PROCESS, REGULATION REQUIREMENTS, AND FINANCIAL ANALYSIS FOR TRANSFORMING RURAL LAND TO RECREATIONAL SPORTFISHING WATERS Except where reference is made to the work of others, the work described in this thesis is my own or was done in collaboration with my advisory committee. This thesis does not include proprietary or classified information. _________________________________________________ James Wesley Cumbie Certificate of Approval: _______________________ _______________________ Curtis Jolly John L. Adrian, Chair Professor Professor Agricultural Economics Agricultural Economics _______________________ ________________________ Deacue Fields, III Stephen L. McFarland Assistant Professor Acting Dean Agricultural Economics Graduate School PROCESS, REGULATION REQUIREMENTS, AND FINANCIAL ANALYSIS FOR TRANSFORMING RURAL LAND TO RECREATIONAL SPORTFISHING WATERS James Wesley Cumbie A Thesis Submitted to the Graduate Faculty of Auburn University in Partial Fulfillment of the Requirements for the Degree of Master of Science Auburn, Alabama May 11, 2006 iii PROCESS, REGULATION REQUIREMENTS, AND FINANCIAL ANALYSIS FOR TRANSFORMING RURAL LAND TO RECREATIONAL SPORTFISHING WATERS James Wesley Cumbie Permission is granted to Auburn University to make copies of this thesis at its discretion, upon request of individuals or institutions and at their expense. The author reserves all publication rights. ________________________ Signature of Author ________________________ Date of Graduation iv THESIS ABSTRACT PROCESS, REGULATION REQUIREMENTS, AND FINANCIAL ANALYSIS FOR TRANSFORMING RURAL LAND TO RECREATIONAL SPORTFISHING WATERS James Wesley Cumbie Master of Science, May 11, 2006 (B.S., Auburn University, 2000) 84 Typed Pages Directed by John L. Adrian This study illustrates the process and regulation requirements for transforming rural land in South Alabama into recreational waters. Moreover, the goal of this study is to evaluate the financial feasibility of addition of sportfishing water to an ongoing outdoor recreational facility. Also, the feasibility of 40?acre and 20?acre start-up sportfishing operations was evaluated. The data analyzed were obtained through inputs from outdoor industry contractors and consultants, recreational water owners and managers in Alabama, and state and national environmental regulatory agencies. This study is arranged from an outdoor recreational industry standpoint. The information therein and results are shown so that the general public, rural land owners, recreational water owners and outdoor industry can comprehend and benefit. v Furthermore, this paper examines a specific case study of a 40?acre sportfishing water in the state of Alabama utilized under a membership criterion to generate additional income for an existing outdoor recreational facility. The analysis illustrates that an outdoor recreational facility which currently owns the land needed for lake construction and uses equity capital for initial capital costs can generate significant cash inflows relatively early in the life of the project. The specific 40?acre sportfishing project examined for an existing recreational facility obtained a net present value of $16,233.30 at an 8 percent rate, and had an internal rate of return of 10 percent, given shared overhead costs. The 40?acre and 20?acre start-up operations analyzed with owned parcels of rural land and requiring borrowed capital to satisfy initial capital requirements and early operating costs returned negative net present values at 8 and 12 percent rates. Also, only a 3 percent internal rate of return was generated for the 20?acre project and a negative internal rate of return was generated for the 40?acre start-up project. vi ACKNOWLEDGMENTS The author would like to thank Dr. John Adrian and Dr. Curtis Jolly for their assistance regarding the economic aspects of this project. A sincere thank you is due to Mr. Robert Pitman III for his continuous efforts throughout the project in providing direct use of his sportfishing operation and for granting open access to the data. Also, a debt of gratitude and appreciation is owed to my loving and supportive wife, Emily, and to my family for their constant love and support throughout the course of Graduate Study. vii Style manual or journal used: Journal of Agricultural and Applied Economics Computer software used: Microsoft Word 2000 for Windows; Microsoft Excel viii TABLE OF CONTENTS LIST OF TABLES????????????????????????....... ix I. INTRODUCTION????????????????????????? 1 II. OBJECTIVES AND METHODS ??????????????????... 8 III. LITERATURE REVIEW????????????????????....... 15 IV. REVIEW OF PLANNING PROCESS???????????????...... 19 V. ANALYSIS AND RESULTS??????????????????........ 32 VI. DISCUSSION?????????????????????????? 40 VII. REFERENCES?????????????????????????. 44 APPENDICES ???????????????????????????. 47 Appendix 1?????????????????????????.. 48 Appendix 2 ?????????????????????????. 65 Appendix 3 ?????????????????????????.. 67 Appendix 4 ?????????????????????????.. 68 Appendix 5 ?????????????????????????.. 70 Appendix 6 ?????????????????????????.. 71 Appendix 7 ?????????????????????????.. 72 Appendix 8 ?????????????????????????.. 73 Appendix 9 ?????????????????????????.. 75 ix LIST OF TABLES TABLE 1-1 Capital and Operating Costs for a 40-Acre Sportfishing ..????.. Lake with a 15-Year Planning Horizon and Using Equity Capital, Alabama 49 TABLE 1-2 Projection of the Net Cash Flows for a 40-Acre ..???????.. Sportfishing Lake, 15-Year Planning Horizon, Alabama 52 TABLE 1-3 Capital and Operating Costs for a 40-Acre Sportfishing ..????.. Lake with a 15-Year Planning Horizon and Using Borrowed Capital for Construction and Initial Cost Purposes, Alabama 54 TABLE 1-4 Projection of the Net Cash Flows for a 40-Acre ..???????.. Sportfishing Lake with a 15-Year Planning Horizon, Alabama 57 TABLE 1-5 Capital and Operating Costs for a 20-Acre Sportfishing ?..???.. Lake with a 15-Year Planning Horizon and Using Borrowed Capital for Construction and Initial Cost Purposes, Alabama 59 TABLE 1-6 Projection of the Net Cash Flows for a 20-Acre Sportfishing ..??.. Lake with a 15-Year Planning Horizon, Alabama 62 TABLE 1-7 Cash Inflows, Net Present Values (NPV), and Internal ?????. Rates of Return (IRR) for a 20 and 40-Acre Sportfishing Lakes in Alabama, 15 Year Planning Horizon 64 1 I. INTRODUCTION Today, rural land owners are investigating diverse alternatives to efficiently utilize rural property, including examining nontraditional land uses, such as the addition of recreational water. The more traditional land uses in the Southeast, such as farming soybeans, corn, cotton, and peanuts are being somewhat replaced by larger timber investments, a greater number of hunting leases, fish farming and other economic and recreational uses. These more recently emphasized land uses have not been employed for an extended period of time, and therefore, are constantly evolving. Better technologies, improved resources, and varied goods and services related to these more nontraditional land uses are realized on an extremely rapid time scale. More modern equipment used in the construction process of recreational water, such as global positioning units, enables contractors to work more efficiently when designing recreational water. Also, expert contractors and consultants are available to facilitate planning and completion of either part or the entire recreational water project. Lending institutions are willing and able to assist in these recreational processes, providing the owner meets certain financial requirements. Services needed to complete an acceptable recreational water project are accessible for today?s rural land owner and should be explored in great detail before a project is started. Rural land owner demographics and characteristics are changing just as rapidly as land uses. Agriculturally based farm ownership of rural lands has steadily decreased over 2 the past seventy years and has decreased significantly in the past 40 years (Alabama Bulletin 46 2004). The demographics of ownership of rural property have diversified tremendously during that same period of time and continue to expand. Rural property owners currently are made up of farmers, corporations, banks, timber companies, investment firms, hunting and fishing clubs and outfitters, resorts, retirees, and outdoor recreationalists (Chappell 2005). All of these land owners seek to own property for specific uses and these uses typically vary a great deal from one owner to another. This paper examines the process for meeting regulatory requirements for transforming rural land into recreational sportfishing water. The regulation and approval processes of building recreational sportfishing water will be reviewed from the perspective of the United States Army Corps of Engineers (USACE) and the Alabama Department of Environmental Management (ADEM) guidelines for a specific recreational water project in Alabama. Scenarios for two separate recreational water projects are analyzed for potential financial benefits afforded to land owners. The first scenario evaluates the financial benefits of adding a recreational amenity (sportfishing water) to an existing outdoor recreational facility that will be utilized by current members and customers. The second scenario analyzes the feasibility of a start-up sportfishing facility. Both scenarios consider the initial capital and operating costs required and potential cash inflows of the two projects. Who are the land owners in need of recreational water? The land owners in question vary in their needs as much, if not more, than in their demographics and characteristics. The land owner?s needs are strongly dependent upon the specific use of the property and potential water. For example, the land owner may have the need for 3 recreational uses, such as fishing or hunting. In this situation, the land owner would determine certain purposes the body of water would serve for his/her personal and specific satisfaction and then seek the manner in which to most effectively develop those waters. The water could essentially fulfill the owner?s needs for hunting fowl or perhaps fishing for largemouth bass. The characteristics of land owners, as mentioned before, vary a great deal just as the specific uses do for new waters (Chappell 2005). The land owner may be retiring from his/her residence to the specified site and would enjoy full time use of his/her recreational water or could simply desire a recreational setting for the family and friends with access to a lake and its potential bounty. The owners could be nonresidents or live in local proximity; they could be sole owners or in a partnership with others who desire recreational water and the requisite amenities. Regardless of the personal characteristics of land owners and the planned uses for the waters, certain processes and regulations need to be understood and followed by all owners to bring water related projects to fruition. Below are several selected examples of recreational water development and use. The land owners may have motivations to increase the value of their property more quickly than typical land appreciation in the area. The addition of recreational water to the property could accomplish increases in recreational value of the property, as well as in market value more rapidly than if waters were not present on the land. ?The addition of recreational water to a particular parcel of land that is lacking in water not only diversifies potential land uses, but also establishes an additional amenity to potential users?, said Robert Pitman, owner of a hunting and outdoor recreational facility in Alabama. 