Paying for
Sustainable
Environmental
Systems
A
Guidebook
of Financial
Tools
April 1999 Revision
|
This document has not been
reviewed for approval by the United States Environmental Protection Agency;
and hence the statements, information, views, and opinions expressed in the
document do not necessarily represent those of the Agency or any other
agencies of the federal government. |
A GUIDEBOOK OF
FINANCIAL TOOLS
April 1999 Revision
TABLE OF CONTENTS
Foreword............................................................................................................................... Page
iааааа
Abstract................................................................................................................................ Page
iiаааа
Criteria................................................................................................................................. Page
iiiааа
Financial
Tools
Comprehensiveа
Financial Tools
1.аааааааа Tools
for Raising Revenue..................................................................... Page
1-1аа
A. аааааа Taxes.......................................................................................... Page
1A-1
B.ааааааа Fees........................................................................................... Page
1B-1
C.ааааааа Special
Charges....................................................................... Page
1C-1
Fines and Penalties........................................................................................................................... Page 1D-1
2.аааааааа Tools
for Acquiring Capital..................................................................... Page
2-1а а
A.ааааааа Bonds......................................................................................... Page
2A-1
B.ааааааа Loans......................................................................................... Page
2B-1
3. Grants.................................................................................................................................. Page 2C-1
3. ааааааа Tools
for Enhancing Credit..................................................................... Page
3-1аа
4.аааааааа Tools
for Building Public-Private Partnerships..................................... Page
4-1аа
A.ааааааа Public-Private
Partnership Arrangements.......................... аа Page 4A-1
B.ааааааа EFAB
Case Studies................................................................. Page
4B-1
A GUIDEBOOK OF
FINANCIAL TOOLS
April 1999 Revision
TABLE OF CONTENTS
(continued)
5. ааааааа Tools
for Delivering Financial Outreach................................................ Page
5-1аааа
A.ааааааа Institutional
Arrangements........................................................ Page
5A-1а
B.ааааааа Electronic
Services................................................................... Page
5B-1а
Targeted
Financial Tools
6.аааааааа Tools
for Lowering Costs........................................................................ Page
6-1аааа
7.аааааааа Tools
for Encouraging Pollution Prevention and Recycling................ Page 7-1аааа
8. ааааааа Tools
to Pay for Community-Based Environmental Protection.......... Page 8-1аааа
9.аааааааа Tools
for Financing Brownfields Redevelopment................................ Page
9-1аааа
аа ааааааа10.ааааааа Tools to
Access Financing for Small Businesses &
the Environmental Goods and Services
Industry............................... Page
10-1аа
A.ааааааа Equity
Capital.......................................................................... Page
10A-1
B.ааааааа Debt......................................................................................... Page
10B-1
Indices
Categorical Index........................................................................................................... Page
CI-1аа
Alphabetical Index ааа (under construction)
а
Keyword Index ааааааааа (under construction)
New/Revised Tools Added Index ............................................................................... Page
NT-1а
A GUIDEBOOK OF
FINANCIAL TOOLS
April 1999 Revision
TABLE OF CONTENTS
(continued)
Appendices
A.а
Proposed Tools for the Next Guidebook................................................................ Page
A-1ааа
B.а
Environmental Financial Advisory Board................................................................ Page
B-1ааа
C.а
Environmental Finance Center Network................................................................. Page
C-1ааа
D.а
Environmental Financing Information Network..................................................... Page
D-1ааа
E.а
Glossary....................................................................................................................
Page E-1ааа
F.а
Request for Comments and Suggestions............................................................... Page
F-1ааа
A GUIDEBOOK OF FINANCIAL TOOLS
April 1999 Revision
FOREWORD
The future course of environmental management
in America is increasingly being viewed in the context of "sustainable
systems."а Such systems must
exhibit sufficient institutional, technical, managerial and financial capacity
to prosper and endure.а The question of
how to pay for ‑ or how to sustainably finance ‑ the continuing
demands for pollution prevention and ecosystem protection is a central theme
for the work of the U.S. Environmental Protection AgencyТs (EPA) Environmental
Financial Advisory Board and the AgencyТs network of university-based
Environmental Finance Centers.а This Guidebook
is intended to be a working tool to enable practitioners in the public and
private sector to find the appropriate methods to pay for environmental
protection efforts.
The genesis of this 1997 Guidebook
remains the 1992 report of EPAТs State Capacity Task Force on Alterative
Financing Mechanisms.а This report was
so well‑received that a significant expansion seemed the natural thing to
do.а In a real sense, this and future Guidebook
updates will remain as final drafts.а
The reason is not the lack of information needed to ensure completion:
quite the contrary.а We found in pulling
together this extraordinary amount of material that there is so much going on
that by press times we always have more tools to be added.а Therefore, we have determined to continue to
undertake periodic updates of the Guidebook.а To this end, we ask Guidebook users (via Appendix A) to
send us suggestions for new tools and changes and additions to those listed.
The main laboratories for this fascinating
environmental financing experimentation are, not surprisingly, found at the
regional and local levels.а The
financing arrangements that will characterize how we will pay for the next
generation of pollution prevention and ecosystem prevention are even now being
formed in this crucible.
We remain deeply indebted to the members of the
Environmental Financial Advisory Board and the Directors and Staff of the
Environmental Finance Centers for their contributions to this body of work.
Without the efforts on the part of these worthy practitioners in the finance
arena, the Guidebook would remain an unfulfilled goal. Special thanks
are also due to past and present EPA Environmental Finance Program staff --
Victoria Kennedy, William Bivens, and Tim McProuty.а Finally, Ms. Diane Doyle of GCI Information Services must be
thanked for her efforts to ensure the accuracy of Internet addresses throughout
the Guidebook and for loading the entire document on the Environmental
Finance Program's Web site.
John C. Wise
Executive Director, Environmental Financial
Advisory Board
A GUIDEBOOK OF
FINANCIAL TOOLS
April 1999 Revision
ABSTRACT
The April 1999 revision of the
A Guidebook of Financial Tools is a reference work intended to provide
an overview of a wide range of ways and means that are useful in paying for
sustainable environmental systems.а It
is divided into 10 sections, presenting outline information on approximately
340 financial tools.а The first five
sections present comprehensive financing tools that include traditional means
of raising revenue, borrowing capital, enhancing credit, creating
public-private partnerships, and ways of providing technical assistance.а The next five sections present financing
tools that are, will, or might soon be, available to address significant
environmental priorities, including ways of lowering the costs of compliance,
encouraging pollution prevention, paying for community-based environmental
protection, financing brownfields redevelopment, and improving access to
capital for small businesses and the environmental goods and services
industry.а Each tool is described along
with its actual and potential uses, advantages and limitations, and references
for further information.а The Guidebook
is the product of a collaborative effort among members of the Environmental
Protection AgencyТs Environmental Financial Advisory Board, the Directors and
staff of eight university-based Environmental Finance Centers, the staff of
EPAТs Environmental Finance Program, and numerous other contributors.а The Guidebook contains forms for
users to provide comments and suggestions, and it will continue to be revised
and updated as necessary.а The GuidebookТs
location on the World Wide Web (Internet address) is:а http://www.epa.gov/efinpage/guidbk98/index.htm .
OVERVIEW
OF COMPARATIVE CRITERIA
USED
IN THE GUIDEBOOK
April 1999 Revision
A number of criteria are used throughout this Guidebook
to compare the current use and potential effectiveness of individual tools
relative to one another in each section.а
The criteria are discussed briefly in the single page narratives of the
individual financial tool write-ups, chiefly under the "Advantages"
and "Limitations" headings.а
The comparative criteria also are summarized in matrix form at the end
of most sections.
The comparative criteria are meant to describe
and compare single financial mechanisms with others within each section, in
order to give the reader some sense of the prevalence of use and potential
longer-term effectiveness of individual mechanisms.а The criteria used in this Guidebook are drawn from the
general literature on revenue raising and financing mechanisms, and the
experience ofа States, localities and
the private sector in using particular tools.а
Necessarily, some comparisons are somewhat subjective, since data on
many tools are not available, for example, data on the incidence of actual use.
Other criteria depend on public or private sector viewpoints, for example,
whether aа tool is considered relatively
easy to use, readily accessible, or reasonably priced. Thus, the comparative
criteria are meant to provide the reader some perspective on the large of
number ofа tools presented in this Guidebook,
and some reasons why one or another tool might be utilized.
At the end of each section, the authors'
judgements as to how individual tools might be compared to one another are
summarized in a Comparison Matrix, with ratings of "High",
"Moderate", and "Low" assigned to make these
comparisons.а On occasion, some
numerical value or objective data are presented, such as the number of States
using a tool or money raised or spent, and these data are summarized at the
bottom of the chart.а However, most typically
the ratings, while incorporatingа such
data, are for comparison purposes only.
Stars (*) also are used in the list of opening
list of tools described in each section, as well as in the matrices, to provide
the reader with a summary of which tools have been most highly rated.а The stars (*) are meant to provide some
measurement, necessarily subjective, of past effectiveness, and a sense ofа those financial mechanisms which seem the
most durable, i.e., able to stand the test of time.а Tools which may be short-lived, for example, tools which depend
on tax code changes or special assistance program, are not considered durable.
Ten sections in this Guidebook use six,
and sometimes seven, criteria to compare individual financial tools presented
in the individual section.а However,
Section 2C on "Grants" does not have a comparison matrix. For the ten
sections, the criteria are the same for the most part, with several exceptions
as noted below, and some variation in terms of emphasis or nuance in each section,
as described in the narratives accompanying each section and each tool.а A total of nine comparative criteria are
described below.
1.а
Actual Use:а All sections of the Guidebook give
some indication of current State and local government, and/or private sector,
use of a particular funding mechanism. Actual (current) use may give some
indication of the stage of development of individual tools, i.e., how long they
have been in existence, how widely available or applicable they are on a
geographic basis, and their acceptability.а
Financing mechanisms presented in Section 1 "Tools for Raising
Revenue",а must be dedicated to
environmental protection, as opposed to being used for non-environmental
purposes, to be counted.а The number of
States using a particular tool does allow some numerical data to be included in
the ratings from "High" to "Low", for example, high use
might mean that a tool is used in over twenty-five States, as opposed to low
use, for example, under ten States.а
Actual use cannot measure the potential effectiveness of newly created
tools, since by definition they are in their infancy.а
2.а
Revenue Size:
аThis criterion gives an
indication of the relative annual sum of money that is raised or invested
within States, annually,а as a result of
using the financial mechanism, or in some instances the potential sum of
money.а Revenue size is used in all
sections, but only rarely is accompanied by dollar amounts since in most cases
these data have not been collected nationwide.а
In those cases where actual use of a tool is low either because it is
new or because it is not dedicated to the environment, potential revenue
size is estimated.а For example, tobacco
taxes are widely used by States but typically not dedicated to environmental
protection.а However,а since these taxes yield comparatively large
revenues, size is rated "High".а
Revenue size gives some indication of the actual or potential
effectiveness of a particular financing tool in terms of environmental
benefits, although it is not presented in relationship to total environmental
needs.аа Low revenue size may not mean
that a tool is ineffective, because it may be offset by other criteria scoring
high, for example, the ability to leverage other financial resources, or the
ability to enhance environmental awareness.а
However, low revenue size may signal problems, for example, it might
suggest levying an environmental fee or tax cannot be justified in terms of
addedа administrative costs, time and
political difficulties.а A proliferation
of many small programs may be confusing and burdensome, leading to a decline in
public acceptability.
3. Revenue Stability:а This
criterion is used only for Section 1 "Raising Revenue" and for
Section 2B "Loans".а
Here, the relative stability and predictability of annual revenues is
compared for each tool to indicate whether the revenue source can be relied
upon and readily estimated, audited, and factored into budgetary
decisions.а Revenue stability can
influence the dedication and use of taxes, fees and special changes (e.g.,
low-to-moderate), but stable revenue receipts would be suitable for funding
State operating budget costs such as personnel, and larger, steady revenue
streams could be used for capital for infrastructure construction.а Many factors can contribute to revenue
instability.а Examples includeа consumer product substitution, pollution
"havens" in different geographical areas, political decision-making,
tax laws and general economic conditions.а
Revenues from pollution control fines, penalties and cost-recovery are
unpredictable and may result only after protracted legal negotiations.
4.а
Revenue Cost/Savings:а Revenue cost/savings is used in six
sections.а This criterion relates the
rough dollar cost of the financial tool to the user with the amount of revenue
saved or accessed as a result of using the tool.а For example, private bond insurance is relatively costly but it
can lower interest costs substantially through improved bond ratings, and may
be critical to attracting bond investors. Similarly, private sector use of
surety and performance bonds may enable aа
project to move forward.а
Privatization can result in lower construction, operations and
maintenance costs, which may be translated into lower user fees, compared to
the public alternative.а Refinancing,
while incurring new bond issuance fees and legal costs, can lower annual
interest payments considerably.а
5. Administrative Ease:а Administrative ease is used as a comparative
criterion in all sections,а addressing
practical issues pertaining to both the providers and users (clients) of the
financial tool . Such issues include the basic complexity or simplicity of the
mechanism, demands onа staff time to
process paperwork, handle applications and red tape, and the flexibility
provided in the administration and use of a financial tool.а For Section 1 "Raising Revenue",
administrative factors are of special concern to the government imposing the
tax, fee or fine, for example, the administrative costs of imposing new fees,
particularly establishingа collection
system, and the costs ofа legal
enforcement proceedings for pollution fines and penalties.а For the other sections, administrative ease
also can refer to the users of the financial tool, for example, whether the
tool is complicated to understand, whether using it is burdensome in terms of
staff time and paperwork, whether expensive legal advice is required, whether
voter approval must be sought. Tools which provide hands-on technical
assistanceа can be administratively
time-consuming for the provider,а but on
the other hand are easy to use for the client.
6. Equity:а
Equity also
is used in all ten sections, with varying nuances as described in the text.
Equity in some sections is used to compare the extent of direct public
participation in the choice to use a given tool, or even how to structure the
tool.а For example, any bond or other
local fund-raising device which requires local voter approval is described as
highly equitable.а Equity also is used
extensively to compare the accessibility of the financial tool to small versus
large potential users and to compare the costs of the tool for different
clients or those who pay.аа Tools are
most equitable if they reflect affordability concerns or special circumstances
of the user, for example,а in the case
of fees and taxes adopting graduated or non-regressive rate structures.а Taxes which are paid for by non-residents as
well as residents, both of whom may benefit from an environmental improvement,
also are highly equitable. Tools are relatively inequitable if all users pay
the same price regardless of economic circumstances, if small users pay more
since investment is considered more risky,а
or if certain businesses pay much more than others.аа Some tools are simply not available to
certain small users if they are too costly or complicated, and thus are not
particularly equitable.а
7.а
Cost/Benefit Relationship.а The cost/benefit relationship
applies only to Section 1 "Raising Revenue" and Section 8
"Community-Based Environmental Protection".а Here, the relationship addresses "who
pays" the tax or fee or other costs and "who benefits" from
subsequent environmental project investment with the dollars collected.а A high or close cost/benefit relationship
results when people who pay can see or directly benefit from specific
environmental projects, such
aа
temporary local sales tax add-on to acquire park land. A high
cost/benefit relationship may enhance the public acceptability of the financing
mechanism.а A high cost/benefit
relationship also describes situations in which the "polluter pays"
principle is applied, although this may result in inequities if costs are
economically burdensome.а In many
sections, aа high cost/benefit
relationship clearly is present since the users who purchase the financing tool
do so for their own benefit, such as a loan or credit enhancement device.а
8. Financial Leveraging:а This criterion is used in half of the sections
to compare the ability of individual financial tools to leverage, free up or
attract additional dollars from other sources. For example, State Revolving
Funds selling bonds to make loans are highly financially leveraged, since more
projects can be initiated in the short-term.а
Loans are more leveraged than grants, and loans under 100% are further
leveraged.а Financial outreach, or
technical assistance, is a leveraging device since local managerial capacity is
heightened which adds to investor willingness to extend credit.а Small businesses similarly can make improve
their capacity to attract investment by steps such as preparation of business
plans and internet use.а Some locally
approved tax and voluntary community-based environmental protection fund
raisingа are matched by other public and
private sector monetaryа grants or
donations.а
9. аEnvironmental
Benefits:а Environmental benefits
can result in a variety of ways, some direct and others less tangible.а The most obvious environmental benefit
occurs when an environmental project proceeds as a result of using the tool,
such as construction of a drinking water treatment plant orа brownfields redevelopment.а However, other environmental benefits may be
more indirect.а For example, pollution
prevention and recycling, "green" products and marketplace
substitutions, conservation easements and development rights purchases, lands
placed in trusts, and other measures may forestall or delay impact of
pollution, although difficult to measure in the short-term.а Paying an environmental tax may result in
heightened public awareness ofа
environmental problems and public financing possibilities, as well as
change subsequent polluting behavior. Some financial tools call attention to
positive as well as negative environmental impacts and provide incentives to
increase environmental financing.а Other
mechanisms enhance the popularity and acceptability of additional pollution
control regulations.а Hands-on technical
assistance and outreach mayа increase
local capacity to pay for and manage critical environmental assets.а Involving the private and nonprofit sectors
in project funding, operations and maintenance vastly multiples the
possibilities for environmental progress.а
In this Guidebook, only those financial tools which have no known
environmental impact or are neutralа are
described as "Low".
1.а TOOLS
FOR
RAISING
REVENUE
ааааааааааааааааааааааааааааааааааааааааааа 1.ааа TOOLS FOR RAISING REVENUE
This Section describes specific financial
mechanisms which States and localities can use to raise revenue to dedicate to
funding environmental protection.а Four
ways of generating monies are presented: taxes, both general and selective;
fees; special charges primarily for УpollutingФ activities; and pollution
control fines and penalties.а While many
of these tools are used by the federal government, the primary focus here is on
State and local governments.
Taxes are by far the largest source of revenue
for State and local spending, and are imposed on individual and business income
and property, and commodity sales.а
Sales taxes, often termed sales and use taxes, may be general in nature
or selective, such as tobacco taxes.а In
contrast, fees are much less universally used and generate far less
revenue.а Fees are fixed charges paid
for governmental administrative services such as permit issuance, activities
such as park fees, and for utility services (user fees).а Of these, only user fees raise significant
revenue.а Special charges are similar to
fees but are aimed specifically at УpollutingФ activities such as effluent and
emission discharges and development impact fees.а Fines and penalties are monetary or in-kind payments assessed by
government on violators of environmental laws and regulations, and in this Guidebook
include Superfund liability cost-recovery.а
Both special charges and fines/penalties are used sporadically and
selectively by governments.
Raising revenue through taxes, fees and other
means is a multi-step governmental process, and all steps are complicated and
controversial.а Imposition of charges is
only the first step in the legal process.а
Taxes, fees and special charges also must be designed to enable
systematic collection and limit possible circumvention.а The next step of ensuring environmental
dedication is just as critical. Dedication to environmental improvements is by
no means a foregone conclusion, even for supposedly earmarked taxes, since all
government-funded programs including social services vigorously compete for
monies and the popularity of environmental issues rises and falls over
time.а Dedication can be made directly
to a specific project such as a park, or indirectly as a source of bond
repayment.
Some revenue generation tools are more suitably
dedicated to specific environmental work than others.а For example, large and relatively stable revenue sources may be
ideal for environmental infrastructure capital and land-related projects such
as parks, while smaller mechanisms can fund program operating functions such as
personnel, monitoring, and technical assistance.а Some taxes, fees and special charges have dual purposes of
revenue raising but also as market devices to alter polluting behavior, which
may result in lower revenue collection.аа
State and local governments understand that imposing costs is onerous to
those who pay, unlike many tools presented in this Guidebook which arise
from the voluntary action of individuals and businesses.
