Valuing Common Assets for
Public Revenue in Vermont
May 6, 2008
Air- Beth Nolan and Jennifer Kenyan
Fish and Wildlife- Ross Saxton
Forests- Mark Kolonoski
Groundwater- Colin McClung
Internet- Ida Kubiszewski
Land- Conor Casey
Minerals- Ian Raphael
Spectrum- Will Murray
Surface Water- Elliot Wilkinson-Ray
Wind Power- Susan Skalka
Instructors:
Amos Baehr
Gary Flomenhoft
Air as a Common Asset
Jennifer Kenyan and
Beth Nolan
Air as a Common Asset
Thank God men cannot as yet fly and lay waste the sky as
well as the earth!
--Henry David Thoreau
• What are the precedents
that define air as a
common asset?
• How do we currently
manage our air?
• Do we currently derive
revenue from air?
VT Energy Consumption by Sector
19%
33%
Commercial
Industrial
Residential
Transportation
18%
30%
Energy Revenue ($ in Millions)
Revenue
Source
Diesel Fuel
Tax
Other
Revenues
Motor
Vehicle
Fees
Gasoline
Tax
Purchase &
Use Tax
Fuel Gross
Receipt and
Petroleum
Distributor
License Fee
Electric
Energy Tax
Utilities
Gro ss
Receipts
Tax
Total
FY
2004
(Actual)
$18.0
FY
2005
(Actual)
$15.5
FY 2006
(Actual)
FY 2007
(Actual)
FY 2008
(Forecast)
Sector
$17.7
$18.5
$19.0
Transportation
$15.2
$15.9
$17.1
$19.1
$19.8
Transportation
$55.2
$56.1
$57.4
$66.7
$71.9
Transportation
$54.3
$65.5
$63.8
$64.4
$65.5
Transportation
$71.9
$56.0
$53.9
$54.3
$56.1
Transportation
$5.53
$6.64
$6.93
$7.64
$7.86
Residential,
Commercial
$2.77
$2.6
$2.6
$2.7
$2.8
Industrial
$5.67
$5.85
$6.20
$6.31
$6.57
Residential,
Commercial
$228.57
$224.09
$225.63
$239.65
$249.53
Future Management and Rent
Management is nothing more than motivating other people.
-- Lee Iacocca
• Regional Greenhouse Gas
Initiative (overview)
• Heating Emissions
•Transportation Emissions
• Cap and Dividend
Potential Rent Collection for Residential Fuels from Permit Aucti on
RGGI ($1.8 6)
Coal (.0003 mm t)
Petroleum (1.45)
Natural Gas (.16)
Wood (.03)
Electricity- System
Purchases (.24)
Electricity- Historical
Mix (.24)
Total Rent
Eur opean Union ($40)
$558
$2,697,000
$297,600
$55,800
$446,400
British Columbia
($10)
$3,000
$14,500,000
$1,600,000
$300,000
$2,400,000
$446,400
$2,400,000
$9,600,000
$3,943,758
$21,203,000
$84,812,000
$12,000
$58,000,000
$6,400,000
$1,200,000
$9,600,000
Potential Rent Collection for Commercial Fuels from Permit Aucti on
RGGI ($1.8 6)
Coal (.002)
Petroleum (.51)
Natural Gas (.14)
Wood (0)
Electricity- System
Purchases (.22)
Electricity- Historical
Mix (.22)
Total Rent
Eur opean Union ($40)
$3,720
$948,600
$260,400
$0
$409,200
British Columbia
($10)
$20,000
$5,100,000
$1,400,000
$0
$2,200,000
$409,200
$2,200,000
$8,800,000
$2,031,120
$10,920,000
$43,680,000
$80,000
$20,400,000
$5,600,000
$0
$8,800,000
Potential Rent Collection from Transportation Emissions Permit Aucti on
RGGI ($1.8 6)
Gasoli ne Emi ssions:
Carbon Dioxide
(3.024 mmt)
Gasoli ne Emi ssions:
Other GHG (.126
mm t)
Diesel Emi ssions:
Carbon Dioxide (.64
mm t)
Diesel Emi ssions:
Other GHG (.03
mm t)
Total Rent
$5,624,640
British Columbia
($10)
$30,240,000
Eur opean Union
($40)
$120,960,000
$234,360
$1,260,000
$5,040,000
$1,195,980
$6,400,000
$25,600,000
$49,848
$300,000
$1,200,000
$7,104,828
$38,200,000
$152,800,000
So how do you change paradigms? ...In a nutshell, you keep pointing at the anomalies and
failures in the old paradigm, you keep speaking louder and with assurance from the new one,
you insert people with the new paradigm in places of public visibility and power. You don’t
waste time with reactionaries; rather you work with active change agents and with the vast
middle ground of people who are open-minded.
