The next NOA meeting will be Monday, July 14th, at 6:30 p.m., at the LaGrange Community Center. The center is located at 307 West Jefferson Street in LaGrange.
The purpose of this meeting is to finalize plans for NOA activities in the month of July. Please plan on attending this meeting; we will need a large number of volunteers this month.
It’s been almost two months since the Oldham County Airport Board last met. Unfortunately, nothing much was learned at their April 4th meeting. In fact, the airport board has taken no substantive action since February. They have made no apparent headway in securing the finances required to launch an economic impact study. There is no progress on an airport business plan. There has been no improvement in communications between the airport board and the citizens of Oldham County.
NOA continues to look at economic issues surrounding the construction of an airport. If you haven’t been to the NOA website in awhile, I would encourage you to at least read the Executive Summary of an article entitled, “The Announcement Effect of an Airport Expansion on Housing Prices. This study was conducted by the Bryan School of Business & Economics, University of North Carolina. The results of that study indicated that houses within a 2.5 mile radius of the Greensboro/Winston Salem airport declined approximately 9.2% with the announcement of building a 3rd runway. In the next 1.5 mile band, house prices declined about 5.7%. This occurred where there was already a very active airport! So, you certainly have reason to worry about when the Oldham County Airport Board will announce an airport site, and where it will be.
Meanwhile, in nearby Spencer County, the Fiscal Court heard the will of the people and has decided not to build an airport. In fact, they will introduce legislation on June 16th to formally dissolve the Spencer County Airport Board. I would highly recommend you take a look at the article written in the Spencer Magnet, “Airport Board Dissolved.” You can find it at www.spencermagnet.com. Click on the “headlines” tab.
More importantly, please visit www.kyfarms.org. Click on the GRA analysis link, and you will see another economic impact study that indicates a General Aviation airport is a losing proposition. It is my opinion that this analysis was also a critical factor in helping the Spencer County Fiscal Court make the right decision.
NOA has been in contact with GRA, Incorporated since March. While Oldham County has some unique issues to work through, NOA believes the results of a GRA study of a proposed airport in Oldham County would be similar to the findings in Spencer County—as well as the one done for Shelby County in 2005. However, it will take $8,000 - $10,000 in pledges before we can commission a study. Currently, NOA has received nearly $6,000 in pledges, so we are getting close. We are asking everyone to make an email pledge to: jpearsonnoa@yahoo.com. No money will be collected until we have enough to do the study. No pledge is too small, so please consider helping fund this important study!
We have a window of opportunity to commission an economic impact study from a highly respected firm that provides economic counsel to the transportation industry. While there is no guarantee that our Fiscal Court will listen to the GRA experts, we do know that our Fiscal Court has chosen not to listen to us.
Jim Pearson
NOA Executive Director
by G. Donald Jud & Daniel T. Winkler
Bryan School of Business & Economics, University of North Carolina—Greensboro,
Springer Science + Business Media, LLC 2006
Editor’s Note: This is a study conducted by the Bryan School of Business and Economics, University of North Carolina, Greensboro. The entire article is printed below the Executive Summary for your review. Due to the limitations of this program, figures and tables in the original study were not included. However, you may obtain copies of these items by emailing jpearsonnoa@yahoo.com.
Executive Summary
This study examines the announcement effect on housing values of building an air cargo hub in the Greensboro/High Point/Winston-Salem metropolitan area. The study differs from other studies of airport noise by focusing on the change in pre versus post-announcement housing prices, prior to the actual construction and operation of the proposed airport hub. The methodology employed in this study is useful for city planners, real estate professionals and others who desire to measure the net effect on housing values of an airport expansion prior to actual construction.
It has the advantage of measuring the change in housing prices ex ante instead of ex post. This is important because neighborhood and locational attributes often change substantially after an airport expansion is operational. Although noise level measurement is possible ex post, the net effect is very difficult to determine years later.
The results of the study indicate that even after controlling for housing, neighborhood, and locational characteristics, there is a 9.2% decrease in housing prices for properties located within 2.5 miles from the Greensboro Airport. A 5.7% decrease occurs for properties in the next 1.5-mile band surrounding the airport. With an average house price of $154,182 in the 2.5 mile band during the post announcement period and a 9.2% discount, the average loss per house seller is $15,622 or about $9.42 million for the post-event sample. In the next 1.5-mile band (between 2.5 and 4 miles), the average house sold for $151,070, and an average loss of $9,131 per house seller was incurred or about $10.46 million in total during the post-event sample.
As with any event study methodology, even after resolving measurement problems, the announcement impact of the event is likely to differ from the actual. Therefore, one should not necessarily assume that the estimated discount for properties in the 2.5-mile band around the airport will continue to prevail once the air-cargo hub is operational. Changes to the infrastructure and unanticipated employment clusters, for example, together with lower or higher than expected noise levels and flight frequencies might propel properties prices in the 2.5-mile zone to sell at larger or smaller discounts than estimated here. Additional study of the actual impact of the air-cargo hub following construction and operation would be necessary to measure this change. However, in the short-run, the findings of this study indicate that homeowners nearest an airport may have reason to be concerned that the announcement of an airport expansion will have a noticeable negative effect on housing prices. While the magnitude of the housing price decrease might change depending on the particular airport expansion plans and community in question, there is evidence that an announcement can have a detrimental impact on housing prices for properties nearest an airport, as property markets anticipate negative consequences to follow.
********************
Abstract
Keywords
Airport noise Aircraft noise Property values Housing prices Residential property
Introduction
Local economic development groups often look to improved air service as a way to quicken the pace of economic growth in their communities. This is especially true in areas where the pace of growth is perceived to be lagging. The Greensboro/High Point/Winston-Salem MSA (the Triad) is an eight-county area of central North Carolina that includes the cities of Greensboro, High Point, and Winston-Salem.
The economy of the region has long been concentrated in apparel, furniture, textile, and tobacco manufacture. But by the mid-1990s, regional growth had begun to lag both state and national averages as the region’s major industries faced stiffening international competition.
