Farm level economic analysis of a wetland-reservoir subirrigation system in northwestern Ohio

Three wetland-reservoir-subirrigation systems (WRSIS) have been designed an d constructed in northwestern Ohio, These systems have the potential to imp rove downstream water quality by reducing discharge to streams, to provide wildlife? habitat, to increase wetland acres and vegetation, and to provide a reliable supply of subirrigation water for sustained crop production, Th is study attempts to quantify all costs and benefits of a WRSIS investment in order to provide farmers with useful information for evaluating applicat ion of the technology. Net present value (NPV) analysis was used to compare operation and investment costs with benefits of improved crop production, improved water quality, increased residual land value, decreased tax liabil ity, and wetland mitigation payments. For the studied case, the total NPV i s $11 225. Capital and operating costs have a NPV of -$71 293. Sensitivity analyses show that changes in the total amount of invested capital most aff ect this value, The NPV of yield improvements and increased land value is $ 39 712. Further analyses show that yield improve ment value is most sensiti ve to variations in the amount of yield response and crop mix (commodity va lue). Reductions in tax liabilities improve WRSIS NPV by $9333. Analyzing t ax parameters shows that increases in variables such are loan terms, propor tion of debt financing, and marginal tax rate reduce tax liability due to l arger amounts of deductible interest. Likewise, increasing the proportion o f equity financing increases tax liability due to less deductible interest and higher equity opportunity costs, Finally, wetland mitigation payments a dd $30 000 and water quality improvements add $3473 to the WRSIS NPV.