1.A.а TAXES
1.A. TAXES
Description:а
Most taxes
are charged against income, property or sales.а
Income taxes are charged as a percent of the money earned by an
individual or corporation; property taxes are based on a percentage of the
value of property owned; and commodity taxes; typically called sales and use
taxes, are charged as a percentage of commodity value or a flat rate per
transaction.а Most States have a general
sales and use tax on retail sales of commodities, and local governments often
have riders charging an additional surtax to fund local government.а In addition to general sales taxes, all
States and many localities impose selective taxes on the sales of particular
products or services, such as gasoline and tobacco taxes.а In all, 23 States earmark a portion of State
taxes to the environment, although there is considerable variation among
States.
In this report, tax "base" refers to
the segment of population, products, activities or pollutants on which charges
are imposed.а Tax "rate"
refers to the structural design of tax schedules, i.e., whether flat rates,
graduated rates, volume/toxicity based rates, percentages, or other structures
are employed.
Advantages:а
Taxes typically have a broader revenue base than the fees presented in
Part B, and therefore can generate high revenues at relatively low rates,
although the special charges in Part C also have significant potential.а For example, States can levy sales taxes on
fertilizer at rates of cents/per pound and generate millions of dollars
annually.а Dedicating a surcharge on an
existing tax to environmental programs, or even a percentage of existing taxes,
involves little additional administrative costs.а Local governments sometimes can pass a "piggy-back" tax
on existing State taxes, generating local revenue, although in some States this
may require legislative authorization and voter approval.а In most States, income, property and sales
data are already reported, thus further reducing administrative costs of new
surcharges.
Limitations: аPublic
opposition to new or increased taxes often hinders legislative passage.а Unlike fees, many taxes are used for general
budgetary support and historically have remained undedicated to particular
programs, with clear exceptions such as gasoline taxes.а In some States, institutions do not exist
for arranging the dedication of taxes to particular programs, or there may be
constitutional or statutory limitations on dedication, or
"earmarking" as it is often termed.а
Depending on the market in question, some taxes may be inappropriate
financing mechanisms for those pollution control activities that require a
predictable amount of revenue every year.а
Tax bases may shrink due to general economic conditions or behavioral
responses to tax imposition, such as conservation of product use or product
substitution in the case of some selective sales taxes.а Also, unless the tax is targeted to a
particular type of property, income or sales, there is only an indirect
relationship between the tax base and use of funds, what is termed herein a
weak cost/benefit relationship.
а
Two types of taxes are discussed here:а General taxes and selective sales
taxes.а The operating principles and
dedication opportunities are different in these two cases, so they are
evaluated
separately in the following pages.
1.A.1.а GENERAL TAXES
1.A.1.а GENERAL TAXES
Description: A general tax is a tax whose burden falls upon
very broad section of the general public, such as wage earners or property
owners.а State and/or local general
taxes are charged against personal and corporate income, property, and
commodity sales.а Income taxes are
levied as a percent of the money earned by an individual wage earners or
corporation.а Property taxes are based
on a percentage of the value of property owned.а General commodity taxes, called sales and use taxes, are imposed
as a percentage of the commodity value, or as a flat rate per transaction, and
are contrasted with selective sales taxes discussed later.а General taxes may fund environmental
projectsа through earmarking or specific
tax surcharges or add-ons.
Historically, States have set the rules for how
local governments are organized and conduct their affairs, аincluding raising money.а Recently however, localities have appeared
more active in seeking and receiving more finance discretion for increasing
taxes.
Advantages: General taxes typically have a
broader revenue base than other revenue sources and therefore can generate high
revenues at relatively low rates.а Not
only is the tax base large, but income tax rate structures typically are
graduated, or proportional, thus increasing equity.аа Sales and property taxes are more regressive.а When local support is high, temporary local
tax surcharges may be an effective environmental financing avenue.
Limitations: Imposing or increasing general
taxes generally requires legislative action and public opposition often hinders
its passage.а Since general taxes are
not targeted at a particular type of environmentally-related property, income
or transaction, there is only an indirect relationship between the tax base and
the use of the funds (i.e., a weak cost/benefit relationship).а General taxes are a more traditional source
of revenue for programs such as education and social services, and thus may be
alreadyа "tapped out".а It may be difficult to safeguard the
earmarking of portions of general taxesа
for environmental purposes over time, since the competition from other
programs will persist.а A serious
concern also pertains to whether earmarking of general tax revenues constitutes
sound budgetary and fiscal policy, since earmarking constrains current policy
makers' ability to direct funds where they may be most needed, or demanded, at
any particular point in time.
Summary: Historically, general taxes have
not been the best source for environmental fundingа compared to revenue sources aimed at more specific products or
activities with a more direct relationship to the environment.аа In particular, State earmarking has been
rare.а However, in recent years States
have granted localities more authority to levy tax surcharges or add-ons which
have been dedicated to the environment, especially parks and conservation.
The nine general taxes described here are
compared using seven criteria including:
1.а Actual Use:а Actual
(current) use may indicate the developmentalа
stage of individual taxes, i.e., how long they have existed, how widely
available or applicable they are on a geographic basis, and their
acceptability.а Taxes presented in the
sectionа must be dedicated to
environmental protection to be counted.а
The number of States using a tax allows some numerical data to be
included in the ratings from "High" to "Low".а For example, high use might mean a tool is
used in over 25 States, as opposed to low use meaning under 10 States.а Actual use cannot measure the potential
effectiveness of new taxes, since by definition they are in their infancy.а
2.а Revenue Size: аThis criterion
helps indicate the annual sum of money raised or invested,а or in some instances the potential sum of
money.а Revenue size is rarely expressed
in dollars since in most cases this data has not been collected
nationally.а Where a taxТs use is low because
it is new or not directed to the environment, potential revenue size is
estimated.а Revenue size may give an
idea of the actual or potential effectiveness of a tax in terms of
environmental benefits, but not inа
relation to total environmental needs.а
Low revenue size may not mean that a tax is ineffective, because it may
be offset by other criteria scoring high, i.e., the ability to leverage other
resources, or enhance environmental awareness.а
However, it may signal problems, i.e., by suggesting that levying a tax
cannot be justified in terms of added administrative costs, time and political
difficulties.аа
3. Revenue
Stability: The relative stability and
predictability of annual revenues is compared for each tax to indicate whether
the revenue source can be relied upon and readily estimated, audited, and
factored into budgetary decisions.а
Revenue stability can influence the dedication and use of taxes.а Stable revenue receipts would be suitable
for funding State operating budget costs such as personnel, while larger,
steady revenue streams could be used for capital infrastructure
construction.а Many factors contribute
to revenue instability, such as product substitution, pollution
"havens" in different geographical areas, political decision-making,
tax laws and general economic conditions.
4. Administrative
Ease: аAdministrative ease addresses practical issues pertaining to the
providers and users of a tax.а Such
issues include the taxТs complexity/simplicity, demands on staff to handle
paperwork, applications and red tape, and the flexibility in administration and
use.а Administrative ease also can refer
to users of a tax, i.e., whether it is complicated, whether using it is
burdensome in terms of staff time and paperwork, whether expensive legal advice
is required, and whether voter approval must be sought. Taxes which provide
hands-on technical assistanceа can be
administratively time-consuming for the provider, but on the other hand are
easy to use for the client.
5. Equity:а
Equity can
be used to compare the extent of public participation in the choice to use a
tax, or even how to structure it.а For
example, a tax which requires local voter approval is described as highly
equitable.а Equity also is used
extensively to compare the accessibility of the tax to small versus large
potential users and to compare the costs of the tax for different clients or
those who pay.аа Taxes are most
equitable if they reflect affordability concerns or special circumstances of
the user, for example, in the case of taxes adopting graduated or
non-regressive rate structures.а Taxes
which are paid for by non-residents as well as residents, both of whom may
benefit from an environmental improvement, also are highly equitable. Taxes are
relatively inequitable if all users pay the same price regardless of economic
circumstances, if small users pay more since investment is considered more
risky, or if certain businesses pay much more than others.аа Some taxes are simply not available to
certain small users if they are too costly or complicated, and thus are not
particularly equitable.а
6.а Cost/Benefit Relationship. аThis
criterion addresses "who pays" and "who benefits" from the
environmental investment made with the taxes collected.а A high or close cost/benefit relationship
results when those who pay can see or directly benefit from specific
environmental projects, such a temporary tax add-on to acquire park land. A
high cost/benefit relationship may enhance public acceptability of a tax.а It also describes situations in which the
"polluter pays" principle is applied, although this may result in
inequities if costs are economically burdensome.
7. аEnvironmental Benefits:а
Environmental
benefits may be both direct and indirect.а
The most obvious environmental benefit occurs when a project proceeds as
a result of using a tax, such as construction of a water treatment plant or
brownfields redevelopment.а Other
environmental benefits may be indirect, i.e. paying a tax may result in
heightened public awareness of environmental problems and public financing
possibilities, as well as change polluting behavior. Some taxes may call
attention to positive as well as negative environmental impacts and provide
incentives to increase environmental financing.а In this Guidebook, only those financial tools which have
no known environmental impact or are neutralа
are described as "Low".
LIST OF GENERAL TAXES
(In Alphabetical Order)
*1.а Corporate Gross Receipts Tax
а
2.а Corporate Income Tax
а
3.а Death and Gift Taxes
а
4.а Individual Income Tax
*5.а Local Sales Taxesа
а
6.а Personal (Tangible) Property
Taxes
*7.а Real (Ad Valorem) Property
Taxes
*8.а State Sales and Use Taxes
а
9.а Value-Added Taxes
ааааааа
*а Stars
indicate most highly rated mechanisms as described in the Comparison Matrix at
the end of the narratives.а See
Introduction to the Guidebook for a description of the criteria
used.а Ratings of УHighФ, УModerateФ,
and УLowФ are for comparison purposes only, as some ratings are necessarily
subjective and data are incomplete.
CORPORATE GROSS
RECEIPTS TAX
Description:а These corporate taxes are assessed on the gross
receipts of businesses, in some States in lieu of corporate income taxes.а
Actual Use:а
Several States have general taxes on gross receipts of businesses.а Portions of these receipt revenues are
targeted to specific environmental programs.а
For example, Delaware dedicates 2.9% of its general gross receipts taxes
to a hazardous waste clean-up fund.а
New Jersey has a general hazardous waste gross receipts tax dedicated to
site clean-up.а
Potential Use:а
Gross
receipt tax revenues in each State from particular businesses could be
dedicated to the environmental program area that the business activities
affect. аFor example, monies from
the gross receipts of dry cleaning businesses could be used to fund small
source air emission reduction programs.
Advantages:а
аWhen tax revenues are dedicated, businesses
engaged in environmentally-sensitive activities pay for the remediation of
problems.а Unlike net income taxes,
gross receipts taxes are based on the full size of the business and are charged
against a broader revenue base.а Revenue
yield could be quite significant, although it may vary considerably depending
on general economic conditions or other factors.а Dedicated taxes also mean that the cost/benefit relationship is
sustained.а Gross receipts taxes may be
more simple and equitable, because they employ more reliable administrative and
accounting procedures, than other kinds of taxes.а For example, for hazardous waste, data on gross receipts are more
accurate than data underlying a tax on hazardous waste volume produced or
feedstock used.
Limitations:а
Gross
receipts taxes may have a disproportionate impact on smaller businesses and on
those with high receipts but also high costs.а
There is no incentive to improve management practices that contribute to
problems,а since producers pay the same percent
tax regardless of recycling programs or other efforts at reducing solid waste.а The lack of environmental incentives could
be overcome if the tax were structured to provide rebates for recycling or
waste reduction, but this would add to administrative complexities and result
in lower revenues.
Reference for
Further Information:а National Conference of State Legislatures
(NCSL), аEarmarking State Taxes, Denver,а Colorado,а
April 1995.
CORPORATE INCOME
TAX
Description:а
Corporate income taxes are based upon the net income earned by
corporations in aа given State.а They sometimes are established as, and
termed, corporate franchise taxes.
Actual Use:а
State dedication of corporate income taxes to environmental protection
has been rare.а Ohio dedicates 1.2% of
its corporate income tax revenue to litter control and recycling. аPennsylvania allocates 3.8% of its capital
stock and franchise tax to a hazardous waste clean-up fund.а Arizona commits 0.2% of its corporate income
revenue to environmental programs.а The
federal government uses an environmental tax surcharge on corporate income,
under the Alternative Minimum Tax provisions of the Tax Reform Act of 1986, to
fund a portion of the Superfund Trust Fund.а
The federal tax is 0.12% of taxable corporate income in excess of $2
million.а A few States offer corporate
income tax credits for land donations.а
(See Section 1A: УIndividual Income TaxФ)
Potential Use:а
Corporate income tax revenues could be dedicated to finance
environmental programs that stem from the corporate activity itself.аа For example, if two percent of revenues
were generated from mining companies, the State could earmark that portion for
erosion control, habitat restoration, and other activities that mitigate the
environmental impacts of mining.а
Similarly, revenues from drink bottle companies could be used to finance
state recycling programs.
Advantages:а
With a
relatively broad revenue base, corporate income taxes or surcharges can be
charged at relatively low rates and still generate significant revenues.а They can spread the costs of the
environmental impacts of business activities to out-of-state consumers, adding
pollution control to the overall costs of production.а For example, a paper company might pass on the cost of a
corporate income tax to its customers via a price increase.а These revenues could be used to help
mitigate environmental impacts of the paper production process, and improve the
equity and cost/benefit criteria.
Limitations: Increasing corporate tax rates may
be politically difficult, since States attempt to be competitive with other States
in order to attract corporations.а Net
income may not serve as a good measure of the actual size of a corporation,
since many corporations have small incomes relative to their gross receipts.
This reduces the equity potential of the tax. Of the three main state general
taxes (i.e., personal and corporate income, and general sales taxes), the
corporate income tax is the least stable.аа
As net corporate income varies tremendously from year to year,а the revenue stream will be unpredictable and
thus may be unsuitable for some types of environmental program budgets.а Corporate headquarters may be located in a
different State from production activities, meaning that the revenues from the
income tax may not go to the state that experiences environmental damage from a
corporation's production activities.а
References for
Further Information:а National Conference of State Legislatures
(NCSL),а Earmarking State Taxes,
Denver, CO, April 1995.
DEATH AND GIFT
TAXES
Description:а
Death and
gift taxes, or inheritance taxes, are taxes on inherited property or gifts
worth more than a set amount. Inheritance taxes can be structured to provide
tax relief for property owners making outright land donations or by placing
conservation easements on inheritance land, even during a donorТs lifetime.
Actual Use:а
All States
now have inheritance tax programs although they vary considerably,а Typically, State death and gift taxes have
been dedicated to local government, pension funds, and local police and fire
protection funds, but not the environment.а
Most States also structure inheritance taxes to provide tax relief for
land donated to State or Local governments or nonprofit land trusts, although
not always for conservation easements.
Potential Use:а
States could
earmark a portion of death and gift taxes to general environmental
programs.а Alternatively, they could
structure such taxes to encourage land conservation.а Bargain sales of natural land to State and local park services,
or anti-development deed restrictions (i.e., conservation easements), could be
regarded as non-taxable gifts by the landowner, as is currently done under the
federal tax code.а While this does not
raise revenue per se, it would lower the costs and increase the administrative
ease of natural lands acquisition.
Advantages:а
Inheritance
taxes provide a very broad revenue base.а
If taxes are structured to provide incentives for land donation, i.e.,
by offering tax-exempt status for the landowner, this may provide State and
local parks with additional natural lands at a much lower cost than outright
purchase.а In times of tight State or
local budgets, this facilitates continuation of open space acquisition
programs.а The donated land can be
purchased and managed initially by State or local land trusts such as The
Nature Conservancy, until the appropriate State or local agency can assume
responsibility.а
Limitations:а
Using death
and gift taxes to provide incentives for land conservation or donations
decreases government cash revenues.а It may also be difficult to evaluate which
gifts are actually valuable natural lands.а
While most States have natural heritage programs and work closely with
non-profit conservation organizations to establish land protection criteria, for
example, the presence ofа rare animal
andа plant species or natural habitats,
potential land donors may not recognize such criteria.а For "less valuable" open space,
States or localities must then work with non-profit land trusts to sell such
property and use the proceeds for other land protection activities.
Reference for
Further Information: аThe Nature Conservancy,а Guidebook for Land Giving and Trusts, Arlington,
VA, 1993; The Trust for Public Land, Doing Deals: A Guide to Buying Land for
Conservation, San Francisco, CA, 1997.
INDIVIDUAL INCOME
TAX
Description: аIndividual income taxes are assessed based on
a specified percentage of income earned by individuals.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
Actual
Use:а States and counties typically
use income taxes for general fund support.а
Presently, at least 17 States earmark a share of their State individual
income tax for local governments, most commonly for education.а However, only a few States earmark for
environmental purposes.а For Example,
Arizona earmarks, (0.2%) for environmental protection, in this case to a water quality
revolving fund. аThe federal
government has allowed deductions for donated land for some time.а Other States use property tax credits for
the same purpose.
Potential
Use:а A large potential use of State
and local income taxes for the environment may come from income tax credits for
land donations, conservation easements, and voluntary income tax check-offs
(See Section 8, CBEP, Contributions of Land).а
For example, North Carolina has an individual and corporate income tax
credit of 25% of the value of the donated real property.а When the initial $5,000.00 annual credit cap
was raised to $25,000.00 in 1989, donations grew from $800,000.00 to $17.5
million.а Credits can be carried over to
succeeding years.а California has
discussed, but not passed, an ambitious credit of 60-85% of the value of land
or water rights donated, which is weighted so that higher taxable incomes
receive the lower percentage credit.
Advantages: ааEarmarking the income tax for environmental
funding could provide significant revenues at a very low percentage rate, with
a highly stable tax base and revenue stream suitable for dedicating to State or
county capital infrastructure construction funds.а Tax credits for land donated or easements could provide
considerable incentives to landowners to make such donations, particularly in
times when tax-averaging would be beneficial.
Limitations:а In most States, it is
politically difficult to increase and/or dedicate income taxes to specific
programs.а When income taxes are
earmarked for education and other social programs, they may be "tapped
out" already.а Continued dedication
of a portion of income tax revenues to the environment may be difficult to
preserve.а While individual income taxes
are progressive and thus relatively equitable, there is no direct cost/benefit
relationship to be attained through using this revenue source for environmental
protection.а As an alternative, many
States are using special individual income tax check-offs for environmental
purposes, as opposed to the income tax itself.а
This practice is discussed subsequently under Section 1.E.: Voluntary
Programs.
Reference
for Further Information:а National Conference
of State Legislatures, Earmarking State Taxes, Denver, CO, April 1995;
The Trust for Public Land, GreenSense: Financing Parks and Recreation,
Phyllis Myers, Editor, San Francisco, CA, Autumn, 1995 and 1997, Telephone:
800-714-LAND, Internet: http://www.tpl.org/tpl.
LOCAL SALES TAXESаа
Description: аLocalа sales taxes are add-ons to State general
sales and use taxes, or may exist where there is no State sales tax.а Depending on State constitutions, statutes
and home rule traditions, most local governments must seek State approval to
levyа local sales taxes, as well as
local voter approval.а State authorization
processes vary.а States may give
approval to all counties or communities, or limit it to a specific localities.
Typically, local taxes are limited to a specified time period, or a dollar
collection total, and a specific use.а
The dedicated revenue stream may be used to back local general
obligation or revenue bonds or to pay for a specific program directly, such as
parks and conservation.
Actual Use: Many States have given localities more leeway
to levy taxes, and local residents have approved sales tax increases or new
taxes. Revenues often are dedicated to open space acquisition, parks and
recreation, historic preservation and other land projects.а Missouri has given communities authority to
raise taxes up to 0.5% for parks and stormwater improvements, and 29 have done
so since 1995.а Colorado has been
flexible in allowing local taxes, and 17 municipalities and 7 counties use a
sales tax increase of 1/10 cent for 12 years for land conservation. Carson City
and Douglas County, Nevada, use a 1/4 cent "quality of life" sales
tax add-on for open space and parks. Three Georgia counties have a 5-year, 1
cent sales tax for roads, parks, and recreation. Other localities with recent
sales tax add-ons from 1/2 to 1 cent for 5-20 years include Albuquerque, Tulsa,
Scottsdale, Suffolk County (New York), and counties in Florida where revenues
are dedicated to nature centers, trails, environmental education, and parks.
