystem services, including salmon, in the Nisqually Watershed.
A previous study by Earth Economics in 2009 stated that the Nisqually Watershed
produced between $275 million and $3.9 billion each year in ecosystem services
across several landscapes. This shows that the Watershed is well worth tens of
millions of dollars in ongoing investment required to restore salmonids, as well as
ensure and enhance the continued provision of other ecosystem services.
The value and public benefits of restoring a healthy watershed provide a strong
economic justification for expenditures to secure viable and healthier salmon
populations, enhancing natural capital throughout the Watershed. A number of
these services are provisioned at the watershed level and are key components
to economic development and to securing high quality of life for those within
the Watershed, as well as people outside the Watershed. It is in the interest of
all beneficiaries of watershed services, such as clean and abundant water supply,
healthy food, energy, raw materials, and recreation and tourism to maintain the
production of these services through sustainable management practices.
Built vs. Natural Capital
One hundred years ago, our watersheds were largely pristine. Built capital, such as
buildings, roads, bridges and dams was scarce and highly valuable. Natural capital,
such as forests, clean water, and salmon were abundant. Greater salmon catches
simply required more boats and nets. Today, the reverse is true. Our watershed has
an abundance of built capital. Value creation is less limited by built capital and more
constrained by natural capital limits, even in a relatively undeveloped watershed like
the Nisqually. Greater salmon catches today require more quality habitat to support
healthy fish populations, not more boat and nets. Increased production of timber
and fish is no longer limited by a shortage of chain saws and nets, but by a shortage
of fish and trees.3
Historically, many solutions to watershed problems emphasized replacing natural
capital assets with built capital. Our current tax jurisdictions reflect this bias. As
floodplains were built up, flooding increased in the lower reaches of the watershed.
Flood districts have traditionally been located in the deltas and charged principally
with building levees to replace lost natural flood protection from wetlands, forests,
and riparian areas. Flood protection is a watershed-scale service and cannot be
effectively delivered with actions only in the lower reaches of the watershed.

EARTH ECONOMICS 5
In recent years, King County merged six separate flood districts across the Water
Resource Inventory Area (WRIA) 9.4
These districts extended only where flooding
occurred, not where flood protection was provisioned. King County recognized that
while flooding occurs at the lower end of the watershed, much of the service of
flood prevention is provisioned upstream in forests and wetlands. Merging separate
flood districts into a single district created a more effective and efficient countywide
flood district, which links flood protection actions across the whole watershed.
Solutions should be applied at the watershed scale of the problem, and
the Nisqually Tribe has embraced the correct scale and focus. The Tribe has
facilitated effective governance between jurisdictions, the public, nonprofit
organizations, corporations, and residents in the watershed, serving as a conduit
for communication on watershed issues. The Nisqually Tribe and the River Council
are also vehicles for managing solutions that are sustainable and ecologically
sound, which build natural capital for economic development, and thus benefit all
jurisdictions and residents.
The Nisqually Watershed Stewardship Plan provides lower cost solutions to continue
restoration work throughout the Watershed.5
Investing in natural capital is far more
efficient than replacing these with human-built infrastructure that depreciates
and must be replaced every 30 to 40 years, not to mention the costly maintenance
costs. Natural systems are unsurpassed in preserving natural and human health and
economic benefit for the lowest cost.6
The greatest barrier to salmon recovery in the Watershed is the lack of sufficient
and dependable funding mechanisms to implement the various plans and
projects. Accomplishing the objectives of this report should lead to the creation
and implementation of a number of new funding mechanisms to invest in
the restoration of salmonids and other critical natural capital in the Nisqually
Watershed. The chosen funding mechanisms will enable implementation of a
watershed plan at the scale of the Nisqually Watershed, and allow the flexibility
of providing funding in other areas of Puget Sound critical to the recovery of the
Nisqually salmon stocks.
Wildflowers
at Paradise in
Mount Ranier
National Park.
Image credit:
CC by Rachel Sarai

FUNDING MECHANISMS
6
PROJECT OBJECTIVES
The main objective of this report is to develop multiple, permanent and sufficient
funding mechanisms to provide $3 million of revenue annually to fund a healthy
and sustainable Nisqually Watershed.
The following steps were undertaken to identify and evaluate funding mechanisms:
1. Survey of literature on existing and proposed funding mechanisms within the
United States or outside for models that are relevant to a Nisqually solution,
and seek descriptions of working case studies that implement ecosystem service
funding mechanisms.
2. Identify and describe a set of 3-5 potential funding mechanisms that could be
applied to provide a sufficient dedicated funding source for implementation.
One of these funding mechanisms should be in a form that could be
implemented in one year in collaboration with the Washington Department of
Natural Resources, Nisqually Tribe, and other basin stakeholders.
3. Conduct workshops with Nisqually Tribe staff, Nisqually River Council members,
and watershed stakeholders to create a funding viability matrix and rank
possible funding mechanisms, identifying one to three for further analysis.
4. Based on the mandate from the workshops, stakeholders and decision makers,
examine the identified funding mechanisms for economic viability, sufficiency,
legal requirements, collection efficiency, and other criteria.
5. Produce final report in collaboration with the Nisqually Tribe, Nisqually River
Council, and relevant stakeholders.

EARTH ECONOMICS 7
The Nisqually Watershed
From the depths of Puget Sound to Mount Rainier’s height of over 14,000 feet,
an incredible variety of natural surroundings is part of what makes the Nisqually
Watershed spectacular and unique. The Nisqually Watershed Stewardship Plan
identified seven ecoregions in the area: Oak Woodland/Prairie, Puget Sound
Douglas Fir, Coastal Western Hemlock, Silver Fir, Mountain Hemlock, Alpine, and
Ice/Snow.
Figure provided by the Nisqually River Council
FIGURE 1 MAP OF THE NISQUALLY WATERSHED

FUNDING MECHANISMS
8
The Nisqually Watershed begins on the volcanic slopes of Mount Rainier. Mount
Rainier National Park, the country’s fifth national park, was established in 1899,
with the Nisqually entrance, the most used entrance and the primary climbing route
to the summit of Mount Rainier.
The Nisqually Glacier provides cold, clean water throughout the dry summer, and
is a premier attraction from Paradise, the most popular destination in the park. The
bridge on the road to Paradise provides a stunning view of the glacier and of the
emergence of the Nisqually River, a high mountain braided river that flows rapidly
to Alder Lake, a popular fishing area. Three dams on the Nisqually River—Alder, La
Grande, and the Centralia Diversion dam—provide power to western Washington.
Along with electricity, these dams provide recreational opportunities on their
associated lakes. Numerous creeks flow below Alder Lake into the Nisqually River.
The area has dozens of pothole lakes, which retreating glaciers created about
12,000 years ago.
The Nisqually Watershed also provides freshwater flows that are critical to the
health of lower Puget Sound. The South Sound is a marine area that is not naturally
cleansed by tides given its distance from the Strait of Juan de Fuca and the Pacific
Ocean currents.
Additionally, the Watershed hosts one of the most extensive areas of native prairie
in the Puget Sound region, with a spectacular bloom of camas and other native and
endangered prairie plants. The Nisqually Watershed’s diverse vegetation patterns
range from heavily forested mountain slopes covered with cedar, fir and hemlock,
to shrubs in the lowlands, and grasses in the prairie lands and meadows. Before the
European settlers arrived, the Nisqually people burned much of the prairie each
fall to curb the encroachment of forests into the prairies where the Tribe harvested
food and medicinal plants. Wildfire suppression and an end to burning for prairie
maintenance have resulted in the conversion of much of the prairie and oak forests
to Douglass Fir forest-dominated land cover.
The Nisqually
glacier at
Mount Ranier.
Image credit: CC by Mount
Ranier National Park

