Economic Analysis of Urban Tree Replacement Decisions

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Figure 1.
Timeline for the existing urban tree maintenance alternative, where B is tree benefits and C is periodic maintenance costs.
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Figure 2.
Timeline for the existing urban tree maintenance and replacement alternatives considering the replacement tree.

Table 1.

American elm characteristics/ratings and CTLA benefit values (in U.S. dollars) for the tree now and at the end of the 8-year maintenance program.

↵^z Base values are expected to increase at the rate of 2.5% per year, or 36(1.025)⁸ = $44.
↵^y Calculated as $36 per in² × 2,076 in² × 0.7 × 0.49 × 0.6 = $ 15,380.

Table 2.

American elm maintenance schedule, cost outlay, and compounded costs (in U.S. dollars) for the existing tree maintenance program

Year applied^{^z}	Treatment	Projected cost outlay^{^y}	Compounded cost (at 7% per year)
0	Minor prune	$250	$430^x
1	Soil injection	$100	$161
3	Soil injection	$100	$140
5	Soil injection and minor prune	$350	$429
7	Soil injection	$100	$107
Total		$900	$1,267

↵^z Year 0 represents the first year of the maintenance program; year 7 is the last year. The tree would be replaced, using this time scale, at the beginning of year 8. Costs are assumed to occur at the beginning of the year, and benefits at the end of the year.
↵^y These projections should consider the rising costs of maintenance (inflation) over time in making the estimates. In other words, the figures should be a estimate of the cost outlay at that time in the future. Further, the possible increase in tree removal cost attributable to retaining the tree has not been considered here. If there are increased removal costs, from removing a larger and/or less sound tree, this additional cost should be included here as a cost to the retention program.
Otherwise, the removal cost is considered as part of the establishment cost of the replacement tree.
↵^x For example, the calculation is 250(1.07)⁸ =$430.

Table 3.

Replacement tree establishment and maintenance schedule, cost outlay, and compounded cost (in U.S. dollars)

Year of occurrence	Activity	Cost outlay per occurrence^{^z}	Total cost outlay	Total cost outlay including interest (7%) after 50 years
0	Tree establishment including existing tree removal, replacement tree cost, and planting	$1,100	$1,100	$32,403
1–9	General maintenance (watering and fertilizer)	$20 per yr	$180	$3,587
10–46	Insect control every 2 yrs	$26 every 2 yrs	$468	$2,452
10–45	Pruning every 5 yrs	$100 every 5 yrs	$700	$3,371
Total			$2,448	$41,813

↵^z To be consistent with the existing tree analysis, these replacement tree costs should be estimates of the actual cost outlay made in the future, that is considering inflation. In this example, they are average figures over the period (for example, $20 per year over years 1-9). ĩf, instead, the cost outlays were based on today’s costs they would need to be adjusted to include inflation by a percentage factor, similar to the adjustment in tree value. Thus, rising costs over time can be addressed by either using cost estimates that include the rising costs (inflation) or by adjusting today’s costs by percentage factor to account for inflation. The latter approach is available in forest investment analysis programs such as Quick-Silver (Vasievich 1999) to individually adjust both benefit and cost figures considering inflation.

Table 4.

Value/rating and CTLA values (in U.S. dollars) for the DED-resistant elm tree in the future.

↵^z This is the current base value of $36 per in² adjusted by an increase of 2.5% per year for 50 years and 58 years, respectively.
↵^y Note that the increase in CTLA values is due entirely to the increase in base values used in the formula. There is no difference in the tree’s size or ratings. The tree just exists at different times in the future, 50 and 58 years, respectively.