The first across-state tax of 1/8% was passed in four Kansas City counties in
1996, to raise $118 million to restore the historic Union Station.а
Potential Use:а
Local sales tax add-ons are especially useful in high tourism areas and
can support a multitude of environmental programs, including brownfields
redevelopment, and wetlands, watershed and farmland protection through
conservation easements and development rights purchases.а Sales tax revenues often are used to
capitalize local revolving environmental trust funds as in New Jersey and other
States, and may attract State or private matching funds as in Kansas City.
Advantages: Specific approval of dedicated
local sales taxes assures revenue use for a particular environmental purpose,
and projects funded enjoy public support.а
Environmental benefits are direct, timely, visible, and heighten public
awareness.а Revenues can be sizeable and
further leveraged.
а
Limitations:а
All sales taxes are highly regressive.а
State and local approval of tax increases may be time-consuming and is
not assured.а The environmental programs
funded must be popular.
Reference for
Further Information: аU.S. Advisory Commission on Intergovernmental
Relations, State Laws Governing Local Government Structure and
Administration, March 1995; The Trust for Public Land, Green Sense:
Financing Parks and Conservation, Phyllis Myers, Editor, San Francisco, CA,
Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
PERSONAL
(TANGIBLE) PROPERTY TAXES
Description:а
These are
taxes levied on the estimated or assessed value of items of personal
propertyа such as automobiles and boats,
but not land.а Such taxes are charged on
a recurrent basis, frequently annually or biannually, and sometimes are limited
to property worth in excess of a specified dollar value, e.g., $2,000.
Actual Use:а
These taxes
are used (not widely) by State and local governments for a variety of purposes,
but there is no earmarking for environmental protection at the present
time.а For example, Virginia charges a
flat percentage tax on the blue book value of all motor vehicles, but this is
dedicated to highway and road improvements.
Potential Use:а
State and
local governments could establish personal property taxes to mitigate the
negative environmental impacts of the use of that property.аа For example, the revenues generated by a
tax onа air conditioners could be used
for Freon disposal; revenues from a tax on lawnmowers and small engines could
be used to fund small source air emissions reduction programs.а States could further structure personal
property taxes to encourage emissions reduction and/or energy efficiency by
discounting tax rates on high-efficiency appliances such as heaters,
refrigerators and air conditioners, and low-emission vehicles.
Advantages:а
Taxes on
tangible property could be carefully structured to have a close cost/benefit
relationship, depending on the particular purposes to which the tax revenues
are dedicated.а Also depending on the
specific structure of the taxes, they may provide incentives for taxpayers to
purchase higher efficiency appliances and vehicles, although this approach is
somewhat inequitable as lower income individuals are less able to afford new
equipment and cars.а Revenue yields
generated by personal property taxes tend to be moderate.
Limitations:а
Few
governments have administrative systems in place to track ownership of personal
property, aside from automobiles, so that administrative costs could be high
and the tax easy to circumvent.а The
legality of state taxes on high-emission vehicles has been disputed in some states,
such as in Maryland.а These types of
taxes may be highly unpopular with voters and subject toа reduction and even elimination.
Reference for
Further Information:а Virginia Department of Revenue, аAnnual Personal Property Tax Estimates, Richmond,
VA, 1993.
REAL (AD VALOREM)
PROPERTY TAXES
Description:а
Real
property taxes are charged to property owners as a percentage of the current
assessed value of property. They are limited to local governments, and require
voter approval.
Actual Use:а
There are
two main ways localities use property taxes to fund environmental
projects.а The first is to earmark a
specific portion of annual revenues, which is rare.а The second is to direct a property tax increase or surcharge,
temporary or permanent, to a specific purpose. Use of the latter method has
been increasing.а Dade County, Florida,
dedicated over $45 million in one year to funding local natural areas.а Colorado's Cherry Creek basin project uses a
property tax increase to finance building artificial wetlands, channels and
sediment holding ponds to control nonpoint sources.а The most publicized use is in New Jersey.а By 1997, two counties and 21 municipalities
had passed a one or two penny per $100 in value "land preservation
tax" to finance open space and farmland trust funds.а Los Angeles County, Kings County,
Washington, Helena, Montana and Marion, Massachusetts use property tax
increases to fund greenways, open space, parks, beaches and shorelines.а Several Michigan towns use property tax
surcharges to buy development rights on farmland.а Spokane, Washington has a "conservation futures tax" of
6 cents per $1000 to buy open space and buffer lands.а A third way of using the property tax has occurred in Maryland,
which offers a property tax credit to donors who give perpetual easements to
the Maryland Environmental Trust.
Potential Use:а
Any
land-based protection or recreation program could be funded through the
property tax, as well as any environmental infrastructure popular enough to be
approved by residents.а Revenues can go
to local trust funds, serve as collateral forа
general obligation or revenue bonds, and leverage State funds.а For example,а New Jersey's Green Acres Trust Fund makes 25%grants and
low-interest loans to localities with dedicated taxes and open space plans.
а
Advantages: аMost
local governments have administrative systems in place for assessing real
estate values and collecting taxes, which reduces administrative costs.а The property tax provides a relatively large
and stable revenue base.а Voter approval
of tax increases to pay for specific environmental projects, and visible
results,а helps ensure revenue
dedication.а Additional monies can be
leveraged when public commitment is clear, including matching funds.
Limitations: Some localities have statutory
limits on property tax levels. Competition forа
revenues is keen and environmental dedication may be difficult to
safeguard.а Many proposed tax hikes have
been defeated.а California uses a
landscape and lighting law as an alternative, which enables property owners in
developing communities to assess themselves for parks and open space.
Reference for
Further Information: The Trust
for Public Land, GreenSense: Financing Parks and Conservation, Phyllis
Myers, Editor, San Francisco, CA; The Trust for Public Land, Mid-Atlantic Regional
Office, On the Land, Winter/Spring 1998, New York, NY; The Trust for
Public Land, Lands and People, San Francisco, CA, Spring 1998,
Telephone: 800-714-LAND.
STATE SALES AND
USE TAXES
Description:аа
State sales and use taxes are based and levied on the value goods sold
in retail stores.а The scope of coverage
of these kinds of taxes could be broadened to also include out-of-State mail
order sales to State residents.
Actual Use:аа
Compared to
corporate and personal income taxes, State earmarking of general sales tax
revenues has become more common in recent years.а Currently, at least five States dedicate a percent of their
general sales and use taxes to environmental programs. For example, Missouri
dedicates 2.9% of its tax revenues to a conservation fund, including non point
source control (0.1%); North Carolina dedicates 0. 1% of its revenues to a
Wildlife Resources Fund;а Idaho
dedicates 1.5%, and Washington 0.1%, of revenues to water pollution infrastructure
funds; and Florida earmarks 0.2% to a solid waste management fund.а Increasingly, States have been allowing
counties or cities to charge an additional rider on the State tax, which may
also be dedicated to environmental programs (See Section 1Aа УLocal Sales and Use TaxФ).а In Sacramento, California, the county rider
on the State sales tax is dedicated to funding the local air quality management
district.
Potential Use:а
States could choose to earmark a specified percentage of their sales and
use tax revenues to fund environmental programs.аа Application of the tax to out-of-state catalog mail order sales,
which are typically not taxed unless a retail store exists in the purchaser's
state, would broaden the revenue base considerably.
Advantages:а
The revenue
base generated by State sales and use taxes is quite broad and relatively
stable, and thus even small percentages of a general sales and use tax can
bring in significant revenues.
Limitations: Sales taxes are inherently highly
regressive, and thus equity is not attained.а
The cost/benefit relationship is not immediately obvious unless taxes on
specific goods can be relatedа and
dedicated to related environmental programs,а
but this may prove administratively burdensome and too complex.аа States and localities may have statutory
limitations on general sales tax increases and earmarking.а Environmental dedication may be difficult to
sustain.
Reference for
Further Information:а National Conference of State Legislatures
(NCSL), Earmarking State Taxes, Denver, CO, April 1995.
VALUE-ADDED TAXES
Description: Value-added taxes (VATs) tax the
addition to the value of consumer goods orа
services created at each stage of production or distribution.а The VAT is an alternative way of collecting
a tax on consumption expenditure: itа
does not tax a base different from other sales taxes.а The VAT resembles a sales tax in that each
trader adds the tax to sale invoices issued and accounts for the tax so
collected.а However, traders deduct the
tax paid on invoices received for goods and services.
Actual Use: MichiganТs single business tax
utilizes value-added principles in part, as does a portion of the Louisiana
retail sales tax, but, on the whole, the concept remains generally unused
throughout the United States.
Potential Use:а
аThe VAT is applicable to any State or local
sales tax.а Implementation of a 10
percent VAT in the three production stages of manufacturing, wholesaling, and
retailing is illustrated as follows:а A
wholesalerа buys inputs valued at $500
from manufacturers and sells outputs valued at $900 to retailers.а Accordingly, the wholesalersТ value-added
equals $400.а The tax owed by the
wholesaler equals $40, $400 times 10 percent.а
The tax is collected by applying the rate to the transaction price ($900
times 10 percent = $90) and applying a credit for tax paid at earlier stages
($50); the net is the tax on value added ($90 - $50 = $40).а The sum of all values added in the process
($500 at manufacturers, $400 at wholesalers, and $300 at retailers) equals the
final value of the product ($1200) and the tax generated at each stage ($50,
$40, and $30) equals the amount from the same rate sales tax on the final value
($120).
Advantages: VAT is a multistage tax that
produces a burden equivalent to that of a single stage retail-sales tax.а The tax is a constant proportion of the
retail price of the product; it does not vary according to the number of
transactions in the production process, as normally occurs under multistage
taxes.а As a result the tax does not
pyramid because it depends on the value added at each stage, not the total
transaction price at each stage, and each firm receives credit for taxes paid
in prior stages of the product flow.а
Thus, the tax base for any firm in the production-distribution process
will equal its value-added -- the difference between the value of its sales and
the value of its purchases -нinstead of the value of its sales (or gross
receipts).а The self-enforcing nature of
VAT makes it attractive when the tax-compliance climate is not good.а VAT induces purchasers to require a
documented receipt from vendors for taxes paid, because those receipts will be
used to pay part of the taxes vendors will owe when they make sales.а Vendors pay the tax because the purchasers
of those items demand tax receipts for credit purposes,
Limitations: The European experience with VAT
shows that tax evasion still exists and delinquency continues to be a problem,
despite the self-enforcing nature of VATS.
Reference for
Further Information:
Mikesell, John L., Fiscal Administration: Analysis and Applications
for the Public Sector,а Third
Edition,а Brooks/Cole,а Belmont, CA, 1991.
OTHER
Description:а
Actual Use:а
Potential Use:а
Advantages:
Limitations:а
Reference for Further
Information:а
COMPARISON MATRIX FOR
GENERAL TAXES
|
Criteria/ General Taxes |
Actual Use |
Revenue Size |
Revenue/ Stability |
Admini-strative Ease |
Equity |
Cost/ Benefit Ratio |
Environ- mental Benefits |
|
*Corporate а Receipts |
а Low |
а High |
аHigh |
аHigh |
аMod. |
а Mod. |
аHigh |
|
а Corporate а Income |
а Low |
аHigh |
аMod. |
аHigh |
аLow |
а Low |
аMod. |
|
*Death/ а Gift |
аLow |
аMod. |
аLow |
аMod. |
аHigh |
аHigh |
аHigh |
|
а Individual а Income |
аLow |
аHigh |
аMod. |
аMod. |
аMod. |
аLow |
аMod. |
|
а Personal а Property |
аLow |
аLow |
аMod. |
аLow |
аLow |
аMod. |
аMod. |
|
*Real а Property |
аHigh |
аHigh |
аHigh |
аHigh |
аLow |
аMod. |
аHigh |
|
*Sales and а Use |
аLow |
аHigh |
аHigh |
аHigh |
аLow |
аLow |
аHigh |
|
а Value а Added |
аLowа |
аMod. |
а Mod. |
аLow |
аHigh |
аLow |
аMod. |
High -а High use (over 25 states/many localities);
criteria score high (many advantages);
High revenue yield (over $50
million annual state revenue, currently)
Mod -а Moderate use (10-25 states/many localities);
criteria score in medium range;
Moderate revenue yield
Low -а Low or rare use; criteria do not rate well
(many limitations, and one or more major implementation problems);а Low revenue yield
*а Star indicates best rated
mechanisms
1.A.2.а SELECTIVE SALES TAXES
ааааааааааааааааааааааааааааааааааааааааааааааа 1.A.2.а SELECTIVE SALES TAXES
Description: Selective sales taxes are taxes on
the sale of particular commodities or services.а Selective sales taxes include all other sales and use taxes that
are not applied to the general public as a whole.а These taxes are sometimes termed excise taxes.а They are levied either as a percentage of
the sale or price of the item, or as a flat charge per item.аа Compared to general sales taxes, selective
sales taxes have been more widely used by States and localities, although for
environmentally-related products (e.g., fertilizer/pesticide taxes as opposed
to alcohol taxes) the revenue yield is not yet high.
Some selective sales taxes are collected
annually at the point of production, as opposed to the point of sale, to
enhance administrative efficiencies in collection.а For example, gasoline taxes typically are paid by manufacturers,
who then are reimbursed from revenues collected at the gasoline pump.а Many green product taxes can be most
efficiently collected directly from producers or distributors, whoа typically will pass on costs to
consumers.а Selective taxes which do not
involve sales, such as effluent fees, are discussed under Section 1.C.: Special
Charges.а
Advantages:а
Selective sales taxes are more easily dedicated to a particular
environmental program compared to general sales taxes, since there often
isа a more direct relationship between
the particular type of product in the tax base and the use of the funds for
environmental purposes.а For example,
the gasoline tax can be dedicated to oil pollution control, the real estate
transfer tax to bond related acquisitions, and certain green product taxes to
water quality.а Such taxes may have
inherent environmental incentives, i.e., avoiding the tax may lead to behavioral
shifts resulting from conservation of use or purchase of "safer"
products, although this reduces revenue yield.а
Some taxes such as the real estate transfer tax, have been used to make
interest payments on environmental bonds.
Limitations: The tax base for selective sales
taxes is much narrower than for general taxes.а
Therefore, a higher rate must be charged to generate the same amount of
revenue, which may cause inequities.а
Sales taxes typically are highly regressive, since it is difficult to
use graduated rate structures depending on the economic circumstances of the
purchaser. However, more "toxic" products could bear higher tax rates
than less toxic products, if this could be appropriately measured.а Pollution "havens" may arise
between States and localities when taxes are not uniform local sales taxes
typically must have State approval.
Summary:а
State use of selective sales taxes is widespread, and for
environmentally-related products and services is increasing.а However, revenue yield remains modest and
there is little uniformity among States.а
Some high revenue-producing taxes used in virtually all 50 States, such
as alcohol and tobacco taxes,а rarely
are dedicated to environmental programs.
ааааааааааааааааааааааааааааааааааааааааааааа LIST OF
SELECTIVE SALES TAXES
(In Alphabetical Order)
ааа
1.а Alcoholic Beverage Taxes
ааа
2.а Amusement Taxes
ааа
3.а Energy Taxes
ааа
4.а Fertilizer/Pesticide Taxes
(Agricultural Chemicals)
а
*5.а Green Product Taxes
а
*6.а Hard-to-Dispose Taxes
а
*7.а Hotel and Resort Taxes
ааа
8.а Insurance Premium Taxes
ааа
9.а Litter Control Taxes
а
10.а Marine and Aviation Taxes
а
11.а Miscellaneous Selective
Sales Taxes
*12.а
Motor Fuel Taxes
а
13.а Motor Vehicles Sales and
Registration Taxes
а
14.а Petroleum Products Taxes
*15.а
Real Estate Transfer Taxes
а
16.а Rental Car Taxes
*17.а
Tobacco Taxes
а
18.а Watercraft Sales Taxes
*а Stars
indicate most highly rated mechanisms as described in the Comparison Matrix at
the end ofа the narratives.а See Introduction to the Guidebook for
a description of the criteria used.а
Ratingsааа of УHighФ, УModerateФ,
andа УLowФ are used for comparison
purposes only, as some ratings areаааа
necessarily subjective and data are incomplete.
ALCOHOLIC
BEVERAGE TAXES
а
Description:а
Alcoholic beverage taxes are based on volume or value, and include liquor,
wine and beer.а Along with tobacco and
lottery/gambling taxes, alcohol taxes are often termed "sin" taxes.
Wine coolers and similar beverages could be included.
Actual Use: All 50 States,а many localities, and the federal government,
levy rather steep taxes on over-the-counter purchase of all alcoholic
beverages.а Half of the States currently
earmark alcohol tax receipts, typically for local revenue-sharing and State
alcoholism prevention and rehabilitation programs.а However, no States have dedicated alcohol tax revenues to
environmental protection as yet, although this is proposed from time to time.
Potential Use:а
Since alcohol is distilled from agricultural products, State or local
governments could dedicate a surcharge on the alcohol tax to agricultural
runoff control or other land-based programs. Alternatively, since breweries
require a large volume of very clean water and discharge wastewater from
distilling processes,а revenues could be
dedicated to drinking water treatment and point source water pollution control
programs.а Breweries might also be taxed
directly. Tax surcharges could be extended to currently non-taxed consumption,
such as at military commissaries.а Imports
would have to be accounted for.
Advantages: Since administrative records of
alcohol sales already exist, a tax surcharge would be administratively simple
to collect and track.а Consumption is
widespread, and thus revenues could be significant with an additional tax, for
example, of 1%. The demand for alcohol is relatively unresponsive to price
changes, and thus a tax increase may not cause a decrease in sales sufficient
to full offset revenues.
Limitations: аAll
consumption taxes are highly regressive and, therefore, may be considered in
this context as inequitable.а Since alcohol
taxes already are extremely steep, additional costs may impose undue hardship.
The cost/benefit relationship is questionable. Depending on the State,
alcoholic beverage taxes would face strong opposition from the alcohol
industry.а Lack of uniformity among
State taxes and surcharges already has given rise to pollution
"havens" between States, with consumers crossing State lines to make
purchases, thus reducing tax yield for some States.а It might be difficult to retain the dedication of alcohol surcharges
for environmental programs, since total revenue yield is large and commonly
"tapped out" for other State and local programs.
Reference for
Further Information:а National Conference of State Legislatures
(NCSL), Earmarking State Taxes, Denver, CO, April 1995;а U.S. Advisory Committee on Intergovernmental
Relations, Significant Features of Fiscal Federalism, 1991.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
AMUSEMENT TAXES
Description: Taxes on ticket sales to sports or
entertainment events, or on gross receipts from events.а Parimutuel taxes are charged on amounts
wagered at race tracks. Gambling casinos could be included as well.а Use ofа
lottery ticket purchases is discussed subsequently in Section 8: УEnvironmental
LotteriesФ.
Actual Use: Amusement taxes are used by both
State and local governments for a variety of purposes, including stadium
construction and renovation.а However,
dedication to environmental programs is rare.а
Illinois dedicates a share of proceeds from its parimutuel tax to local
park districts, and Oregon earmarks a small portion for youth conservation
programs.
Potential Use:а
Revenues from amusement and gambling taxes could be used to offset the
impact of large numbers of visitors to a particular site or area.а For example, a county with a sports arena
and/or a theme park could use the tax funds generated to cover additional water
and solid waste disposal costs created by visitors.а States could dedicate amusement taxes to recycling, litter
control, or greenways beautification programs.
Advantages:а
Amusement taxes spread the costs of providing government services to
benefitting visitors.а Ticket sales are
relatively easy to track, although government collection systems must be
established.а Taxes are highly equitable
in that non-local and out-of State residents can help subsidize the cost of
governmental services.
Limitations: аDemand
for tickets to sporting and other entertainment venues can be relatively
sensitive to price increases, and therefore taxes could reduce the number of
tickets bought and thereby lower revenues.а
Revenue yield may not be high.