EARTH ECONOMICS 9
A gem of the U.S. National Wildlife Refuge system, the Nisqually National Wildlife
Refuge, hosts migratory birds, amphibians, salmon and other fish species, seals
and sea lions, mink, otter and beaver. In 1974 the refuge was created to protect the
delta and its rich biodiversity. It houses critical habitat and has just finished a major
restoration project increasing rare estuary habitat in Puget Sound. The Nisqually
Wildlife Refuge hosts about 200,000 visitors annually, contributing over $9 million
per year to the local economy.
Although many of these areas are in relatively good condition, there are still many
important restoration needs. The Nisqually Watershed Stewardship Plan aims to
restore viable areas of these ecoregions by 2055 by eliminating invasive species and
fully restoring all threatened and endangered animal and plant species.
The Nisqually Watershed has been home to the Nisqually Tribe for thousands
of years. The Tribe is a vibrant, welcoming community with advanced work in
ecological restoration, tribal health and education. The Tribe has worked hard and
successfully developed strong, constructive relationships with residents throughout
the Watershed.
Although it was the first area in the Puget Sound to be settled by Europeans, the
Nisqually basin was not rapidly developed. Due to this, as compared to other parts
of the Puget Sound region, the Nisqually Watershed is in good ecological condition.
Significant areas within and around the Watershed enjoy protection: Mount Rainier
National Park, the Nisqually Indian Reservation, Fort Lewis Military Reservation,
Nisqually State Park, Nisqually tribal lands, the Nisqually National Wildlife Refuge,
University of Washington’s Pack Forest, mitigation land purchased for protection by
Tacoma Public Utilities along the Nisqually River, and the lands of the Nisqually Land
Trust.
The population of the rural towns in the Watershed—including Yelm, Eatonville,
and Roy—has grown rapidly in the past decades. This has brought an increase in
built infrastructure from roads and utilities to storm water and sewage treatment
systems. More people have demanded the services that the Watershed’s natural
systems provide as well. Answering these needs has put increasing pressure on the
landscape.
Wildlife like
this Blue Heron
is common at
the Nisqually
National
Wildlife Refuge.

FUNDING MECHANISMS
10
Nisqually Watershed
Management
BRIEF HISTORY
The Nisqually River was first recognized as a “River of Statewide Significance” under
the 1972 Washington State Shoreline Management Act. State House Bill 323 was
passed in 1985 directing the Washington Department of Ecology (DOE) to develop
a comprehensive management plan to protect and cultivate economic, cultural
and natural resources within the Watershed. The DOE subsequently established
the Nisqually River Task Force, which later evolved into the Nisqually River Council,
to fully develop the proposed management plan, known as the Nisqually River
Management Plan. This was approved by the Washington State legislature in 1987.
The Nisqually River Council, the oldest river council in Washington State, comprises
a wide variety of stakeholders including citizens, city and county elected officials,
private landowners, local industry, environmental organizations, state and federal
agency representatives and the Nisqually Indian Tribe. The Tribe is a significant force
in coordinating and implementing watershed protection efforts, and is a critical
player in current and future planning and restoration work.
In 2003, the Nisqually River Council looked to update the Nisqually River
Management Plan. The update resulted in the Nisqually Watershed Stewardship
Plan in 2009, which was created to ensure previous conservation efforts continuing
well into the future. The Stewardship Plan is a model emphasizing sustainability as
the guiding principle for healthy communities, a healthy watershed and a healthy
local economy. The Stewardship Plan also stipulates actions, objectives, goals and
missions out to 2055, separated into four main categories: community involvement,
biological diversity, recreation/public access/tourism and sustainable economy.

EARTH ECONOMICS 11
The Watershed has been the site of many restoration projects including habitat and
riparian restoration, reforestation and storm water management. The Nisqually
National Wildlife Refuge hosts one of the largest tidal marsh restoration projects
to date in the Pacific Northwest.7
The Nisqually Watershed has made a great
deal of positive progress in adopting a watershed-wide approach to ecosystem
management and restoration.
CURRENT MANAGEMENT CHALLENGES
Though the Nisqually Watershed is in far better condition than most Puget
Sound watersheds, there has been significant degradation of natural systems
and the benefits they provide. Declining goods and services include: salmon,
flood protection, drinking water quality, cultural and aesthetic value. Increasing
the ecological health and economic value of the Watershed requires investment
in natural assets. Fortunately, these investments pay off. A healthier watershed
ensures more salmon, provides more jobs and healthy food, and creates
recreational and cultural benefits. Abundant, clean water benefits people and
wildlife.
Most of the current built infrastructure was created in the last century without a full
understanding of the impact on salmon, natural systems and long-term economic
health. Ecosystem services, such as flood protection were lost, and taxpayers paid
for built structures, such as levees to replace what natural systems previously
provided for free. These built structures have often performed poorly in comparison
to natural systems. Levees were built to provide flood protection because forests
were cleared, wetlands were filled and floodplains were populated with structures.
As natural flood protection reduces and storm frequency and intensity increases,
damages produced by frequent floods will also increase. Storm water districts in
many western Washington cities were required because impermeable pavement
caused flooding. These expensive built systems often direct water from cities into
rivers with great efficiency. This contributes to higher river peak flows, degraded
water quality, and flooding downstream where flood districts are at work to reduce
flooding with ever greater expenditures on levees.8
A combination of built structures and natural systems is today’s most inexpensive
and effective way to provide many of the services needed for a healthy watershed
and prosperous economy. Access to salmon, clean water, clean air, flood protection
and other benefits provided by healthy ecosystems should be available to present
and future residents of the Nisqually Watershed. Good planning and investments
in restoration are required to achieve this goal. One generation should protect, not
destroy, the potentially permanent flow of benefits that the Watershed’s natural
capital provides. This is a core value of the Nisqually Tribe, the River Council, and
many other stakeholders living in the Watershed. The fruit of these shared core
values are reflected in the efforts to protect and restore the Watershed’s natural
assets.9

FUNDING MECHANISMS
12
Nature provides vast amounts of economic value for free or at little cost. Once
degraded, natural systems require investments to restore health. Restored systems
provide the flow of goods and services. Unlike other built-capital investments,
healthy, natural systems are self-maintaining.
The people who will benefit the most from protection and restoration efforts are
those who live within the Nisqually Watershed. However, the Nisqually Watershed
is a key indicator regarding the health of the entire Puget Sound, having regional
and statewide significance.10
Restoration provides long-term dividends to everyone
connected to the Watershed, whether they are within the actual boundaries or
within the area of benefits, which extends far beyond the Watershed boundaries.
The investment in watershed restoration provides a high, sustainable and fair rate of
return for people in Washington State today and in the future.11
Though the Nisqually Watershed has avoided some over development mistakes,
there is no doubt that pressure on the Watershed will increase as population
and demands on natural systems within the Watershed grow. The Nisqually River
Council has developed a list of needed restoration projects. Indeed the greatest
challenge is not what to do but finding the funding for both maintaining the current
natural asset institution, the River Council, and identifying capital improvement
projects.
WATERSHED SCALE GOVERNANCE
The Nisqually Watershed Stewardship Plan is a large-scale project that includes
several other projects all with measurable milestones that work towards the overall
watershed restoration goals. Crucial projects are often time specific to a particular
location, action must be taken or an opportunity to work with landowners, within
seasons, or implement changes will be missed. There are several projects that focus
in areas near Yelm, Eatonville, and the Nisqually Tribe Reservation, such as the Ohop
Valley restoration, rain gardens in Eatonville, easement acquisitions and the well-
known restoration of the Nisqually Delta.
There are also species-specific plans, such as the Chinook Recovery Plan and the
Multi-species Plan. Cities also have projects and plans that have importance to
the Watershed, water quality and salmon, such as storm water and wastewater
in Eatonville and Yelm. It is wasteful to build expensive systems that destroy each
other. A storm water system that damages salmon or increases storm impact on
levees may do more harm than good. This is called an “infrastructure conflict.” Plans
that are implemented within a watershed framework, mutually informed, and in
coordination with a watershed scale institution, like the Nisqually River Council,
that represents the Watershed jurisdictions and stakeholders can cost less, generate
co-funding sources, provide greater benefits, and last longer than uncoordinated,
blind investments. A watershed approach with a sufficiently funded watershed
scale institution strengthens objective and achievements for the entire watershed,
including the Nisqually Watershed Stewardship Plan.12
Image credit: CC by Kat
Kellner
The Nisqually
River as it winds
along a rocky
valley.

EARTH ECONOMICS 13
FURTHER EFFORTS
This report aims to secure funding to ensure the success of the Nisqually Watershed
Stewardship Plan and the Chinook and Steelhead recovery plans. Current funding
for the Tribe, the Nisqually River Foundation, the Nisqually Land Trust, and other
associated groups working towards implementing these three plans runs between
$2 million and $3 million annually for operating expenses. However, finding this
funding has become increasingly difficult, and takes more time each year to secure.
Securing $3 million annually to cover the operating expenses will allow all projects
to proceed at a pace to achieve the restoration objectives by 2055.
Investing $3 million per year in the health of the Nisqually Watershed is a good
investment, it maintains and improves an enormous asset that provides economic
benefits to every resident, and many people beyond the Watershed’s boundaries.
The Nisqually River Council recently commissioned an analysis of the economic
value provided by the Watershed.
Mudflats at
the Nisqually
National Widlife
Refuge.