4 There are numerous water ski clubs available for private use in the state of Alabama that have membership fees available ranging from $500 to $2,000 per member per year. These lakes are expensive to build due to the specific design needs for water skiing purposes which require a minimum of 2,000 feet of length and 350 feet of width. ?The ability to have private use of the water while skiing not only provides convenience, but also provides greater safety?, says Steve Stanley, a member of a central Alabama ski club. ?When you have complete use of the lake to yourself without worries of other boaters, you can control the water surface for roughness providing a safer environment for everyone?. Farming operations utilize water in everyday farm practices, such as irrigation. Huguley Farms in Geneva County, Alabama designed and built waters for the above mentioned purpose during the summer of 2003. The lake totals 14 acres in size and is used to irrigate 80 acres of peanuts and cotton annually. Tommy Huguley said, ?having the ability to irrigate their cotton and peanuts four times a year has produced more consistent yields?. Huguley Farms runs 4 irrigation cycles a year on their newly acquired property, pumping approximately 1,365,000 gallons of water per cycle. ?There are also recreational benefits for our family and friends who enjoy the lake for fishing and hunting,? Huguley (2005) relayed. This particular water serves several purposes and was constructed through an exemption of the United States Army Corps of Engineers for specific agricultural purposes. (Exemptions and permitting will be discussed later in the paper) A final example of recreational water development and use, and the main subject of this paper, is the privately held recreational sportfishing water site that is larger and 5 more complex in size and design than a majority of developed waters. A recreational water project used for day fishing trips, family recreation, hunting, nature observation, aesthetics, and as a source of income will be reviewed. Sportfishing alone has more participation by Americans than the sports golf and tennis combined, produces nine times as many jobs as AT&T and the overall economic impact is large enough to make sportfishing 32 nd on the Fortune 500 list (American Sportfishing Association 2002). These statistics demonstrate the extent of involvement in sportfishing, and also the growing opportunity and need for planned recreational waters. What type and size of lake should someone build for sportfishing and other related uses? This aspect of the recreational water planning process is dependent upon several factors, including: 1) personal utilization or preferences, 2) site compatibility for such use to the tract of property, and 3) site approval. Each project will vary substantially in each of these aspects. As previously mentioned, land owners have different needs and uses for water, basically no one person has the same wants or needs as another for utilization of recreational water. Secondly, every property is unique in topography and layout, which greatly influences lake design. Lastly, the approval process is an independent process and is specific to the project design and site location. As discussed earlier, the personal preferences of land owners have a major influence on the design of recreational water. Moreover, each land owner has different needs and uses in mind for adding water resources to their land. However, those needs and uses help significantly in determining the design and utilization of a planned water project. Remember the water ski example previously discussed, that body of water required a length of over 2,000 feet and a width of 350 feet along with at least a depth of 6 7 feet and would be a minimum of 20 acres in size. Additionally, the water would need to be clear of structures, obstacles, and debris that could damage boats and injure skiers. However, the sportfishing water used for fishing or water fowl hunting would need areas both deep enough for fishing (approximately 6 feet) and shallow enough for hunting (approximately 1 foot). Also, there would need to be structure and debris present in the form of sandbars or points and flooded timber in order to provide proper habitat for both fish and other wildlife. Note that the uses of the two lakes are dependent upon the preferences of the land owner; therefore, they differ greatly in design. The recreational water projects reviewed in detail for this study were specifically designed for sportfishing. The lakes total 40 acres and 20 acres in size and range from 1 to 24 feet in depth. The design of the 40-acre lake contained 5 fingers or channels, which are narrowed bodies of water that branch off from the lake?s main body of water. There are several sandbars or points that extend from the shorelines toward the main body of the lake. These structures provide fish with preferred spawning areas and structures for feeding purposes. A majority of the tree trunk and root systems that remained from the timber harvest that took place during the construction of the lake were placed in strategic areas throughout the lake. These areas will offer fish structure, safety, and good feeding habitat. There were also several areas of the lake that contain shallow depths and flooded timber, which give water fowl a beneficial habitat. The shorelines and damn are planted with grasses that produce seed and forage that the resident and transient wildlife and water fowl can utilize for feed, and in turn, also provide great areas for wildlife observation. The 20?acre and 40-acre lake projects using borrowed capital illustrated in 7 this paper are strictly used to evaluate financial feasibility and start-up and not to demonstrate the design and regulation aspects of a recreational water project. 8 II. OBLECTIVES AND METHODS This study addresses two primary objectives. The first is identifying and examining the nature and process of satisfying regulatory requirements for adding recreational water to a rural tract of land. The second is to analyze the financial feasibility of developing recreational water to add to an existing outdoor recreational facility and also as a start-up sportfishing operation: one 40?acre and one 20?acre sportfishing lake. The first objective will be achieved by summarizing and describing requirements specified by USACE and ADEM to add water on a rural land tract. The second objective will be achieved by development of cash flow statements for a 15 ? year planning horizon. Also, Net Present Value (NPV) and Internal Rate of Return (IRR) analysis will be conducted to evaluate feasibility of the projects. Recreational Facility Case Study Overview The data used for the specific study of a 40 - acre sportfishing lake for an ongoing recreational facility located in Southeastern Alabama, were obtained over a two-year time period, in which the author was afforded the opportunity to experience all facets of the project. The author personally participated in the process of the projects: site selection, state and federal permitting application requirements, site engineering and construction bidding and acceptance process, financial status and budgeting, stocking and management of fish, and marketing and sales plans. Data were collected from USACE and ADEM regulatory permitting entities regarding site acceptance and cost of 9 permitting. The site engineer and consulting costs were derived from actual bids submitted by two separate consulting firms. All construction costs were also obtained through a bid process that included four separate contracting firms. Assumptions of a 40-Acre Sportfishing Project Addition to an Ongoing Recreational Facility The 40-acre sportfishing lake used in this case study was constructed and managed for the purpose of generating additional income for the land owner. The site on which the lake was constructed is currently owned; therefore, not requiring financial assistance for both land purchase and lake construction. The property, previous to lake construction, was used solely for paid hunting trips and a moderately sized hay production operation. The land owner currently operates a year round outdoor recreational facility that generates income through paid hunting trips, shooting sports, timber and hay production, as well as several other outdoor activities. Through the addition of the sportfishing lake, the land owner has positioned the facility to generate income during the time of year when other aspects of the business are lacking significant cash inflow. By selling fishing memberships during the traditionally slow income producing times of the year, April through September, the outdoor recreational facility will experience less of the seasonal fluctuations in cash inflows. The initial assumptions made about transforming this particular section of rural land into a sportfishing lake were the following: 1. Building a lake large enough to withstand a maximum of 90 fishing trips during a 6 month time frame would generate solid income during the facilities slower cash inflow time of year. 2. Stocking a more aggressive and rapid growing fish would allow trips to be sold earlier in the life of the project compared to more traditional forms of stocking. 3. Relatively early in the project?s life, substantial financial returns would be generated, permitting relatively quick recoupment of the initial outlay cost. Financial Analysis Methods Feasibility was evaluated using Net Present Value (NPV) and Internal Rate of Return (IRR) approaches for the project. The NPV method is used to demonstrate the current or net present value of an investment, while taking into account the time value of money, when analyzing cost and returns of the project over time. This method measures the net value of a multiyear project investment in today?s dollars using a discount factor (Erickson et al.). Since the time value of money encapsulates that a dollar now is worth more than a dollar received at some future date, NPV can be used by project managers to decide whether or not to engage in certain projects. Net Present Value Formula () ()() N N N N iii i1 V 1 P ... 1 P 1 P INVNPV 2 21 + + + ++ + + + +?