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Your New California Native Landscape but Does it Pay?

Your New California Native Landscape but Does it Pay?

(Bob Sussman-Matilija Nursery fall 2014)

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About a month ago, I posted a question on our Matilija Nursery Facebook page asking,  “Does your new native landscape pay?” I got many interesting comments most having to do with the ethics of saving water and the environment.  Strangely, I didn’t get any comments directly relating to the specific question of “does it pay”, which while a financial question, is one of the selling points of these landscapes.

The answer to this type of question is one that needs to be addressed by business, government, and households alike.  It is not unimportant and gets at the true cost of your landscaping decision so that people can compare choices on a common basis.  Said a bit differently the “true cost” of a native landscape will be lower than the initial cost of installation and design because of the future savings.

I’ll try to provide a simple framework by which this question can be answered with an example – keeping things general and simple to get the main ideas across.  I’ll have to take a few simplifying short cuts to help get the main points across.

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First, what does it mean when you ask,  “does something pay”?  The nature of this question is purely financial.   You’re going to be comparing the initial cost of a new landscape to its annual savings.  The annual savings is the reduction in your water bill as well as the reduction of your monthly maintenance expense.  Note, this is a financial decision not directly related to any impact on the environment or whether you like the new landscape you’re thinking about installing.

Second, how do you figure all this stuff out so you can tell whether it pays or not? To answer this, you’re going to be comparing your initial investment, which includes things like removal of old landscape, any adjustments to the irrigation system, design work, new plants, and planting your new plants.  A cost for an “average” front and back garden might be between $15,000 and $20,000, just as an example. And, if you’re taking out your lawn and/or reducing water consumption, the water company may give you a rebate/subsidy too, which needs to be figured in.


Next, you want to figure out your annual savings on things like your water bill and maintenance.  You can estimate your water bill reduction by looking at what you spend on taking care of the garden, and cutting it by 80%.  As a ballpark number on this – 70% of the average household water bill is for the garden. That would suggest that your water bill should drop by about 56%.  You can make a better and more accurate estimate; this will give you at least “an order of magnitude” to work with.  So if your monthly water bill is $300, this should cut your bill by something like $168 per month or about $2,000 per year.

Maintenance? There will always be some maintenance like cutting things back, raking up leaves, and weeding, but this should be significantly reduced compared to a traditional garden by maybe 50%?  If your monthly maintenance bill is $120, you should be looking at a savings of  $60 per month or $720 per year.  This would give you a total annual savings after tax of $2,720 per year.

Before we can compare the savings and the investment, we have to answer the question, “How long do you plan on staying in your house?”  If you’re only going to stay in your house for another year, then savings aren’t going to be nearly enough to cover your investment. However, if you’re planning to stay for 10 more years, then things look much better.

We need one last piece, and then we’re ready to add things up.  We have to come up with an interest rate, or rather a discount rate. What this does, is allow us to adjust distant benefits so that we can compare them to our initial expense of installation.   We know that our projected annual savings of $2,720 in year 10 isn’t as valuable as getting $2,720 today.  In fact, if we could invest our money at 4% annually, we’d only need to put up $1,800 today to walk away with $2,720 in 10 years.  So we have to adjust all of our annual benefits downward a bit to reflect this, then we can properly compare current investments to the sum of future benefits.  This is the sort of stuff you get in a Principals of Finance course-basic stuff and I’ll handle the arithmetic, so don’t worry. You might note that a low interest rate environment tends to make the economics of a new landscape more favorable.

Ok, time to take a first look at our possible decision. Given that our new landscape will cost $20,000, our annual savings will come in at $2,720, we’re planning on staying in our house for another 10 years, and our after tax interest/ discount rate is 4% – should we put in our new landscape or not?

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Yep, turns out with a 4% discount rate this decision actually generates an extra $2,000 in value over it’s cost  for us. Said a bit differently, the annual savings from the decision to put in our new native landscape actually generates an after tax return of 6% . Not bad at all in this world.  If there are  all kinds of other benefits to a new native landscape such as – you really like the new look and it is better for the environment too, then all the better.  It’s like getting paid to have fun!





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