Reference for
Further Information:
National Conference of State Legislatures (NCSL), Earmarking State Taxes,
Denver, CO, April 1995.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа ENERGY
TAXES
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
Description: аEnergy
taxes are surcharges on regular customer utility bills, such as electricity,
heating oil or gas, and even telephone charges.а Energy taxes could also be charged directly to utility companies,
which then probably would pass costs on to consumers.
Actual Use: аMany
localities, and a few States, have energy surcharges taxes to fund
environmental programs among other uses.а
Maryland has a special electric energy tax which is reflected on regular
electric bills to all customers, and California has a small utility sales tax
based on kilowatt generating capacity.а
Massachusetts also has established a sales tax on all utility
bills.а Overland, Missouri has a 3.5%
utility surcharge dedicated to open space and greenways.аа A Federal "BTU Tax" was proposed
and widely discussed in 1993, and the concept of energy taxes in general is
often debated.а
Potential Use:а
Any utility
bill could be a vehicle for such surcharges, the receipts of which could be
dedicated to the corresponding program, such as heating fuels to spill
prevention and recovery projects, and electricity surcharges to air pollution
control and acid rain programs.а The
concept could be extended to cable television services, as well as telephone
services although these are already subject to federal, State and local taxes.
Advantages: Energy consumption is readily estimated and
tracked on a national, State and local basis.а
Tax surcharges would be easy to collect through regular billings, which
the utility company then would rebate to the relevant governmental unit.а A very close cost/benefit relationship might
be attained depending on subsequent program dedication, since energy production
has such strong environmental impacts.а
Even low-level increases to annual residential costs for total energy consumption,
such as $5.00 per year, is estimated to yield $10 billion nationwide. The yield
would be relatively stable, and any resulting energy conservation could yield
important environmental benefits.а State
and local governments could structure surcharges to reflectа local economic conditionsа and existing tax burden, and provide special
subsidies, e.g., for lower income households.
Limitations:а
Compared to
water and sewer utility charges, heating fuel and electricity costs are already
steep,а although smaller than the
relative costs ofа cable
television.а Thus, the impact on some
residential customers could be high within an already highly regressive cost
structure.а Graduated tax structures
might enhance equities but would be administratively complex since, other than
heating fuel for the elderly in some localities, utility bills are rarely
subsidized. If based on the cost of providing energy, revenue yield could
fluctuate dramatically with the price of oil.
Reference for
Further Information:а National Conference of State Legislatures (NCSL),
Earmarking State Taxes, Denver, CO, April 1995;а Warren, Richard E., "Funding
Environmental Values," presented at the Public Works and the Human
Environment International Symposium, Seattle, Washington, April 1995.
аааааааааааааааааааааааааааааааааааааааааааааааа FERTILIZER/PESTICIDE
TAXES
(Agricultural
Chemicals)
Description: аAgricultural chemical taxes are imposedа on fertilizers, pesticides, agricultural additives and minerals,
and some herbicides, either as aа retail
sales tax or as a sales production tax, i.e., a tax placed directly on the
producer,а manufacturer or distributor
but based on a percentage of the item value to be sold.а They represent a type of green product sales
tax.а
Actual Use: At least four States, Wisconsin,
Iowa, Minnesota and Oregon, assess a surcharges on fertilizer/pesticide sales
or charge producers/distributors directly.а
Typically, these and other Statesа
also charge fertilizer/pesticide product inspection, registration and/or
licensing fees (discussed subsequently under Part B: Fees).а Wisconsin charges $2,000 for each
manufacturer of the active (toxic) ingredients in a pesticide, and $100-$300
for pesticide distributors; Iowa assesses a dedicated tax on nitrogen-based
fertilizers at $.75 a ton; Minnesota levies a sales surcharge on all
agricultural chemicals collecting $2.5 million annually; and Oregon levies a
$.20 -.60 per ton tax on producers.
Potential Use: This tax could fund remediation of agricultural
nonpoint source and groundwater pollution.а
It could also beа used to fund
research and technical assistance for sustainable farming techniques that have
reduced environmental impact.
Advantages: The tax could generate significant revenues due
to the relatively large volume of fertilizers and pesticides used.а States could employ graduated rate
structures which vary according to the toxicity of the ingredients in each
item, thus improving equity considerations.а
Such taxes are relatively easy to collect if imposed on producers
directly, and may discourage excessive use of harmful products (leading to
declining revenues).а They could include
residential garden use.
Limitations: аAlthough there is a direct cost/benefit relationship between
agricultural chemical use and pollution, it would be difficult to apply all
revenue receipts to nonpoint source projects because such projects are
generally lower cost compared to point source projects.а The tax is highly regressive and inequitable
in terms of the cost to small farmers versus large agricultural businesses, and
impacts vegetable and fruit producers especially hard.аа Taxes would be strongly opposed by the
agricultural lobby because ofа the
importance of fertilizers/pesticides to reliable crop production.а Pollution "havens" between States
might be created if the taxes were not uniform across States.а As a sales tax, fertilizer/pesticides taxes
might be as efficiently and equitably administered at the federal as opposed to
State level, although then would fall most heavily on crop producing States.
References for
Further Information: аNational Conference of States Legislatures
(NCSL), Financing Clean Water, Non Point Sourceа Pamphlet, June 1991; U.S. EPA Report to
Congress, Alternative Funding Study: Water Quality Fees and Debt Financing
Issues, Syracuse University, June 1996; Congressional Research
Service,а Funding Water Quality
Programs,а 1992.
GREEN PRODUCT
TAXES
Description: аGreen
product taxes are sales tax surcharges, which might be levied on a large range
of household and commercial products which negativelyа impact water or air quality.а
The use of the term "green" here implies that the product is
potentially harmful, not "safe".а
Taxes may be imposed as a percentage of value, or a flat fee per item
(see page 7-6, Deposit Refund Systems).
Actual Use:аа
States increasingly use green product taxes, although they still are
most prevalent asа hard-to-dispose
products taxes, pesticide/fertilizer taxes, and petroleum product taxes,
described separately. The majority of States now have recycling program charges
(e.g., aluminum cans and some plastics).а
Examples of newer green product sales taxа programs include Florida's taxes on toilet paper and dry cleaning
solvents, Wisconsin's taxes on de-icing salts, and WashingtonТs wood stove
sales tax. Illinois and Washington also have sales tax surcharges on various toxic
products.а The federal government has
established a tax on ozone-depleting chloroflourocarbonsа yielding almost $1 billion annually. Green
product taxes are used extensively in Western Europe.
Potential Use: The list of potential products in a tax base is
very long, and includes: personal cleaning products (soaps, shampoos,
mouthwash, etc.); household paper products; cleaning products and solvents;
chlorides; detergents; cooking oils; plumbing fixtures, chemicals, and copper
pipe; paint products; photo processing chemicals; and synthetic dyes and
inks.а
Advantages: These taxes could generate
significant revenues, if a wide array of products were included in the tax base
and rates were at 3% or more of sales price.а
When collected directly from producers/manufacturers as opposed to
over-the-counter, they are relatively easy to collect.а They can heighten awareness of the negative
environmental impacts of such products, and lead to behavioral shifts such as
conservationа and the development of
new, "safe" products.
Limitations: These taxes are regressive, impacting both
small producers and consumers adversely.а
It is difficult to define and limit the tax base, as the list ofа harmfulа
products is so large, and data on adverse environmental impacts small.а The lack of quantitative toxicity data makes
it difficult to employ a more equitable, graduated rate system for different
products.а Administrative complexities
impact the stability and predictability of the revenue stream, as new products
and producers will appear or disappear over time, and be imported.а These taxes create pollution havens if the
tax base and rates are not uniform across States, which is hard to
achieve.а Industry and consumer
resistance may be high.а For many
products, green taxes may be best run as a federal and not State program.
References of
Further Information:
U.S. EPA Report to Congress, Alternative Funding Study: Water Quality Fees
and Debt Financing Issues,а Syracuse
University,а June 1966;а Natural Resources Defense Council; Reprint
of "Life and Taxes", The Amicus Journal, 1995;а Association of Metropolitan Sewerage
Agencies, "A Federal Green Fee for Clean Water",а July 1996.
аааааааааааааааааааааааааааааааааааааааааааааааааааа HARD-TO-DISPOSE
TAXES
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
Description:аа
Taxes on hard-to-dispose items that contribute heavily to solid waste
disposal problems, such as new or used tires and lead acid batteries, paint and
solvent containers, and used oil.а They
can be assessed at a flat rate per item, or as a percentage of the value of the
item.а When collected at the time of
purchase, they represent a type of green product tax .а If collected at the time of disposal, they
are like solid waste disposal fees (see page 7-6, Deposit Refund Systems).
Actual Use:а
These taxes now are used extensively by States and, for some items, as
part of local government recycling and disposal programs.а For example, Arkansas charges $1.50 for each
tire sold at retail and $10.00 for each car battery purchased if customer does
not bring the old battery in exchange.а
Florida charges $1 for each new tire or battery purchased, while North
Carolina assesses 1% of the value of each tire purchased.а Other States imposing taxes for new tires
include Kansas, Nebraska, Oklahoma, Oregon and Wisconsin.аа Montana charges a junk vehicle fee.а The Federal Highway Trust Fund has a
graduated tire tax ranging from $.15/lb. to $10.50/lb.а Used oil taxes are imposed in Florida and a
number of other States.
Potential Use:а
аThe tax base could be broadened by imposing
charges onа any items contributing to
landfill problems, such as fast food packaging materials, cars, mattresses and
household appliances, or on goods that have no recyclable content, such as
disposable diapers.а Some taxes might be
refundable analogous to deposits on recyclable or reusable material like glass
bottles.а Florida's Advance Disposal Fee
exempts any item, such as aluminum and steel cans, 50% of which is recycled
Statewide. Sales taxes also could be imposed on surrogates for landfill use,
such as plastic garbage bags, garbage and trash cans, and recycling bins.
Advantages:а
Hard-to-dispose taxes are easily understood by the public and provide a
direct cost/benefit relationship when proceeds are used for local landfill,
incinerator or recycling costs.а As in
Arkansas and Florida, taxes could be structured to encourage recycling of
reusable commodities and encourage recycling markets, although this leads to an
unpredictable and diminished revenues.
Limitations:аа
It may be administratively difficult to separate out specific
commodities for taxation.а Double
taxation, if such products are also taxed as green products, may be hard to
avoid and would heighten inequities. Ifа
taxes are collected at the point of disposal and not sale, collection
may be administratively expensive, andа
illegal dumping may result.а This
may also be the case if local and/or State fees are not uniform.а Revenue generation and the environmental
goal of encouraging conservation/recycling are very much in conflict for these
taxes.
References for
Further Information: Natural
Resources Defense Council Reprint, "Life and Taxes", The Amicus
Journal, 1995;а New York State
Department of Environmental Conservation, аSurvey of State Funding for Solid Waste Management, June 1991.
аааааааааааааааааааааааааааааааааааааааааааааааааа HOTEL
AND RESORT TAXES
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа а
Description: Hotel and Resort taxes are taxes on room
accommodations, or occupancy, charged either per night or as a percentage of
the room rate.
Actual Use: аBoth
State and local governmentsа have used
hotel and resort taxes for various purposes, including alleviating the burden
placed by tourism on the local culture.а
For example, Dade County, North Carolina used occupancy tax proceeds to
finance a new wastewater treatment facility made necessary by the influx of
seasonal tourists.а Delaware dedicates
12.5% of its public accommodation tax to beach preservation.а Flagstaff, Arizona has a 0.2%, 10-year УBBBФ
tax on hotels, bars and restaurant charges dedicated to beautification,
greenways and trails, as well as marketing and economic development.а Montana allows resort communities to charge
up to a 3% tax on goods and services sold to tourists, such as hotels,
campsites, restaurants and skiing.а
Designated Colorado communities have a similar tax.
Potential Use: аOccupancy taxes could be used to finance operating costs for State
and local parks and natural areas that attract tourists.а Revenues could also finance operating and
capital costs for local services.а For
example, occupancy tax revenues could finance capital costs for the expansion
of a solid waste facility to accommodate the influx of tourists to a particular
area.
Advantages: аOccupancy taxes spread the costs of maintaining State and local
natural areas and government services to those who benefit from them.а Because non-local and out-of-State residents
must pay such taxes, they are equitable and maintain a good cost/benefit
relationship.
Limitations:а
Since the
demand for hotel space is relatively elastic, a price increase could reduce
occupancy rates, and ultimately tax revenues, particularly if a city or county
unilaterally imposes an occupancy tax higher than in surrounding areas.а If no occupancy tax currently exists,
collecting occupancy information for hotels, motels, and rental units each
month could involve high administrative costs.а
Revenue yield might be low, unpredictable, and lack stability.
Reference for
Further Information:
The Trust for Public Land, Greensense: Financing Parks and Recreation,
Phyllis Myers, Editor, San Francisco, CA, Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
INSURANCEа PREMIUM TAXES
Description: аThese
are taxes that are levied on insurance premiums, or on the gross receipts
ofа insurance businesses.
Actual Use:а
Insurance taxes are used by State governments, and they are frequently
dedicated to pension funds.
Potential Use: The proceeds from premium taxes
could be dedicated based on the type of insurance.а For example, proceeds from taxes on auto insurance could fund air
pollution control and proceeds from taxes on homeowner's insurance could fund
operating costs ofа water and wastewater
facilities.а The concept could be
expanded to include liability insurance required in some States for projects
falling under Superfund laws, and revenues collected could be used to provide
funds for abandoned facilities orа very
small facilities for which liability insurance is very costly.
Advantages: Taxes on insurance have a large tax base and
thus could yield a significant and predictable revenue stream at a modest
cost.а For mandatory types ofа insurance, such as auto liability and
residential fire insurance, and flood plain insurance in some States, revenues
will be extremely dependable.
Limitations:а
Insurance
premiums are not a good proxy for assessing the environmental risk of an
individual.а For example, an air
pollution controlа tax based on auto
insurance premiums would capture less revenue from older cars that have lower
premiums, butа generally higher
emissions levels, than from newer cars.а
Thus, inequity may result and lower the cost/benefit relationship.а Collection by governments may prove
difficult, and administrative tracking will be costly.
Reference for
Further Information: аApogee Research, Inc., аPreliminary Review of Alternative Superfund
Financing Schemes (unpublished report), July 1991.
аааааааааааааааааааааааааааааааааааааааааааааааааааа аLITTER CONTROL
TAXES
Description: Litter taxes are taxes on the sale of virgin
newsprint and paper products, such as newspapers and magazines, that contribute
significantly to solid waste volume.а
When assessed as sales taxes, litter taxes represent a type of green
product sales tax.
.
Actual Use: The imposition of litter control taxes is
generally limited to State governments.а
At least three States use them extensively, dedicating tax receipts to
solid waste programs.а For example,
Nebraska's litter tax funds solid waste facilities.а The tax can also be structured to encourage conservation.а To encourage newspapers to use recycled
newsprint, North Carolina taxes virgin newsprint and dedicates the proceeds to
a solid waste management trust fund.а
Washington spends its litter control tax revenues on recycling and waste
reduction programs.
Potential Use:а
These taxes could be used to finance any solid waste disposal costs,
including facility operation and maintenance, and State recycling facility and
program costs.а The concept could be
extended to cover sales catalogs which would broaden the tax base and capture
revenue from out-of-State businesses.
Advantages:а
Litter
control taxes might encourage consumers to buy less ofа the taxed commodity, reducing the total amount
of solid waste but also lowering revenue yield.а The cost/benefit ratio can be strong depending on program
dedication.а If taxes are collected
directly from producers, they can be relatively easy to collect and
administer.а However, equity is reduced if
the tax is then passed on to the consumer.
Limitations:а
Virgin newsprint and other paper taxes wouldа face political opposition from the paper industry or other
affected industries.а
Reference for
Further Information:а National Conference of State Legislatures
(NCSL), Earmarking State Taxes, Denver, CO, April 1995.
аааааааааааааааааааааааааааааааааааааааааааааа MARINEа AND AVIATION TAXES
Description:а
These are
taxes on fuel used by commercial or recreational boats and inland barges, and
aviation fuel, tickets and airport service charges. Marine and aviation fuel
taxes could be implemented either by removing the exemptions from highway fuel
(gasoline) taxes which exists in many States, or by instituting fuel tax
surcharges at different rates.
а
Actual Use:а
Marine fuel
taxes are generally limited to State governments.а In Alaska, the tax funds water and harbor facilities.а In Iowa, marine fuel revenues are dedicated
to Department of Natural Resources programs.а
California, Maryland, Oregon and Washington also use these tax receipts
to fund coastal and estuary programs.а
Aviation fuel and airline ticket taxes (almost 8.5% of ticket value) are
assessed by the federal government, and many localities impose airport service
fees to all passengers ofа
$1-$3.00,а which are initially
collected by commercial airlines and were authorized under the 1990 Federal
Aviation Safety and Expansion Act, as well as aircraft landing fees.а The federal government also imposes a port
tax (about .04% of cargo value) and an inland barge fuel tax (slightly over 10
cents/gallon).
Potential Use:а
ааMarine tax revenues could be used to fund
research on water pollution,а
particularlyа on near coastal and
estuarine water quality, and marine fuel spill prevention and response.а Sewage pump-out stations for recreational
boaters also is a likely area for funding.а
Taxes on the use of public docking and pump-out facilities could be used
as a surrogate tax and, if flat tax rates were employed, might be easier to
collect.а State or localities could
assess surcharges on federal air ticket, port, and inland barge fuel taxes,
although these charges already are quite steep.а Aviation-related taxes, often used for aircraft safety and
airport renovation, could be used to support air pollution and noise abatement
programs as well, or safe disposal of de-icing fluids.
Advantages:а
Implementing marine fuel taxes assures equity among all gasoline and
diesel fuel users, although current marine fuel rates generally are lower than
highway gasoline taxes.а Having boat and
barge users pay some of the costs of pollution control associated with their
activities creates a solid cost/benefit relationship, as well as heightening
awareness of potential water quality problems.а
Aviation-related taxes can be a particularly good source of local
revenue and, similar to rental car taxes, help ensure equity by including
out-of-State travelers..
Limitations:а
If a State
does not already tax marine and aviation fuel, it could be costly to set up a
collection and accounting system.а The
same is true for local mooring and port taxes. The revenue stream probably will
fluctuate depending on a number of factors, including weather and travel
conditions, and the current cost of air travel.
Reference for
Further Information:
GovernorТs Panel Financing Alternatives for MarylandТs Tributaries
Strategies, Maryland University Sea Grant College, August 1995.ааа
MISCELLANEOUS
SELECTIVE SALES TAXES
Description: Any product or specific activity
could be subject to a State or local sales and use tax, provided authority is
granted by the State to a locality and voter approval is gained.а Local sales tax may exist in States where no
general sales and use tax exist.а The
taxes described are termed miscellaneousа
because they exist sporadically, and are designed to leverage or replace
other monies.
Actual Use: In recent years States and
localities have been active and extremely creative in imposing taxes on
individual products or uses.а Most taxes
are relatively small and limited by a specific time period, or to raise a specific
dollar amount, and then are ended.а
Sales taxes are designed to meet unique sales characteristics of
individual communities, and may or may not be environmentally-or green
product-related, although the relationship may attract more public
support.а Examples ofа local sales taxes are the BBB (bed, board
and boozeФ) tax in Flagstaff, Arizona which raises $2 million a year for open
space and trails and is leveraged by ArizonaТs lottery and federal
transportation funds.а Virginia Beach
uses a tax (sales and service) on cellular phones to make regular payments on
farmland development rights, with Treasury bond proceeds guaranteeing the end
balloon payments.а Texas taxes sales of
sporting goods (the only State to do so), imposed to replace declining
cigarette tax revenues supporting parks and recreation initiatives.а Minnesota has a $2 per ton birdseed
manufacturing tax, and Florida places a penny per pound assessment on
Everglades-grown sugar dedicated to the Everglades Trust Fund which leverages
additional government dollars.
