Phosphorus pollution from excessive litter application causes eutorphication of lakes in the Eucha-Spavinaw watershed in eastern Oklahoma and western Arkansas. Consequent algal blooms impair the taste of municipal water supply drawn from the watershed. The paper shows how GIS data based biophysical modeling can be used to derive spatially optimal, least-cost allocation of management practices to reduce phosphorus runoff in the watershed. Transportation activities were added to the model so that transport of litter within and out of the watershed was possible. Results from the mathematical program suggest that uniform regulation of litter application is excessively costly regulatory measure and hence a regulation that assigns management practices according to the specific spatial characteristics is preferred. The results also show that alum based litter additives may be economically efficient management option.