Local economic development groups sought a FedEx hub as a way to stimulate the region’s economic growth. The new hub offered significant economic development benefits to the region. It was anticipated to initially employ 750 people, 250 full-time with an average salary of $34,000, and a longer-term goal of employing 1,500 people. In addition, the hub would bring state tax incentives for infrastructure improvements, and also attract additional businesses related to FedEx.
In April 1998, it was announced that Federal Express had decided to locate a regional air-cargo hub at the Piedmont-Triad International Airport (PTI). The hub would require an expansion of the current airport infrastructure by adding a third runway to the current airport. Newspaper reports at the time anticipated that the hub would begin operation in May 2004, with about 20 flights a night scheduled for landing and takeoff between 10 P.M. and 4:00 A.M. The number of flights was expected to expand to 126 per night by 2009. Following the initial announcement, a widely reported public debate erupted between proponents who stressed the anticipated economic benefits on area employment and income and opponents who warned of the effects on noise, pollution, and congestion. A search using the InfoTrac database revealed a total of 508 news stories and 582 opinion and editorial pieces in the Greensboro News & Record relating to the FedEx hub between January 1998 and June 2004(1).
This paper examines the effect of the FedEx announcement on surrounding property values(2). The first section reviews the literature on airport noise and property values. The second and third sections present the methodology and empirical model, respectively. The fourth section lays out the data and empirical results, and the final section reviews relevant findings.
Literature Review
The relationship between airport noise and property prices has been examined for a number of cities in North America and Europe(3). The results of many of the early studies have been summarized by Nelson (1980). All of the studies estimate hedonic price equations for residential property in which the level of noise is included among the attributes of the properties examined.
In order to compare the results of the studies, Nelson develops a Noise Depreciation Index (NDI), which measures the percentage decline in the price of housing for each unit increase in noise exposure. Nelson finds that the NDI averages 0.58 for the 18 airport studies he examines, that is, residential property values fall 0.58% for every decibel increase in airport noise.
More recent studies by Pennington, Topham, and Ward (1990) and Collins and Evans (1994) examine the relationship between noise and property values in Manchester, England. Pennington, Topham, Ward report no relationship between housing values and noise in Manchester during 1985–1986. Collins and Evans (1994) reexamine the Manchester data employed by Pennington, Topham, and Ward using a neural networks approach. They report that noise indeed does exert a strong, independent effect on residential values, which is negative. The effect of airport noise in the Manchester area has further been examined by Tomkins, Topham, Twomey, and Ward (1998) using 1992–1993 data. They estimate the noise discount at 0.84% per decibel.
Uyeno, Hamilton, and Briggs (1993) report a NDI of 0.68 using data for the Vancouver area in 1987. A unique feature of the Uyenro, Hamilton, and Briggs paper is the results reported for vacant land. They find the NDI is significantly higher for vacant land than for detached housing. Levesque (1994) explores the
impact of noise in the area surrounding the Winnipeg airport during 1985–1986. He decomposes the effects of noise into two separate aspects: intensity and frequency. He reports that frequency is less important than loudness and the variability of the loudness during a single occurrence.
Other studies by Espey and Lopez (2000), Feitelson, Hurd, and Mudge (1996), and O’Byrne, Nelson, and Seneca (1985) explore the impact of airport noise in other metro areas, including Atlanta and the Reno-Tahoe area. While the studies employ different measures of airport noise, each reports significant noise discounts. However, Lipscomb (2003) finds that the change in noise level causes a negative but statistically insignificant change in the housing sales price for a small city located near Atlanta GA; the relatively small sample size might partially explain the insignificant noise effect.
McMillen (2004) estimates the noise discount applying to properties around Chicago’s O’Hare airport. He measures noise using the annual energy mean sound level (Ldn), which has become the most common measure of noise for North American airports. The Ldn statistic measures average sound levels over the course of a year, including a 10 dB penalty for nighttime. The FAA and HUD define areas
exposed to Ldn levels of 65 or over as incompatible with residential housing. McMillen reports a 9.2% discount on homes selling in severe noise areas where Ldn levels are 65 or above.
Nelson (2004) conducts a meta-analysis of airport noise and property values. The study consists of 33 estimates of noise discount for 23 airports in Canada and the U.S., combining the findings of various prior studies. His results indicate that the noise discount is between 0.50 and 0.60 per decibel (dB). Properties would sell at about 10–12% less if located at 75 dB instead of 55 dB(4).
Salvi (2003) applies a hedonic regression specified as a spatial error component model for single family housing data in the Zurich Switzerland airport area. He finds that airport noise decreases housing values by up to 4% for noise levels of 55 dB and under, and up to 27% for noise level of about 68 dB. Although spatial autocorrelation is found to exists, its effect on the estimated coefficients and their standard errors is minimal.
An Ex-ante versus Ex-post Housing Price Methodology
Our study differs from most prior research because if focuses on the announcement effect on property values of an airport expansion to accommodate an air cargo hub. We measure the change in the property values pre- and post-announcement of the airport expansion, but before the actual construction or operational use of the new airport facility(5).
A potential problem with almost all airport noise studies is that they examine the effects of noise in an ex post dimension, that is, after the noise level has increased and property markets have had time to adjust. The problem with this approach is that after the fact, noise is very highly correlated with other aspects of the property market: air pollution, traffic congestion, and other neighborhood/location amenities. This is the point made by Pennington, Topham, and Ward in explanation of their insignificant findings for the Manchester area. They suggest that noise is inextricably bound up with other, more important neighborhood/location variables so that its effect cannot be reliably untangled using property data collected after the noise level has changed.
To overcome this problem, we propose an event study methodology(6). Using this approach, we are able ex ante to study effects of the noise announcement. Because the announcement of a change in noise (both frequency and intensity) does not change the actual noise level, we are unable to directly examine the effect of a change in noise. Instead, we assume that the expectation of future noise brought about by the announcement is related to distance from the airport(7). Thus, the announcement of a significant change in airport traffic (and noise) will affect the shape of value-distance gradient for properties surrounding the airport(8).
Empirical Model.