FUNDING MECHANISMS
14
Ecosystem Services in the
Nisqually Watershed
A previous study by Earth Economics in 200913
estimated the value of ecosystem
services produced in the Nisqually Watershed. The range of value was derived
using both a benefit transfer methodology with GIS data provided by the Nisqually
Indian Tribe Department of Natural Resources, and peer-reviewed economic studies
of market and non-market values employing direct use and indirect use valuation
methods.
Valuation figures from this analysis established per acre values for four different
categories of ecosystem services using GIS data for each land cover type within the
Watershed. These were further adjusted with ecosystem health coefficients.
CO₂
Provisioning
Services
Regulating
Services
Supporting
Services
Information
Services

EARTH ECONOMICS 15
TABLE 2 DESCRIPTION OF 21 ECOSYSTEM GOODS AND SERVICES
Good/Service Economic Benefit to People
Provisioning Services
Food Producing crops, fish, game, and fruits
Medicinal Resources
Providing traditional medicines, pharmaceuticals and assay
organisms
Ornamental Resources
Providing resources for clothing, jewelry, handicraft, worship
and decoration
Energy and Raw Materials Providing fuel, fiber, fertilizer, minerals and energy
Water Supply
Provisioning of surface and ground water for drinking water,
irrigation and industrial use
Regulating Services
Biological Control Providing pest and disease control
Climate Stability
Supporting a stable climate at global and local levels through
carbon sequestration and other processes
Air Quality Providing clean, breathable air
Moderation of Extreme Events
Preventing and mitigating natural hazards such as floods,
hurricanes, fires and droughts
Pollination Pollination of wild and domestic plant species
Soil Formation
Creating soils for agricultural and ecosystems integrity;
maintenance of soil fertility
Soil Retention Retaining arable land, slope stability and coastal integrity
Waste Treatment
Improving soil, water, and air quality by decomposing human
and animal waste and removing pollutants
Water Regulation
Providing natural irrigation, drainage, ground water recharge,
river flows and navigation
Supporting Services
Habitat and Nursery
Maintaining genetic and biological diversity, the basis for most
other ecosystem functions; promoting growth of commercially
harvested species
Genetic Resources Improving crop and livestock resistance to pathogens and pests
Information Services
Aesthetic Information
Enjoying and appreciating the presence, scenery, sounds and
smells of nature
Cultural and Artistic Inspiration
Using nature as motifs in art, film, folklore, books, cultural
symbols, architecture and media
Recreation and Tourism
Experiencing natural ecosystems and enjoying outdoor
activities
Science and Education Using natural systems for education and scientific research
Spiritual and Historical Using nature for religious and spiritual purposes
Using a similar classification to the Millennium Ecosystem Assessment14
the
following table describes services that were valued, and some which were identified
as present and holding economic value but were not valued (appropriate estimation
techniques or valuation studies may not exist).

FUNDING MECHANISMS
16
THE VALUE OF THE NISQUALLY WATERSHED
The valuation of 12 ecosystem services across 18 land cover types present in
the Nisqually Watershed shows an annual flow of approximately $275 million to
$3.9 billion. These are conservative values because 11 other ecosystem service
categories present were not valued. The values reported, even on the low side,
clearly justify significantly higher investment in restoration and conservation than
is currently available. The asset value of ecosystems in the Watershed is certainly in
the billions, with annual benefits in the hundreds of millions.
TABLE 3
SUMMARY TABLE OF THREE FUNDING MECHANISM OPTIONS VIABLE FOR
THE NISQUALLY WATERSHED
Total
$/Acre/
Year
Total
$/Acre/
Year
Total
$/Year
Total
$/Year
Cover Type Acre Low High Low High
Early Forest 71,436 $0 $0 $0 $0
Pole Forest 34,362 $12 $636 $402,379 $21,858,725
Mid Forest 56,449 $73 $1,093 $4,144,221 $61,713,425
Late/Old Forest 35,441 $396 $2,420 $14,026,485 $85,784,232
Riparian Forest Pole 22,288 $35 $12,567 $790,902.45 $280,107,404
Riparian Forest Mid to Late 59,604 $3,469 $25,365 $206,764,141 $1,511,864,248
Riparian Shrub 21,712 $35 $12,567 $770,440 $272,860,254
Fresh Wetland 20,216 $319 $59,914 $6,446,723 $1,211,196,925
River/Lakes 7,230 $78 $22,013 $561,804 $159,145,008
Shrub/Scrub 21,711 $12 $636 $254,236 $13,811,018
Grassland/Herb 29,680 $97 $97 $2,889,657 $2,889,657
Agriculture 1,190 $30 $40 $35,567 $47,106
Pasture 26,845 $6 $6 $167,781 $167,781
Urban Green Space 28,365 $1,278 $4,743 $36,259,414 $134,537,539
Beach 2 $22,353 $81,528 $37,330 $136,152
Salt Marsh 1,215 $359 $114,739 $436,013 $139,454,364
Estuary Waters 1,912 $19 $1,869 $35,601 $3,572,591
Marine Waters 3,009 $259 $773 $780,354 $2,324,994
Total 442,666 $274,803,050 $3,901,471,422
Forests, wetlands, riparian areas, estuaries and marine waters are of particularly
high values. Prairies are clearly undervalued because few valuation studies of
prairies exist. For example, within the Nisqually Watershed prairies are crucial
groundwater recharge areas for aquifers and water supplies both for cities and
individual wells.

EARTH ECONOMICS 17
From this annual flow of benefits, an asset value can be calculated for the
Watershed systems that produce this flow of goods and services. The asset value
of ecosystems in the Watershed is $274 million to $3.9 billion. Letting this asset
degrade or improving it has an enormous impact upon the economy and quality of
life within the Watershed.
Importantly, many of the beneficiaries of the goods and services produced with
the Nisqually Watershed are very easily identifiable. For example, Olympia receives
much of the city’s water supply from the Nisqually, yet the city provides no funding
for the health of the Watershed that provides and filters every drop of that water.
This is not unusual. Los Angeles provides no funding to the Colorado Basin for
watershed restoration, though water from The Colorado is sipped from the tap in
Los Angeles. This historical oversight is changing, however. Bellingham, WA, as will
be further discussed is a utility that places a watershed health charge on the bill and
invests in watershed restoration and improvements.
Trees in the
Nisqually
Watershed filter
water that ends
up in the City of
Olympia’s water
supply.

FUNDING MECHANISMS
18
The Beneficiaries and
Provisioners of the
Nisqually Watershed
A healthy environment is essential to a high quality of life. People live longer when
they have the clean water, clean air and healthy food that a healthy watershed
provides. This may seem obvious, but every polluted watershed was once as
spectacular as the Nisqually.
The residents of the Nisqually Watershed have identified a healthy environment as
a critical contributor to quality of life thus empowering elected officials and others
to actively pursue restoration throughout the Watershed, from the National Park,
National Forest, and private lands to the Nisqually Wildlife Refuge. In understanding
the economics of a watershed, there are three aspects of the production and
distribution of ecosystem services that are important across a landscape: the
provisioning area (the areas that produces benefits), the beneficiary area (those
receiving the benefits), the areas of impairment (where the services are damaged
or disrupted.
FIGURE 2 RELATIONSHIP BETWEEN BENEFICIARIES AND PROVISIONERS
PROVISIONER = WATERSHED
The Nisqually watershed provides
water, food, and other goods
BENEFICIARIES = PEOPLE
Residents within the watershed and
all who receive water, food, and other
goods