Potential Use: Any locality may seek to establish
a selective sales tax for a special, and widely supported environmental
purpose, such as parks, recreation, open space, nature centers and trails,
environmental education, and the like.а
Fees could be designed in concert with federal, State and private sector
programs to leverage additional monies.а
They could be particularly useful in States where there is no general
sales and use tax.
Advantages: The advantages of selective sales
tax pertain to their specificity and short-term nature,
thus yielding direct environmental benefits and
heightened public environmental awareness without becoming too burdensome.а The leveraging potential, which may be
spelled out at the outset, adds to revenues and increases popularity.а Selective sales taxes may be less regressive
than general sales taxes since in most cases a Уhigher endФ product or activity
is taxed, and non-residentТs pay as well.
Limitations: There may be voter revolt against
special taxes, particularly if the project is not properly presented, widely
supported, or completed on a timely basis.а
Voter approval is not assured.а
Revenue raising potential may be small, unstable or unpredictable if
there are ways to avoid the tax.
Reference for Further
Information: The
Trust for Public Land, Green Sense: Financing Parks and Conservation,
Phyllis Myers, Editor, San Francisco, CA, Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
MOTOR FUEL TAXES
Description:а
Motor fuel
taxes, commonly termed gasoline taxes, are imposed on fuel used in all
vehicles, except off-road vehicles.а
Fuel includes both gasoline and diesel fuel.а Off-road vehicles typically are exempted because taxes normally
are used to fund highway improvements.
Actual Use:а
All 50 States have gasoline taxes, typically dedicated to highway
construction and maintenance and sometimes to local streets and roads.а Three States, Illinois, Massachusetts and
Nevada currently earmark between .3% and 1.7% to environmental programs. California
earmarks $10 million annually for open space acquisition by the State Land
Trust Funds.а At least four States, New
Mexico, Oklahoma, Vermont and Washington, add a surcharge to existing taxes for
environmental spending.а Total gasoline
rates generally range from 8 cents to 25 cents per gallon, with surcharges
being considerably less, typically under one cent per gallon.а The Federal Leaking Underground Storage Tank
Trust Fund is financed by a 0.1 cent per gallon federal excise tax on motor
fuels.а The Federal Highway Trust Fund
is supported in large part by federal gasoline taxes, which have averaged 5
cents/gallon less than similar State taxes.
Potential Use:а
Because of
the impact of auto emissions on air quality, revenues from the tax could be
used to fund air pollution research or control.а State motor fuel taxes could also be used to finance underground
storage tank clean-up, such as done in Illinois.
Advantages:а
Because of
the broad tax base, high tax rates, and somewhat inelastic demand, gasoline tax
receipts have the potential to raise considerable revenues, although surcharges
would raise less and may be less predictable and stable.а Gasoline taxes exhibit a strong cost benefit
relationship when dedicated to environmental programs.а Since all States already have motor fuel
taxes, collecting surcharges would involve few additional administrative costs.
Limitations:а
Many States
have historically dedicated motor fuel taxes to highway funds, and in some
States, revenues from these taxes may be constitutionally or statutorily
dedicated to these uses.а Since the tax
also increasingly is used to raise general revenues at the State level, and is
the largest source of earmarked road money, it is one of the slowest growing
taxes levied by States because gasoline consumption per mile has declined and
most States use flat per gallon rates. Thus, it may be difficult to legislate
new earmarking and surcharges, and safeguard dedication to environmental
programs.а Gasoline taxes are
notoriously regressive and, thus, inequitable.
Reference for
Further Information: National
Conference of State Legislatures (NCSL), аEarmarking State Taxes, Denver, CO, April 1995.
аааааааааааааааааааааааааа MOTOR
VEHICLE SALES AND REGISTRATION TAXES
Description:а
Motor vehicle taxes are placed on the sale of new and used vehicles by
States.а They may include recurrent
(annual or biennial) registration of existing vehicles, or registration fees
may be used as a surrogate for a sales tax. Some States incorporate
emission-based fees, including for inspection, into this tax.
Actual Use:а
All 50 States charge substantial taxes for the purchase of motor
vehicles, as well as ongoing registration and licensing taxes.а Generally, the funds raised go to pay for
highway-related State programs.а At
least three States, including Washington, now dedicate a small portion of these
types of taxes to air pollution control programs.а Washington also charges a tax surcharge on campers and trailers.а Illinois raised $5 million in 1997 from the
title transfer tax to fund State and local trails and bike paths.
Potential Use: аEarmarking a portion of these taxes or tax surcharge receipts to
air pollution control is an obvious choice.аа
Revenues could be dedicated to solid waste programs as well.а The sale or transfer of recreational
vehicles and heavy trucks could be taxed at higher rates.
Advantages: These taxes clearly demonstrate the
relationship between motor vehicles and air pollution.а They could be graduated depending on the air
pollution control devices on the vehicles, e.g., older cars with less efficient
catalytic converters could be assessed more, as well as on the specific use of
the vehicle.
Disadvantages:а
Many States have statutory or constitutional limits on the earmarking of
these funds, such as with motor fuel taxes.а
These taxes are probably not a large revenue source because of this fact
and the limited tax base.а
Collectability may be made more difficult if special surcharges are
added, and auto individual dealers may be able to avoid new charges.
Reference for
Further Information: аNational Conference of State Legislatures
(NCSL), Earmarking States Taxes, Denver, CO, April 1995.
а
аааааааааааааааааааааааааааааааааааааааааааааа PETROLEUMа PRODUCTSа
TAXES
Description: Petroleum products taxes could cover a wide
range of products derived from the refining of crude oil.а Excluding motor vehicle gasoline, diesel and
aviation fuel, special petroleum products might include plant condensate,
lubrication oils, crankcase motor oil, kerosene, benzol, residual fuel,
petroleum coke, asphalt base, and liquefied or liquefiable gases such as
butane, ethane and propane.а Derivatives
such as petroleum jellies, cleaning solvents and asphalt paving might also be
included.а Petroleum product taxes
present a type of specialized green product fee, and could be imposed as a
percent of production, wholesale or retail value.а Fuel oils and gas for residential and commercial heating
represent an energy tax, discussed earlier along with electric energy
surcharges.
Actual Use: These taxes increasingly are used
by States, and dedicated to underground storage tank projects and oil spill or
conservation funds.а Tennessee earmarks
28.6% of its special petroleum product tax to an underground storage tank fund,а Oklahoma dedicates its excise taxes on
petroleum and gas to oil conservation and well plugging.а Washington and Maine dedicate all tax
receipts to oil spill response and insurance.а
Nebraska taxes petroleum wholesalers directly.а Hawaii earmarks a petroleum product barrel import tax for
groundwater protection.а New Hampshire
taxes all stored oil.а The Federal
Superfund Trust Fund was supported in part by a tax of about 10 cents per
barrel of domestic and imported crude oil, and by petroleum chemical feedstock
and other taxes.а The Federal Highway
Trust Fund is supported аby taxes on the
sale of ethanol/methanol from petroleum.
Potential Use:а
Petroleum product taxes could be used by any State to fund oil leakage
or spill projects.а Because of existing
federal taxes, equity would be enhanced by avoiding federally-taxed products.
The list could be expanded to certain plastics and synthetic rubbers.
Advantages: The cost/benefit relationship between the
pollution source and cleanup or prevention is attractive and easily understood,
especially with oil production and storage. Demand is inelastic.
Limitations: Administration and collection could
become complicated. It might be difficult to single out products for taxation
in the first place, as the potential list is long, especially if expanded to
plastics. There isа potential overlap
with other taxes, particularly federal excise taxes supporting the
above-mentioned federal trust funds,а
and there are many possible collection points.а Foreign imports would have to be accounted for in some fashion,
or substantial substitution might occur.а
It might prove easier to charge certain petroleum producers directly.
The petroleum and chemical industries are already heavily taxed, resulting in
increased inequity of impacts.а
References for
Further Information:
U.S. Department of Transportation, Federal Highway Administration, Financing
Federal-Aid Highways, May 1992;а
Congressional Research Service Report,а
Summaries of Environmental Laws Administered by the Environmental
Protection Agency, January 1993.
аааааааааааааааааааааааааааааааааааааааааааааа REAL
ESTATE TRANSFER TAXES
Description:а
Real estate transfer taxes are charged to the buyer and/or seller
ofа real property at the time of
sale,а based on a percentage of sale
value of the property, a flat deedа
registration tax, or a combination.а
A similar tax is called a documentary stamp tax.
Actual Use: Real estate transfer taxes are widely, and
increasingly, used by both State and local governments.а At the State level the tax has funded trust
funds for environmental infrastructure and open space/natural lands acquisition,
park rangers salariesа park maintenance,
watershed and wetlands protection, and conservation easements, and has been a
dedicated source of payment for revenue bonds for these projects.а For example, Florida and Tennessee finance
land acquisition and habitat and wetlands restoration with taxes ofа 7.5 cents/$100 and 28 cents/$1000,
respectively.а Montana finances State
park programs, and Washington uses tax revenues to fund wastewater and drinking
water capital facility construction.а
Illinois raised $13 million in 1997 to fund a grant program for local
open space acquisition.а New York raised
$120 million in the same year dedicated to pay a portion of the interest on its
1996 mega-environmental bond act, particularly for watershed protection
projects, and North Carolina and Vermont similarly fund their environmental
bonds.а MarylandТs 0.5% tax funds
Chesapeake Bay protection.а At the
county and city level, Cape Cod voters approved (and subsequently eliminated) a
1% tax to finance a land bank for open space and trails, but not before ten
other Massachusetts town asked the State to approve similar local real estate
transfer taxes.а Colorado communities
use the tax for open space and conservation initiatives.
Potential Use:а
Real estate
transfer taxes could be dedicated to any environmental, land-oriented program,
or mitigation of the impacts of rapid land development such as agricultural and
urban runoff.а The tax could be extended
to new construction.
Advantages: Real estate transfer taxes based on property
values generate a large amount of revenue at relatively low rates.а Most governments already have system in
place for recording sales which ease collection, Tax rates can be graduated to
increase equitability and a close cost/benefit relationship.а The tax leverages additional monies when it
is used as a source of bond repayment.а
Dedication of revenues to popular land protection programs enhances the
acceptability of the tax.
Limitations: Revenues depend on the level of real
estateа market activity, which is subject
to wide and frequent fluctuations based on economic conditions/interest rates,
weather and other factors.а Application
of the tax may have inequitable distribution effects, and increased housing
costs in some areas.а Localities must
seek State legislative approval to impose the tax, which has not been easy.
Reference for
Further Information: The Trust
for Public Land, GreenSense: Financing Parks and Conservation, Phyllis
Myers, Editor, Spring and Fall 1997, San Francisco, CA, Telephone: 800-714-LAND,
Internet: http://www.tpl.org/tpl.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааа RENTAL
CAR TAXES
Description:а
These types
of taxes are levied on rental cars, or on the gross receipts of rental car
businesses.
Actual Use:а
аLike hotel taxes, many States and counties
use the revenues raised from rental car taxes for beatification and tourism
promotion purposes.
Potential Use: Because of the impact of rental care use on air
quality, a share of rental car taxes could be dedicated by State and local
governments to fund the operating costs of air pollution control programs.а Alternatively, these taxes could be used to
finance water quality activities in lake and seaside area frequented by
tourists, or to mitigate any environmental problem exacerbated by increased
tourism.
Advantages:а
Rental car
taxes could help spread the costs of maintaining air and water quality to those
who benefit from it, including out-of-county and out-of-State visitors, which
would enhance equity considerations. These taxes might also serve as an
incentive for the visitors to use public transportation, reducing mobile source
air emissions but producing a corresponding drop in revenues.
Limitations:а
At the local
level, imposing a new tax or increasing an existing tax could cause a city or
county to lose rental car business to other, lower-tax jurisdictions.а Similarly, State business as a wholeа could be affected negatively, particularly
in areas bordering other States.а The
revenue yields from rental car taxes may be small and unpredictable.
Reference for
Further Information:а Virginia Department of Revenue, Richmond VA,
has information on Virginia's rental car tax.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа TOBACCO
TAXES
Description: These taxes are levied on tobacco, based on
volume or as a percentage of value.
Actual Use: All 50 States have tobacco taxes on
cigarettes,а pipe and chewing tobacco,
and cigars.а However, tax receipts
typically are used for general revenue purposes.а Atа least three States,
Idaho, Minnesota and Washington, dedicate a portion of tobacco taxes to water
quality, including wastewater treatment facility construction, generating $3
million, $16 million, and $31 million, respectively.а California dedicates tobacco taxes to health programs including
indoor air protection.
Potential Use:а
Tobacco
taxes could be used to finance programs for agricultural non-point source
control, such as offering economic incentives to encourage tobacco farmers to
use best management practices.а In
States without tobacco farming, the tax could be dedicated to indoor air
pollution or
solid waste programs.а
Advantages:а
Since demand
for tobacco still is not too elastic, small earmarks or tax increases in the
form of an environmental surcharge might yield significant revenues.а However, larger tax increases might produce
a behavioral response of declining smoking having personal as well as
environmental benefits.а Some States,
such as Texas have experienced a large decline in revenues from cigarette
sales.а Texas now uses a sporting goods
sales tax to compensate for lost revenues, generating $32 million annually.
Limitations: Tobacco taxes are highly
regressive, and the failure of states to dedicate tax revenues to the
environment results in a weak cost/benefit ratio.а The tobacco industry is in turmoil due to litigation and recent
congressional debate, and a further decline in smoking may ensue.а A dedication of revenues to the environment
may not send the right signal for anti-smoking campaigns.
Reference for
Further Information: U.S. EPA,
Report to Congress, Alternative Funding Study: Water Quality Fees and Debt
Financing Issues, Syracuse University, June 1996.а The Trust for Public Land, Green Sense: Financing Parks and
Conservation, Phyllis Myers, editor, Spring 1995, San Francisco, CA,
Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
аааааааааааааааааааааааааааааааааааааааааааааааааа WATERCRAFT
SALES TAXES
а
Description: Watercraft taxes may be imposed on boat sales
and/or boat title registration and transfer.
Actual Use:а
Although
State use of these taxes is widespread,а
tax receipts generallyа are not
dedicated to the environment.а
Currently,а Maryland, Virginia,
North Carolina and Washingtonа earmark
the tax to marine estuarine programs.а
Potential Use:а
A tax or a
percentage of a tax on boat sales could be specifically dedicated to water
pollution control or marine fuel spill cleanup because of the impact of
recreational boating on water.
Advantages:а
Boat owners
would pay some of the costs of maintaining water quality, which creates a
strong cost/benefit ratio.а
Limitations:а
Revenue
yield is modest andа unstable, as general
economic conditions and other factors influence boat sales.а Even in Virginia and Maryland, with strong
estuary protection programs, boat sales taxes are actually several percentage
points lower than the standard sales and use tax due to the strength of the
boat-building and fishing lobbies.
Reference for
Further Information:а Governor's Panel, Financing Alternatives for
Maryland's Tributary Strategies, Maryland University Sea Grant College,
August 1995;а Virginiaа Department of Taxation, 1990 Virginia Sales
and Use Tax Expenditure Study, Richmond, VA, 1992.
OTHER
Description:а
Actual Use:а
Potential Use:а
Advantages:
Limitations:а
Reference for Further
Information:а
ааааааааааааааааааааааааа COMPARISON
MATRIX FOR SELECTIVE SALES TAXES
|
Criteria/ Selective Sales Tax |
Actualааа
Use |
Revenueа
Size |
Revenueа
Stability |
Admini-strativeааа Ease |
Equityаааа
|
Cost/ Benefitа
Ratio |
Environ-mentalааа Benefit |
|
аAlcohol |
Low |
High |
Mod. |
High |
Low |
Low |
Mod.. |
|
аAmusement |
Low |
аLow |
Low |
Mod. |
Mod. |
Mod. |
Low |
|
аEnergy |
Low |
High |
Mod. High |
Mod. |
Low |
Mod. |
Mod |
|
аFertilizer аPesticide |
Low |
Mod.аааа
|
Mod. |
Mod. |
Mod |
Mod. |
High |
|
*Greenааааааааааааа Product |
Mod. |
Mod.-аааааа
High |
Mod. |
Mod. |
Low |
Mod. |
High |
|
*Hard-to-аааааааа Dispose |
High |
Low |
Low |
Mod. |
Low |
High |
High |
|
*Hotel |
High |
Mod. |
Mod. |
Mod. |
Mod. |
Mod. |
Mod. |
|
аInsurance |
Low |
аLow-ааааааа Mod. |
Mod. |
Low |
Low |
Low |
Low |
|
аLitter |
Low |
аLow-ааааааа Mod. |
Mod. |
Mod. |
Low-аааааа
Mod. |
Mod. |
High |
|
аMarineа &аа
ааааAviation |
Mod. |
аMod. |
Low |
Low |
Mod. |
High |
Mod. |
|
аMisc.
Sales аааааTaxes |
Low |
аLow |
Low |
Mod. |
Mod. |
Low |
Low |
ааааааааааааааааааааааааааааааааааааааааааааа COMPARISONа MATRIXа
continued
|
Criteria/ Selective Sales Tax |
Actual Use |
Revenue Size |
Revenue
Stability |
Admini-strativeа Ease |
Equityа
|
Cost/ Benefit Ratio |
Environ-mentalа Benefit |
|
*Motorааааааааааааа Fuel |
Mod. |
High |
Mod.аа
|
High |
Low |
High |
аHigh |
|
а
Motorааааааааааааа Sale |
Low |
Low |
Low |
Mod. |
Mod. |
Low |
Low |
|
а
Petroleum |
Low. |
Low-ааааа
Mod. |
Mod. |
Mod. |
Mod. |
Mod. |
Mod. |
|
*Realаааааааааааааааа Estate |
High |
Mod.- High |
Mod. |
High |
Mod. |
Mod. |
High |
|
а
Rentalаааааааааааа Car |
Low |
аLow |
Low |
Low |
Mod. |
Mod. |
Low |
|
*Tobacco |
Low |
High |
Mod. |
High |
Low |
Mod.- High |
High |
|
а Watercraft |
Low |
Low |
Low |
Mod. |
Mod. |
High |
High |
High -а
High use (over 25 States/many localities); criteria score high (many
advantages);
High revenue yield (over $25 million
annual State yield currently)
Mod.-а
Moderate Use (10-25 States/many localities); criteria score in medium
range;
Moderate revenue yield
Low -аа
Low or rare usage; many limitations and one or more major implementation
problems exist;
Low revenue yield
*а Star
indicates best rated mechanisms
1.B.а FEES
1.B.а FEES
Description:а
A fee is a financial charge for services rendered, or activity
undertaken.а Fees can be based on the
service provided or benefit received, including potential negative
environmental impacts.а Fees establish
direct links between the demand for services and the cost of providing
them.а For example, local utilities
require customers to pay for the cost of providing water and wastewater
services.а State permitting fees are
used to finance the cost of processing permit applications,а e.g., NPDES permit fees.аа Inspection/monitoring fees cover the
inspection and certification of equipment, facilities, or employees for
environmental compliance.а Park and
recreation fees finance oversight of the general public's
environmentally-sensitive activities.
Most of the fees described in this section are
dedicated to State or local program budgets, i.e., to cover personnel and other
operating costs, as opposed to be capital-generating fees for environmental
facility construction.а Fees that
provide environmentally-related services, e.g., laboratory testing fees, are
termed administrative service fees.а Fees that allow a certain activity to be undertaken that may
impact the environment negatively, e.g., septage disposal, are called activity
fees.а User fees that pay for
utility services are called utility fees.а Utility fees often are applied to capital cost recovery.
Revenue yield from administrative service and
activity fees is typically modest, although the utility fee revenue stream may
be significant.а Another characteristic
of administrative service and activity fees is that many are one-time charges,
i.e., imposed only once, or imposed periodicallyа at the time of demand.а In
contrast, most utility user fees are recurrent charges imposed at regular
intervals.