= NPV = net present value of the investment alternative INV = initial investment P i = net cash flows attributed to the investment in period i V N = terminal or salvage value of the investment i = interest rate or required rate of return 10 11 The project manager or land owner selects a desired rate of return for the project which he/she feels is acceptable and that rate serves as the interest rate used in capital budgeting for the project. The interest rate is also referred to as the discount rate or cost of capital. For example, the 40?acre and 20?acre sportfishing scenarios analyzed in this paper use rates of 8 percent and 12 percent. If at 12 percent the NPV is negative, the manager would reject the project, if positive, he/she would accept it, and if equal to zero it would cover the stated rate. When determining a discount rate, there are several influences to consider: risk, alternative uses for capital, and inflation (Jolly and Clonts). Risk simply refers to the uncertainty associated with the project. For example, the manager can not be certain he/she will sell the projected amount of fishing trips. Alternative uses imply the manager should investigate other possible projects that could use the available funds and be more profitable than the project being considered. Inflation reflects the purchasing power of the dollar or anticipated rate of inflation that could affect the cost of say, labor, money, or fish. Using the NPV method has several advantages. The method realizes projected cash flows, is responsive to the cash flows timing due to the investment, allows managers to evaluate benefits and costs in current dollars, and, through accepting positive NPV projects to increase the value of the firm. One disadvantage is that managers must determine/estimate cash flows over long periods of time. Remembering the influences of the discount rate, managers must ultimately guess what alternative uses might produce greater profits, what effects inflation might have on the project, and whether or not people will actually purchase fishing trips. Basically, at the end of the day, the manager has to be confident he/she has made correct calculations of cash flow for the entire life of the project. The internal rate of return for a project can be determined by using the same equation used in determining the net present value. The IRR is the discount rate (i), which equates the net present value of projected cash flows to zero. Internal Rate of Return Formula () ()() N N N N ii i1 V i1 P ... 1 P 1 P INV)0($NPV 2 21 + + + ++ + + + +?= However, with a multiyear project such as the one in this case study (15 ? year planning horizon), it is recommended that a computer program be used in determining IRR compared to a trial and error approach. As with NPV, the manager will compare the IRR to his/her required rate of return. If the IRR exceeds the required rate of return, the project should be accepted, if it is less than the required rate of return the project should be denied, and if IRR equals the required rate of return the manager would be indifferent. The manager can also compare different projects? IRR, accepting the project demonstrating the largest IRR. Another way to view IRR is to be willing, as a manager, to borrow money at a rate no higher than the IRR to engage in a project that satisfies the managers required rate of return through the methods of NPV and IRR. 40-Acre Sportfishing Scenario Using Equity Capital The life of the project is 15 years and there are initial capital investments made in each of the first three years of the project and capital replacements needed in the fifth and tenth year of the project. Sale of day fishing memberships take place in April of the fourth year. (See Table 1-1) The production cycle in this project is two years in order to obtain larger weights of the sportfish and greater numbers of feed fish before fishing trips are permitted. Fathead minnows, coppernose bluegill, and shellcrackers were all stocked 12 13 during October of the second year and are considered feed fish in this particular setting. The fathead minnows were stocked at a rate of 1,000 fish per acre, totaling 40,000 fish. The coppernose bluegill and shellcrackers were stocked at a 9:1 ratio, coppernose bluegill to shellcrackers, at a rate of 1,000 fish per acre totaling 36,000 coppernose bluegill and 4,000 shellcrackers. Threadfin Shad were stocked during March of the third year of the project at a rate of 500 per acre totaling 20,000 fish and are considered feed fish as well. The F-1 Tiger Bass, 2? in size, were stocked during June of the third year at a rate of 50 fish per acre totaling 2,000 fish and are considered the sportfish in this project. There were two primary motivations for stocking feed fish at earlier times for this project. First, early stocking and lengthened production cycle allowed the feed fish to complete several spawning cycles in order to increase the population of each species. Secondly, it provided enough time for feed fish to increase in size, and this established a noncompetitive condition for feed with the F-1 tiger bass. The F-1 tiger bass is a hybrid cross between the northern smallmouth bass and the Florida largemouth bass. The smallmouth is recognized for highly aggressive feeding habits and behavior, but not for reaching weights significantly over 8 pounds. The Florida largemouth, however, are identified as a less aggressive but larger strand, reaching weights in excess of 17 pounds. The motivation for stocking the F-1 tiger bass is to grow fish that gain weight quickly and have fish which exhibit highly aggressive feeding habits (Smith 2005). Fishing will be on a catch and release basis. 40-Acre and 20-Acre Sportfishing Start-Up Scenarios Using Borrowed Capital The 40?acre sportfishing lake scenario designed as a start-up sportfishing operation follows the same initial and operating costs schedule and management practices 14 as the ongoing outdoor recreational facility case study. Additional costs include the loan amortization payments and the interest and principal payments of the loan. The 20-acre sportfishing start-up scenario also mimics the initial and operating costs schedules as the ongoing scenario, however, overall costs are significantly less due to a decreased size of the project. 15 III. LITERATURE REVIEW This case study examines the potential financial benefits available for outdoor recreational facilities through the addition of recreational sportfishing water. Throughout the United States, particularly the Southeastern region, fee fishing has been used by water owners to generate income through the sale of fishing activities. Basically, these facilities charge a minimal fee for the access to fish or charge a standard fee per pound of fish harvested. More often than not, these operations have been minimal in size and in the production of income. The 40-acre fee fishing operation in this study differs substantially from typical freshwater fee fishing operations. The 40?acre sportfishing scenario in this study provides participants the option of utilizing other outdoor activities during his/her stay such as golf, hunting, or shooting sports. The customer has the opportunity to stay overnight, have all food and beverage needs provided, and transportation services are even available to and from airports. The operation in this case study provides the customer more than just a setting to fish, it provides a ?recreational experience.? The public sector has attempted to measure the net social benefits associated with outdoor recreation, specifically recreational water, and has encountered difficulties in doing so. Benefit of state parks or public waters for the use by the general public are examples. The difficulty lies in that a majority of these recreational venues are publically funded and managed and a majority of the costs, such as travel, are incurred by the participants before they actually use the resource (Burt and Brewer 1971). Also, more 16 often than not, the entry cost associated with areas such as state parks or public waters is minimal, unlike the cost associated with the utilization of the sportfishing lake used in this study. For example, consider the consumer who drives ten miles for a meal with his/her family. There is a cost associated with travel, although nominal, but the bulk of the cost of this particular activity takes place when the balance is due for the meal. Now, consider the same family traveling to a public state lake for the weekend to camp and fish. The cost of travel could be as minimal as going to the restaurant the night before, however, more than likely, greater travel will be required to do so. The majority of cost will be associated with the resources needed in order to partake in the outdoor recreation, such as camping equipment, food, and fishing gear. The cost of outdoor recreation varies much more dramatically than for most commodities for consumers (Burt and Brewer 1971). The reason for the 40?acre addition of sportfishing water to an existing outdoor recreational facility lies in this fact; increased income and leisure desires, combined with advances in transportation technologies, have made outdoor recreation an important consumption commodity in the United States (Burt and Brewer 1971). The decision to take a sportfishing trip is done so with the expectation that the experience or benefit will exceed the associated costs. That decision is dependent upon characteristics of the participant and attributes associated with the recreation (Hamel et al. 2002). Attributes such as fish population or regulatory guidelines have been found to affect fisher?s decisions regarding sportfishing trips. In this paper?s particular case study, high stocking rates of a regionally preferred sportfish are used to increase potential catch rates and to positively affect a fisher?s decision to take a trip to the outdoor facility. 17 A study on the importance of environmental quality and catch potential in Mississippi noted that clean fishing environments and the availability of desired fish were ?very? or ?extremely? important to fishing site selection (Schramm et al. 2003). There are about 3 million acres of ponds in the Southeast. As a conservative estimate, it is believed that 15 percent of the acreage is fertilized and 5 percent of the fish stocked receive feed (Boyd et al. 2002). Sportfishing lakes managed correctly can provide excellent opportunities to anglers and outdoor enthusiasts alike. Proper fertilization and feeding rates are not only important for commercial aquaculture, such as catfish ponds, but are also extremely important for the management practices of sportfishing waters. Improper rates of fertilizer and feed application can result in the discharge of nitrogen and phosphorus into local streams and waterways (Boyd et al. 2002). Best management practices (BMPs) are considered to be the best economically feasible and technically practical method for reducing pollution to a level that protects water quality and are consistent with resource management goals (Hairston et al. 1995). Below are prescribed BMPs for sportfish ponds/lakes from Auburn University and USDA/Natural Resources Conservation Service: Feed Application BMPs for Sportfish Water ? Select high quality feeds that do not contain excessive amounts of nitrogen and phosphorous. ? Store feed in dry, ventilated bins or rooms if bagged and use on a first in, first out basis. ? Do not apply more feed than fish will eat. 18 Fertilizer Application BMPs for Sportfish Water ? Only apply fertilizer when necessary to promote phytoplankton bloom. ? Do not use animal manures for fertilize. ? Do not fertilize when heavy precipitation is expected. ? Do not fertilize during the winter months. ? Do not use fertilizers with high nitrogen to phosphorous ratios, because excess nitrogen contributes to pollution of streams. ? Store fertilizer in a dry place. There are very limited applied economic analyses available concerning private sportfishing institutions. However, there is theoretical work available illustrating the importance of outdoor recreation and sportfishing. The theoretical work promotes the ideology that consumers are willing and able to purchase outdoor recreation providing the appropriate attributes are in place. Attributes such as, good environmental quality, high stock rates, amenities and overall safety all affect a fisher?s willingness to purchase a sportfishing trip. The 40?acre sportfishing lake in this study provides a setting where the attributes listed above are all present and managed for continuity throughout the life of the project. 