To examine the effect of the FedEx announcement on the value of surrounding residential property, we posit the following hedonic price model for property i at
time t:
ln Pi,t = a0 + a1Ti,t + a2Di,t + a3Ai,t + a4Ci,t + ui,t
where
Pi,t = log of the real sales price (sales price adjusted by the consumer price index CPI-U),
Ti,t = time of sale,
Di,t = a vector of distance bands,
Ai,t = a vector of housing property characteristics,
Ci,t = vector of city location variables,
ui,t = a stochastic error term.
The coefficients of the variables are denoted by a0, a1, … a4. The distance variables include distance bands (in miles) from the airport (d) for 0 < d < 2.5 and 2.5 < d < 4.0. The distance bands capture the additional impact on property values of proximity to the airport.
The effect of the announcement on values is revealed by estimating Eq. 1 using data in the period prior to the FedEx announcement and again with data following the announcement (1999:1–2004:2)(9). The effect of the announcement on property values is revealed by comparing the estimated coefficients on the distance variable. If a1 is the coefficient on the distance variable estimated in the pre-announcement period and g1 is the coefficient estimated for the post-announcement period, the effect of the FedEx announcement is (g1 - a1). The test statistic for statistical significance is a Wald statistic for structural change with unequal sub-sample variances:
t = [((g1 - a1)2 / (s2l + s2a)]0.5
where
sl + sa are the standard errors of +g1 and a1, respectively [Greene (1990), p. 189](10).
Sample Data and Empirical Results
The Piedmont-Triad International Airport is located adjacent to I-40 about midway between the town limits of Greensboro and Kernersville, NC. Our sample is drawn from properties sold in Guilford and Forsyth Counties from January 1997 through June 2004. (Editor’s Note: Figure #1, which is a scatter plot of homes sold in the areas surrounding the PTI aiport,1 was not included due to formatting limitations of this program. For a copy of Figure #1, please email jpearsonnoa@yahoo.com) The Forsyth County portion of the sample includes only the eastern portion of the county defined by zip code 27284, which subsumes the town of Kernersville. The sample includes 29,614 properties. Of the total sample, 8,957 were sold during 1997–1998, while 20,657 were sold from 1999:1–2004:2. Table 1 shows the means and standard deviations for all variables in the sample. The sample sizes are 8,957 and 20,657 for the pre-announcement and post-announcement periods(11)pproximately 2.8% of the sample is within a 2.5-mile distance band of the airport, and 5.6% within the next 1.5 miles of the airport. For the preannouncement sample, 228 properties are within 2.5 miles of the airport and 509 within the next 1.5 mile band. For the post-announcement sample, the numbers are 603 and 1,146 properties, respectively.
A least-squares estimation of Eq. 1 is shown in the Appendix. (not included) This model has adjusted R-squares of 0.62 for the pre-announcement period and 0.71 for the post announcement period; the F-values are highly statistically significant. These results; however, have econometric problems including heteroscedasticity and spatial correlation. Inferences based on least squares are biased in the presence of heteroscedasticity (Greene, 1990). White’s (1980) general test indicates that the least squares estimator is not consistent, and therefore, heteroscedasticity is a problem(12)n examination of the residuals indicates that the heteroscedastic disturbance is directly related to time of sale (Time). When error variances vary directly with an independent variable, Pindyck and Rubinfeld (1981) suggest a data transformation using weighted least squares(13)
Spatial autocorrelation is a frequent problem associated with housing price data. Accordingly, it is important to identify the presence of spatial correlation and correct for it if necessary14) the simultaneous autoregressive (SAR) model is commonly used to correct for spatial correlation in hedonic pricing models(15). In the SAR model, house prices are assumed to be dependent on surrounding house prices. In addition, however, the independent variables (property characteristics) are assumed to be correlated with housing characteristics of surrounding houses (Griffith, 1993).
The empirical findings for the SAR model using the transformed heterscedasticity-consistent variables are reported in Table 2(16) The SAR estimates are based upon five nearest neighbors and a geometrically declining weight of 0.85 for the next nearest neighbor(17). The findings suggest that spatial autocorrelation is relatively large and statistically significant in the pre- and post-event samples, increasing from 0.46 in the pre-announcement sample to 0.65 post announcement.
As shown in Table 2, the coefficients of the independent variables have the anticipated signs and magnitudes. The Time trend variable shows that the real value of houses increased 1.2% per year in the pre-announcement time period and decreased 0.84% per year in the post-announcement period. The negative price trend in the post-announcement period reflects the effects of the 2001 recession and the severe loss of textile, apparel, and furniture jobs on the economy of the Greensboro NC MSA.
In the pre-event time period, properties located near the airport (within 4.0 miles) sold for slightly lower prices, on average, than other more-distant properties. The coefficients of j0.24 and j2.72%, however, are not statistically significant. Properties within the city limits of High Point and Kernersville had lower prices compared to those outside the city limits of the towns.
While many of the amenity coefficients changed somewhat in the pre- and post-event equations, the number of bedrooms and bathrooms were the most notable. Bedrooms became significantly less important, while the number of full- and half bathrooms became much more important, measured by the impact on selling price. As expected, the effect age on house price was negative. The age coefficients suggest that property values fall 0.5% per year.
Of particular interest in this study are the magnitudes of the coefficients on the distance bands in the pre- to the post-announcement periods(18). Prior to the announcement, properties within 2.5 miles were subject to a 0.2% discount19. Following the announcement, these properties sold at a 9.4% discount, an increase of 9.2%. Properties that were more than 2.5 miles from the airport but no more than 4.0 miles from the airport had a 2.7% discount before the event and an 8.4% after the event; this difference is 5.7%.
The Wald t-tests in Table 3 provide a formal test for comparing the distance coefficients before and after the announcement period. The results of the Wald tests provide evidence that the FedEx announcement was associated with a significant negative impact on properties located within 2.5 miles of the airport. The difference in the regression coefficients denoting properties less than or equal to 2.5 miles from the airport is j0.0968, and this difference has a t-value of 2.45 which is statistically significant at the 0.01 level. The distance coefficient for 2.5 < d e 4.0 indicates a difference of j0.0603 with a t-value of 2.08; this difference is statistically significant at the 0.05 level. These findings suggest a strong localized effect on housing values for properties located close to the airport.