Advantages: Well-structured fees can be an
equitable means of matching program costs to program beneficiaries.а In many cases, instituting a fee essentially
eliminates a subsidy for a government service, freeing up general revenues that
could be used to fund other environmental programs.а Thus by definition, many fees have a very close cost/benefit
relationship and, ifа graduated rate
structures are used, are highly equitable.а
Because they are imposed at the time of service, or through regular
billing, they may be relatively easy to collect.а Behavioral shifts do not reduce revenue potential as much as with
sales taxes.а In many States, service
and activity fees can be set administratively, meaning that no legislative
action is required to impose them.а
Utility fees, in contrast, typically require public approval or, in the
case of privately-owned facilities, are subject to State regulation.
Limitations:а
Since they
are targeted to a specific service or group, fees have a narrower revenue base
than most taxes.а In many States, administrative
service fees cannot exceed the costs of providing a service, although there is
often wide latitude in defining what constitutes service.а Thus while equitable, revenue potential is
sharply curtailed.а Some States have
expressed increasing concern over a growing resistance to both administrative
and activity fees among industry groups, as well as the general public.а Likewise, voters frequently defeat passage
of even modest utility user fee increases.
Summary:а
Increased
use of administrative service and activity fees by States and localities is a
well-established trend in environmental program funding, encouraged by the
federal government.а Most administrative
service and activity fees are used solely to offset government operating costs,
and, although equitable and directly related to costs and benefits, they
provide only a modest revenue yield.а In
an effort to raise more revenue and cover more budgetary costs, the number of
State fees has proliferated in recent years, and may have led to some public
backlash.
Utility user fees have been in existence for a
long time, particularly for public water supply, and employ increasingly
sophisticated rate structures and billing mechanisms.а In recent years, the policy goal of "full-cost pricing"
appears to be more widely recognized and may provide capital cost-recovery in
addition to ongoing operating costs. However, utility charges may be fashioned
to accommodate other policy goals such as economic development, suburban
growth, and privatization.
LIST OF FEES
(In
Alphabetical Order)
ааа
1.аа Access Rightsааа
ааа
2.аа Bond Issuance Fees
а
*3.аа Connection Fees
ааа
4.аа Construction Fees
ааа
5.аа Franchise Fees
а
*6.аа
Inspection/Monitoring/Testing Fees
а
*7.аа Licensing and Recreational
Fees
а
*8.аа Local Aquifer Protection
Fees
а
*9.аа Local Water/Wastewater
Utility User Fees
*10.аа
Permitting Fees
а
11.аа Product Registration Fees
а
12.аа Professional Certification
Fees
а
13.аа Septic System Impact Fees
*14.аа
Solid Waste Disposal Fees (Tipping, Septage/Sludge Fees)
*15.аа
State Public Water Supply Withdrawal Fees
*16.аа
Tolls
а
17.аа Transporter Fees
а
18.аа Water Rights Application
Fees
а
19.аа Well Permit/Pumping Fees
ааааааааааааааааааааааааааааааааааааааааааааааааа аааааа
*а Stars
indicate most highly rated mechanisms as described in the Comparison Matrix at
the end of the narratives.а See
Introduction to the Guidebook for a description of the criteria
used.а Ratings of УHighФ, УModerateФ,
and УLowФ are for comparison purposes only, as some ratings are necessarily
subjective and data are incomplete
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа ACCESS
RIGHTS
Description:а
Access
rights or capacity credits are local fees, imposed on a one-time basis,а onа
new users requesting access, and old users requiring increases in
capacity, to water and sewer facilities.а
In exchange for payment, applicants are guaranteed future access to a
contracted amount of system capacity that has been reserved for their use.
Actual Use:а
Many local
communities sell water and sewer access rights to finance expansion or upgrades
of water and sewer systems.а Water and
sewer access rights programs are structured in many different ways.а The basic principle is that for a set,
one-time charge, the purchaser of a water and/or sewer access right is
guaranteed the right to connect to the system in the future.а This is important since possible sewer
moratoriums at a later date would prohibit new residential or commercial
development.
Potential Use:а
The
principle of capacity rights to a new facility could be broadly applied.а For example, developers, industry and
households could be required to purchase access rights to solid waste
management removal or treatment services, and revenues from the sale of the
rights could be used to finance construction of future solid waste management
facilities.
Advantages:а
New users of
government services pay for the expansion, which helps facilitate governmental
planning and provides needed capital in advance of construction.а The cost/benefit relationship thus is very
direct.
Limitations:а
It may be
difficult to sell credits in advance, particularly if a community is not
experiencing a high demand for new housing and commercial activity, or seeks to
attract economic development.а It is
difficult to measure what the needed capacity might be for some new users,
which reduces the likelihood of equity.а
Revenue may be neither large nor stable.
Reference for
Further Information:а U.S. EPA, Alternative Financing Mechanisms, August
1992.
аааааааааааааааааааааааааааааааааааааааааааааааааааааааа BOND
ISSUANCE FEES
Description:а
These are fees that might be imposed by States or localities on
environmentally-related bonds in addition to normal bond "cost of
issuance" fees.а Fees are assessed
as a percentage of total bond value, including general obligation bonds,
special obligation bonds,а
appropriation-backed bonds, revenue and private-activity bonds, and
other bond instruments.а Any
environmental infrastructure construction bond could be included.
Actual Use: New York State collects a bond
issuance fee on all State bonds.а Rates
move on a sliding scale, i.e., 7 basis points (.07% of value) for bonds under
$1 million, 14 basis points/$1-5 million, 21% basis points/$5-10 million, 28
basis points/$10-20 million, and 35 basis points for bonds over $20
million.а Revenues in New York are
collected by the bond issuance agency or authority but rebated to the State
budget general fund.
Potential Use:а
Bond issuance fees could be used by any level of government or special
authority issuing bonds, and dedicated to its general infrastructure capital
account.а Fee proceeds might also be
used to lower specific debt reserve fund requirements, pay for bond insurance
or legal fees,а makeа hardship, no-interest loans.а For the State Revolving Fund (SRF) program,
these fees cannot be used to cover SRF loan administrative cost due to recent
EPA restrictions on using more than 4% of SRF capitalization grants for
administrative purposes but fees from other bonds could also be used.а
Advantages: Such fees could provide a significant revenue
stream when bond issuing amounts are high.а
If graduated fee schedules are established, fees are equitable and
provide a good cost/benefit ratio depending on subsequent environmental
dedication.
Limitations: The revenue stream is unpredictable
since it depends on the local demand for financing, which is influenced by
environmental compliance issues, local debt capacity, and readiness to proceed
with construction.а State
private-activity revenue bond issuance fees may result in a lack of State
competitiveness with local industrial development authorities, which already
may have lower bond issuance costs.а
Fees add to the carrying costs of local agencies undertaking
infrastructure work, and thus may seem counter-productive. The administrative
costs of collecting fees on very small bonds may be prohibitive.а In New York, bond issuance fees were
implemented to support the State budget, not to fund environmental projects.
Reference for
Further Information:а New York State, Public Authorities Law,а Chapter 166а
Section 240, "Cost Recovery on the Issuance of Certain
Bonds",а effective August 1, 1991.
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааа CONNECTION
FEES
Description: аConnection fees are charged to property owners at the time they
hook up to or connect with an existing municipal utility.
Actual Use: аConnection fees generally are limited to local governments.а Hook-up fees and new connection fees are
frequently charged by localities in residential developments for water supply
services and wastewater collection systems, as well as for some industry and
businesses.а At least three States use
drinking water connection fees at present, including Massachusetts, New Jersey
and Nevada, with fees averaging several hundred dollars for each residential
hook-up.а
Potential Use: Many local governments charge low or no
connection fees, particularly forа
businesses,а essentially
subsidizing the cost from general revenues.а Charging connection fees would allow these general revenues to be
used for other purposes.
Advantages: аBeneficiaries pay for the extension of local government
services to them, rather than having current users subsidize new customers,
which increases equity.а Connection fees
could be a strong revenue source with a very direct cost/benefit relationship.
Limitations:а
In contrast
to access rights,а connection fees
provide capital only after, not in advance of the need created by new
residents.а Thus, local governments will
need some alternative means of raising capital before new residents actually
move in, or necessary expansion may not be completed in time.а It is difficult to provide high equity with
connection fees, since water and sewer use may be the same regardless of the
economic status of the household hooking up to the central system.а Connection fees may provide some
disincentive for suburban or rural households to join the central systems, thus
possibly exacerbating environmental problems.
Reference for
Further Information:
Raftelis Environmental Consulting Group (now Raftelis Financial Consulting,
PA), 1998 National Water and Wastewater Rate Survey, Charlotte,
NC, 1998, Telephone: 704-373-1199; Raftelis, George, Comprehensive Guide to
Water and Wastewater Finance and Pricing, second edition, CRC Press/Lewis
Publishers, 1993; National Conference of State Legislatures, аStates as Water Quality Financiers,
Denver, CO, May 1991.а
аааааааааааааааааааааааааааааааааааааааааааааааааааааааа CONSTRUCTION
FEES
Description:а
Construction fees are charged by States and localities on a one-time
basis for the right to construct an environmental facility, most notably for
drinking water and underground storage tanks.а
While they may be used to cover the costs of reviewing construction
plans, environmental impact reviews or permit issuance, such fees are meant in
part to serve as a measure of future environmental impact.ааааа
Actual Use: At least seven States charge
drinking water facility construction fees, including Arkansas, Florida,
Illinois, Missouri, New Jersey, Ohio, and Pennsylvania, in most cases in
connection with a construction permit.а Florida's
fees range from $50 to $1000; New Jersey's vary between $100 and $12,000;
Illinois structures its fee rate on the depth of the water main extensions;
Pennsylvania uses a flat fee structure of $750 per project.а New Jersey and Florida also use flat-rate
underground storage tank construction permit fees of $50-$100 per tank which,
given the large number of tanks, generates close to $2 million annually in each
State.
Potential Use: Fees could be used to cover expenses related to
any future environmental problem, especially those related to private sector
activity.а For example, some small,
privately-owned drinking water facilities provided by developers in new
residential areas, often result in problems as developers abandon or turn
facilities over to the public.а Private
underground storage tanks, landfills, and mines similarly may be abandoned or
improperly maintained.а Annual operating
fees also could be charged by States.а
Currently, New Jersey and Oklahoma levy annual operating fees on
investor-owned drinking water systems.
Advantages:а
Construction fees ensure that States or localities can recover some
costs relating to future environmental compliance, resulting from poor
management or other problems, such as closing landfills or fixing underground
leaks in accordance with new regulations.а
Limitations:а
Fees may be difficult to collect up-front from the private sector.а Revenue yields may be modest and sporadic.
Reference for
Further Information:
U.S. EPA, An Overview of Existing State Alternative Financing Programs:
Financing Drinking Water System Capital Needs in the 1990's, Office of
Water, May 1992; National Conference of State Legislators (NCSL), States as
Water Quality Financiers, Denver, CO, May 1991.
FRANCHISE FEES
Description: Franchise fees can impose on any
private activity that must purchase a franchise to operate a commercial
business.а Typically, the new private
business purchases a franchise to market a parent companyТs goods or services,
using its name, in a particular territory.а
In this instance, fee would be imposed by a State or local government on
the new business, and could be dedicated to an environment program.
Actual Use: Several States, as well as the
federal government, are experimenting with franchise fees on the private
sector, primarily in parks and other public lands.а States and localities are using franchise fees for private
businesses selling products in publicly-owned parks, for example, T-shirts,
hats, toys, or food products bearing the name of the park, or food and beverage
concession fees.а Private parking lots
in parks have been subject to franchise fees.а
Fee for such businesses are onetime, but the public entity also may
collect a portion of annual profits.а
New York CityТs Central Park charged a $1 million fee for DisneyТs
production of УPocahontasФ in the Park.а
Market-driven Уprofit centersФ operating on leased parklands which pay
State and local franchiseа fees include
fees on selling Olympic-type corporate sponsorships, building and operating
sports and entertainment centers piers and bumper boat rides, restaurants and
the like.
Franchise fees may be imposed directly on
selected private businesses, for example, Florida uses a franchise fee on
electric companies, dedicating revenues to parks and recreation.
Potential Use:а
While franchises in parks are becoming more commonplace and innovative,
franchise fees on any new businesses unrelated to parks could be expanded.
Advantages: The benefits of franchise fees are
not only financial, but for parks they can enhance land uses which pay for
themselves.а The market linking of
public and private sector goals leverages revenues, such as additional private
contributions, and enhances future funding opportunities.
Limitations: A major concern for non-park
business franchising is that it may discourage new development and commercial
concerns.а Equity and the cost/benefit
relationship is questionable
if fees are placed on non-environmentally
related businesses and if dedication of revenues is not sustained.
Reference for
Further Information:
Garvin, Alexander, The American City: What Works, What DoesnТt, McGraw,
New York, 1995; Souder, Jon and Fairfax, Sally, State Trust Lands: History
Management, and Sustainable Use, University of Kansas Press, 1996; The
Trust for Public Land, GreenSense: Financing Parks and Conservation,
Phyllis Myers, editor, San Francisco, CA, Autumn, 1996, (УNouveau Park
CapitalismФ), Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
аааааааааааааааааааааааааааааааааааа INSPECTION/MONITORING/TESTING
FEES
Description: аThese
fees pertain to the ongoing inspection and monitoring ofа operatorsа
or outputs of facilities which have an impact on the environment, to
confirm that equipment or discharges meet applicable standards.а This may be part of ongoing permit
enforcement, but not actual facility permitting.а Outputs, or discharges, of facilities must be laboratory tested
according to regulatory requirements.
Actual Use:а
Most State
and local governments charge regular inspection/monitoring/testing fees.а In a single year, New York collected almost
$3 million in private company reimbursements for State monitoring. Examples of
State programs charging fees include:
-а
Emissions inspection fees (widespread use);
-а
Laboratory inspection fees (widespread use);
-а
Drinking water monitoring fees (New Jersey and Iowa charge for
monitoring,ааааааа but this is still
relatively rare);
-а
Septic tank inspection fees (Wisconsin, Maine and Massachusetts);
-а
Laboratory testing fees (widespread use); and
ааааааааааааааааааааааа аа -а
Underground storage tank inspection fees (Wisconsin).
Potential
Use: аMany States have privatized water supply, solid waste
disposal,а and vehicle emissions
inspection facilities.а Governmental
monitoring of these and other privatized facilities could be financed by facility
inspection/monitoring fees.а Septic tank
inspection fees could finance the creation of septic tank management districts
to monitor and prevent spillage.а
Laboratory fee revenues could pay for oversight of privatized
environmental monitoring facilities, such as private air emissions inspection
contractors.
Advantages:а
In addition to revenues, inspection/monitoring/testing fees provide a
way of tracking which facilities are engaged in environmentally-sensitive
activities.а They may provide environmental
incentives to stay in compliance, as this might reduce the need for
inspection.а Septic tank fees capture
revenues from households not connected to municipal sewers, but impacting on
water quality due to septic tank leakage.
Limitations: аFee
revenue may be modest in most cases.а If
set too high, fees may discourage private companies from owning and operating
environmental facilities.а It may be
difficult to identify and track owners of some facilities, especially
residential septic tanks.
Reference
for Further Information: аU.S. EPA, Report to Congress, Alternative
Funding Study: Water Quality Fees and Debt Financing Issues,
Syracuse University, June 1996.
LICENSING
AND RECREATIONAL FEES
Description:а
These are
fees charged to individuals for the privilege of engaging in activities,
andа can be distinguished from
professional certification fees by the lack of training required.а Examples include the privilege of mooring boats
on State waters, using State parks and campgrounds, or for hunting, boating or
fishing licenses.а Vanity licensing
plate purchases are discussed in Section 8 УCommunity-Based Environmental
ProtectionФ.
Actual
Use: ааBoth State and local governments use these fees for a variety of
purposes.а Some local governments charge
mooring fees at municipal marinas run by port authorities, where the income
pays for port operations.а Delaware
charges a $1.50/square foot for private docks on State waters to fund its boat
safety program.а North Carolina supports
marine research with salt water fishing license fees.а State and local governments charge fees for park use.а Arizona's park user fees produce over $1
million/year for park operating costs.а
Fees for fishing and boating licenses also are charged by most
States.а The federal government uses
park and recreational fees extensively for its facilities.
Potential
Use:а License revenues could cover the costs of
environmental programs associated with the activity.а For example, a share of boat license fee or mooring fee revenues
could be used to finance pump-out facilities for boat toilets.а Park fees can be levied wherever State or
local governments incur costs for the provision of recreation services.а Camping fees can be used to fund improved
access to and maintain camping sites.
Advantages: аThese
fees can cover expenses forа public use
ofа environmentally sensitive areas, and
still represent an untapped revenue source in many States.а Charging fees would allow State general
revenues to be used for other purposes.а
Most license fees have built in enforcement mechanism, since the
licensing government can revoke the privilege granted with the license if fees
are not paid, and provide a direct cost/benefit relationship.а Equity is enhanced because out-of-State
tourists must pay for the environmental impacts of increased tourism in an
area.
Limitations:а
It may be
difficult to institute recreational fees if use of State waters and parks has
historically been free.а Such fees may
have a disproportionate impact on lower-income segments of the population who
may have few other low cost recreational opportunities.а Since they generally apply only to a limited
population, most license fees have a small revenue base, and it may be
difficult to raise significant revenues if fees are set at low levels.
Reference
for Further Information: National
Conference of State Legislators (NCSL), States as Water Quality Financiers,
Denver, CO, Mayа 1991.
аааааааааааааааааааааааааааааааааааааааааа LOCAL
AQUIFER PROTECTION FEES
Description: Local aquifer protection fees are
similar to the concept underlying State water supply withdrawal fees and State
direct water use fees in that they are special charges on local water utility
fees and private well users.а By
labeling them as УaquiferФ or Уwater conservationФ fees, localities are
attempting to highlight the effects on aquifer health of groundwater
withdrawals.а (See also Section 1B:
УState Public Water Supply FeesФ and Section 1C:Ф УState Direct Water Use
FeesФ).
Actual Use: Local use of special aquifer
fees is recent, and sporadic.а For
example, in Spokane, Washington all residents are charged a $15 annual Уaquifer
protection feeФ.а In Dade County,
Florida water utility users pay a 3% surcharge on all water bills.а In Providence, Rhode Island all water
customers pay a surcharge of 1 cent/100 gallons of regular water bills.а The property tax has been dedicated to open
space, watershed and wetlands protection.
Potential
Use: Similar to
Уquality of lifeФ or Уconservation taxesФ added on to local general sales taxes
or property taxes, aquifer fees are designed to heighten public awareness of
environmental consequences, as well as raise revenue.а Revenues could also be used for a range of drinking water
treatment needs, infrastructure, septic and well rehabilitation, purchase of
development rights and other land protection projects.
Advantages: Advantages in terms of
environmental benefits and public awareness are clear.а If revenues are dedicated to specific
projects, the cost/benefit relationship is strong.а Revenues could be designed to leverage additional dollars.а Water conservation may or may not result,
depending on fee structure.
Limitations: Fees are regressive when imposed as flat
fees.а They require voter approval,
which means that the dedicated uses of fees must be popular, and fees must be
affordable.а While revenue yield may be
predictable, unless structured to influence water conservation, it most likely
is relatively small.а There may be a
public backlash against fee surcharges.
Reference
for Further Information: The Trust
for Public Land, Protecting the Source: Land Conservation and the Future of
AmericaТs Drinking Water, Richard Stapleton, author, San Francisco, CA,
Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.
LOCAL WATER/WASTEWATER UTILITY USER FEES
а
Description:а User fees are
charged regularly to all customers, industrial, commercial and residential, for
the receipt of utility services such as public drinking water, wastewater
treatment, and stormwater drainage.а
Customers receiving services are connected to central publicly or
privately-owned facilities.
а
Traditionally,
utility user fees have been levied for water and sewer.а Water meters and pollutant tracking have led
to sophisticated billing procedures and rate structures based on volume and
toxicity.а Utilities can assess rates to
cover their full costs including capital cost recovery ("full cost
pricing"), or subsidize the costs of service with general revenues.а Rates are usually measured in cents per
1,000 gallons of water withdrawn (drinking water) or dischargedа (wastewater) into the treatment system.