19 IV. REVIEW OF PLANNING PROCESS The planning process in this study involves two primary regulatory agencies: United States Army Corps of Engineers (USACE) and Alabama Department of Environmental Management (ADEM). The roles of these agencies are to ensure that construction of impoundments and quality of added water are achieved in a specified manner which is environmentally sound. The process requires proper permitting for all construction activities and development of environmental impacts on projected sites. United States Army Corps of Engineers (USACE) Since 1890, USACE has been regulating activities affecting U.S. waters. Historically, their activities were primarily concerned towards the navigation of U.S waterways. However, during the 1960s, the scope of USACE activities broadened to include dumping of trash and sewage through new laws and court decisions. In 1972, the Clean Water Act, particularly section 404, passed and broadened USACE authority to an even greater scope, which now considers the full public interest for both the protection and utilization of water resources (USACE, Clean Water Act). The USACE bases regulatory practices on the following laws: ? Section 10 of the Rivers and Harbors Act of 1899 (33 US.C. 403) basically states that obstruction or alteration of navigable water ways in the United States without a permit was prohibited. 20 ? Section 404 of the Clean Water Act 1972 (33 US.C. 1344) basically states that discharge of dredged or fill material into United States water is prohibited, without permit. ? Section 103 of the Marine Protection, Research, and Sanctuaries Act of 1972 (US.C. 1413) basically states that transportation of dredged material for dumping into ocean waters without permit is prohibited. These are not the only laws that can affect the USACE decisions in the approval process of a potential lake site. The USACE has the authority and responsibility to review all regulatory forms that are pertinent to a specific water resources project and has effects on the general public. Laws such as, Fish and Wildlife Coordination Act 1934, Endangered Species Act 1973, and National Historic Preservation Act 1966 are just some examples of other laws that USACE has, and can use in Alabama when researching water related application requests. As mentioned before, the USACE regulates for both the protection and utilization of water resources based on the public?s interest. The USACE focus on public interest is to assure that projects do not harm the general public, that is, the project can not benefit one citizen while at the same time harming others. As an example, consider the situation in which the amount of run off needed to sustain a new water site takes away run off water needed to sustain a public water already in existence. Therefore, it is necessary, regardless of the project size or complexity, to follow the correct procedures set in the proposed project?s district. Not all projects will require specific permits by USACE; however, the land owner should notify and inquire regarding the proper process to be taken through USACE before commencing in the building process. 21 The USACE has many general permits which allow minor activities to be completed without the need for individual processing. There are also several exemptions that are available for very specific activities, though consultation with either a site planner or USACE engineers is still highly recommended. Certain projects can avoid the permitting process partially or completely: the prudent action would be to ensure those omissions apply to your project before beginning construction. The site owner or planner should contact USACE regarding whether or not the potential site is applicable for such exemptions and permits. The larger, more complex projects typically require a complete process of submission, review, and approval by the USACE before building commences. Since these more complex projects usually require greater amounts of labor, money, and time, adhering to approval guidelines beforehand can prove beneficial and help in avoiding hardships throughout the building process. The remainder of this section examines the steps needed to be taken through USACE in the approval process, the guidelines and influences considered by USACE when permitting projects, and examples of several general forms and applications used by USACE in the approval process. The basic application form used by USACE throughout the country and in Alabama is the Engineer Form 4345, Application of a Department of the Army Permit (Appendix 2). The form is easily accessible and can be obtained through downloading from the internet at www.usace.mil or can be acquired through one of the USACE regulatory offices. As previously mentioned, certain activities/uses have already been authorized by nationwide or regional permits, and will need no further approvals. In this situation, USACE would likely inform the planner to commence activities under a 22 Region (RWP) or National (NWP) permit, also referred to as a General Permit. Other activities/uses that are minor or routine in nature, such as inserting new pipes and pumps needed in the irrigation process of an existing farm, may qualify for a Letter of Permission (LOP). A LOP is usually issued for activities that are minimal in impacts and will likely have no public objections. The LOP can be issued quickly since public notification is not required (USACE). The Individual Permit can be issued in one or two ways. The first, mentioned above, is the Letter of Permission and, secondly, through a Standard Permit (SP). The SP is a more intensive process of approval and requires more measures to be taken by the owner. A recreational lake of approximately 40 acres in size, on private land in Alabama will be used for an example in the consultant proposal (Appendix 3) Below are the standard procedures for a SP listed in the order of the review. I. Pre-application consultation ? This step is optional, as mentioned previously, but highly recommended. An applicant can simply contact the USACE?s engineer in his/her district to schedule a consultation. II. Applicant/Planner submits ENG Form 4345 to local regulatory office ? Local offices can have minute variations for submission. III. Application received by USACE ? USACE will assign the project an identification number; the ID number is what the applicant/planner will need to use when checking the status of the application 23 IV. Public notice issued ? This notice is to be issued by USACE within 15 days of receiving all permit information from the applicant, including drawings, fees, and applications. V. Comment Period ? The comment period typically takes place within 15 to 30 days after notices of potential site construction have been served, yet it is dependent upon the proposed construction activities. VI. Proposal review ? The proposal for planned activities/uses will be reviewed by USACE. This review observes all permit request information and could be delayed if that information is not received in a timely manner. VII. Corps considers all comments ? This point of the process is when USACE considers reviews from all relative groups such as, adjoining land owners, engineers, or office of public health, for example. VIII. Other Federal agencies consulted ? This step is only used if USACE deems it necessary. Example: applicant has been denied previously for a certain construction activity due to Federal or State Law. 24 IX. District engineer may ask for additional information ? Depending on the proposed activities, USACE could require wetlands/waters delineation, alternative analysis, mitigations, endangered species, drawings or minimization plans (Appendix 4). X. Public hearing ? Public hearings are held to acquire information and give the public the opportunity to present opinions. These meetings are rarely needed, and can usually be resolved by the district engineer, informally. XI. District engineer decision ? The district will either issue the permit for construction or deny the site and advise the applicant on reasoning. Several of the standard procedures should be examined more thoroughly. The pre-application consultation, although optional, can be very beneficial to the planner in expediting the permit process. After determining if a permit is needed, the applicant would need to schedule a meeting date with the local USACE district office. Upon scheduling a meeting, a ?Summary of Project? should be sent to all agencies that could be in attendance at least 10 days prior, such as Alabama Game and Fish Department or the Alabama Department of Environmental Management. Wetland/water delineation should be brought to the meeting, if necessary. The pre-application meeting is a good opportunity for the applicant to gather information regarding USACE rules and regulations that could be used in final project design. 25 If public notice is needed, the applicant could be asked to notify Federal, state or local agencies, adjacent property owners, and the general public. This contact allows both public and private views to be heard by the USACE. Informing these groups allows for an assessment by USACE on the impact of the specified project. Upon receiving information concerning the proposed project, USACE will begin an assessment process. USACE will review the likely benefits of the project compared to the detriments possible from granting a permit for the said project. There are numerous factors to be considered when evaluation of the ?public interest? is considered. Conservation, erosion, economics, aesthetics, flood hazards, wetlands, water quality, recreation, and safety are important items for consideration when decisions are made for the approval or denial of a construction site. Simply stated, USACE will weigh the need for the proposed project both publicly and privately, consider alternative locations and methods to obtain the project, and evaluate benefits and detriments of the project. In the state of Alabama, particularly the central and southern regions, wetlands/waters are often found on projected sites. Alabama is very fortunate to have ample water available to the public for recreational uses, for example swimming, boating, fishing, and wildlife observation. However, a land owner should identify wetlands that are located on and in proximity of the project and take appropriate measures to ensure that the projected construction site is not detrimental to those specific areas. The presence of said areas typically requires a wetlands/waters delineation to be completed for USACE. The site planner will obtain delineation in accordance with the Routine Onsite Methodology described in the 1987 U.S. Army Corps of Engineers Wetland Delineation Manual. 