Donella Meadows, “Leverage Points: Places to Intervene in a System””
Fish and Wildlife Rent
Ross Saxton
Fish and Wildlife Rent
Figure 1a.
Total Revenue FY06
$6,822,884
46%
$7,880,000
54%
Tax
Total: $14,702,884
Economic Rent
Potential Revenue Collection
Possibilities
• Increase the Fish and Wildlife Trust Fund
-Currently: a little over $1.6 million,
generating $139,000 in interest (usable funds) in
FY06 {interest rate of about 8.4%}
If increased to $12 million, over $1 million would be
generated annually…an increase of total revenue of
about 6.8%
-investment will pay off in about 10 years
Potential Revenue Collection
Possibilities (continued)
• 1/8 of 1 Cent of sales tax: This Bill needs to be passed
- Redirection of tax dollars- will add $6-7 million to
current total revenue, increasing total revenue by
almost 50%
- Fish and Wildlife related activities generate
about $386 million annually
- Allocate a portion to the Fish and Wildlife
Trust Fund
Potential Revenue Collection
Possibilities (continued)
• Increase boat registration fees.
• Currently $22 for motorboats <16 feet long* times
33,901 boats registered annually = $745,822
• Increase to $35 = $1,186,535 (very conservative
estimate)*
*Larger boats reg. fees are more expensive, so
increasing those fees will increase the revenue even
more
Potential Revenue Collection
Possibilities (continued)
• Biodiversity and Land Conservation Fund
-Permit system for potentially developed lands
-Increases price for developers to develop,
especially on land that holds high habitat value
-Reduce rural development…increase viable habitats and
other ecosystem services
-Funds go to Fish and Wildlife Trust Fund
Management of Vermont’s
Forest Revenue
Mark Kolonoski
Public Revenue vs. Private Revenue
PublicState Forests
$3.2 million
State Parks
$6.58 million
Fish and Wildlife
$180,486 (logging)
Current Use Program
$17 million
PrivateForest-based manufacturing
$207.4 million
Recreation/tourism
$485 million
Forestry and logging
$32 million
Paper and Pulp
$50 million
Current Use Program
Withdrawal Penalty
20% appraised value < ten years enrolled
10% appraised value > ten years enrolled
Amount saved often outweighs the penalty.
Large parcel owners may take advantage of
the program through subdivision.
2007- $489,540 in penalties.
Revenue Generating Suggestions
• Leave public lands alone
• Current Use withdrawal penalty
Sale price of the property being converted
-- Original purchase price (adjusted to inflation)
Current Use Exit Penalty
• Depletion of Ecosystem Services (DES) tax
Estimated $8.2 million
• Impose auction and insurance bond regulation
• Vermont Public Land Bank
Changes in Management
• State appointed private woodland foresters
• DES tax managed by the Vermont Agency
of Natural Resources
• Additional Current Use Program employees
Groundwater in Vermont
Colin McClung
Ground Water in Vermont:
Current Revenue:
• Vermont has no structure in place to glean
economic rent for this asset, so it goes without
saying that Vermont’s rent payment on
groundwater equals zero at the present time.