Conclusion
This study examines the announcement effect on housing values of building an air cargo hub in the Greensboro/High Point/Winston-Salem metropolitan area. The study differs from other studies of airport noise by focusing on the change in pre versus post-announcement housing prices, prior to the actual construction and operation of the proposed airport hub. The methodology employed in this study is useful for city planners, real estate professionals and others who desire to measure the net effect on housing values of an airport expansion prior to actual construction.
It has the advantage of measuring the change in housing prices ex ante instead of ex post. This is important because neighborhood and locational attributes often change substantially after an airport expansion is operational. Although noise level measurement is possible ex post, the net effect is very difficult to determine years later.
The results of the study indicate that even after controlling for housing, neighborhood, and locational characteristics, there is a 9.2% decrease in housing prices for properties located within 2.5 miles from the Greensboro Airport. A 5.7% decrease occurs for properties in the next 1.5-mile band surrounding the airport. With an average house price of $154,182 in the 2.5 mile band during the post announcement period and a 9.2% discount, the average loss per house seller is $15,622 or about $9.42 million for the post-event sample. In the next 1.5-mile band (between 2.5 and 4 miles), the average house sold for $151,070, and an average loss of $9,131 per house seller was incurred or about $10.46 million in total during the post-event sample.
Although the event methodology used in this study differs from the NDI approach employed by Nelson (1980) and others, the discounts from the preannouncement to the post-announcement period provide information about the estimated change in the level of noise. Nelson’s (2004) finding of a 10 –12% discount for properties located at 75 dB instead of 55 dB suggests that residents in the 2.5 mile radius at PTI International Airport are expecting an increase in noise levels of perhaps 15 dB or more. Using NDI measures from various studies ranging from 0.50 to 0.84% per decibel, a 9.2% decrease in housing prices suggests an increase in the noise level of 11 to 18 dB. For the next 1.5-mile band, the 5.7% decrease indicates a noise level increase of 7 to 11 dB(20).
As with any event study methodology, even after resolving measurement problems, the announcement impact of the event is likely to differ from the actual. Therefore, one should not necessarily assume that the estimated discount for properties in the 2.5-mile band around the airport will continue to prevail once the air-cargo hub is operational. Changes to the infrastructure and unanticipated employment clusters, for example, together with lower or higher than expected noise levels and flight frequencies might propel properties prices in the 2.5-mile zone to sell at larger or smaller discounts than estimated here. Additional study of the actual impact of the air-cargo hub following construction and operation would be necessary to measure this change. However, in the short-run, the findings of this study indicate that homeowners nearest an airport may have reason to be concerned that the announcement of an airport expansion will have a noticeable negative effect on housing prices. While the magnitude of the housing price decrease might change depending on the particular airport expansion plans and community in question, there is evidence that an announcement can have a detrimental impact on housing prices for properties nearest an airport, as property markets anticipate negative consequences to follow.
Footnotes
1. For the first several months, the news stories in the News & Record reported that six metropolitan airports were being considered for the FedEx hub. The final announcement that FedEx had chosen PTI occurred on April 13, 1998. In July 1998, the governor signed into law a multi-million dollar incentive package that included millions of dollars of tax breaks for FedEx. The first draft of the FAA environmental impact statement was released on April 6, 2000, which supported the FedEx proposal. In June 2000, the Environmental Protection Agency expressed a concern that the noise level estimates were underestimated, and state environmental regulators were concerned about damage to wetlands and wildlife habitats. During the months leading to the elections, opponents of the FedEx hub openly campaigned against politicians who supported FedEx; some politicians changed their position and some others lost the election because of their support for the hub. In November 2001, the FAA released its final impact study selecting the PTI hub as the preferred alternative of six options, and formally approved the project. However, delays in the approval process resulted in the target date for an operational hub being postponed until 2009; clearing and leveling of land began in 2004 with the expectation this phase being completed in early 2007.
2. It is important to note that what we refer to as an announcement effect is actually a series of announcements that extends over multiple years (but well before the operation of the airport expansion).
These announcements provide information to housing market participants who act on this information, resulting in adjustments to housing prices.
3. Although our study does not directly measure the impact of a change in airport noise, noise is the primary reason cited in prior research that explains a negative impact on housing values. Therefore, we review the airport noise literature.
4. The impact of noise on property values is non-linear; the audible irritation to humans from noise, as measured per decibel (dB),) is greater per dB increase at higher levels of noise than per dB increase at lower levels of noise. Theebe (2004) analyzed 160,000 transactions in the Western part of The Netherlands, and found very little impact of noise below 65 dB from trains, vehicular traffic, and airplanes on property values. However, the estimates were relatively large between 66 and 75 dB, especially for more expensive properties.
5. During the period of study, the airport expansion was announced and studies of the environmental impact were conducted during the approval process. However, the actual airport expansion had not begun.
6. The concept of event study methodology was coined in the finance literature as a method used to study the impact of new information (usually from an announcement) on stock prices. The methodology developed by Fama, Fisher, Jensen, and Roll (1969) used the market model in a pre-announcement period to estimate the regression parameters. In the subsequent announcement period, these parameters were used to provide regression residuals. A cumulative change in residuals indicated a significant announcement effect. Work by Brown and Warner (1980, 1985) tested variations of event study methodology. Karafiath (1988) demonstrates that the use of dummy variables for the days of the announcement period provides identical results to the use of the regression residuals. Burnett, Carroll, and Thistle (1995) offer a general methodology to correct for changes in market parameters.