26 Mentioned previously were specific laws and Acts USACE regulates under, one of which was the Clean Water Act, Section 404. Having a wetland/waters delineation completed prior to applying for a permit helps in expediting the approval process. Typical steps a planner would take in a wetland/water delineation process are as follows, and can vary depending on the proposed permitting site. ? Mark wetland boundaries with labeled flags designated alphabetically and numerically for each wetland site. Example: A-1 on the corner of a wetland boundary and continuing around the perimeter of entire wetland accordingly, A- 2,A-3,A-4, until complete. Other wetlands may be designated in similar manner B-1 - B-4, C-1 ? C-6, etc. ? Each wetland boundary would then be denoted on the appropriate map. ? Upland and wetland data test would be conducted for vegetation, soils and hydrology as per regulatory agency guidelines. ? Drawings would be given to the land owner of each of the areas tested along with results. ? Photographs of each area tested would also be provided in mapped form to the land owner. A wetland survey prepared by the applying party is also required by USACE for projects in areas that contain wetlands/waters; however, a global positioning system (GPS) could be used in place of a wetland survey. The later method of distinguishing wetlands for USACE is a more economical approach with the high availability of GPS units; however, the user must still have the capability of operating the unit properly. 27 Drawings of proposed sites and activities are required in addition to wetland delineation and application. There are three types of drawings needed in order for planned activities to be properly depicted for review by USACE. An original (or good copy) of, Vicinity, Plan, and Elevation notations are to be submitted by the site planner on 8.5 X 11 inch white paper. These drawings are intended to provide USACE with a clear vision of the projected site and should be in good detail. The Vicinity Map is used to describe the area or vicinity as exact as possible through existing maps or site originals, and should include such items as latitude and longitude, township/range, roads, directions and other items used in locating the site. The Plan View illustrates the proposed activity from a view of above, and should include such items as water marks, location of structures, dimensions, and other items used in describing the site?s structural make up and plan of construction. The Elevation View should represent the water elevations, water depths, high water marks, and other items needed in describing the dimensions of the varying elevations of the project site (Environmental Laboratory / USACE). These illustrations can be very detailed and should have the assistance of a professional in development, who may already possess customized versions of each map or view (Appendix 5, 6 & 7). Alabama Department of Environmental Management (ADEM) The second regulatory agency to be discussed in this study is the Alabama Department of Environmental Management, referred to as ADEM for the remainder of this paper. The overall responsibilities of ADEM cover a broad spectrum of issues and separate divisions address certain aspects categorized under each particular division?s responsibilities. Divisions for air, permits and development, land, field operations, 28 education & outreach, and water, regulate and enforce all activities that could possibly affect the state of Alabama?s environment (ADEM). The passage of the Alabama Environmental Protection Act in 1982 created the Alabama Environmental Management Commission and ADEM, which absorbed other commissions and agencies responsible for implementing environmental laws. All major federal environmental laws, including the Clean Air, Clean Water, and Safe Drinking Water Acts and federal solid and hazardous waste laws are administered through ADEM. The above responsibilities were only assumed by ADEM after state laws and regulations were at least equivalent to federal standards and matching funds and personnel were available to administer efforts. ADEM enforces any and all regulations and laws affecting the state of Alabama?s environment in order to protect the State?s environment and citizens. Also, ADEM constantly monitors the State?s environmental status and will make recommendations on revisions needed to existing state laws and regulations as environmental status changes. For the needs of this study, the Permit Coordination and Development Division(PCDD) and the Water Division(WD) will be examined and the steps required by both divisions during the site selection and building approval processes of water in Alabama will be included. The PCDD communicates all pertinent application and project standings to the proper divisions involved for each program area. For example, a permit for drainage alteration for an existing water body would first reach PCDD, then would be referred and coordinated to the appropriate division for approval, denial, or monitoring procedures, in this case the WD. The environmental permit is the main tool that ADEM will use to regulate emissions into the air and water, assure the quality of drinking water, and 29 oversee the management of solid and hazardous wastes. The permits sent to ADEM by the site planner will again, first be reviewed by the PCDD and then be directed to the appropriate program areas. When applying for a site approval permit, the destination of acceptance should be understood because failing to do so can cause major time loss in the project?s review. The Water Division (WD) is the other division that will be heavily involved in the permitting process for the proposed approval site. The WD constantly evaluates the current and projected status of waters in the state of Alabama. The WD adheres to the Clean Water Act as does the USACE; however, the two agencies work in conjunction under separate sections of the Act. The WD uses section 401 Water Quality Certifications in conjunction with the Section 404 permits used by the Mobile and Nashville Districts of USACE when considering potential site approval. The main disparity between Sections 404 used by USACE and Section 401 used by ADEM is that the 404 permits address more of the actual construction and design of the proposed site, and the 401 certifications emphasize the actual water quality of the proposed site. A more thorough discussion regarding the specifics of Section 401 certifications will follow. To basically understand how USACE and ADEM work in conjunction with Clean Water Act, remember that USACE approves the actual construction process of the proposed site and ADEM certifies that the quality of water and effects on Alabama waters resulting from that site are acceptable. Section 401 of the Clean Water Act requires that certain activities have a State water quality certification. The WD of ADEM will issue certification, when there is reasonable assurance that the 30 discharges of the proposed activities will not violate the water quality standards under Section 303 of the Clean Water Act and Title 22 of the Code of Alabama 1975 (ADEM). The Alabama Department of Environmental Management Field Operations Division - Water Quality Program, Chapter 335-6-12 is a great tool to utilize when learning the requirements of water quality standards, definitions and programs considered by ADEM when evaluating projects. The Water Quality Program Chapter purpose is to establish a comprehensive statewide program for stormwater management pursuant to the requirements of the National Pollutant Discharge Elimination System (ADEM, NPDES). This material can be obtained through ADEM with ease and should be used by prospective site planners. Application forms required are site and activity/use specific. Consultation should be obtained by the site owner with either the project planner or the Field Operation Division of ADEM before the project commences. Several forms and registrations needed by ADEM for the recreational site are represented in Appendix 7, 8, and 9 of this study. The Field Operation Division will be able to assist site planners with the proper forms for each activity/use. For example, a flooded timber area utilized for hunting would require separate registration and monitoring forms than a 40-acre site used for sportfishing with greater depths and larger run off capabilities. If a project site?s activities/uses do not accommodate standard best management practices regulated through ADEM, alternative measures regarding best management practices could be required. Examples of this situation could be improper drainage, discharge, or improper materials used in filtering discharge, such as pipes and rocks. 31 Again, the primary concern of ADEM with recreational waters regards discharge into Alabama waters. Sites are monitored periodically for adherences to regulations and water quality management practices. Like with USACE, ADEM is present to preserve and protect Alabama?s waters and citizens. Complying with the proper regulatory processes insures that all parties concerned are partaking in the best management practices needed to construct a recreational site that conforms best to applicable legislation, the citizens? needs, and waters involved. 