Actual Use: User fees are limited to localities. (State utility
fees will be discussed later).а Most
localities issue water and sewer bills once or twice a year.а Average annual water/wastewaster rates per
household range from $170 to $230, based on a family of 2.64 persons using 104
- 140 gallons of water per day, at $.14/1000 gallons.а Costs of smaller communities may be two to three times more due
to lack of economies of scale.а Costs
for stormwater drainage pipes and discharge are less universal and more often
subsidized.
а
Potential Use:а A basic issue
in rate-setting is the link between capital and operating budgets, and the rate
base and structure.а Medium-to-large
communities review user fees regularly in relation to budget needs, and make
decisions about using full-cost pricing procedures to cover more than current
operating costs.а They also make policy
decisions to subsidize classes of users (e.g., the elderly or disadvantaged,
urban residents), and on using ascending block rates for conservation and other
purposes, or descending block rates to promote economic development.а Industrial waste stream toxicity is also
accounted for.а Another issue is ifа non-users of the facilities should payа for the environmental benefit to surrounding
clean lakes and streams.а
Advantages:а Utility user fees
provide services that most residents require.а
Thus, the fee base is large enough to provide a strong and reliable
revenue stream at relatively low, equitable rates.а Graduated rate structures would improve equity.а Small rate increases can raise significant
revenues while imposing a fairly small increased burden on households.а The cost/benefit relationship is clear and
rational rate-setting increases public awareness of the true cost and
environmental benefits of water-related services.
Limitations:а Many
localities are accustomed to subsidized rates.а
This makes rate increases difficult.а
In small or economically disadvantaged communities, reliance on user
fees for operations and maintenance as well as capital financing may be
unaffordable, based on fiscal indicators such as median household income and
community debt capacity.а Smaller
communities may not have the management and other tools needed to reevaluate
their rate structures with many complex policy choice issues.а
Reference for Further Information: Raftelis Environmental
Consulting Group (now Raftelis Financial Consulting, PA), 1998 National
Water and Wastewater Rate Survey, Charlotte, NC, 1998, Telephone:
704-373-1199; Raftelis, George, Comprehensive Guide to Water and Wastewater
Finance and Pricing, second edition, CRC Press/Lewis Publishers, 1993;
Association of Metropolitan Sewerage Agencies, Wastewater User Fee Survey, Washington,
DC, 1994.
PERMITTING FEES
Description:а Permitting
fees are charged for processing costs associated with the initial permitting,
and periodic permit renewal, of municipal and industrial facilities, or aа location such as a wetland.а Such fees typically are dedicated to operating
budgets.а Fees may be graduated
depending on whether a facility is classified as major and minor, and depending
on the toxicity of the waste stream.
Actual Use:а Both State
and local governments increasingly have used permitting fees to cover the administrative
costs associated with permit writing and issuance.а This has been supported by the federal government, and is
required for air emissions under Title V of the 1990 Clean Air Act and in
several Clean Water bills. Wetlands fees are one of the major sources of
funding for State wetlands programs.а
Local industrial pretreatment permit fees are a source of revenue for
local governments. Examples ofа
administrative fees and rates include: State NPDES Permit Fees
(over 30 States); State Drinking Water Permit Fees (over 35 States); State
Air Emissions Source Permit Fees (all States); State Hazardous and Solid
Waste Permit Fees (at least 20 States); State Wetlands Permit
Application Fees (at least 20 States); State Groundwater Certification
Fees (used by a growing number of States); State Underground Storage
Tank Fees (at least 10 States); and Local Industrial Pretreatment Permit
Fees (manyа localities, but only
where program is delegated).
Potential Use:а State and local
governments could institute permit application fees, as well as periodic permit
renewal fees, for any environmentally-related facility or location.а Wetlands permits could be expanded to all
areas classified as valuable natural habitat.а
Permit fees could be more widely used for solid waste, sludge disposal,
underground storage tanksа and
stormwater discharge.
Advantages:а Permit fees
may cover some or all of the start-up costs related to the permit application
process.а Graduated fee rates based on
toxicity, such as used for effluent-based permits in Louisiana, New Jersey and
Louisiana, and hazardous waste permit fees in New York, could produce a
significant revenue stream for State capital-generation for environmental
infrastructure.а Graduated rates may
encourage pollution reduction, and wetland permits promote conservation and
give State governments advance information on wetland building plans.а Fee collection is relatively
straightforward.
Limitations:а Revenue yield
in most States is modest, and somewhat unpredictable. Flat rates may be
inequitable, particularlyа forа minor facilities which constitute the
majority of permittees, and facility owners may not see a close cost/benefit
relationship.а Tracking ownership and
development of wetlands and underground storage tanks can be administratively
complex and expensive.
Reference for Further Information:а National Conference of State Legislatures (NCSL), Summary of
State Wastewater Discharge Permit Fees, Denver, CO, December 1993; NCSL, Alternative
Funding Mechanisms for State Drinking Water Programs, Denver, CO, July
1993; U.S. EPA, Report to Congress, Alternative Funding Study: Water Quality
Fees and Debt Financing Issues, Syracuse University, June 1996.
а
ааааааааааааааааааааааааааааааааааааааааааааааа PRODUCT
REGISTRATION FEES
Description:а
Such fees are charged for the registration of particular products that
have some environmental impact, most notably fertilizers and pesticides.
Actual
Use:а These fees generally are limited to
States,а as well as the federal
government.а A number of States have
fertilizer registration programs, some of which finance nonpoint source
pollution control.а In Kansas, for
example, a State $1.70/ton fertilizer fee is charged, with $0.30/ton dedicated
to the fertilizer program and $1.40/ton dedicated to the State Water Plan which
funds conservation, water quality and water use projects throughout the
State.а Other States with dedicatedа pesticide registration fees include Iowa,
Minnesota (which raises $3 million annually), New York and Wisconsin.
Potential
Use:а
Any (especially new ones), environmentally-sensitive product, with
complex, non-organic components, could be required to be registered and pay a
fee, for example, water treatment compounds, carpet treating chemicals, and the
like.
Advantages: аIf set
high enough, and proportional to anticipated product production, such fees may
increase the awareness of harmful products on the part of consumers and
influence the conservation of use or product substitution.а Fee revenues dedicated to research and data
collection on new, environmentally-degrading products would result in a good
cost/benefit relationship.а These fees
also may enable the placement of limits or regulations on the sale of such
products, and at least provide advance notice of new products coming on the
market.
Limitations: Product registration fees will face opposition
from the producers, who may already have gone through complicated and expensive
federal approval processes, such as the Food and Drug Administration
certification.
Reference
for Further Information: The
Fertilizer Institute, Summary of State Fertilizer Laws, 1988;а National Council of States Legislators
(NCSL),а States as Water Quality
Financiers, Denver, CO, May 1991;а
U.S. EPA, Prevention, Pesticides and Toxic Substances: Pesticides
Industry Sales and Usage: 1992 and 1993 Market Estimates, June 1994.
PROFESSIONAL CERTIFICATION FEES
Description: аCertification
fees are charged to companies or individuals for the privilege of engaging in
an activity, at one time only or on a periodic renewal basis.а Fees can fund training for professionals in
environmentally sensitive industries and confirm that environmental officials
are certified.
Actual Use:а Both State and
local governments use license fees to finance administrative costs associated
with related government agencies. Examples include:
-Pesticide Dealer
and ApplicatorsТ License Fees;
-Business License
Fees, including for engineering/construction/testing;
-Laboratory
Certification Fees; and
-Occupational License Fees, e.g.,:
-Solid and
Hazardous Waste Facility Operator and Transporter Certification
-Water and
Wastewater Operator, and Training Program, Certificationа
-Underground
Storage Tank Installer Certification Fees; and
-Septic Tank
Installer Certification Fees.
Potential Use:а Professional
certification revenues could cover the costs of environmental programs
associated with the industry or activity.а
In addition to plan review and processing costs, fees could be used to
pay for public notification required under regulations. Fees for the
professional engineering and construction industry could be used to mitigate
the urban runoff problems associated with construction.
Advantages:а Like licensing
fees, most professional certification fees have a built-in enforcement
mechanism, in that a privilege granted through certification can be revoked if
fees are not paid.а Construction
certification fees give States advance warning of construction and the funds to
analyze the extent of the potential impact.а
Laboratory, operator, and testing certification fees for businesses
allow the State to maintain some oversight of particularly privately-owned
and/or operated environmental facilities.
Limitations:а Certification fees
may have a disproportionate impact on small businesses, who may not be able to
afford operator or construction certification.а
Since these fees generally apply only to a limited population, most
professional certification fees have small revenue base in most cases, and it
may be difficult to raise significant revenues. Fees dedicated to potential future
impacts do not have a high cost/benefit relationship.
Reference for Further Information: аU.S. EPA, Office of Underground Storage Tanks,аа Funding Options for State and Local
Governments, August, 1988;а National
Governor's Association, Funding Environmental Programs: An Examination of
Alternatives, Washington, D.C., 1989.
аааааааааааааааааааааааааааааааааааааааааааааааа SEPTIC
SYSTEM IMPACT FEES
Description: Septic system impact fees are levied on the
construction of new septic fields, including residential septic systems. They
are designed as a type of impact fee, which measures the future negative impact
of poorly maintained septic systems.
Actual
Use: At least five States impose septic
system fees on allа new development,
including Maryland, Oregon, North Dakota, Virginia and Wisconsin.
Potential
Use: Since individual septic fields and
tanks are largely unregulated at the State and local level, the impact fee
could be used as a surrogate for permit issuance.а Fee rates could be graduated to reflect the possible negative
damage to water quality resulting from improper maintenance by owners, for
example, fee rates could be higher if septic system were located near lakes or
groundwater sources of community drinking water.а Fees could heighten awareness of the importance of preventative
maintenance.
Limitations: Fees could be difficult to collect
from individual property owners, and administratively complex and expensive to
track.а Revenue yield is modest and
unpredictable.а The cost/benefit
relationship may not be apparent for individual homeowners.а
Reference
for Further Information: аNational Conference of State Legislatures
(NCSL), Financing Clean Water, Groundwater Pamphlet, Denver, CO, June
1991.
аааааааааааааааааааааааааааааааааааааааааааааааа SOLID
WASTE DISPOSAL FEES
ааааааааааааааааааааааааааааааааааааааааааааааа (Tipping
Fees, Septage/Sludge Fees)
Description: аState and
local disposal fees are levied for the volume and sometimes toxicity of solid
waste (e.g., garbage and trash) disposed of at local management and/or
treatment facilities, such as landfills and incinerators.а This type of fee also may be used for septage,
pumped from septic tanks and treated at local wastewater treatment plants, and
municipal water and wastewater treatment sludge which is sub-surface disposed
and land applied.а
а
Actual Use: аMost
localities use "tipping fees" to cover solid waste disposal and
treatment costs at municipal (or private) landfills and incinerators.а Tipping fees range from $50 to $200 or more
per ton depending on waste content and local demand for service, as well as the
availability and location of management/treatment facilities.а While tipping fees represent one type
ofа service unit cost for solid waste,
they are not strictly user fees, and extraneous factors such as geography and
public/private competition influence the level of charges.а Many localities also charge fees per bin or
bag of garbage and recycling.а
Connecticut,а New Jersey, and
Vermont, levy an added fee per ton of solid waste disposed, ranging from 1-4
dollars.а Septage/sludge disposal fees
used by several States are used to finance sludge management programs.а Colorado,а
Indiana, Oklahoma, and Wisconsin, charge for industrial sludge disposal.
Potential Use:а Local tipping fees
could be adjusted to reflect more precisely the true cost of service, as
opposed to demand/supply issues.а
Disposal fees could be more broadly applied, especially for septage, for
revenue purposes but also as an incentive mechanism to encourage conservation
and beneficial use.а States could become
more active in assessingа solid
wasteа fees.а
Advantages: Fees could be set to encourage waste reduction.а Currently, solid waste disposers do not bear
the full costs of disposal, which encourages the option of disposal as opposed
to recycling.а Tipping fees should
remove this disincentive if set at appropriate levels.а There is a clear cost/benefit ratio, and
revenue yield could be significant and predictable.а Fees from local garbage and trash haulers should be relatively
easy to collect.
Limitations:а Fees are not
necessarily equitable if not directly related to the true cost of service.а However, competition between the public and
private sectors, and lack of available landfill space has undercut efforts at
fair pricing.а Fees based solely on
volume may not adequately capture revenue from the most toxic and least
degradable waste, which is difficult to measure.а Very high fees could encourage illegal dumping of wastes.а If significant waste reduction occurs in
response to fees, revenues will similarly decline. Also, since manyа wastewater treatment plants subsidize the
cost of beneficial sludge uses, e.g., land spreading, fees may be
counter-productive.
Reference for Further Information: New York State Department of
Environmental Conservation, Survey of State Funding for Solid Waste
Management Programs, June 1991.
ааааааааааааааааааааааааааааа STATE PUBLIC WATER SUPPLY WITHDRAWAL FEES
Description: аIn addition to
local user fees, these State fees are assessed on public and private utilities,
or their industrial, commercial and residential customers, that supply or are
supplied consumptive water via central facilities.а They may be levied as a percentage of local water utility sales
to local customers, or volume of water treated or produced.а They may also be levied as a surcharge or
add-on to local waterа bills.а Imposed as a flat rate and assessed in
cents/per 1,000 gallons of water sold or withdrawn, they can be collected by
States directly or, in the case of customer surcharges, by local utilities
which rebate the surcharge to the States. (This differs from the State direct
water use fees discussed in the next section).
Actual Use: State public water supply withdrawal fees
increasingly have been used by States primarily to cover program costs as
opposed to infrastructure capital-generation.а
Presently, at least 11 States have imposed such fees in the form of drinking
water production, sales or service fees, ranging from $.03 - $.07 per 1,000
gallons, including Arizona, California, Delaware, New Jersey, New Mexico,
Montana, Oklahoma, Rhode Island, Texas, Vermont and Virginia.а A similar fee was defeated recently in New
York and is being considered in Pennsylvania and Florida.а
Potential Use: аAn increase of
$.07/1000 gallons to water customer bills yields $1 billion annually
nationwide, based on 1990а
consumptionа rates.а Thus, there is significant potential for States
to use this fee to generate revenue for capital infrastructure funds for water
and wastewater, suchа as SRFs.
Advantages:а This type of
broad-based, low level fee could yield high revenue. The regressiveness of flat
fees could be avoided by using graduated fee rate structures or
percentages.а The cost/benefit
relationship is strong, and State fees may increase awareness of the true cost
of water services.а The demand for public
water, particularly by industry, is relatively inelastic, resulting in a stable
and predictable revenue stream.а
Disadvantages: The revenue base of the public water supply withdrawal
fee is severely limited, however, because water supplied by utilities resents
only a very slim portion (about 12%) of all water use in this country.а The majority of water use results from
direct withdrawals from ground and surface water sources by industry, mining,
hydroelectricity and agriculture, and private wells.а Legislation would be required, and local utilities may resist
rebating fees to the State level.а New
fees would be unpopular with water utilities, both public and private, which
oppose incremental increases in user fees because of lack of community support
particularly when fees are redistributed to other localities.а New State administrative procedures would be
required to collect fees from utilities.
Reference for Further Information: U.S. EPA, Report to Congress,
Alternative Funding Study: Water Quality Fees and Debt Financing Issues,
Syracuse University, June 1996, discusses the fee in-depth;а Clean Water Council, America's
Environmental Infrastructure: A Water and Wastewater Investment Study,
Washington, D. C., December 1990; U.S. EPA, Environmental Finance Advisory
Board (EFAB), аPublic Sector Options
to Finance Environmental Facilities, March 1992.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа TOLLS
Description: Tolls are fees charged for auto and
truck passage on thruways, highways, roads andа
bridges to offset the expenses of new construction, operation and
maintenance.а Tolls are also imposed on
boats (e.g., docking fees) and airplanes (e.g., landing fees).а Tolls may be used to pay for environmental
mitigation resulting from negative construction impacts (See Section 8:
УMitigation Lands and BankingФ).
Actual
Use: Tolls have
been used in all States for transportation budgets, and may constitute the
State matching share to federal construction grants.а Localities use tolls as well.а
Traditionally, highway construction has included some environmental
component, for example, preventing nonpoint construction sites.а Recently, some States and localities have
gained approval to establish new tolls specifically to pay for environmental
mitigation of problems caused by construction and use.а A good example is Alligator Alley (Interstate
75) bisecting the sensitive Florida Everglades ecosystem, and the construction
of which has been a major contributor to altered water flows.а An estimated $4.5 million annually of
Alligator Alley toll revenues is being used for environmental mitigation projects,
including land purchases in the Everglades and Florida Bay.а Toll dedication was agreed to by both the
federal and State Government, and is part of a $685 million, 20-year
initiative.
Potential
Use: The potential
uses of a tollа revenues for
environmental projects is large.а After
meeting federal and state requirements for operation, maintenance and new
construction needs, dedication of a portion of toll receipts can pay for both
on-and-off site environmental mitigation.а
Highway tolls could be to correct problems caused by use of de-icing
salts.а Harbor-related tolls could be
used to correct water degradation.а
Airport landing fees could be used to collect and treat propylene glycol
contaminated runoff from aircraft deicing operation.
Advantages: Considerable environmental benefits
can be achieved, and public awareness of environmental degradation from highway
construction and use may heightened.а
Toll collection systems already exist, and non-residents can help bear
some of the cost of environmental mitigation.а
Revenues could be substantial.
Limitations: Tolls already are fairly steep, and
regressive.а It may be difficult to
increase tolls, and ensure environmental dedication over time, particularly
given competing demands from highly popular transportation projects.
Reference
for Further Information:а The Trust for Public Land,
GreenSense: Financing Parks and Conservation, Phyllis Myers, editor, San
Francisco, CA, Spring 1996, Telephone: 800-714-LAND, Internet: http://www.tpl.org/tpl.а See the Transportation Equity Act for the 21st
Century (TEA-21), June 1998, for a description of what tolls may be applied to
a StateТs matching share to federal grants.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааа TRANSPORTER
FEES
Description:аа
These are fees charged to a company or individual, most notably for
hauling and transporting solid or hazardous wastes, septage, petroleum
products, and radioactive waste.а Fees
can be charged on volume of waste transferred, or as a flat charge per hauler.
Actual
Use: аHazardous waste transporter fees are used to payа the cost of hazardous waste monitoring and
spill response in many States, including Arkansas, California, Connecticut,
Indiana,а Massachusetts,а New Jersey, Ohio, Oklahoma, Pennsylvania,
Washington, and Wisconsin, often generating several million dollars per
year.а A few other States assess septage
hauling fees, such as Michigan, Texas and Wisconsin. Washington levies a flat
fee of over $1,000 for petroleum transporters, which must be renewed
periodically.а Maine charges significant
fees for hauling radioactive waste.а
Potential
Use: аRevenues could be used to make road improvements on routes
traveled by hazardous waste transporters with safety considerations in mind.
Graduated rate structures based on the anticipated distance of transporting
could be imposed.а Revenues also could
finance the operating costs of State monitoring programs for hazardous waste
transport.
Advantages:а
The fees could capture revenue from transporters who are responsible for
some waste spillage. Graduated fee structures based on distance might provide
incentives for disposal at nearby sites.а
Charging septage haulers may be the only way to include private septic
systems in fee systems.а
Limitations:а
The revenue
base is very small and thus the revenue yield is low.а Depending on the structure of the fee, it may have a
disproportionate impact on small businesses, particularly in the septage
hauling business.а The fee might
encourage polluters to dump wastes illegally to avoid the costs of
transportation to a legal site.
Reference
for Further Information: аNational Conference of State Legislators
(NCSL),а States as Water Quality
Financiers, Denver, CO, May 1991.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
ааааааааааааааааааааааааааааааааааааааааааа WATER RIGHTS APPLICATION FEES
Description:а State water rights application fees are imposed on municipal, agricultural and industrial users seeking to establish legal boundaries for diversion of water for direct use.а Fees could be charged at one time for new permits, or on a recurrent basis.