7. The final Record of Decision by the FAA was issued on 12-31-01. The noise impact estimates were provided in the report. A total of 178 people and 75 homes would be within the DNL 65 dBA noise contour without the expansion. With the expansion, 698 people and 262 homes would be within the contour. Of these, 126 people and 53 homes would be inside the 70dBA contour. Also, 549 people and 231 homes (of the 628 people and 262 homes) would experience an increase of DNL 1.5 dBA within the DNL 65 dBA (BThreshold of Significance’’ for noise impacts). This information does not necessarily coincide with the distance bands used in this study, so it is not possible to meaningfully equate the dBA information to the findings our study. In addition, there have been revisions to the dBA impact and the contours since the report was issued.
8. Because it does not use a measure of noise level, but instead, includes structural variables measuring distance bands (pre- and post-event) from the airport, this study measures the anticipated “net’’ effect of the airport expansion. Although the principal concern of most communities that are considering an airport expansion is increased noise, other negative effects would include expected construction and traffic congestion, while anticipated longer-term advantages include more employment and shopping, as well as enhancement of roads and other infrastructure. Nonetheless, the literature on airport expansion points generally points to noise as the primary negative effect.
9. Although the announcement that FedEx chose the PTI Airport for its hub occurred in April 1998, we decided to separate the sample into the 1997:1–98:4 and 1999:1–2004:2 time frames for four reasons. First, several months of vociferous debates occurred, and there was sentiment suggesting that FedEx could have reversed its decision. It was clear that the FedEx hub had organized opposition who would be challenging a FedEx hub in court. Second, the sample used in this study consists of closing prices which can occur up to several months after making an offer on a property. Such new homebuyers could have made offers before the final announcement, or at least, without the knowledge of subsequent information. Third, while it would be possible to exclude altogether a portion of the latter observations occurring in the pre-event sample; a large sample is needed, and we wanted to minimize the influence of changes to area that were unrelated to FedEx hub announcement (which might occur by extending the pre-event sample using observations prior to 1997). Fourth, the inclusion of data in the “pre-event’’ period would work in favor of the null hypothesis that the FedEx announcement had no effect because some of the negative impact would be captured in the pre-event dummy distance band coefficients, making the difference in the pre- and post-event distance bands smaller.
10. Although a dummy variable pre- and post-event could be introduced into Eq. 1, this specification would assume that the other coefficients would not change pre- and post-event. We find that this assumption is not true. Also, the use of Eq. 2 allows for variances of the pre- and post-sample to be statistically different.
11. Testing for the difference in the pre- and post-event means, assuming they have unequal variances, all variables are statistically different at the 0.05 level except the means for the distance bands, age of the house, and dummy variable houses located in the city of High Point. This finding is not surprising given the very large sample size.
12. The White statistic is 458.38 for the pre-announcement sample and 1,049.81 for the post-announcement sample. These statistics are #2 distributed, and are significant at the 0.0001 level.
13. The weighted least squares procedure is based on the Time variable. Using this procedure, the original intercept becomes a variable term and the slope parameter associated with the Time variable becomes the new intercept term. For more details, see pp 145–146 of Pindyck and Rubinfeld (1981).
14. Spatial autocorrelation occurs when similar values cluster in a geographical area. Similar to time series autocorrelation, positive spatial autocorrelation can be measured on a continuum from 0 to 1, with the latter associated with perfect positive spatial autocorrelation. A large positive spatial autocorrelation means that neighboring properties have similar values that are not independent of each other. The coefficients and standard errors are affected by spatial autocorrelation, and therefore, corrections are necessary to correct for it.
15. The SAR model is appropriate in situations involving higher order spatial dependency (a stronger effect), whereas the conditional autoregressive model (CAR) assumes only a first-order dependency (Griffith, 1993). When compared to the simpler autoregressive response (AR) model, the SAR model does not assume the error terms to be independent of the dependent variable, leading to a complicated error term covariance matrix.
16. The SAR model was estimated using Statistics Toolbox 2.0 software (written by Kelley Pace and Ronald Barry) and Matlab 6.5.
17. SAR models were tested with many variations including changes to the number of nearest neighbors
as well as different geometrically declining weights. The findings are robust to the particular specification used. In addition, a Delaunay triangle spatial weight matrix was tested; the results reported here for five nearest neighbors indicate a slightly higher spatial correlation than using the Delaunay triangle spatial weight matrix.
18. In addition to these distance bands, other bands were tested. The next 1.5 mile distance band (where
4.0 < d e 5.5), for example, have relatively small but positive pre-and post-announcement coefficients, but the difference in the two coefficients was not statistically significant. Therefore, price declines beyond the 4-mile radius are relatively small and not statistically significant.
19. The percentage impacts of a one-unit change in the distance dummy variables on sales price are given by ex j1, where x is the estimated coefficient on the particular dummy variable.
20. Caution should be exercised when converting the distance band housing price changes to anticipated changes in the noise level because (1) the NDI measures are estimated using data from other airports with unique environmental characteristics, (2) the effect of a given increase in NDI changes depending on the initial level of noise, and (3) the band represents a radius around the airport which might not be uniform because of the projected landing patterns.
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The Announcement Effect of an Airport Expansion on Housing Prices
J Real Estate Finan Econ (2006) 33: 91–103
DOI 10.1007/s11146-006-8943-4
Bryan School of Business & Economics, University of North Carolina—Greensboro,
P.O. Box 26165( Greensboro, NC 27402-6165, USA
G. D. Jud (*) D. T. Winkler e-mail: juddon@uncg.edu
D. T. Winkler e-mail: dt_winkler@uncg.edu
The Impact of Noise on Sleep
This is the second in a series of articles on the economic impact of aircraft noise. The previous article presented strong evidence that concluded:
· For residential areas and other similarly noise sensitive land uses, noise impact becomes significant in urban areas when the DNL exceeds 55 dB.
· In suburban areas where the population density is between 1250 and 5000 inhabitants per square mile, noise impact becomes significant when the DNL exceeds 50 dB.
· And in rural areas where the population density is less than 1250 inhabitants per square mile, noise impact becomes significant when the DNL exceeds 45 dB.
The air into which second-hand noise is emitted and on which it travels is a shared public good. It belongs to no one person or group, but to everyone. People, businesses, and organizations, therefore, do not have unlimited rights to broadcast noise as they please. This is especially true when it comes to interruptions to nighttime noise, and its impact on sleep.