EARTH ECONOMICS 19
Manufactured goods are typically composed of an element of built capital that,
when combined with labor, yields a single good or service. By comparison, natural
systems, such as a wetland, provide a variety of benefits, such as flood protection,
water filtration, recreation, and biodiversity. In addition, a single ecosystem service
is provided by a variety of systems in a watershed. Flood protection is enhanced
by multiple factors, including forest cover, porous soils, wetlands and wide riparian
areas. This means that each ecosystem service has a unique provisioning map
across a watershed landscape. Flood protection, for example, is primarily provided
in the upper watershed and prairies, where forests break up rainfall and waters
are slowed, ponded, or absorbed in highly permeable prairie soils to recharge
groundwater. Flood protection services are also provided by built structures, such as
dams and levees.
The provisioning maps for each ecosystem service is different. Carbon
sequestration, recreation, salmon production, and drinking water are all different,
but overlapping within the watershed.
The beneficiary maps for each ecosystem service are also different but overlapping.
The beneficiaries of flood protection typically live at the base of a watershed where
flooding takes place, whereas a map of the beneficiaries of recreational value in the
Nisqually Watershed, would include people from all over the nation and world who
visit the Nisqually entrance to Mount Rainier National Park or Nisqually Wildlife
Refuge (recreational provisioning areas). Carbon sequestration benefits are global.
Drinking water benefits are outlined by the wells and distribution systems of public
utilities, which are inherently local.
The third set of maps includes impairment of, damage to, or interference with
ecosystem services. Areas of groundwater pollution within a watershed would be
mapped as damage to drinking water quality. A map of areas where the floodplain
has been filled would be included an impairment or damage to the service of flood
protection to those downstream.
These maps contribute to an understanding where there are highly critical areas for
ecosystem services. For example, the transition zone for juvenile salmon is where
salt and fresh water mix. Salmon species require days to weeks in this area to adjust
to salt water before entering Puget Sound. While a parking lot could be located in
many places within a watershed, the transition zone for salmon cannot. There is
only one transition zone in the Nisqually River; if that transition zone is not available
to salmon, then salmon runs cannot be maintained. These concepts set the stage
for wiser and more effective land-use planning and infrastructure investment
decisions.

FUNDING MECHANISMS
20
BENEFICIARIES
In a market transaction, a consumer who purchases (benefits from) a product
pays the producer to produce it. If producers received no pay, they would likely
stop producing the products. Nature is much more generous, often providing
many valuable goods for free, such as water or fish, as long natural assets are
unimpaired. In an ecosystem service transaction, beneficiaries of an ecosystem
service pay those who provide the ecosystem services. In the Nisqually Watershed
the beneficiaries are all those who benefit from services provided by the natural
landscape, services such as abundant and clean drinking water, suitable habitat for
salmon, and flood protection. Often these payments are a tiny fraction of the value
provided, but ensure that landscapes are healthy and flows of ecosystem services
and goods continue. Residents within a watershed, as well as those residing outside
a watershed who receive food, drinking water, recreation, and flood protection are
considered beneficiaries.
The utility and efficiency of these types of payments for ecosystem services will
become more apparent in coming years as new market opportunities develop for
habitat, climate control, temperature and water quality.15
These formal ecosystem
service markets have been slowly developing in areas where there is clear and
strong demand for the services provided and sufficient infrastructure to assure
credibility of the market transactions. A number of factors make ecosystem service
markets more challenging than markets for traditional commercial goods. Unlike
goods, a flow of services is often measured over time. Quantifying the amount of
flood protection provided by a given forest and the value of that flood protection
is much more difficult than calculating the potential for timber harvest. Regardless
of the difficulty in measuring service flows, the value of drinking water, flood
protection or other services may be higher than the production of goods of that
same ecosystem.16
PROVISIONERS
In the Nisqually Watershed, the main provisioner of services is the Watershed
itself. The Watershed boasts a number of native salmon runs, a large protected
estuary, and a wide range of critical habitats. It is home to several threatened and
endangered species, including bald eagles, marbled murrelets and spotted owls.
These ecosystems also provide a number of tangible and measureable economic
and societal benefits, such as recreational opportunities, hydroelectric power
generation, timber production, potable water supply, and more than half of the
fresh water flow that enters the South Sound.
Farming is a significant activity in the Watershed. The 1,500-acre Wilcox Farm,
the largest farm in the Watershed, producing eggs for western Washington and
Alaska, generating some $180 million in annual sales, and employing 110 people.
Greenhouses in the lower Watershed provide seed trees and plants, enabling
greater forestry and agricultural production in other watersheds, farms and
nurseries.
The Nisqually
Estuary
provides
important
habitat to
hundreds of
species of
wildlife.

EARTH ECONOMICS 21
Forestry is still a dominant part of the Nisqually Watershed’s working landscape.
The high rainfall and good soil quality provide high quality timber and fast growth
rates. Hancock and other companies own significant areas of land, the State of
Washington manages two forests within the Watershed, and the Gifford Pinchot
National Forest implements the U.S. Forest Service’s vision of multiple use on their
lands within the Watershed.
WATER PROVISIONING
The provisioning and purification of water are two of the most essential ecosystem
services. It is anticipated that population growth will result in water supply shortfalls
for the cities of Yelm and Lacey and the Town of Eatonville in the next 10 to 20
years, if new sources are not found and water rights are not granted by the State.17
Olympia and the South Sound rank among the fastest growing areas in the state,
with water becoming increasingly scarce in Thurston County.18
Although the
McAllister Spring has traditionally provided 84%19
of Olympia’s water, it was found
to be susceptible to contamination from nitrates from failing septic systems,
pesticides from both agricultural lands and residential lawns and runoff from local
roads.20,21
Resolving water supply and quality issues will require careful planning,
solid science, defining sustainable use and rights and determining fair distribution.
The Nisqually Watershed provides drinking water to residents including those in the
City of Olympia, which lies outside the Nisqually Watershed. Puget Sound aquifers
are complex due to the glacial history that left tremendous amounts of permeable
sand and gravel, accompanied by impermeable glacial lake sediments. Because
glacial streams cut through sediments and then were covered, it is no easy task to
understand how one aquifer is related to another. Although it was once thought
that a single aquifer provided much of the Watershed’s groundwater and discharge
to the Puget Sound, recent studies have revealed several deep aquifers that are
directly connected to surface waters.22
Thus, the McAllister and Yelm sub-basins
may have a greater impact on surface and ground water than previously thought.
This ongoing research accentuates the importance of carefully understanding and
balancing natural resource and land-use planning to sustainably accommodate the
needs of current and future generations living in and outside of the Watershed.
The Nisqually watershed
provides water to the McAllister
Springs
McAllister Springs supplies 84% of
the City of Olympia’s water
FIGURE 3 WATER PROVISIONING WITHIN THE WATERSHED

FUNDING MECHANISMS
22
Funding Mechanisms
Overview
TYPES OF FUNDING MECHANISMS
Following from the rationale of beneficiaries and provisioners in a watershed, this
section of the report details a variety of potential new, innovative funding
mechanisms to provide the Nisqually River Council, Nisqually Tribe and other
relevant stakeholders with options for choosing the most practical and reliable
funding sources to match their needs. As seen in Figure 4, the sources of revenue
are mainly: taxes, fees and voluntary contributions. Allocation mechanisms are
separated into six: grants, conservation easements, revolving loan funds, tradable
development rights, land acquisitions and special purpose districts; the allocation
FIGURE 4 FUNDING SOURCES AND ALLOCATION TOOLS
Watershed Investment
District
PROPOSED NEW
ALLOCATION
STRUCTURE
SOURCES OF
REVENUE
Taxes
▪▪ Property
▪▪ Incentives
▪▪ General/
Special
Purpose
Voluntary
Contributions
▪▪ Corporate
Donations
Fees
▪▪ Environmental
Impact
▪▪ Watershed
protection
Revolving Loan Funds
ALLOCATION
TOOLS
Trade-able
Development Rights Conservation
Easements
Grants
Land Aquisitions
Special Purpose
Districts
MARKETS
Voluntary
▪▪ Carbon Offset
▪▪ Stormwater
Offset
Regulatory
▪▪ Wetland
Mitigation
▪▪ Carbon
▪▪ Water Quality