Current Management
Structure:
Unlike the majority of states in the country, Vermont does
not have an overall water use program that addresses
withdrawals of surface water, groundwater, and water from
springs. [1]
We have adopted the Correlative Rights “Doctrine”
[Statute]
http://www.vjel.org/journal/VJEL10046.html
[1] VNRC Memorandum, Groundwater Study Committee: Overview of GW Issue
in VT, 12/07/07, Jon Groveman pg 2
Oil and Water Comparison:
Extremely low overhead compared to a similar institutional model
• 24-Ounce Bottle Water
Calculator
Cost of one acre foot of water
(An acre foot of water is
43,560 cubic feet or roughly
326,000 gallons)
$1,630.00Cost of
Bottling$0.10Selling Price of 1
Bottle $0.85 GROSS PROFIT:
ONE ACRE FOOT SOLD
$1,300,875.50
• http://waterdividendtrust.com/in
formation/waterprofit.php
• http://waterdividendtrust.com/d
ocuments/education.pdf
Future Economic Rent
Revenue:
Currently an average household consumes about 200 gallons of
water per day. [2]
For example, Clear Source is (on average) withdrawing 78,427
gallons per day. This withdrawal amount is approximately
28,427.50 over the limit of the Vermont resident usage
At a penny a gallon over the 50,000 G residential limit, the difference
would be 284 dollars and 27 cents a day paid to the state or
distributed to residents of Vermont for the use of their water.
240 (approximate week days per yr.) X 284.27 =
$ 68,224 a year from Clear Source alone
[2] http://www.uvm.edu/~gflomenh/GRN-TAX-VT-PA395/ (Power Point
Presentations: Air, Water, Chemicals)
Future Suggestions for Management
Structure:
• Support (Senate Bill 304) – or future bills like it - which would
give citizens of Vermont a “public trust” designation. Such a
designation is a crucial step [3] in the eventual direction of
creating an infrastructure for economic rent (PASSED 2008!)
• Under such law: Not only could bottle water companies afford
the aforementioned rent payment of a penny on any gallon
beyond the Vermont residential use, since they are still
producing (at least in the example from Maine in the last slide)
approximately 89% net profit. A withdrawal cap placed in
addition to a standard percentage of 2% (known as a
Preservation Fee) could be collected from surplus profits (“rent”)
and it would have little to no effect on the cost of their operation
[3]
“The state’s water quantity laws are much weaker than its regulations regarding water quality.” Jon Groveman (the chief architect of
S. 304) as quoted by Mike Ives in Seven Days Journal article “Groundwater Rising”, Feb. 27-March 05, 2008 edition
Internet as a Common Asset
Ida Kubiszewski
Current Management
Structure
• Internet Service Providers
– Public
– Private
• Domain Name Registration
– ICANN
– VeriSign
Current Revenue
• Internet Service Providers (~$70M)
– Individual Households
– Businesses
• Domain Name Registration (related
services) (~$130M)
– Hosting
– IT Design & Development
– etc.
New Management Structure
• Trust
– 93% of income
– ~$30 million
– Development of intellectual property
– Research
Land Rent in Vermont
Conor Casey
Current Management
• Current State Property Taxes are set at ~1.05%, with
municipalities adding additional rates.
– This ratio is based on a lumping of land & building values
• Money collected goes towards the state education
fund
• Additional taxes are assessed for buying, selling, and
patterns of current use
– Current Use Tax, Property Gains Tax, Property Transfer Tax
Current Revenue
• Current Use Penalties
Current State Revenue from Land Taxes
– $489,540
• Speculative Gains Penalties
– $5,646,165.77
Current
Use
Property
Transfer
5%
• Property Transfer Tax
– $38,315,508.89
• State Property Tax
– $696,371,326
• Total Revenue
– $740,822,540
Speculativ
e Gains
1%
State Property
Tax
94%
Proposed Revenue
• Median home prices in Vermont have seen a steady rise of 5%
between 1980 and 2000
– This represents a massive private capture of publicly created
value
– A state land tax of 5% would capture most if not all of this
rent, collecting $1.07 trillion, an amount comparable to the
entire state budget
• Median home prices between 2000 and 2007 rose from $5.4
billion to $21.4 billion a 21% increase each year
• Revenue neutrality is often an important selling point in the
implementation of a single tax on land
– A tax rate of 3.457% applied to the $21.42 billion in
assessed land values would capture what the 4 combined
taxes currently do.
