Valuing Common Assets for Public Revenue in Vermont May 6, 2008 Air- Beth Nolan and Jennifer Kenyan Fish and Wildlife- Ross Saxton Forests- Mark KolonoskiInstructors: Groundwater- Colin McClungAmos Baehr Internet- Ida KubiszewskiGary Flomenhoft Land- Conor Casey Minerals- Ian Raphael Spectrum- Will Murray Surface Water- Elliot Wilkinson-Ray Wind Power- Susan Skalka

Air as a Common Asset Jennifer Kenyan and Beth Nolan

Air as a Common Asset 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? Thank God men cannot as yet fly and lay waste the sky as well as the earth!--Henry David Thoreau

Future Management and Rent Regional Greenhouse Gas Initiative (overview) Heating Emissions Transportation Emissions Cap and Dividend Management is nothing more than motivating other people. -- Lee Iacocca

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

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 Public- State Forests $3.2 million State Parks $6.58 million Fish and Wildlife $180,486 (logging) Current Use Program $17 million Private- Forest-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 $489,540 in penalties.

Revenue Generating Suggestions Leave public lands alone Current Use withdrawal penalty Depletion of Ecosystem Services (DES) tax Estimated $8.2 million Impose auction and insurance bond regulation Vermont Public Land Bank Sale price of the property being converted -- Original purchase price (adjusted to inflation) Current Use Exit Penalty

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] [1] We have adopted the Correlative Rights “Doctrine” [Statute] [1][1] VNRC Memorandum, Groundwater Study Committee: Overview of GW Issue in VT, 12/07/07, Jon Groveman pg 2 [1]

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, formation/waterprofit.phphttp://waterdividendtrust.com/in formation/waterprofit.php ocuments/education.pdf

Future Economic Rent Revenue: Currently an average household consumes about 200 gallons of water per day. [2] [2] For example, Clear Source is (on average) withdrawing 78,427 gallons per day. This withdrawal amount is approximately 28, 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 = $ 68,224 a year from Clear Source alone [2][2] (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!)[3] 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] [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 –$489,540 Speculative Gains Penalties –$5,646, Property Transfer Tax –$38,315, State Property Tax –$696,371,326 Total Revenue –$740,822,540

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 Value96,800,000 Direct Mining Earnings63,000,000 Listed Property Value132,228,257 Property Taxes ( includes state tax of 1% and, average municipal tax of 1.79%) 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 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 : Billion –Broadcasting : 79.9 Billion –Fixed Communication : 1.66 Billion Total: $ Billion Annual use value Potential

Commons Management Per Capita Value of Spectrum : $ –In Vermont (x629,908) : $ 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

1,000 galBase Price Watershed Fee RentTotal $ $ $ $ 6.40 Table 1.1 Increasing Price Structure for Public Supply

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 $520,000 annually to mitigation fund, ppty taxes H.520, Sec. 5402c: Fee based on production –$ in fiscal year 2009 –$ 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 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, 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,

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

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