As a pilot who works primarily at night, and “attempts” to sleep in the day, I am very familiar with sleep cycle interruptions. Noise from vacuums, routine maintenance, and loud neighbors are all occupational hazards of “daytime” sleeping in hotels. It’s goes with the job, but that is a choice I made. However, when the Airport Board decides to build an airport near someone else’s backyard, they are making a decision that will affect the sleep cycle of hundreds of other people.
In 1983, the FAA requested NASA Langley Research Center to review the literature on “state of the art” sleep interference research1. Here is what NASA found:
NASA’s Conclusions Concerning Arousal from Sleep:
1. The threshold level of a noise which will cause arousal from sleep depends on sleep stage and the age of the subject, among other things. Noise levels which can cause sleep disturbance cover a range of 35 to 70 decibels.
2. In a normal 8-hour sleep night, more time is spent in lighter stages of sleep in the last half than in the first half. This implies that airport use restrictions limiting early morning flight from 3 a.m. to 7 a.m. are particularly important.
3. Little or no physiological adaptation to sleep interference from noise occurs.
4. Psychological annoyance from the effects of sleep interference from aircraft noise is probably more significant than the direct physiological consequences.
While the NASA study concluded that sleep arousal could cause a psychological annoyance, later studies have shown it’s much worse than that. In 2004, the World Health Organization (WHO) also looked at the effects of noise on sleep2. It concluded that, “[sleep disturbances], when chronic, can have persistent and permanent effects on mental and physical health of exposed people. Effects include:
· Reduction of sleep efficiency,
· Increased number of arousals,
· Decrease of rapid eye movement (REM) sleep [possibly affecting long-term memory and spatial orientation]
· Decrease of slow wave sleep (Non-REM sleep [possibly affecting the energy restoration quality of sleep]
· Decrease of total sleep time
The WHO has concluded that there is a clear link between environmental noise (including aircraft noise) and insomnia. Insomnia is an experience of inadequate or poor quality sleep characterized by one or more of the following: difficulty falling asleep, difficulty maintaining sleep, waking up too early in the morning, non-refreshing sleep.
Risk groups for having their sleep disturbed by noise include:
· Children
· Shift workers
· Elderly people (their sleep is more shallow)
· Patients at intensive care units
· Low-birth weight infant units
· Residents and disabled persons in nursing homes
· Women during pregnancy and menopausal periods
So, there is ample evidence to suggest that aircraft noise will impact the sleep patterns of Oldham County citizens. However, there are many variables—proximity to the airport, age, gender, number of occurrences, and the time of night—that make it difficult to put a definitive price tag on the cost of sleep disturbance. Difficult, but not impossible.
Bottom Line: The exposure to aircraft noise constitutes a major annoyance, especially when it comes to sleep disruption. For people living around airports, sleep disturbance is a major problem which will lead to a diminished quality of life.
Sources
1. Federal Aviation Administration. “Aviation Noise Effects”, Federal Aviation Administration, Washington D.C., Mar 85. www.nonoise.org/library/ane/ane.htm]
2. World Health Organization. “Report on Night Noise Guidelines,” 6-7 December, 2004. Geneva, Switzerland, www.euro.who.int.
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During its public meeting in November 2007, the Airport Board claimed that one of the economic benefits of an airport would be the tangible property taxes paid by aircraft owners to Oldham County. Indeed, the Kentucky Department of Revenue estimates that local governments collect about $2 million annually from property taxes imposed on privately owned aircraft. So, aircraft owners may actually help bring in needed revenue to Oldham County coffers. Or, maybe not.
In 2006 and 2007, Kentucky law makers introduced legislation designed to exempt private aircraft owners from paying property taxes on their airplanes! With a stroke of a pen, legislators would have cut $2 million in tax revenues from local governments! Fortunately, the proposed legislation died in committee. However, the same legislation was drafted again for 2008, and introduced on March 3rd, as House Bill 705.
If an aircraft taxation exemption bill passes, noncommercial aircraft will be removed from the personal property base, and local governments will have to figure out how to make up the difference, or reduce spending. Counties will have no option but to make up the difference. Here’s how it can be done:
According to the Kentucky Legislative Research Commission, the Kentucky Revised Statutes (KRS 132.010) allows local governments to adjust the compensating property tax rate to make up any reduction in taxable property, including personal property. That would most likely mean an increase in the personal property tax rate on other taxable property (cars, trucks, motorboats, for example), to make up the loss in tax revenue. In short, WE will make up the tax revenue lost when private aircraft are no longer taxed!
No one likes to pay taxes. Auto collectors and boating enthusiasts would like a tax exemption as well. So, how do we exempt one group without exempting others? Should it be determined by who has the better lobby?
The aircraft taxation exemption has strong support from the Aircraft Owners and Pilots Association, the Kentucky Aviation Association, and private pilots. Will they get this legislation passed? Is this smart legislation when the state is experiencing a $900 million dollar shortfall over the next two years? One thing that’s certain, if it passes, you and I will cover the deficit.
Perhaps it’s time to call your state representatives, Ernie Harris and David Osborne. Let them know how you feel about giving private aircraft owners a “special” interest group status, at the expense of other taxpayers.
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This is the beginning of a series of articles on the economic impact of aircraft noise. While our local government appears to be preoccupied with how much money an airport might generate, it will probably not factor in this cost. However, NOA believes you have a right to know all the “hidden” costs of an airport. And, there is definitely a cost related to aircraft noise.
Regardless of which site is eventually selected for an airport, there will be Oldham County citizens who will live directly under the path of departing aircraft. Some will live as close as a mile from the airport boundary! And, aircraft departures will occur around-the-clock. Make no mistake about it; there will be families who must cope with the constant sound of aircraft noise. To these families, the economic cost of an airport will go beyond paying more taxes. So, before we build an airport, let’s make a concerted effort to understand the true relationship between noise and the possible economic impact it may have on the citizens of Oldham County. To do that, we must first determine what an acceptable level of noise is.