EARTH ECONOMICS 23
of which potentially could be managed more efficiently and effectively by a new
allocation structure called a watershed investment district. Markets stand on their
own, as both voluntary or regulatory, and are a viable option in the development
of new funding approaches. In addition, the team further describes the approach
taken for selecting appropriate funding mechanisms for the Nisqually Watershed.
SOURCES OF REVENUE
Taxes
Taxes for funding general services at state and local levels
Funding collected from taxes, at the state and local level (generally from property
or sales taxes), provide means to support a wide variety of civic services including
garbage collection, sewer maintenance and education.23
Business taxes, fuel tax and
the Regional Transit Authority (RTA) tax, a combined vehicle tax and sales tax are
other examples used in Washington State.
Generally, taxes should have the following qualities to be fair, efficient, and
effective:
1. Clarity and Certainty: the tax should be transparent and understandable (like a
sales tax), There should be certainty as to how much will be paid and how it is
calculated.
2. Efficiency: tax collection, implementation, and enforcement should be easy,
rapid, and low-cost.
3. Fairness: people or firms in the same situation should have the same tax
liabilities, and individuals and firms with a higher “ability to pay” should pay
more. Taxes should be progressive (the wealthy pay relatively more than those
with less income) rather than regressive (the poor pay more).
4. General taxes support universally beneficial services (national defense,
environmental protection, education). Specific taxes/user fees support actions
that benefit a portion of the population (road tolls for bridges, sewer charges for
sewer services).
5. Taxes are dis-incentives, so they can be used to reduce externalities and
overall market and social costs. Taxing tobacco reduces lung cancer, which
reduces public health costs, increases employment and income, and both saves
taxpayers money and increases tax revenues (people who would get lung cancer
live longer and pay more taxes than if they were sick).24
6. Geographic Distribution: The tax should be set at the geographic scale of
beneficiaries, which may be outside the Watershed.
A watershed provides a broad set of benefits to everyone within it and to many
people outside it. That is why a more diverse set of funding mechanisms are
justified (market, non-market, tax-based, volunteer) than simply a special purpose
single funding mechanism.

FUNDING MECHANISMS
24
An example of a tax collected for a special purpose, a common practice to address
specific environmental and other challenges, is demonstrated by the King County
Flood Control District (KCFCD) tax levy, at a rate of $.10 per $1,000 of assessed
property value generates $32 million a year for flood protection management
activities across the county. This revenue is used to manage flooding in vulnerable
areas, including building or maintaining existing infrastructure such as levees and
revetments.
Taxes for incentives
In addition to generating revenue, taxes can serve as an incentive to change
behavior, adjusting incentives to discourage activities that force impacts or external
costs on others. For example, taxes on cigarettes, alcohol, or gas emissions reduce
external costs.25
These incentives have been successfully implemented in various locations. In
Maryland, the Chesapeake and Atlantic Coastal Bays Trust Fund, a water quality
incentive program, pays rural landowners to reduce nutrient and sediment run-off
from their land. The money used to pay these landowners comes from taxes on
motor fuel and rental cars. The Chesapeake Bay restoration effort is supported by
a tax known as the “flush tax.” Currently the fee is $30 per year, which is levied on
those with sewer connections as well as those with septic systems. The fee is used
to upgrade the state’s 67 major sewer treatment plants that discharge into tidal
waters, upgrade failing septic systems and fund cover crops for fields—all designed
to reduce nutrient loading and improve the overall health of the Chesapeake Bay.
Property Taxes
A property tax is a levy on property that the owner is required to pay based on
the assessed value, as allowed in the Revised Code of Washington State. The tax
is levied by a local governing authority of the jurisdiction in which the property is
located, such as Thurston or Pierce Counties, in the case of the Nisqually. Depending
on State law, multiple jurisdictions may tax the same property.
In Earth Economics’ work with WRIA 9, a new $5-per-parcel special assessment
fee was discussed which would generate an estimated $866,950 to support the
proposed establishment of a watershed-wide tax district status for the WRIA.
Alternatively discussed was a new property tax levy at a rate of $.20 per $1,000
property value, estimated to generate $21.2 million for WRIA 9.26
Fees
Fee-based funding mechanisms provide an alternative to tax-based mechanisms.
Fees are charged to parties based on a particular benefit provided. Fees are levied,
collected, and allocated to fund projects or programs that address a problem or
alleviate negative impacts. For example, local stormwater management fees are
designed to provide funding for engineered stormwater management systems to
mitigate flooding caused by a high concentration of impervious surfaces. The fee
amount is related to the cost of the stormwater management actions required.

EARTH ECONOMICS 25
Other fees in Washington State include title and registration fees for land and
vehicles, permitting fees, and environmental impact fees. Development of fee-
based mechanisms may in some cases require establishment of a new district under
legislative direction detailed in the Revised Code of Washington State. Such districts
include special purpose districts, benefit assessment districts, or local improvement
districts. For example, in 2001, the Board of Thurston County Commissioners
approved two ordinances creating the Henderson Inlet and the Nisqually Reach
Shellfish Protection District, led by an appointed stakeholder group. The stakeholder
groups proposed changes to enhance the overall health of the Nisqually Reach and
the Henderson Inlet, with the objective of protecting shellfish harvests. Rates and
charges apply to those who have property that utilize any portion of the wastewater
system. In the case of the Nisqually Reach, the rates are $60 per single family
residence, $135 per family in high risk areas, and $145 per food establishments and
schools (unless part of a large on-site sewage system). The charge varies depending
the property’s soil drainage level and its proximity to water.
A related example is the Washington Discover Pass, created in the budget-strapped
year of 2011 and used to ensure the public could continue to enjoy recreation
lands across the state. Given a budget shortfall, the state shifted from relying on tax
revenue from the state General Fund to a user fee to pay for recreation. The cost to
users is $30 for the annual Discover Pass or $10 for a one-day pass.
In Maryland and Virginia, money from the sale of specialty license plates goes to the
Chesapeake Bay Restoration Fund, which allocates contributions to programs that
help restore the Bay and educate people about the restoration effort. From 1995
to1999 this Fund provided more than $3 million to some 300 community groups for
restoration and environmental education.27
Environmental Impact Fees
Impact fees are common across many areas. There are school impact fees, road
impact fees, traffic impact fees, and development impact fees. Local environmental
impact fees are created by local governments, under State Environmental Policy
Act (SEPA), to mitigate environmental impacts caused by new or proposed
development. This includes the authority to impose fees to pay for the mitigation
of impacts on public facilities and services. The income generated by impact fees is
used to help fund and pay for offsite environmental mitigation projects.28
Other areas would work well for impact fees as well. Marine shoreline armoring
is a practice that has known and measurable ecosystem service impacts. These
impacts could be partially addressed by paying a special fee. Bulkheads damage
species including as smelt, Dungeness crab, herring and salmon. There is substantial
evidence that salmon habitat is dramatically affected.29
A fee on existing bulkheads
(new bulkheads are banned, though many variances are allowed) could help pay for
the conversion from hard to soft armoring that would restore some of these critical
and lost functions.
The headwaters
of the Nisqually
begin at the
Nisqually
Glacier on
Mount Ranier.
Image credit: CC by Steve
Cyr

FUNDING MECHANISMS
26
A fee on impervious surfaces is paid by those disrupting the normal flow of water
absorption into the ground in a specific area. The scientific evidence is clear that
untreated run-off harms salmon fingerlings, habitat and ecosystem health. WRIA 9
is considering an additional fee on new impervious surfaces, which could generate
approximately $15.4 million annually from a levy in unincorporated King County.30
The University of Pennsylvania started saving $11,000 per month on the fees it pays
the Philadelphia Water Department to handle stormwater runoff at its campus by
changing to green infrastructure practices that enhanced the collection of rainwater
thus lowering the amount of stormwater discharge into the sewer system. Less
stormwater into the system, lowered stormwater fees.31
Watershed Protection Fees
Water utilities depend on natural assets such as watersheds, forests and river
systems as a vital component of their drinking water infrastructure. Yet most do not
include natural capital costs in their rate structure. As the primary source of revenue
for water utilities, water rates have traditionally included a single base rate and/or
user charges such as consumption charges. To better communicate the value of, and
provide sufficient investments in their natural capital assets to ratepayers and other
stakeholders, several utilities across the country have begun to include natural
capital surcharges in their rate structures.
In 2009, the City of Santa Fe, New Mexico, completed its 20-year Santa Fe Municipal
Watershed Management Plan. It provides a framework for ongoing watershed
management, environmental monitoring, educational outreach and long-term
funding. In terms of long-term funding, the plan includes financial management
based on a “Payment for Ecosystem Services” model. The plan is unique in that it
identifies city water customers as the beneficiaries of a healthy watershed, and
proposes that costs associated with ongoing water source protection activities in a
watershed be paid for by the public through the “Water Source Protection Fund.”
The fee is assessed per household on an annual basis and is in the range of $5.10
per household per year.32
As the source of Bellingham, Washington’s drinking water, the Lake Whatcom
Watershed is monitored carefully for high nutrient runoff from residential
development and other sources, which can result in algae problems. In 2001,
Bellingham’s municipal utility implemented a system of “watershed rates” to fund
land acquisition and preservation measures in the Lake Whatcom Watershed.
Activities funded by the rates include identification, cleanup and long-term
maintenance, and restoration of utility-owned land. The watershed rates are also
used as a communication tool to help ratepayers understand the role of natural
systems in filtering pollutants and distributing nutrients is more cost effective than
traditional built infrastructure. The watershed rate for metered customers is the
sum of a $5 per month base rate plus a volume rate of 64 cents per 100 cubic feet
of water used. The base and volumetric rate for metered customers is expected to
be roughly equal to the fixed rate for unmetered customers. Rates are increased
by 50% for customers outside the city. Before implementation, the proposed fee
structure and Acquisition Program went through a public process, including a public
hearing before City Council. The fee has received little opposition from ratepayers
and a recent fee increase passed unanimously in the City Council.