32 V. ANALYSIS AND RESULTS A land owner who is planning a site development for recreational water usually has a preconceived idea or vision of the demand for the waters? end use before site selection takes place. The next step is the actual site selection on the property. Several property aspects affect the ultimate site selection such as topography of the property, streams and other flowing bodies of water, soil characteristics and percolation and other land characteristics depending on area or region of the state (Environmental Laboratory / USACE). The site approval process through regulatory agencies will require great amounts of time and detailed preparation. A land owner is strongly encouraged to employ the consultation services of a consulting project engineer, environmental consulting firm, and/or a USACE district engineer for assistance in this process. The State of Alabama is served by USACE in the Mobile District, which regulates the majority of the State, and the Nashville District that regulates the extreme northern area of the State. The site engineer, recognized as the planner for the remainder of this study, will make assessments of the topography and related impacts to aquatic features, such as wetlands, that the potential recreational water development site will have on the property. Upon the initial assessment of the projected site, determinations will be made on the type of permitting needed by the applicable regulatory agencies (See appendices I, II, VIII and IX for specific examples.) Subject to characteristics of a potential site and its 33 dimensions, wetlands/waters delineation could be required. Wetlands delineation simply outlines all wetland areas that are possessed on the applying party?s land, which could possibly be utilized in the exchange through mitigation for the approval of the potential water site (ADEM, NPDES). The site planner will be able to inform the land holder of these needs so that he/she can take the appropriate actions and steps. Basically, a detailed representation by drawing will be developed and provided to the regulatory agencies regarding the wetland location and impacts of the project. Further discussion related to wetland delineation will follow later in the paper. It is necessary to reiterate the importance of taking the proper steps towards site approval before embarking on the actual construction of a site. Failure to successfully complete compatible site locations and proper request for permits could result in project delays, plus severe damages and penalties. For example, if run off estimates from the proposed site were inadequately calculated, adjoining land owners? property could be eroded or flooded. Other inadequate site selection examples could be related to the destruction of wetlands due to failure of observation, or damn depletion which could ultimately result in a complete loss of water. Special attention should always be given to wetland observation when selecting a potential site. Wetlands are areas characterized by growth of wetland vegetation where the soil is saturated during a portion of the growing season or the surface is flooded during some part of most years (Environmental Laboratory / USACE). Wetlands in the state of Alabama generally would include swamps, marshes, bogs, and other similar areas of terrain. These areas are not only important to observe before selecting a site, but also as a means to understand the benefits that wetlands serve on a particular property. 34 Wetlands serve as good habitat to many species of fish and wildlife; nesting, rearing, resting sites for aquatic and land species; protection of other areas of the property from erosion; and for natural water filtration and purification functions (USACE). Of course, there are many other benefits and further discussion will follow when discussing the approval processes of USACE and Alabama Department of Environmental Management (ADEM). For now, the main objective of the land owner is to identify and designate wetlands and consider the impacts they will have on the location and approval process of the projected body of water and vice versa. The previous examples dealt with only physical repercussions a recreational lake site could have on the applicants land. Premature building could also result in economically devastating repercussions in the form of penalties and delays to construction. Regulatory agencies, such as USACE, have a multitude of ways in which a land owner can be penalized, such as monetary fines, mitigation of lands, and complete reconstruction of the site. By employing the services of a professional planner, a land owner can likely avoid hardship and be assured of a properly planned building site. Below are several recommendations to help in the selection process for a lake site planner: ? Contact accredited environmental service companies or engineers. ? Ask existing lake owners in your area for referrals. ? Be informed of the planner(s) previous works / projects. ? Have proposals submitted on site determination. ? Have proposals submitted on site construction. ? Review regulatory agencies lists of consultants. 35 ? Review other waters/wetlands projects completed or occurring in your area and the planners employed for those projects. Below are the costs and return estimates for the specific 40-acre sportfishing lake used in this project. Management and budget analysis are based solely for the uses in this project and could vary considerably for other projects. The investment and operating costs of the project are shown in Table 1-1. The initial capital costs were satisfied through personal equity. The cost of lake construction was $1,500 per acre and the engineering fee of $7,500 included all but one of the registration and permitting fees. All operating cost remain constant throughout the life of the project and exclude assumptions of future inflation. The sales assumptions were based on other outdoor activities sales and marketing records during the past 23 years at the project site facility. Feed cost were based on a 4 month cycle of 2 feedings per day and a 2 month cycle of 1 feeding per day of approximately 7 pounds of feed per feeding, or approximately 3,780 pounds. Fertilizer application was based on recommended practices of liquid based fertilizer. There are 7 applications of 200 pounds prescribed from March to October each year. Insurance is liability based, providing $1,000,000 of coverage per occurrence with 2 occurrences allowed annually. Recreational water that is not in a farm setting and non-income producing can usually be covered by general home owners insurance. Maintenance cost includes general upkeep and feed and fertilizer application. Labor cost include overall daily management practices of the site when customers are present, sales and booking, and marketing. Property taxes are based on the market value ($1,800 per acre) at a 10 percent assessment rate for a 2,300 acre tract of rural property and a local 51 millage rate. The sportfishing lake represents approximately 6 percent of the facility?s outdoor 36 recreation income and therefore bear?s approximately 6 percent of the property taxes for the specified tract of rural land. Advertising cost are approximately 6 percent of the facility?s total outdoor recreation advertising budget. Federal taxes will adjust depending on the nature of the sportfishing entity?s legal business status as a limited liability company, corporation, partnership, or as a sole proprietorship. Sales taxes also fluctuate depending on the county of the state in which the project is located. All federal and state taxes were excluded from this project but can be simply added to Tables 1-2, 1-4, or 1-6 for analysis purposes. Fishing memberships cost $700.00 per day per boat and were held constant throughout the life of the project (See Table 1-1 and 1-2). Fishing memberships generate income starting in the fourth year of the project. Fishing trip sales are expected from existing ad campaigns in outdoor publications, facility web site traffic, and individual mailings to facility?s existing customers and members. An existing customer or member is recognized as someone who has personally visited the facility, joined as a member in the past, or has specifically requested information regarding outdoor recreation at the facility. The maximum number of trips per season is 90, which includes two members per trip. A booking rate of 85 percent per year, approximately 77 trips, is held constant throughout the life of the project. By allowing the extended production cycle and providing substantial feeding sources in way of feed fish, the F ? 1 tiger bass were expected to increase in size at a rate of 2.2 pounds per year or greater until leveling off in excess of 14.0 pounds. Also, by limiting the amount of fishing pressure on the resource, harvest numbers should increase compared to waters open to the public that can be fished daily by high volumes of people. 37 Expected catch per person per day range from 25 to 75 fish, based on similar sportfishing lake harvest records already established with similar management practices in place (Smith 2005). The amount borrowed for the 40-acre start-up operation was $138,000 at a 5.75 percent interest rate and closing costs were assumed to be 2.5 percent of the loan, approximately $3,450. The borrower is responsible for 20 percent down payment of the loan and all financial cost and closing cost (See Tables 1-3 and 1-4). The 20-acre sportfishing lake scenario used in this study mimics the management practices and cost schedules of the 40-acre sportfishing scenarios, but does so, on an overall lesser scale. As with the 40-acre scenario start-up operation, the land is currently owned and is considered to be approximately 100 acres in size, worth approximately $1,800 per acre. This scenario required the borrowing of capital to address the initial capital cost and operating cost during the first four years of the project. The borrower is responsible for 20 percent down payment of the loan and all financial cost and closing cost. The amount borrowed was $119,000 at a 5.75 percent interest rate and closing cost were assumed to be 2.5 percent of the borrowed amount, approximately $2,975. Closing costs were amortized over the life of the loan. The initial capital construction costs were assumed to reflect the same prices as the 40-acre project equating approximately 50 percent the total initial cost needed in the 40-acre project. The labor and maintenance costs were combined in the 20-acre scenario. Advertising costs would be higher for the 40-acre ongoing scenario due to a lack of existing or current customers and start in year three of the project. The advertising cost 38 provides ad space in 2 outdoor publications to be run 5 times year, approximately $3,800 and site brochures and literature, approximately $1,200 (See Tables 1-5 and 1-6). The 40-acre sportfishing lake addition to an existing outdoor recreational facility was evaluated using Net Present Value (NPV) and Internal Rates of Return (IRR) methods. The net present value at a 12 percent rate was $ -12,216.72 and therefore lacked feasibility. However, with a rate of 8 percent, the net present value was $16,233.30 and acceptable to the firm (See Table 1-7). By observing the net present value at 8 percent, the manager would be willing to engage in the 40-acre sportfishing addition project. The net present value relays to the manager that the project will not only meet the firms required rate of return at 8 percent, but will also give the project an additional worth of $16,233.30 present value above that required rate of return. The internal rate of return for the 40-acre scenario is 10 percent. This informs the manager that capital for the project should not be borrowed at a rate higher than 10 percent. The 40?acre sportfishing lake start-up using borrowed capital illustrates a complete lack of feasibility at both 8 and 12 percent rates and has a negative internal rate of return (See Table 1-7). The manager would reject the addition of a 40?acre sportfishing lake if he/she were required to borrow capital in order to satisfy initial and operating costs during the first four years of the project. The 20-acre sportfishing start-up operation scenario also proved not to be an acceptable project for the land owner. Due to the land owners need for borrowed capital for initial cost and portions of early operating cost, net present values remained negative at both 12 percent and 8 percent. The net present value at 12 percent was $-42,236.81 and at 8 percent the net present value was $-29,580.49 (See Table 1-7). The land owner 39 would choose an alternative use for his/her 100 acres and reject the 20-acre sportfishing project with negative net present values at both evaluated rates of return. The internal rate of return for this project was only 3 percent. 