The Federal Aviation Administration (FAA) uses the (decibel day-night level) DNL metric for assessing the noise in environmental assessments. The FAA recommends a minimum criterion value of 65 DNL to assess impact in residential areas (FAA, 2000). And, they do not differentiate between urban, suburban or rural areas.
In its assessment of noise annoyance, the consulting firm Schomer & Associates conducted extensive research to determine an acceptable noise threshold, based on a more universally recognized definition of aircraft noise, and the environment where one lives. Doctor Paul Schomer is a nationally recognized expert in acoustics noise control. His research concluded:
1. Nearly all agencies and boards, standards setting bodies, and international organizations use a DNL criterion value of 55 dB as the threshold for defining noise impact in urban residential areas. In fact, of this large number of agencies, boards, standards setting bodies, and international organizations, only the Department of Defense and the Federal Aviation Administration suggest a criterion value for DNL that is higher than 55 dB.
2. The policies of FAA/DOD were developed in the 1970’s and earlier. In contrast, most of the agencies and boards, standard setting bodies, and international organizations have established their policies after 1995. In particular, the World Health Organization recommendations (WHO, 1999) are based on over 25 years more worldwide research into noise effects than are the earlier FAA/DOD policies.
3. Significant evidence exists to suggest that aircraft noise is more annoying than is road traffic noise for the same DNL level.
4. No single DNL criterion is equally applicable to all residential situations and all types of residential communities. A sizeable number of agencies and boards, standards setting bodies, and international organizations recommend a DNL criterion value that is less than 55 dB as the threshold for defining noise impact in sparse suburban and rural residential areas. Rural areas require a criterion that is 10 dB lower than the criterion used in normal urban areas.
5. For residential areas and other similarly noise sensitive land uses, noise impact becomes significant in urban areas when the DNL exceeds 55 dB. In suburban areas where the population density is between 1250 and 5000 inhabitants per square mile, noise impact becomes significant when the DNL exceeds 50 dB. And in rural areas where the population density is less than 1250 inhabitants per square mile, noise impact becomes significant when the DNL exceeds 45 dB.
Source: A White Paper: ASSESSMENT OF NOISE ANNOYANCE, April 22, 2001, Paul Schomer, Ph.D., P.E. Schomer and Associates, Inc. Champaign, IL 61821
Clearly, the FAA is willing to let you be exposed to a larger degree of noise than what is acceptable to most other agencies. But, why is it so important to determine the true threshold between acceptable and unacceptable noise exposure?
That, my friends has to do with determining what amount of noise will distract your children, while they study at school, the amount of noise that will impact hospital patients during their recovery, and the amount of noise that will wake you up in the middle of the night!
Not convinced? Well, you will have to wait until the next article to see more evidence!
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Folks, Mr. Ronal Cheek has written a superb editorial about their battle with the Spencer County Airport Board. Kinda makes you feel like you’re in the “twilight zone!” It’s well worth your time to read………..jpearsonnoa.
Public should beware of airport efforts
If you read this, you should be mad enough to kick your dog. First, I want to say that we have good and honorable public servants in our county government but we have a few politicians who are sorry, self serving, power hungry and egotistical. The citizens of Spencer County need to know the truth and we are in search of the truth. In that search we are finding lies, cover ups and deceit.I served in three school systems in Eastern Kentucky for almost a decade. I truly had to fight the devil to give children a better education. The devil is politics, and now when I return home, I am having to fight more demons to protect our land and livelihood.
The airport issue is and has to be one of the saddest political fiascoes in the history of Spencer County. Let us start with the formation of the air board. Our county officials, under the recommendation from our county judge executive, appointed an airport board with three pilots, a retired person from the Federal Aviation Administration and two others. Stacked? I might add that in recent weeks two of the original board have resigned. I understand one said that he could not deal with what was about to happen and the other said he was wrong on this issue.The airport board chairman makes his living in aviation, he has recently purchased approximately 160 acres next to one of the sites and seems intent on shoving this down the throats of our tax payers. I have been told that an airport will cost an estimated $20 (twenty) million dollars with ninety-five (95%) of the costs being paid by the federal government. Is that supposed to make us feel better? Did they forget that we pay federal taxes, too? A year or so ago, federal pork barrel politics “hid” a proposal to build a bridge in Alaska that was to cost tens and tens of millions of dollars. When it became public knowledge that it was only to serve 40 or 50 homes, it was quickly defeated. We have the same issue here in Spencer with the building of a $20,000,000 airport which may only serve a hand full of people and it will be at the tax payers cost.
Twice during the last few weeks, we have had 35 people come to our home to discuss the situation that is threatening us. Many spoke about how we love our country but we could not trust some of our government. In the first paragraph I mentioned the difference in a public servant and a politician. Keep that difference in mind because I want to make it clear that we do have some level-headed people in our county government and I am in no way being critical of all our county officials. But, unfortunately, we have some politicians in our own local county government that have that same thirst for power and control that I have seen before. We also have another evil here in the county and it is the evil of apathy. I, too, have been guilty of apathy, but no more. I, like many others “assumed” we were in good hands but it has become very obvious that bad things happen to good people when they do nothing. Our county has thousands of good people and a few who are self serving. It is time that we all become more actively involved in our community even when things “appear” to be going smoothly.
The airport board hired a company, Entran, to conduct a site selection for the airport at the cost of $152,000. (Again, tax payer’s monies) When my wife asked if both the pros and cons were presented as part of the selection process an Entran person said that they were hired to show why a location is good and why an airport would be a good thing for Spencer County. In other words, we will tell the people who pay us what they want to hear. Needless to say, money talks.