EARTH ECONOMICS 27
TABLE 4 FUNDING MECHANISM STRATEGY USED IN THE CITY OF BELLINGHAM
Name Watershed Rate
Implemented 2001
Amount
$144 per year for unmetered city residents.
$60 + $.64/CCF volume rate per year for metered city residents.
$90 + $.96/CCF per year for residents outside the city.
Communication
Strategy
Public process and public hearing
Investment Strategy
Nutrient monitoring and cleanup, long-term maintenance and
restoration of utility-owned land.
Source: Earth Economics/US Endowment: http://www.eartheconomics.org/FileLibrary/file/21st%20Century%20
Utility/EE_US_Endowment_Watershed_Rates_2012.pdf
The Eugene Water and Electric Board (EWEB) is working on setting up a Watershed
Investment Fund, a “dividend on natural capital,” to reward landowners who
maintain 66% forest cover. Participating landowners would be paid an annual
dividend per year. The Fund will be capitalized by an initial grant, corporate
sponsorship (breweries) and water rates. The target for initial fund setup is
$250,000. Earth Economics completed a rapid valuation of McKenzie watershedi
,
which produced values for water storage, filtration, habitat and recreation to help
educate policy makers and the public. This valuation can be used to help set initial
dividend prices, acknowledging that current rate payers are not expected to pay the
full price of the asset value of a watershed.
The City of Denver implemented a $27 dollar water fee per household over 5
years to finance the removal of dead trees and the extermination of northern pine
beetles in 38,000 critical acres in five key watersheds.33
In 2009, Central Arkansas
Water adopted a watershed rate of $5.40–$8.16 per payer, dependent on meter
type. These funds were invested towards acquisitions, protection, monitoring and
management of the watershed services that produce source water for the utility
and its ratepayers.34
A similar funding mechanism is the implementation of a watershed fee to the
electric utility. A healthy watershed provides for hydroelectric production. Running
rivers, tributary streams and abundant water flow are vital to electricity generation.
For example, Bonneville Power Administration (BPA) has established rates, approved
by Congress, for costs for salmon recovery projects at $252 million annually, plus
river operation requirements that cost anywhere from $90 million to $280 million a
year. This is about one-fifth of BPA’s annual operating budget.35
i
http://www.eartheconomics.org/FileLibrary/file/Reports/Earth Economics McKenzie Watershed rESV.pdf

FUNDING MECHANISMS
28
ALLOCATION TOOLS
Conservation Easements
A conservation easement is a legal agreement between a landowner and a land
trust (a private, nonprofit conservation organization) or government agency that
permanently limits a property’s uses in order to protect its conservation values. The
benefits of conservation easements are many, but essentially the private owner
makes a commitment to a management or protection status, or sells some aspect of
their property (development rights). They retain ownership of the land.
In the Blackfoot Valley of Montana, for example, the Nature Conservancy accepted
the state’s first conservation easement on 1,800 acres in the mid-1970s. Today,
30,254 acres in the Blackfoot are protected from development by easements and it
is one of the most intact landscapes in all of Montana.
In Washington State, Forterra has an ownership and/or easements on over 14,300
acres of diverse landscapes within King, Kittitas, Pierce, Snohomish and Mason
Counties, as well as estuary land on the Washington coast. Of this total, they own
7,498 acres. They hold a conservation or stewardship easement on the remaining
6,824 acres. Forterra stewards these lands to enhance their ecological value and
improve the value of these natural assets for the benefits of the local community.
By monitoring conservation easements annually and working with landowners,
landowners improve conservation values while maintaining the uses permitted.
The City of Olympia is committed to providing safe and reliable drinking water to
its customers, now and into the future. In order to meet this commitment, the city
is actively developing a new water source, the McAllister Wellfield that will replace
the McAllister Springs, their current water source, which is located in the Nisqually
Watershed. The City of Olympia owns acres of land surrounding this new Wellfield,
ensuring its immediate and future conservation to protect groundwater in the area.
The construction of the McAllister Wellfield was funded through capital budget that
included funds to purchase property on sensitive lands near this new, key City water
resource.36
Transfer of Development Rights (TDR)
A TDR program is both a voluntary, incentive-based and market-driven approach
to steer development away from rural and resource lands into more suitable urban
settings. These programs, such as the program in King County, Washington, are
based on free-market principles and prices that motivate both landowner and
developer participation. Rural landowners, termed the “sending” area, receive
financial compensation without having to sell or fully develop their land. Private
developers purchase the development rights that enable them to build more
compactly in designated urban areas, termed the “receiving” area. To date in King
County, the program has protected 141,500 acres of rural/resource land.39
Aerial view of
the restored
Nisqually
Estuary.
Image credit: CC by USFWS
Pacific Region

EARTH ECONOMICS 29
The Nisqually
River Delta
represents
the largest
tidal marsh
restoration
project in
the Pacific
Northwest.
Revolving Loan Funds
A Revolving Loan Fund (RLF) is a source of money from which loans are made
for multiple small business development projects, for utilities or other groups of
borrowers. Borrowers tend to be small producers of goods and services, and could
be artisans, farmers, or utilities.
Some examples include U.S. Farm Bill programs, Clean Water Act State revolving
loan funds (SRF) and Safe Drinking Water Act revolving loan funds. They provide
many billions of dollars each year in low-interest loans to farmers, utilities (both
wastewater and drinking water) and communities for the construction or expansion
of built infrastructure.40
An example of a project funded by the Clean Water State
Revolving Fund (CWSRF) is the City of Port Townsend purchasing an area known
as the Winona Wetlands (EPA), which enabled the city to meet both storm water
treatment and reduction objectives as well as wetlands preservation goals.
Originally, State Revolving Funds (SRF) supported only the construction of
built infrastructure such as wastewater treatment systems and drinking water
infrastructure. Today, some states have expanded use of SRF to invest in natural
capital along with built capital to maximize the services provided by watersheds and
other ecosystems, especially for drinking water sources through land acquisitions.41
One example in Ohio allows wastewater treatment projects to receive significantly
lower loan rates if projects invest a portion of the funding in watershed protection
and restoration.42

FUNDING MECHANISMS
30
Grants
Grants are awarded for targeted funding purposes all over the country. Many of the
grant cycles are open all year and financial support awarded can be in the millions
of dollars depending on the source. There is a wide array of federal, state, local
government and private philanthropic grants available that target investment in
sustainable management and restoration of watershed resources. In an average
year, the Nisqually Watershed, through numerous organizations, is the beneficiary
of millions of dollars of both public and private grant funding that is invested in
maintaining the health of the Watershed.
These grants often fund pilot studies, small-scale preliminary studies conducted to
evaluate feasibility (both political and institutional), applicability, cost and adverse
events in an attempt to understand performance and outcomes of a full-scale
research project or implementation effort.
One suggestion for the Nisqually Watershed is to participate in pilot programs in
collaboration with the Puget Sound Partnership Action Agenda. This would align
funding mechanism development with agenda financing strategies (AFS). The
AFS is part of the 2020 Action Agenda for the protection and recovery of Puget
Sound. The Puget Sound Partnership (PSP) is required to complete a financing
strategy for the Action Agenda. As specified under RCW 90.71.370 the financing
strategy is to: (1) Provide recommendations for projected funding needed through
2020 to implement the action agenda by action agenda element; (2) Address
funding responsibilities among local, state and federal governments, as well as
nongovernmental sources; (3) Identify methods to secure stable and sufficient
funding to meet these needs as well as proposals for new sources of funding to be
dedicated to Puget Sound protection and recovery.
One such grant funded project is the Watershed Services Transaction
Demonstration Projectii
was launched by DNR, in partnership with the University of
Washington School of Environmental and Forest Sciences’ Northwest Environmental
Forum in June 2011. The multi-stakeholder forum focused on forest watershed
services, and included project partners from the two participating pilot watersheds,
Snohomish Watershed and Nisqually Watershed. The two-year project, funded by
a grant from the Washington State Department of Commerce, envisioned one year
for organization and start-up; the second year for detailed analysis, implementation
and documentation.43
The work in the Nisqually Watershediii
is driven by DNR staff, members of the
Nisqually River Council, Nisqually Land Trust and Northwest Natural Resource
Group, among others. It is focused on exploring a payment program for watershed-
based ecosystem services that links private-forest landowner actions with
improvements to water quality and quantity within the Watershed. The work is a
natural extension of ongoing Nisqually Watershed protection efforts and is intended
to help provide a steady funding source to improve the health of forest ecosystems
ii
http://www.dnr.wa.gov/ResearchScience/Topics/ForestResearch/Pages/forest_watershed_service_markets.aspx
iii
http://www.dnr.wa.gov/ResearchScience/Topics/ForestResearch/Pages/nisqually_watershed_srvcs_demo_proj.aspx

