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Economic Impact from Forest Fires <br />Historically, forest fires have not had a severe economic impact on Colorado. According to the Rocky <br />Mountain Insurance Information, catastrophic fires account for approximately 3 percent of insurance <br />losses. The 2000 Hi Meadow and Bobcat wildfires cost the insurance industry approximately $18.5 <br />million. Approximately 600 claims were filed from the two fires with the majority of the damage in <br />structures, personal belongings, living expenses paid out, automobiles, and smoke damage. Historically, <br />the most expensive catastrophic fire occurred in California in 1991 and cost insurance companies $1.7 <br />billion. <br />While the economic loss to insurance companies may not be large when compared with other natural <br />disasters, the impact to sate and local governments can be great. Indeed, the 2000 wildfires in Colorado <br />cost state and local governments $6.5 million. The federal government reimbursed the state for $3.2 <br />million because of a Federal Emergency Management Act declaration. However, the current wildfire <br />season has started early and already there have been some major fires. It is thus possible there will be a <br />larger number than average of wildfires that need to be contained, thus driving up state and local <br />governments' firefighting expenses. <br />Impact to State and Local Revenues <br />In addition to the economic impact of the drought, there is likely to be a negative impact to both state <br />and local tax receipts. Lower farm income and lower employment in agriculture, manufacturing, and <br />tourism will negatively impact the state's income tax receipts, which less tourism in Colorado will mean <br />lower sales tax revenues at both the state and local levels. A recent study by Dean Runyan suggests that <br />tax revenues generated by the travel industry are approximately $550 million. This is split almost <br />equally between state and local tax receipts. If we, apply the percentage of the areas of tourism that are <br />susceptible to the drought (53 percent of tourism), then those areas comprise $291 million of the tax <br />revenues. Depending on the severity of the drought, some portion of the $291 million in tax receipts is <br />at risk. <br />Also, the Division of Wildlife (DOW) in the Department of Natural Resources will likely be affected <br />through lower sales of hunting and fishing licenses. Hunting and fishing licenses are the primary <br />sources of revenue for the DOW. If these recreational activities are severely affected, the DOW may <br />have trouble funding its programs. The DOW manages the state's 970 wildlife species, regulates <br />hunting and fishing activities, manages more then 230 wildlife areas for public recreation, conducts <br />research to improve wildlife management activities, and develops programs to protect and recover <br />threatened and endangered species. Thus, each of these state activities is threatened by the current <br />drought. <br />