Changes to Management
Structure
• A single tax on land values could
effectively capture the same amount of
revenue as the 4 major property taxes
already do.
• This shift could have the effect of
curbing sprawl while providing more
affordable housing by removing
disincentives to provide such housing.
Who Owns Vermont’s Rocks?
Ian Raphael
Who Owns Vermont’s Rocks:
A case for collecting economic rent to offset the depletion of nonrenewable
mineral deposits
Current Management Structure
•Act 250- Environmental Protection Permitting Process- Great for environmental
concerns but does not address depletion of these non renewable resources nor any type
of financial monitoring
•Property Rights Majority of mining occurs on privately owned property held by
several mining corporations. They do as the please as long as the pass Act 250
regulations. There is no distinction between surface rights and subsurface rights.
•State Revenue- The only revenue is from property tax. List land values do not take
into account the value of subsurface mining deposits or the value of what is extracted
•That’s it- There is very little management structure compared to other natural
resources in the state
Vermont Mining Revenue
2005
Production/Extraction Value
96,800,000
Direct Mining Earnings
63,000,000
Listed Property Value
Property Taxes
•
•
•
•
•
•
•
( includes state tax of 1% and, average municipal tax of 1.79%)
132,228,257
3,678,990
Property taxes is just on listed property value
If we add in extraction value into annual land assessment then in 2005 the state received
only 1.6% in property tax
Is this 1.6% enough to offset the depletion of these non renewable resources?
What happens when they are gone?
Loss of jobs, currently 2,600.
Mining companies leave a wasteland of abandoned mines – who pays the clean up?
Indirect side effects? Tourism, depletion of habitat, Vermont loses a natural resource
Time to make changes
• National Mining Act of 1872 - being changed to a royalty system – meant
to pay for billions of environmental clean up – estimated at 35 billion
• Alaska Permanent Fund- money generated from the depletion of oil
reserves put into trust fund to offset the impact and benefit current and
future citizens of Alaska
• Other state and countries- are catching on to common ownership- we live
in a different world– resources are limited
• Lets start a Vermont Permanent Fund!- if we collected 10% of the
extraction value in 2005, Vermont would have $9.68 million to be put in
trust fund to offset the depletion of non-renewable mineral resources and to
help pay for environmental management.
• Bottom line - as mineral reserves get lower mining companies revenue
rises because Vermont’s management is outdated
• Vermont needs to rethink how it manages its non-renewable resources.
When they’re gone they’re gone
• Citizens of Vermont have a birthright to these natural resources
• Legislation needs to reclaim subsurface property rights on behalf of the
citizens of Vermont
Spectrum in Vermont
William Murray
“It is the purpose of this Act, among other things, to
maintain the control of the United States over all the
channels of interstate and foreign radio
transmissions; and to provide for the use of such
channels, but not the ownership thereof, by persons
for limited periods of time, under licenses granted by
federal authority, and no such license shall be
construed to create any right, beyond the terms,
conditions, and periods of the license.”