Oldham County and Shelby County wanted no part of this airport when it was presented to them. But, we have learned that Magistrate, Bill Drury is willing and anxious to see this airport in Spencer County. It goes without saying that he sees this as a “political feather in his hat”. I see it as a cost to our county’s tax payers and the people who have supported him for years. He has repeatedly told us what a positive thing an airport can be for the county but based on the research I and any others have done airports such as this are very seldom financially successful and they, more times than not, become a tax burden of the county. Please go to these web sites to see information based on research done in Shelby and Oldham Counties when they were faced with the possibility of an airport. www.nooldhamairport.com and www.more-ky.org You will also find information about what is happening locally with regards to the airport proposal at www.KYfarms.org
Power is an evil use of force and it can be more addictive than drugs. We have a few politicians who want to build a playground for a special interest group at the expense of the tax payers. Our politicians need to find another source for their adrenaline rush.
Do politicians lie? Sure they do. Do public servants lie? No, they do not. My father once told me, “The longer a person talks, the more likely he or she will lie.” He also said, “If a person lies to you, he will lie again, and again.” Through open records and by cross referencing conversations we will find the truth and flush out the politicians. We will separate the good from the bad. We will also ask for resignations..no, we will demand resignations.
I do know that with two openings on the airport board Bill Drury is seeking another person with ties to aviation to fill one of the positions. I thought that the county judge executive makes the recommendation of the person/s to fill the opening so why is one of the magistrates doing this? It appears to me that once again a politician is trying to run things all by himself.
At the airport forum on Febraury 19th it was obvious that ‘the birds of feather were flocking together’. Your politicians, your special interest groups and those that stand to get rich from our hard earned tax dollars were sticking together. All the power players in this issue are not about serving the taxpayers of our county. What we have here is a small group who wants to take care of their own interests. At the forum you could see the smugness, the smirks and the attitudes of those involved. It was as if they were saying, “We will listen to these idiots, then we will do what we please.” My message to them is that you are going to see a rebellion from the people of Spencer County like you have never seen before.
There are e-mails, correspondence, open records and back door politics that are going to crumple the politicians of our county. This communication says, “Tell me what I want to hear, so I can get what I want.” The public servants will continue to serve Spencer County, but the politicians will fall.
I am challenging two things to our judge and county government. 1). Appoint an unbiased person to the open slots on the airport board. We do not need other people who have ties to aviation or who have a personal interest in the process.This will stop the under handed politics of those that are interested in serving themselves and will give our community true and factual information. 2). Let the land owners and taxpaying citizens host a forum that will present the OTHER side of the issue.
Again, I remind you that we have good honorable people serving our county and the process of the truth is going to flush out the rats.
I hope you will call your judge and magistrate and voice your concern of a potential airport and an airport tax. It is easy: No airport = No tax.
Ronald ‘Woodie’ Cheek
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Any news reporter will tell you that the key to a good article is an eye catching headline. It is designed to get the audience to read further. However, the fact remains that many will read no further than the headlines. We have become a nation of “news bytes” and “sound bytes.”
If you picked up the February 21st edition of the Oldham Era and read the headline, “All Airport Sites Are Eliminated,” perhaps you now believe the airport initiative is dead. I regret to tell you that the airport initiative is very much alive. I attended the same airport board meeting as Oldham Era staff writer, Elizabeth Troutman, and I’d like to offer my comments on what she wrote. Ms. Troutman’s comments are in bold italics; mine are in normal font:
All Airport Sites are Eliminated—No airport sites were eliminated. The airport board simply withdrew their approval of the three sites recommended by the Entran Feasibility Study, pending further study. When the board concludes that an airport will bring economic prosperity to the county (and they will), then all 17 sites surveyed by Entran will be re-opened for discussion. This includes the Blakemore, Gathright, and Dawkins, sites. I personally believe that the airport board will look for sites where landowners want to sell their property for an airport. Currently, there are at least two sites available right now (I-71, and Eden Park), where property owners are happy to accommodate an airport. However, you must consider that a downturn in the housing market might convince a property owner to sell his/her land to the first person who makes a reasonable offer.
If an airport won’t generate revenue, board members say the FAA’s process to determine the possibility of developing an airport is futile—wasting time and grant money. It is the Airport Board that accepted a $200,000 grant (taxpayer money) from the state of Kentucky Department of Aviation, to do an airport feasibility study. It is the Airport Board that has spent $70,000 of this grant for Entran’s Feasibility Study. It is the Airport Board that has needlessly spent money, and no one else.
Mr. Bob Sargis [airport board member] said he believes the airport board whisked ahead by tackling technical questions first, as required by the FAA. Mr. Sargis is correct in that the board moved too quickly. However, the FAA does not prohibit an airport board or a fiscal court from doing their homework prior to requesting a feasibility study. The board should have done all the studies they are now calling for well before spending any grant money. It’s like having an architect design a house for you before you even determine that you need or even want a new house!
The board is collecting information on the public’s opinion of the project, which will be presented at a meeting March 6. In order to conduct a professional opinion poll, one would have to contract an independent body, develop an unbiased set of questions, and then administer the poll. This would cost several thousand dollars—money the airport board doesn’t have.
If the board members choose to return to the FAA process, they are required to launch a new feasibility study. This statement is simply not true. In the February Airport Board Meeting, the board made it very clear that they could only ask for refinements to the current Entran Study, since the board has a $200,000+ contract with Entran. That money cannot be used to launch another study using another firm. And, the airport board has no other source of funding a feasibility study.
There are a string of comments offered in Ms Troutman’s article from board members and even the Judge/Executive that appear to blame the current state of affairs on the FAA and the Kentucky Department of Aviation. This is not true and unfair. Each of these organizations has a set of rules for determining whether or not an airport should be built, and the Kentucky Revised Statutes clearly outlines the responsibilities of an airport board. If the airport board and fiscal court didn’t like the rules, then steps should have been taken–prior to asking for the grant money—to resolve the local issues not addressed by state and federal authorities. And, if the airport board did not wish to act like one, it should have remained as an airport committee.
My point is not to disparage Ms. Troutman’s article, but to inform you that some of her points could mislead the reader into believing that the airport initiative is all but dead. Certainly, the Era’s choice of headline conveyed just that message. But, it’s also important not to lay the blame for airport board’s current malaise at the feet of the FAA or the Kentucky Department of Aviation.
Now, to get out of this jam, the airport board will look for money to do more studies. And, it appears the Oldham County Economic Development