EARTH ECONOMICS 31
iv
http://www.dnr.wa.gov/ResearchScience/Topics/ForestResearch/Pages/snohomish_watershed_srvcs_pilot_proj.aspx
on private lands, and to provide new sources of income to forest landowners.
This provides an incentive for landowners to keep forests from being degraded or
converted to non-forest uses. Information about the specific direction of the work
in the Snohomish Watershed can be found on the DNR website.iv
MARKETS
Market funding mechanisms apply innovative approaches to the banking and
trading of benefits or impacts. Credits corresponding to actions with negative
impact are transferred to projects with a corresponding positive impact. In wetlands
mitigation banking, any projects that harm a healthy, intact wetland must be offset
by other projects providing comparable wetland restoration in another location.
Existing protocols, requirements and standards for such market-based mechanisms
are used in a wider range of contexts including carbon trading and water quality
trading.
Wetland Mitigation Banking
Wetlands mitigation banking, an emerging market mechanism, is a mitigation
option for projects that harm a healthy, intact wetland that by law must be offset
the impact by providing comparable wetland restoration in another location.
Wetlands can be pre-developed or created and their credits placed into a bank so
that project proponents that impact wetlands can purchase the “banked” wetland
credits for mitigation. The Washington State Department of Transportation and
Department of Ecology, established wetland mitigation banking across the state,
describing important development criteria in Chapter 173-700 of the Washington
Administrative Code (WAC).37
There are now fourteen approved wetland banks
throughout Washington State and two new banks are under review.38
PROPOSED NEW ALLOCATION STRUCTURE
Watershed Investment District (WID)
The watershed investment district concept takes a multi-jurisdiction approach, and
whole watershed approach, similar to a public utility, which includes management
systems for a range of ecosystem services. Such a mechanism could be structured
on the Vermont Common Asset Trust model or the Alaska Permanent Fund and
implemented at the scale of an individual watershed through the WRIA system in
Washington or by a county. As a watershed provides a suite of inseparable goods
and services related to the health of the whole watershed, a governance structure
such as a WID, holds the potential for being more effective and efficient, in terms of
resource allocation, in achieving designated conservation and restoration across the
whole watershed.

FUNDING MECHANISMS
32
If a watershed were considered the unit of production, then a watershed
investment district would be a jurisdiction at the same scale as the productive asset,
encompassing the full suite of benefits a watershed provides.
Washington State has previously created new tax districts to fund and manage
individual ecosystem services. In nearly all of these cases, the boundaries of these
districts do not correspond to the geographic area in which the ecosystem services
are generated or benefits received. For example, shellfish districts do not include
the areas where water quality is degraded, causing damage to shellfish. Also,
flood districts have traditionally been at the base of a watershed, when most of
the flood protection is provided further up a watershed. In many cases, effective
management of natural flood protection services of upland ecosystems prior to
damage can be more cost-effective than engineered management solutions or
solutions designed after damage has occurred and flooding has increased. The
challenge is how to tax and allocate resources on this scale.
It is inefficient to manage for flooding, stormwater, water quality, biodiversity
(including both salmon habitat restoration and shellfish protection) and other
ecosystem services as individual districts. Moreover, unnecessary complexity
and potential for conflict occur when these services are funded through separate
jurisdictions, with separate legal precedents and jurisdictions overlapping in mission
and geography and in some cases competing for limited funding. This complex,
piecemeal structure also contains potentially redundant administrative functions. A
more efficient solution would be to integrate all into one comprehensive system for
funding, planning and management.
The rationale for a comprehensive approach to watershed-scale integration of
funding is that public and private entities within a watershed receive benefits from
that watershed. Truly public goods such as flood control, storm protection, and
biodiversity are best provided through a public utility model, since a private owner
cannot exclude beneficiaries from these public goods and services. Such a proposal
is currently working its way through the Washington State Legislature, based on an
original proposal by WRIA 9, for the creation of a Watershed Investment District to
better plan and allocate ever shrinking resources to the recovery of salmon across
the whole watershed.

EARTH ECONOMICS 33
Proposed
Funding Mechanisms
for Nisqually
Resource allocation decisions are increasingly complex. Ecological economics
offers a strategic approach for the decisions makers in the Nisqually Watershed to
choose among various standards, taxes, fees or market mechanisms to generate
new sources of revenue and realize the potential of a fully restored watershed. The
strategic goals of economics and ecology together guide the decision making on
estimated costs of preventing, abating or mitigating any social or environmental
impacts as compared to the estimated costs—or foregone benefit—that these
impacts impose on society and the environment.44
It is precisely these costs, also called externalities that represent social or
environmental impacts and loss of value, which are not captured in market
dynamics. Ecological economics provides the opportunity to identify the costs and
design funding mechanisms to protect the systems and restore them from these
impacts.45
This report, and the analysis within, is based on principles of ecological
economics to best manage the economy, address social equity concerns and foster
environmental sustainability across the whole Nisqually Watershed.
THE PROCESS FOR CHOOSING FUNDING MECHANISMS
From the inventory of possible funding mechanisms described above and in
consultation with the principals in the Watershed, including input from the
stakeholders at an earlier River Council meeting, the Earth Economics research team
presented the short list of proposed funding mechanisms for consideration at a
meeting of the Nisqually River Council on July 19, 2013.

FUNDING MECHANISMS
34
Seven Proposed Funding Mechanisms:
▪▪ Watershed Protection Fee
▪▪ Watershed Stewardship Fee
▪▪ Special Assessments
▪▪ Watershed Investment District
▪▪ Voluntary Offset Fund
▪▪ Beyond Local Opportunities/Marketing the Nisqually
▪▪ Corporate Give Back
Along with the list of proposed mechanisms, a set of criteria that influenced the
selection of the funding mechanisms.
Evaluation/Rating Criteria:
▪▪ Equity/fairness (meets the progressive tax standard or is not burdensome)
▪▪ Adequacy to generate sufficient revenue
▪▪ Political feasibility
▪▪ Meets outreach and educational goals of the River Council
▪▪ Can be implemented after one year
Once the funding mechanisms, evaluation and rating criteria were discussed and
adopted, the stakeholders voted on the funding mechanisms. The results of the
voting are summarized in the table below.
TABLE 5 RESULTS OF THE VOTING WORKSHOP (JULY 19, 2013)
Equity/
fairness
Adequacy
to generate
sufficient
funding
Political
feasibility
Meets
outreach
and
educational
goals
Implementable
within the 1st
year
Results
Yes No Yes No Yes
%Voting
Yes’s
1. Watershed
Protection Fee
10 1 9 2 8 69.23
2. Watershed
Stewardship
Fee
14 1 11 1 12 94.64
3. Watershed
Investment
District
11 1 9 2 2 48.57
4. Special
Assessments
8 2 7 2 1 24.00
5. Voluntary
Offset Fund
12 0 9 2 12 94.23
6. Beyond
Local
Opportunities
12 0 12 0 9 84.91
7. Corporate
Give Back
10 0 10 0 10 95.83