40 VI. DISCUSSION This paper reviews the process and regulation requirements for transforming rural land into recreational waters. The benefits and economic feasibility of establishing such recreational waters for sportfishing in the state of Alabama were examined. The economic analysis evaluated a 40-acre sportfishing lake added as an amenity to an ongoing recreational facility and as a start-up operation. Also, a 20?acre alternative as a start-up operation was evaluated for feasibility. Results could be used for comparison when reviewing other sites with similar characteristics in the state of Alabama. Process and regulation requirements discussed are also site specific; however, they could be used to evaluate other similar construction for planning purposes. The economic evaluation indicates that addition of recreational sportfishing water to an existing outdoor recreation facility can be beneficial to the firm under certain conditions. By owning the land and using equity capital in the construction of the 40-acre sportfishing scenario, the firm manager would be willing to engage in the addition of sportfishing water to his/her existing operation. With other outdoor recreational activities already in place and generating income, the overhead costs are shared and minimized for the sportfishing project. That is to say, the 40-acre scenario only bear?s the respective share of cost of advertising, labor, and property taxes compared to the other income producing activities the firm has in place. Also, by having an existing customer base, the firm reduces the risk and efforts associated with generating a customer base strong 41 enough to support the expected sales figures. Without the synergistic relationships with the ongoing facility, start-up 40?acre or even 20?acre sportfishing operation lack feasibility. The financial returns could assist the land owner who does not have other sources of income being generated on his/her land with maintenance cost associated with the property, property taxes, or in providing supplemental income to the owner, but would not be sufficient as a primary source of income for the owner. The need for borrowed capital significantly affects the cash flows of the project negatively. Establishment of an intensively managed population of sportfish that is desired by the majority of the southeast population, and particularly Alabama residents is necessary. Thus, customer or member participation is expected to meet sales expectations early in the life of the existing outdoor facility scenario. Providing a private setting in which customers or members have the opportunity to harvest above average catches and weights also encourages customer or member participation more so than more traditional forms of freshwater sportfishing. The specific type of sportfish used in this project also enables fisherman the opportunity to experience a more aggressive type of bass than is typically found throughout the state of Alabama. In a locale, and more specifically the state of Alabama, in which citizens are highly supportive and involved in outdoor recreation, the addition of sportfishing water compliments the desires of the outdoor recreation populations . The state of Alabama has a multitude of both private and public outdoor recreational opportunities available to the public. The outdoor recreation private sector and rural land owners of Alabama have increased tremendously over the past forty years and is ever growing. The analysis in this study can provide both parties with basic understanding of the process and benefits of 42 constructing recreational waters. Moreover, the analysis in this study demonstrates the economic returns that can be achieved by outdoor recreational facilities through the addition of sportfishing waters. Land owners need to be aware of the options available to them in the state of Alabama. Land owners should be aware of the opportunities, risks, and requirements associated with building water resources on their lands. Land owners should be afforded the right to establish recreational water on their land for personal enjoyment, the enjoyment by their loved ones, and potential economic gains through the use of those waters. Along with these options, opportunities, and risks arises the question of who will ensure these activities are conducted in ways that will not harm the state of Alabama and the people who live there? Great expansions of the regulatory agencies and their coverage and responsibilities have taken place in the most recent decades in order to address that question. These agencies monitor, regulate, inform, serve and in some cases punish those who conduct construction projects of new and existing bodies of water in Alabama. The responsibilities of the agencies are awesome, but so are requirements and responsibilities of the citizens developing water resources. Land owners should be responsible for educating themselves on the proper guidelines and procedures set forth by the monitoring agencies, such as USACE and ADEM. The agencies and land owners working together on proper management of water, best management practices, accurate site planning, excellent water quality controls and sound construction processes will ensure continued use and building of recreational waters by private land owners. Through awareness of the opportunity?s for recreational 43 waters and the policies and procedures needed for the construction of those recreational waters on privately held lands, the citizens and agencies of Alabama will all benefit significantly now, and in years to come. 44 VII. REFERENCES Alabama Department of Environmental Management Field Operations Division ? Water Quality Program. ?National Pollutant Discharge Elimination System (NPDES),? Chapter 335-6-12, (1975). Alabama Department of Environmental Management. Internet site: http://www.adem.state.al.us/ (Accessed April 6, 2005). Alabama Agricultural Statistics. United States Department of Agriculture National Agrucultural Statistics Service and Alabama Department of Agriculture and Industries. Bulletin 46, 2004. pg 6. American Sportfishing Association. ?Sportfishing in America: Values of our Traditional Pastime? Alexandria, VA, 2002. Auburn University and USDA-Natural Resources Conservation Service. ?Reducing Storm Runoff into Ponds? Alabama Aquaculture Best Management Practices BMP No. 1. Internet site: http://efotg.nrcs.usda.gov/references/public /AL/INDEX.pdf (Accessed December 15, 2005). Auburn University and USDA-Natural Resources Conservation Service. ?Feed Management? Alabama Aquaculture Best Management Practices BMP No. 7. Internet site: http://efotg.nrcs.usda.gov/references/public/AL/INDEX.pdf (Accessed December 15, 2005). 45 Auburn University and USDA-Natural Resources Conservation Service. ?Pond Fertilization? Alabama Aquaculture Best Management Practices BMP No. 8. Internet site: http://efotg.nrcs.usda.gov/references/public/AL/INDEX.pdf (Accessed December 15, 2005). Boyd, C., J. Queiroz, and R. Wright. ?Managing Sport Fish Ponds to Lessen Nutrient Discharge to Streams.? Wildlife Trends 2(July 2002): 13-15. Burt, O., and D. Brewer. ?Estimation of Net Social Benefits From Outdoor Recreation.? Econometrica 39(September 1971):813-27. Chappell, R. Personal Communication. First South Production Credit Association, May 2005. Ditton, R.B., S.M. Holland, and D.K. Anderson. ?Recreational Fishing as Tourism.? Fisheries 27(2002): 17-24. Environmental Laboratory. United States Army Corps of Engineers. ?Corps of Engineers Wetland Delineation Manual? Vicksburg, MS, 1987. Erickson, S. P., J.T. Akridge, F.L. Barnard, W.D. Downey. Agribusiness Management, Third Edition. Boston: McGraw-Hill Higher Education, 2002. Hairston, J.E.,, S. Kown, J. Meetze, E.L. Norton, P.L. Oakes, V. Payne, and K.M. Rogers. ?Protecting Water Quality on Alabama Farms.? Alabama Soil and Water Conservation Committee, Montgomery, AL, (1995). Hamel, C., M. Herrmann, S.T. Lee, K.R. Criddle, and H.T. Geier. ?Linking Sportfishing Trip Attributes, Participation Decisions, and Regional Economic Impacts in Lower and Central Cook Inlet, Alaska.? The Annals of Regional Science 36(2002): 247-64. 46 Huguley, T. Personal Communication. Owner of Huguley Farms, April 2005. Jolly, C.M., and H.A. Clonts. Economics of Aquaculture. New York: Food Products Press, 1993. Pitman, R. Personal Communication. Owner of White Oak Plantation, February, 2005. Schramm, Jr., H.L., P.D. Gerard, and D.A. Gill. ?The Importance of Environmental Quality and Catch Potential to Fishing Site Selection by Freshwater Anglers in Mississippi.? North American Journal of Fisheries Management 23 (2003): 512-522. Smith, B. Personal Communication. Owner of American Sportfish, March, 2005. Stanley, S. Personal Communication. March, 2005. United States Army Corps of Engineers. ?Clean Water Act 404? Legal Information Institute, 2003. United States Army Corp of Engineers. Internet site: http://www.usace.army.mil/ (Accessed April 2, 2005). 