-The Communication Act of 1934
• Allocation
• Value
– Mobile Communication : 220.1 Billion
– Broadcasting : 79.9 Billion
– Fixed Communication : 1.66 Billion
• Total: $301.78 Billion Annual use value
• Potential
Commons Management
• Per Capita Value of Spectrum : $1002.12
– In Vermont (x629,908) : $625.23 million/yr
– *40% economic rent = $250 million/yr
• Spectrum Trust Management
– Annual Auction
– Market Determines Price
– Renewable Licensing
*Gaffney, Losses of Nations, 1996
Scratching the Surface
(Water)
Elliot Wilkinson-Ray
93% (roughly 445 million gallons per day) = private profit
Current Revenue:
• Public Supply:
$ 35,000,000
• Wastewater Permits: $ 1,692,350
• Hydroelectric:
$ 164,775,527
• Thermoelectric:
$ 316,000,000
•
Recreation:
$ 109,096,309
•
Total:
$ 626,564,186
Thermoelectric Withdrawals
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
Table 1.1 Increasing Price Structure for Public Supply
1,000 gal Base
Price
Watershed
Fee
Rent
Total
0-10
1.50
0.40
0.00
$ 1.90
10-40
3.00
0.40
0.50
$ 3.90
40-150
3.00
0.40
1.00
$ 4.40
150+
3.00
0.40
3.00
$ 6.40
Rent
•
•
•
•
•
Hydro:10% of revenue ($164,775,527) $ 16,477,553
Local hydro subsidy: $ 6,000,000
Vermont Yankee 10% profit: $ 19,680,000
Public Consumption 5% (over 40,000): $ 639,000
Other uses: $.05/1,000 gallon (24 million gallons/day) =
$438,000
• Total surface water rent: $ 43,234,553
Public Revenue from Wind
Farms
Susan Skalka
Current Public Revenues
• Property Taxes:
– Determined by municipality, no standard
calculation
• $153,995 to Searsburg in 2001, PPM offered
$240,000 for proposed expansion
• Sheffield will pay $520,000 annually to mitigation
fund, ppty taxes
• H.520, Sec. 5402c: Fee based on
production
– $0.00225 in fiscal year 2009
– $0.0025 in fiscal year 2010
– $0.003 in fiscal year 2011 and thereafter
Potential Public Revenue
• Capture economic rent on resource use
• Different fiscal structures could be used
– Economic analysis by energy economist would
be needed to determine which would work best
– Would need to not discourage production of wind
energy
– Instead of taxing production (which is a cost),
take portion of economic rent (not a cost)
• Revenue could go into a fund
– Fund management would need to be discussed
Proposed Guidelines
•Progressive Profit Tax
•Percent of royalties taken increases as profits increase
•Fiscal Structure should take into account age of facility:
• New and older facilities have smaller percentage, those in their prime
have highest percent
Estimates for Discussion
•
•
•
•
•
•
•
2002 Study*: VT could produce 10% of electric energy from 6 wind-farms,with
about 150 1.5 MW wind turbines = 225MW total
Vermont Net generation: 7,084,344MWH/year (EIA) x 10% = 708,434.4MWH/yr
=708,434,400 KWH/yr
Check:
225,000 kW x 24hrs/day x 365 days=1,971,000,000 KWH/yr
x .35 (capacity factor) = 689,850,000kwh/yr
X * 5.6 cents per kWh est. cost * = $38,631,600
•
Assume 6.6 cents per kwh* selling price** x 689,850,000kwh/yr
•
•
= $45,530,100 - $38,631,600 = $6,898,500.00
Assume 10.6 cents per kwh* selling price** x 689,850,000kwh/yr
= $73,124,100 - $38,631,600 = $34,492,500
Assume 30.6 cents per kwh* selling price** x 689,850,000kwh/yr
= $211,094,100 - $38,631,600 = $172,462,500
http://www.revermont.org/windfarm_benefits.pdf*
http://sciencepolicy.colorado.edu/moveabletype/mt-comments.cgi?entry_id=850**
Conclusion
Vermont should complete an analysis
and be prepared to share profits/
economic rent with wind industry as
profits from wind-produced power grow
due to factors other than work put in by
wind company.
Common Assets
Closing comments
Asset
Wind
Spectrum
Minerals
Land
Property
Grnd water
Sfc water
Forests Current use
F&W
permits
Air/ transport
RGGI+
Air/heating
RGGI+
Internet
Speculation Capital gains
Monetization
Total
Existing tax Revenue est
Millions $.
.75
~0
3.7
741.0
~0
~0
Net loss
7.9
209
17.2
~0
?
~0
5.5
375.0
9.7
1071.0
171.5
42.8
8.2
?
7 to 153.0
4.4 to 93.6
30.0
269.0
35.7
2030.0
Methods - must differ with conditions
Complexity - less than current tax code
Tax shifting - direct credits
behavior incentives
Property privileges “A long habit of thinking a thing not wrong gives it a
superficial appearance of being right”
-Thomas Paine