EARTH ECONOMICS 35
The voting, subsequent consultation with key project partners and stakeholders
highlighted the need for about $3 million/year in additional resources. Through this
vote and discussion mechanisms highlighted included the Watershed Protection
Fees, Watershed Stewardship Fees, Special Watershed Assessment, Watershed
Investment District, Puget Sound Regional Funding and Corporate Funding. These
areas are further highlighted below.
WATERSHED PROTECTION FEES
This mechanism is being developed by utilities, primarily drinking water utilities, to
increase revenue for natural capital protection. It is in the interest of utilities, and
by extension their ratepayers, to protect the natural systems that provide abundant,
clean drinking water. In October 2013, representatives of Earth Economics met with
officials of the City of Olympia to discuss the potential of watershed protection
fees as part of the City’s utility rate structure. Earth Economics suggested the City
of Olympia should implement a watershed protection fee to support Nisqually
Watershed health and source water protection. The fee could be implemented
by adding a flat rate of $5 per bi-monthly billing cycle. The flat rate alone will
yield $600,000. Similarly, in 2001 Bellingham, Washington, began assessing rater
payers a watershed protection fee. The Bellingham model shows how the burden
of watershed management is spread across all the beneficiaries (rate payers) as
follows: $144 per year for unmetered city residents; $60 + $.64/CCF volume rate per
year for metered city residents; $90 + $.96/CCF per year for residents outside the
city.
In addition to water utilities, electric utilities can be assessed mitigation fees
to offset the impacts of their operations in a given watershed. The example of
Bonneville Power Administration is relevant to draw on as a potential (partial)
model for modification in the Nisqually Watershed.
TABLE 6
KILOWATT HOURS GENERATED BY EACH DAM AND THEIR ANNUAL
REVENUE47
Dam Kilowatt hours $ Generated per year
Alder 228 million $8.4 million
La Grande 345 million $12.7 million
Total $21.1 million
TABLE 7
THREE DIFFERENT SCENARIOS OF A RATE INCREASE FOR BOTH DAMS
AND THE ADDITIONAL $ YIELDED BY EACH INCREASE
Rate increase for both dams* Additional $ yielded per year given % increase
5% $1 million
2.5% $525,000
1% $211,000
*At a current rate of $0.037 per kwh48

FUNDING MECHANISMS
36
Tacoma Public Utilities operates two dams in the Nisqually Watershed, the Alder
and the La Grande dams. Each dam currently generates power as follows: Alder
Dam: 228 million kilowatt hours (generating $8.4 million). La Grande Dam: 345
million kilowatt hours (generating $12.7 million). The total from both dams is $21.1
million, at a current rate/kwh of $0.037. At that rate, consider three scenarios
for a rate increase on the power generated from both dams: a 5% increase yields
$1 million, a 2.5% increase yields $525,000, and a 1.0% increase yields $211,000.
For purposes of this analysis of the potential of new revenues to invest in the
ecosystem services of the Watershed (in this case generated by a utility needing to
offset its impacts to the Watershed) we assume the mid-level rate increase at 2.5%,
generating $525,000.46
WATERSHED STEWARDSHIP FEES
We use this term to describe various voluntary fees that are paid by visitors taking
advantage of the natural resources available in Mount Rainier National Park and
the Nisqually National Wildlife Refuge. Approximately 573,000 visitors and 198,000
vehicles enter annually through Nisqually Gate to Mount Rainier National Park. The
current fees collected are as follows: $15 per person, $30 per vehicle, and $80 for a
season pass. Through various voluntary contribution opportunities provided either
at the entrance gate or by those commercial entities providing guest services in the
form of gift shopping at the visitors’ centers, lodging or dining, the following fee
options were considered:
Voluntary donations:
▪▪ $10 per vehicle = $1.98 million
▪▪ $5 per vehicle = $990,000
▪▪ $1 per vehicle = $198,000
Similarly, at the Nisqually National Wildlife Refuge, there are approximately
205,000 people visit annually. The current fees consist of a $3 daily suggested
donation, which can include up to four adults, a $12 annual pass, or a $62 lifetime
membership. If we assume that the non-profit group that runs the visitor’s center at
the refuge supported a watershed-based fee in addition to the current contribution,
the range of possible funding is as follows:
▪▪ $2 = $410,000 (for a total donation of $5)
▪▪ $7 = $1.47 million (for a total donation of $10)
▪▪ $17 = $3.57 million (for a total donation of $20)

EARTH ECONOMICS 37
SPECIAL WATERSHED ASSESSMENTS
This funding mechanism would work in tandem with the watershed protection
fee collected by the City of Olympia (discussed above) to capture those living
outside the municipal boundary and benefit from the water services provided by
the Watershed. There are two ways to approach spreading this fee across the total
number of parcels in the Nisqually Watershed. The first is an additional watershed
protection assessment per parcel based on a flat rate of $15 for the total number
of parcels (properties) within the Nisqually Watershed, calculated at 41,775, which
would generate an estimated $626,625.
The second is based on the value of the parcel, which is often thought to be more
socially equitable. There are approximately 41,775 parcels/properties in Nisqually
Watershed:
▪▪ A rate of $.10 per $1,000 property value of a $175,000 property = $1,750; across
41,775 properties = $73 million
▪▪ A rate of $.01 per $1,000 property value of a $175,000 property = $175; across
41,775 properties = $7.26 million
▪▪ A rate of $.001 per $1,000 property value of a $175,000 property = $17.5;
across 41,775 properties = $726,000.
The average price of property in the Nisqually basin was estimated based on
average property values listed on the Zillow.com. For purposes of simplicity, to
demonstrate the possible stream of revenue from new sources, the research team
focused on the amount generated by the flat $15/parcel.
The different funding mechanisms, potential sources, structure of the rates, charges
or fees, and amounts of revenue each could generate are summarized in Table 8.
Additional funding mechanisms to consider for future development are described
next. These were identified, but not pursued as they are more complex in terms
of political feasibility including the need for new governing structures, changes to
existing legislation and establishing support from across the Watershed.
TABLE 8
SUMMARY TABLE OF THREE FUNDING MECHANISM OPTIONS VIABLE
FOR THE NISQUALLY WATERSHED
Funding Mechanism $ Generated
1. Watershed Protection Fee
City of Olympia $5 bi-monthly $600,000
Tacoma Power 2.5% rate increase $525,000
2. Watershed Stewardship Fee
Mt. Rainier $5 per vehicle $990,000
Nisqually Wildlife
Refuge
$2 entrance fee $410,000
3. Special Assessment Fee Nisqually Properties $15 per parcel $626,625
Total $3,151,625

FUNDING MECHANISMS
38
WATERSHED INVESTMENT DISTRICT
The Watershed Investment District (WID) is being further developed under a study
bill supported by Washington State Representative John McCoy (administratively
led by WRIA 9). The study bill supports the concept that watershed boundaries and
the full suite of services it provides should be the organizing scale for planning,
resource allocation and monitoring of a watershed recovery progress. The WID
could help collaboration across jurisdictions and help coordinate investment within
a watershed. The process of defining the WID boundaries and the governance
structure should include the multitude of interests across a watershed. This could
be the natural evolution of the existing Watershed Resource Inventory Areas
(WRIA). The new WID would have taxing authority and be eligible to apply for and
receive grants. It could also serve as a bonding authority for watershed-based Bond
instruments. The WID would be governed by a board of elected officials of counties,
cities and tribal interests that are housed wholly or partly within the district.
The governing body would be authorized to use funds for all or part of activities to
restore and conserve defined ecosystem services. This could include salmon habitat
protection, restoration projects, floodplain management, potable water, forest
protection, integrated watershed-wide stormwater and wastewater management
programs, and flood risk reduction. The WID framework is intended to allow
flexibility because watersheds are dramatically different. A WID in one watershed
may only involve salmon restoration. Another, as in Mason County, might include
water, flood risk reduction, storm water and salmon restoration. The voters and
elected officials would determine the most appropriate scope for their watershed.
Leaders in the Nisqually Watershed should continue to actively support this
opportunity and engage in shaping the scope and scale of a Nisqually Watershed
Investment District. This could be a natural evolution of the existing Nisqually River
Council. The Council could continue with watershed-wide ecosystem services
assessment, planning, strategy, and investment, with a funding mechanism to
implement the plan.49
The Mount
Ranier National
Park is located
in the Nisqually
Watershed,
along with
Paradise,
the park’s
most popular
destination.
Image credit: CC by Rachel
Sarai

Funding Mechanisms for Restoring and Maintaining a Healthy Nisqually Watershed

Funding Mechanisms for Restoring and Maintaining a Healthy Nisqually Watershed

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