47 APPENDICES 48 APPENDIX 1 TABLES 49 TABLE 1-1 Capital and Operating Costs for a 40-Acre Sportfishing Lake with a 15-Year Planning Horizon and Using Equity Capital, Alabama Item 1234 5 Capital Costs Pond construction 60,000.00 Pipe 5,000.00 Trash rack 260.00 Engineer fee 7,500.00 Registration fee 225.00 Fertilzer / Plantings 575.00 Gravel / Rock 6,500.00 2,500.00 Fathead minnows 1,600.00 Shellcrackers 1,000.00 Bluegill 9,000.00 Shad 4,000.00 Bass 2,000.00 Feeder 700.00 Boats 15,000.00 Dock / Pier 1,500.00 Sub - Total 72,985.00 7,075.00 18,300.00 16,500.00 2,500.00 Operating Costs Fish Feed 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 Testing/ Monitoring 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 Gross revenue / year 0.00 0.00 0.00 53,550.00 53,550.00 Net Return / year -74,357.00 -8,447.00 -43,182.00 7,168.00 21,168.00 50 Table 1-1 (continued) Item 6789 10 Capital Costs Pond construction Pipe Trash rack Engineer fee Registration fee Fertilzer / Plantings Gravel / Rock 2,500.00 Fathead minnows Shellcrackers Bluegill Shad Bass Feeder Boats Dock / Pier Sub - Total 2,500.00 Operating Costs Fish Feed 900.00 900.00 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00 Testing/ Monitoring 650.00 650.00 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 Gross revenue / year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / year 23,668.00 23,668.00 23,668.00 23,668.00 21,168.00 51 Table 1-1 (continued) Item 11 12 13 14 15 Capital Costs Pond construction Pipe Trash rack Engineer fee Registraion fe Fertilzer / Plantings Gravel / Rock Fathead minnows Shellcrackers Bluegill Shad Bs Feeder Boats Dock / Pier Sub - Total Operating Costs Fish Feed 900.00 900.00 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00 Testing/ Monitoring 650.00 650.00 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 Gross revenue / year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / year 23,668.00 23,668.00 23,668.00 23,668.00 23,668.00 TABLE 1-2 Projection of the Net Cash Flows for a 40-Acre Sportfishing Lake, 15-Year Planning Horizon, Alabama 52 Item 1 2 3 4 5 6 7 8 Operating Receipts Value ation come axes 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Termin Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay -72,985.00 Operating Expense 1,372.00 8,447.00 43,182.00 46,382.00 29,882.00 29,882.00 29,882.00 29,882.00 Financial Expense Deprc Recurrent Cost 2,500.00 Taxble In Income T Total Cash Outflow -74,357.00 -8,447.00 -43,182.00 46,382.00 32,382.00 29,882.00 29,882.00 29,882.00 Net Cash Flow -74,357.00 -8,447.00 -43,182.00 7,168.00 21,168.00 23,668.00 23,668.00 23,668.00 TABLE 1-2 (continued) 53 Item 9 10 11 12 13 14 15 Operating Receipts 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Terminal Vue ation come axes Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay Operating Expense 29,882.00 29,882.00 29,882.00 29,882.00 29,882.00 29,882.00 29,882.00 Financial Expense Deprc Recurrent Cost 2,500.00 Taxble In Income T Total Cash Outflow 29,882.00 32,382.00 29,882.00 29,882.00 29,882.00 29,882.00 29,882.00 Net Cash Flow 23,668.00 21,168.00 23,668.00 23,668.00 23,668.00 23,668.00 23,668.00 54 TABLE 1-3 Capital and Operating Costs for a 40-Acre Sportfishing Lake with a 15-Year Planning Horizon and Using Borrowed Capital for Construction and Initial Cost Purposes, Alabama Item 1234 5 Capital Costs Pond construction 60,000.00 Pipe 5,000.00 Trash rack 260.00 Engineer fee 7,500.00 Registration fee 225.00 Fertilzer / Plantings 575.00 Gravel / Rock 6,500.00 2,500.00 Fathead minnows 1,600.00 Shellcrackers 1,000.00 Bluegill 9,000.00 Shad 4,000.00 Bass 2,000.00 Feeder 700.00 Boats 15,000.00 Dock / Pier 1,500.00 Sub - Total 72,985.00 7,075.00 18,300.00 16,500.00 2,500.00 Operating Costs Fish Feed 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 Testing / Monitoring 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 Loan Amortization 230.00 230.00 230.00 230.00 230.00 Interest on Loan 7,935.00 7,588.00 7,220.00 6,832.00 6,421.00 Gross revenue / year 0.00 0.00 0.00 53,550.00 53,550.00 Net Return / year -82,522.00 -16,265.00 -50,632.00 106.00 14,517.00 55 TABLE 1-3 (continued) Item 6789 10 Capital Costs Pond construction Pipe Trash rack Engineer fee Registration fee Fertilzer / Plantings Gravel / Rock 2,500.00 Fathead minnows Shellcrackers Bluegill Shad Bass Feeder Boats Dock / Pier Sub - Total 2,500.00 Operating Costs Fish Feed 900.00 900.00 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00 Testing / Monitoring 650.00 650.00 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 Loan Amortization 230.00 230.00 230.00 230.00 230.00 Interest on Loan 5,986.00 5,527.00 5,041.00 4,527.00 3,983.00 Gross revenue / year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / year 17,452.00 17,911.00 18,397.00 18,911.00 16,955.00 56 TABLE 1-3 (continued) Item 11 12 13 14 15 Capital Costs Pond construction Pipe Trash rack Engineer fee Registraion fe Fertilzer / Plantings Gravel / Rock Fathead minnows Shellcrackers Bluegill Shad Bs Feeder Boats Dock / Pier Sub - Total Operating Costs Fish Feed 900.00 900.00 900.00 900.00 900.00 Fertilizer 1,960.00 1,960.00 1,960.00 1,960.00 1,960.00 Testing / Monitoring 650.00 650.00 650.00 650.00 650.00 Maintenance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property taxes 1,372.00 1,372.00 1,372.00 1,372.00 1,372.00 Labor 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 Advertising 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 Loan Amortization 230.00 230.00 230.00 230.00 230.00 Interest on Loan 3,409.00 2,801.00 2,158.00 1,479.00 760.00 Gross revenue / year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / year 20,029.00 20,637.00 21,280.00 21,959.00 22,678.00 TABLE 1-4 Projection of the Net Cash Flows for a 40-Acre Sportfishing Lake with a 15-Year Planning Horizon, Alabama 57 Item 1 2 3 4 5 6 7 8 Operating Receipts 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 axes Terminal Value Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay -72,985.00 Operating Expense 9,537.00 16,265.00 50,632.00 53,444.00 36,533.00 36,098.00 35,639.00 35,153.00 Financial Expense 6,043.00 6,390.00 6,758.00 7,146.00 7,557.00 7,992.00 8,451.00 8,937.00 Depreciation Recurrent Cost 2,500.00 Taxable Income Income T Total Cash Outflow -88,565.00 -22,655.00 -57,390.00 -60,590.00 -46,590.00 -44,090.00 -44,090.00 -44,090.00 Net Cash Flow -88,565.00 -22,655.00 -57,390.00 -7,040.00 6,960.00 9,460.00 9,460.00 9,460.00 TABLE 1-4 (continued) 58 Item 9 10 11 12 13 14 15 Operating Receipts 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Terminal Value Taxes Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay Operating Expense 34,639.00 34,095.00 33,521.00 32,913.00 32,270.00 31,591.00 30,872.00 Financial Expense 9,451.00 9,994.00 10,569.00 11,177.00 11,819.00 12,499.00 13,218.00 Depreciation Recurrent Cost 2,500.00 Taxable Income Income Total Cash Outflow -44,090.00 -46,589.00 -44,090.00 -44,090.00 -44,089.00 -44,090.00 -44,090.00 Net Cash Flow 9,460.00 6,961.00 9,460.00 9,460.00 9,461.00 9,460.00 9,460.00 59 TABLE 1-5 Capital and Operating Costs for a 20 - Acre Sportfishing Lake with a 15- Year Planning Horizon and Using Borrowed Capital for Construction and Initial Cost Purposes, Alabama Item 1 2 3 4 5 Capital Costs Pond Construction 30,000.00 Pipe 2,000.00 Trash Rack 260.00 Engineer Fee 3,750.00 Registration Fee 225.00 Fertilizer / Plantings 288.00 Gravel / Rock 3,250.00 1,250.00 Fathead Minnows 800.00 Shellcracker 500.00 Bluegill 4,500.00 Shad 2,000.00 Bass 1,000.00 Feeder 700.00 Boats 15,000.00 Dock 1,500.00 Sub-Total 36,235.00 3,538.00 9,500.00 16,500.00 1,250.00 Operating Costs Fish Feed 450.00 450.00 450.00 Fertilizer 980.00 980.00 980.00 Testing / Monitoring 650.00 650.00 650.00 Labor / Maintenance 15,000.00 15,000.00 15,000.00 Advertising 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 Property Taxes 918.00 918.00 918.00 918.00 918.00 Loan Amortization Cost 198.00 198.00 198.00 198.00 198.00 Interest on Loan 6,843.00 6,543.00 6,226.00 5,891.00 5,537.00 Gross Revenue / Year 0 0 0 53,550.00 53,550.00 Net Return / Year -44,194.00 -11,197.00 -38,922.00 2,963.00 18,567.00 60 Table 1-5 (continued) Item 6 7 8 9 10 Capital Costs Pond Construction Pipe Trash Rack Engineer Fee Registration Fee Fertilizer / Plantings Gravel / Rock 1,250.00 Fathead Minnows Shellcracker Bluegill Shad Bass Feeder Boats Dock Sub-Total 1,250.00 Operating Costs Fish Feed 450.00 450.00 450.00 450.00 450.00 Fertilizer 980.00 980.00 980.00 980.00 980.00 Testing / Monitoring 650.00 650.00 650.00 650.00 650.00 Labor / Maintenance 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00 Advertising 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property Taxes 918.00 918.00 918.00 918.00 918.00 Loan Amortization Cost 198.00 198.00 198.00 198.00 198.00 Interest on Loan 5,162.00 4,766.00 4,347.00 3,904.00 3,435.00 Gross Revenue / Year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / Year 20,192.00 20,588.00 21,007.00 21,450.00 20,669.00 61 Table 1-5 (continued) Item 11 12 13 14 15 Capital Costs Pond Construction Pipe Trash Rack Engineer Fee Registration Fee Fertilizer / Plantings Gravel / Rock Fathead Minnows Shellcracker Bluegill Shad Bass Feeder Boats Dock Sub-Total Operating Costs Fish Feed 450.00 450.00 450.00 450.00 450.00 Fertilizer 980.00 980.00 980.00 980.00 980.00 Testing / Monitoring 650.00 650.00 650.00 650.00 650.00 Labor / Maintenance 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00 Advertising 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Insurance 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 Property Taxes 918.00 918.00 918.00 918.00 918.00 Loan Amortization Cost 198.00 198.00 198.00 198.00 198.00 Interest on Loan 2,939.00 2,415.00 1,861.00 1,275.00 655.00 Gross Revenue / Year 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Net Return / Year 22,415.00 22,939.00 23,493.00 24,079.00 24,699.00 Table 1-6 Projection of the Net Cash Flows for a 20 - Acre Sportfishing Lake with a 15-Year Planning Horizon, Alabama 62 Item 1 2 3 4 5 6 7 8 Operating Receipts 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Terminal Value Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay -36,235.00 Operating Expense 7,959.00 11,197.00 38,922.00 50,587.00 33,733.00 33,358.00 32,962.00 32,543.00 Financial Expense 5,211.00 5,510.00 5,827.00 6,162.00 6,517.00 6,891.00 7,288.00 7,707.00 Depreciation 1,250.00 Recurrent Cost Taxable Income Income Taxes Total Cash Outflow -49,405.00 -16,707.00 -44,749.00 56,749.00 41,500.00 40,249.00 40,250.00 40,250.00 Net Cash Flow -49,405.00 -16,707.00 -44,749.00 -3,199.00 12,050.00 13,301.00 13,300.00 13,300.00 Table 1-6 (continued) 63 Item 9 10 11 12 13 14 15 Operating Receipts 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Terminal Value Total Cash Inflow 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 53,550.00 Initial Outlay Operating Expense 32,100.00 31,631.00 31,135.00 30,611.00 30,057.00 29,471.00 28,851.00 Financial Expense 8,150.00 8,618.00 9,114.00 9,638.00 10,192.00 10,778.00 11,398.00 Depreciation 1,250.00 Recurrent Cost Taxable Income Income Taxes Total Cash Outflow 40,250.00 41,499.00 40,249.00 40,249.00 40,249.00 40,249.00 40,249.00 Net Cash Flow 13,300.00 12,051.00 13,301.00 13,301.00 13,301.00 13,301.00 13,301.00 Table 1-7 Cash Inflows, Net Present Values (NPV), and Internal Rates of Return (IRR) for a 20- and 40-Acre Sportfishing Lakes in Alabama, 15 Year Planning Horizon 40-Acre Project with Lake Construction and Equity Capital Used 40-Acre Project with Lake Construction and Borrowed Capital 20-Acre Project with Lake Construction and Borrowed Capital Year Cash Flow Cash Flow Cash Flow 1 -74,357.00 -88,565.00 -49,405.00 2 -8,447.00 -22,655.00 -16,707.00 3 -43,182.00 -57,390.00 -44,749.00 4 7,168.00 -7,040.00 -3,199.00 5 21,168.00 6,960.00 12,050.00 6 23,668.00 9,460.00 13,301.00 7 23,668.00 9,460.00 13,300.00 8 23,668.00 9,460.00 13,300.00 9 23,668.00 9,460.00 13,300.00 10 21,168.00 6,961.00 12,051.00 11 23,668.00 9,460.00 13,301.00 12 23,668.00 9,460.00 13,301.00 13 23,668.00 9,461.00 13,301.00 14 23,668.00 9,460.00 13,301.00 15 23,668.00 9,460.00 13,301.00 Total 136,530.00 -76,588.00 29,747.00 NPV 12% -12,216.72 -108,984.93 -42,236.81 NPV 8% 16,233.30 -105,378.95 -29,580.49 IRR 0.10050459 -0.06501686 0.02978489 64 Appendix 2 65 66 Appendix 3 67 68 Appendix 4 69 Appendix 5 70 Appendix 6 71 Appendix 7 72 Appendix 8 73 74 Appendix 9 75