Actual Use: аMost western water rights States use these fees.а Rates in California, Montana and Nevada are quite steep and recurrent.
Potential Use:а This fee concept could be extended to include dam registration fees (Maine) and stream encroachment fees (New Jersey), or any other water diversions.а Also, some western localities have sold water rights УfuturesФ such as Escondido, California.а California has considered using income tax credits to encourage donations of water rights.
Advantages: Water rights application fees could be used to cover the administrative costs of processing State permits, but also could be designed as an activity impact fee, in recognition of potential negative impacts on surface or groundwater.а If a State does not use direct water use fees (discussed subsequently), water rights application fees provide some equity in the imposition of all water withdrawal and use fees.а
Demand for water in the west may still be relatively inelastic, but such fees might heighten awareness of the importance of water as a vital and potentially nonrenewable natural resource.а Collecting fees for water rights permits may be relatively straightforward in the first instance, but there may be strong opposition to recurrent fees in western States which traditionally have regarded water as free.
Limitations: Unless fee rates are steep or levied on a recurrent basis, revenue yield is small and unpredictable.а The cost/benefit relationship is not immediately obvious to permittees.а Water rights fees may not be applicable to many eastern riparian rights States.
Reference for Further Information: University of Florida College of Law, Nationwide Survey of State Water User Fee Legislation, February 1992.
аааааааааааааааааааааааааааааааааааааааааааааааа WELL PERMIT/PUMPING FEES
Description:а Like septic field/tank installation and septage disposal, private wells represent a largely unregulated area.аа Licenses for private well drilling and pumping are imposed in a number of States and localities as a "surrogate" fee for actual water use/withdrawal which may negatively impact theа water table.а Such fees are also discussed in this section under УLocal Aquifer Protection FeesФ.
Actual Use:а At least seven States levy well drilling license, permit and/or pump fees, including Alabama, Arizona (including industrial well users), Montana, New Jersey, South Dakota, Virginia, and Wisconsin (which labels its fee a "compensation" fee for well water use).
а
Potential Use:а Well fees could be used much more widely.а
Advantages:а Well fees could heighten awareness of the value of water and the potential negative impacts on the underground water table.а Well fees provide equity for all water withdrawal and user fees, since private wells are currently a loophole in the system of regulation and user fees.
Disadvantages:а It may be extremely difficult to administer such fees, particularly at the State level.а There exist few notification mechanisms for individual drilling activity, especially for private homeowners.а States such as New York have attempted to institute such fees, but found them too difficult to collect.а Revenue yield would be very small and unpredictable. аAs with all "surrogate" impact-related fees, the benefit is not immediately evident to fee payers.а
Reference for Reference for Further Information: U.S. EPA, Report to Congress, Alternative Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996.
OTHER
Description:
Actual Use:
Potential Use:
Advantages:
Limitations:
Reference for Further Information:
ааааааааааааааааааааааааааааааааааааааааааааа COMPARISON MATRIX FOR FEES
|
Criteria/ Fee |
Actual
Use |
Revenue
Size |
Revenueа Stability |
Admini-strative
Ease |
Equity |
Cost/
Benefit Ratio |
Environ-а mentalаа
Benefits |
|
а Accessаааааааааааааа Rights |
Mod. |
Low-аааа Mod. |
Mod. |
Mod. |
High |
High |
High |
|
а Bondаааааааааааааааа Issuance |
Low |
Mod. |
Mod. |
High |
High |
Mod. |
Low |
|
*Connection |
High |
Mod. |
Mod. |
High |
Mod. |
High |
High |
|
а Construc-аааааааа tion |
Mod. |
Low |
Low |
Mod. |
Mod. |
Mod. |
Low |
|
а Franchise |
High |
Mod.- High |
Mod.- High |
High |
High |
Mod. |
High |
|
*Inspection/ а Monitor/аааааааааа Testing |
High |
Low |
High |
High |
Mod. |
High |
Mod. |
|
*Licensing/аааааа Recreational |
High |
Mod. |
Mod. |
High |
High. |
High |
Mod. |
|
а Local а Aquifer а Protection |
Low |
Low |
Mod. |
Mod. |
High |
High |
High |
|
*Localааааааааааааааа Utility User |
High |
High |
High |
High |
Low-аа Mod. |
High |
Mod. |
|
*Permitting |
High |
Low-Mod. |
High |
High |
Mod. |
High |
High |
|
а Product а Registration |
Low |
Low |
Low |
High |
Mod. |
Mod. |
Mod. |
ааааааааааааааааааааааааааааааааааааааааааааа COMPARISON MATRIX (continued)
|
Criteria/ Fee |
Actual Use |
Revenueа Size |
Revenueа Stability |
Admini- strativeааа Ease |
Equity |
Cost/ Benefitа Ratio |
Environ- mental Benefits |
|
Professionalа Certification |
High |
Low |
Low |
Mod. |
Mod. |
Low |
Mod. |
|
Septic System Impact |
Low |
Low |
Low |
Low |
High |
Mod. |
High |
|
*Solid Wasteаааааа Disposal |
High |
High |
High |
High |
Low |
High |
High |
|
*State Public а Water а Withdrawal |
Mod. |
High |
High |
Mod. |
Mod. |
Mod. |
Low |
|
а Tolls |
Mod. |
High |
Mod. |
High |
Mod. |
High |
High |
|
а Transporter |
Low |
Low |
Mod. |
Low |
Mod. |
Mod. |
Mod. |
|
а Water а Rights |
High |
Low |
Low-Mod. |
Mod. |
High |
Low |
Low |
|
а Well
Permit а
Pumping |
Low |
Low |
Low |
Low |
High |
Mod. |
Mod. |
High -а High use (over 25 States/many localities); criteria score high
(many advantages);
High revenue yield
Mod.-а Moderate Use (10-25 States/many localities); criteria score in
medium range;
Moderate Revenue yield
Low -а Low or rare usage; many limitations; low revenue
*а
Star indicates best rated mechanisms
1.C.а SPECIAL CHARGES
аааааааааааааааааааааааааааааааааааааааааааааааааааааа 1.C.а
SPECIAL CHARGES
Description: аSpecial charges are charges not placed on the general population or upon the sale of a particular good or service, such as many taxes, and they are not fees for administrative services.а Rather, special charges apply to specific types of transactions or activities which impose unique environmental or development costs.а A special charge may be similar in some features to either a fee or a tax and, in fact, hitherto have been termedа fees or taxes somewhat interchangeably.а For example, effluent charges are sometimes called effluent fees or effluent taxes, and mineral severance charges are sometimes referred to as fees and sometimes as taxes.
As discussed here, special charges are a way of assigning clean-up costs to whomever or whatever caused, or may cause, pollution,а hence the termа "polluter pays".а In this sense, special charges may most closely resemble activity impact fees.а However, special charges have the characteristic of beingа recurrent or ongoing, instead of being attached to a permit application, renewal, licensing or certification.а Unlike activity fees, special charges typically are quite steep or costly.
Nine special charges are examined in this section, including effluent and emission fees, feedstock and waste-end special industry fees, direct water use fees, other severance fees (e.g., coal, gas, oil, timber), special assessments and exactions, and development impact fees.а Unlike many other fees and taxes, which could be used by many different levels of government or even simultaneously by more than one level, special charges often are limited to one particular level of government depending on the characteristics of the charge imposed or other revenue and environmental goals.а For example, the federal government may not have the authority or ability to implement direct waterа use fees (i.e., self-supplied surface and groundwater withdrawal) on cultural and constitutional grounds.а Exaction and impact fees typically are local in nature. Multi-governmental effluent, emission, feedstock and waste-end fees would result in double counting, or double taxation, and would be prohibitive from an economic cost and equity standpoint.
Advantages:а Special charges can be designed to generate revenues for any environmentalа and development-related activity or impact.а As described in this report, special charges could have a very significant and highly predictable revenue potential, which in recent years is beginning to be tapped and dedicated to the environment.а The potentially large size of the revenue stream means that such charges could be highly suitable for dedication to State and local environmental infrastructure capital construction funds, as opposed to general operating budgets.а Some, such as effluent or emission charges and hazardous waste production charges, can be highly equitable when rate structures are based on volume and toxicity of the waste stream.а The "polluter pays" principle helps to ensure that some cost/benefit relationship is achieved.а Most special charges create strong environmental incentives, i.e., tax avoidance may cause a reduction in pollution behavior.а Thus, some charges are frequently discussed in the current literature as market-oriented incentives.а
Limitations:а The polluter pays principle is not widely accepted for many special charges, such as effluent fees which typically would be opposed by municipal and industrial dischargers.а Some long-standing fees remain largely undedicated to environmental programs, such as severance taxes, which typically are dedicated to State general budgets.а Since many charges are novel, and extremely complex to design and administerа (e.g., effluent and feedstock fees),а policy makers should exercise special care in designing new systems.а Collection may cause difficulties, as there may be no existing, related collection bureaucracy and procedures on which to build.а Thus, brand new systems may have to be established.а Administrative complexities in establishing graduated rate structures, and lack of uniformity across States, means that some charges (e.g., emissions fees) may be best suited to the federal as opposed to State government.
Many States and local governments may not have enabling legislation to levy special charges.а Both enabling legislation and specific legislation may be very difficult to achieve, which has been the case with the federal government and many States up until now.
Summary:а Special charges, with which State and local government continue to experiment, are increasing in importance.а The potential for yielding revenue streams significant enough for environmental infrastructure capital-generation is high.а However, except for the more traditional charges such as exactions and severance taxes, the use ofа special charges by all levels of government is still low.а This is in part due to strong industry opposition and because of the very large legal and administrative complexities involved in instituting equitable programs and rate structures, e.g., for effluent, emissions, and feedstock taxes.а Special charges offer significant opportunity for States and localities to explore in the future.аа
ааааааааааааааааааааааааааааааааааааааааааааааааааа LIST OF SPECIAL CHARGES
(In Alphabetical Order)
а*1.а Direct Water Use Charges
аа 2.а Effluent Charges
аа 3.а Emission Charges
а*4.а Exactions
аа 5.а Feedstock Charges
а*6.а Impact Fees
а*7.а Severance Taxes
а*8.а Special Assessments
аа 9.а Waste-End Charges (Special Industry Fees)
*а Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the endа of the narratives.а See Introduction to the Guidebook for a description of the criteria used.а Ratings of УHighФ, УModerateФ, and УLowФ are for comparison purposes only, as some ratings are necessarily subjective and data are incomplete.
ааааааааааааааааааааааааааааааааааааааааааааааа DIRECT WATER USE CHARGES
Description:а Water drawn directly from the surface or ground, by
industry, mining, hydroelectric firms, agriculture and households using private
wells represents 88% of all water use.а
Water supplied and treated by public or privately-owned utilities
constitutes the other 12%.а Direct water
use charges are fees placed on self-supplied water, typicallyа measured in terms of cents/per 1000 gallons
of water or acreage, by States and sub-State water districts.
а
Actual Use: аAt least 10 State and large sub-State water districts impose a
recurrent direct water use fee on users that "self-supply" their own
water.а These include Arizona, Arkansas,
Connecticut,а Kansas, New Mexico, New
Jersey,а North and South Dakota, and
several sub-State districts in Texas.а
New York proposed direct charges, but they were defeated in the
legislature.а Florida and Pennsylvania are
considering such legislation.а Two
States exempt agricultural uses, and in two States the hydroelectric industry
has challenged the fees based on temporary non-depletive use.а Most States exempt withdrawals below a
certain amount, so private wells are typically excluded.
Potential Use: Direct
water use fees could be implemented by any State, or they could be implemented
on a sub-State or even municipal basis.а
Inclusion of private wells would be difficult to administer, which is
why well drilling fees often are used as surrogate fees.
Advantages: Direct water use charges
create equity for all users, i.e., most withdrawals from public and private
utilities are charged regular user fees, but this is the clear minority of all
water use.а These charges can raise
significant revenue.а One study
estimates that $1 billion could be raised yearly if all States charged an
industrial use fee of about 2 cents/per 1000 gallons.а Revenues would be stable, since demand for water especially among
non-residential users is relatively inelastic.а
Fees would have little economic impact on small users, who typically are
exempted.а The cost/benefit ratio is
fair in that some revenues would be dedicated to both point and nonpoint source
projects.
Limitations:а Self-supplied water is hard to estimate on a
State-by-State basis because water allocation and regulation (or lack thereof)
differs by State.а The amount of water
returned to the water table, and the degree it is polluted, also vary widely,
and are hard to measure.а For example,
agricultural returns may be contaminated (fertilizer/pesticides), but
hydroelectric uses may be relatively clean.а
This decreases the equity ofа
direct charges substantially.а
Many water users, especially agricultural, object vigorously to the imposition
of these charges.
Reference for Further Information: U.S. EPA Report to Congress, аAlternative Funding Study: Water Quality Fees
and Debt Financing Issues, Syracuse University, June 1996; U.S. Department
of Interior, Estimated Use of Water in the United States in 1990,а Solely, Pierce and Perlman, 1993;а University of Florida College of Law,
"Nationwide Survey of State Water User Fee Legislation", February
1992; Congressional Research Service (CRS), Funding Water Quality Programs:
Revenues for a National Water Investment Corporation, July 1992.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааа EFFLUENT CHARGESа аа
Description:а Effluent charges are those placed on the volume and toxicity of pollutants discharged into the water byа industry and/or municipal wastewater treatment plants.а
Actual Use: While effluent fees have been considered by the federal government and a number of States, only three States, New Jersey, Louisiana, and Washington, have true effluent fee programs.а A true effluent fee program exists when fees are based on measuring the pollutants discharged into water from point sources, including both quantity and quality, and not just what is allowed underа NPDESа limits.а Annual fees in the three States are upwards of $100,000 for each "major" industrial permit, yielding from $10 to over $20 million. While these States use the fees mainly to subsidize State operating budgets, they are used widely in Europe for capital-generation.
Potential Use: аEffluent fees could be used by States or the federal government, but probably not by localities.а Revenue could be dedicated to infrastructure funds such as State Revolving Funds. These fees could be imposed mainly for revenue purposes but also as incentives to reduce pollution.
Advantages:а Effluent fees could generate significant and reliable revenue on an annual basis.а The cost/benefit ratio is satisfactory since the "polluter pays" principle exists.а Fees could provide strong environmental incentives to reduce the discharge of harmful pollutants.а If tied to NPDES permit issuance and renewal, fees could be collected by permit writers.
Limitations:а Effluent fees are hard to design and administer due to data limitations and policy concerns.а Although self-reported Toxic Release Inventory (TRI) data are used to estimate volume and toxicity,а the TRI only covers major industrial toxic discharges and no standardized toxicity measures exist.а Thus, it is difficult to institute graduated rate structures which characterize true effluent fee systems, and even more complex to relate discharges to receiving water quality, because waste streams vary in dilution and receiving water quality varies considerably.а The inability to relate fees to specific environmental damage reduces their equity and the directness of the cost/benefit ratio.а Flat-rate fees are simpler and less easily circumvented via dilution or media transfers.а However, even this approach seems to impact heavily, and disproportionately, on the chemical and allied product industry and, secondarily, on the pulp and paper industry.а Effluent fees are unpopular with industry and municipalities, and there is no observable trend nationwide for their increased use.
Reference
for Further Information:а U.S.
EPA Report to Congress, Alternative Funding Study:а Water Quality Fees and Debt Financing Issues, Syracuse
University, June 1996; Congressional Research Service, Funding Water Quality
Programs: Revenues for a National Water Investment Corporation, July 1992;
Research Triangle Institute, Effluent Discharge Fees and Water Quality,
February 1993;а American Petroleum
Institute (API), Effluent Fees: Present Practice and Future Potential,
Discussion Paper #075, December 1993.
EMISSION CHARGES
Description:аа Emission charges are levied on the volume and toxicity
of pollutants emitted into the atmosphere by industry, and also municipal
facilities such as power plants.а
Actual Use: States already use a type of emission-based permit fee under Title V
of the Clean Air Act, which requires them to charge permitted sources the
equivalent of $25 per ton of regulated pollutants emitted.а Since the purpose of this requirement is to
help States recover the full cost of permit issuance, such fees resemble permit
fees.а A number of States have
emission-based motor vehicle fees which are reflected in motor vehicle sales
taxes and/or recurrent registration fees.а
In contrast, "true" emission fee systems cover a large list of
toxic pollutants and sources, using graduated rate structures based on toxicity
and volume, and assessing fairly steep rates.а
The best example is the non-vehicle acid deposition fees used in
California and Wisconsin.а California's
Acid Deposition Program is funded by low-level fees assessed against sources
that emit 1,000 tons or more ofа sulfur
or nitrogen oxides per year, which are capped at $5 per ton of pollutant
emitted, which produce almost $2 million annually.а
Potential Use:а Since these fees already exist
in States, continued State use as opposed to a new federal system might seem
desirable.а However, since atmosphericа pollutants cross State boundaries, as shown
by acid rain issues, inter-State issues must be evaluated.а States could expand the idea of emission
fees to small sources that are generally exempt from Clean Air Act permits, such
as dry cleaners.а Because of overall volume,
small sources represent a large share of total emissions.а The idea could be extended to volatile
compounds, ozone-depleting emissions, and indoor air emissions.
Advantages:а If emission fees were raised above $25/ton, annual
revenue might be enough to pay for State programs such as pollutionа prevention, monitoring and research,
improving the link between costs and benefits.а
The broader the coverage, e.g., including small sources, the more equity
is achieved.аа Environmental incentives
often discussed in terms of market-based air emission trading and emission
reduction, would come into play at the higher rates, although reducing fee
revenues.
Limitations:а States have hadа
problems with these fees.а
Administrative costs have been high, and fee avoidance exists.а Although sources can be required to monitor
emissions, compliance and enforcement can be costly.а Depending on the fee structure, it mayа be hard to show a polluter's contribution to atmospheric damage,
e.g., differing toxicity of sulphur dioxide versus carbon dioxide.а Receiving air quality also varies and
critical measurements are national/international in scope.а State variations may cause pollution havens.а The national emission trading program has
had mixed success.
Reference for Further Information: U.S. EPA, The Clear Air Act Advisory Committee, The Clean Air Act of 1990: An Introductory Guide to Smart Implementation, Washington, D.C., 1992;а U.S. EPA, Office of Air and Radiation, State Air Emission Fee Programs, 1994;а National Governor's Association (NGA), Funding Environmental Programs: An Examination of Alternatives,а Washington, D.C., 1989.
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа EXACTIONS
Description:а Exactions, or proffers as they are often called, may be broadly defined as money, land, construction materials, infrastructure facilities, or in-kind services provided by a private developer to a public jurisdiction.а Traditional exactions typically are on-site, and have included mandatory land dedication for rights of ways,а the provision of road and parking facilities, other infrastructure, and open space and parks, and cash payments in lieu of these.а Exactions sometimes are termed development fees, or impact fees (but are different from the impact fees discussed subsequently).
Actual Use:а Exactions are by nature limited to local governments.а They have been in existence for a long time, and may be offered voluntarily or negotiated with each developer.а Most localities use exactions in some form.а Some localities offer competitive exactions programs that assign building permits partially based on the level of exactions offered by different developers (Napa, California).а
Potential Use:а Traditional use of exactions for roads and parking couldа be extended to cover all necessary government services required by new developments, including water, sewer and solid waste services, and stormwater drainage.а Agreement as to the operation and maintenance of such facilities could be made at the same time.а While not raising new revenue, the money saved by localities could then be devoted to other environmental infrastructure projects.а Another application is the "in lieu of taxes" concept, whereby a municipality offers tax savings to a developer in exchange for an environmental service or facility offered or constructed by the same developer in another location.
Advantages:а Developers pay the true cost of community expansion out of their direct benefit from that expansion.а Thus, some equity and cost/benefit relationship is achieved, but the way some exactions are privately negotiated may leave equity issues in doubt.а When exactions take the form of construction materials or facilities, having the developer do the construction may be cheaper and faster than having it done by the governmental jurisdiction.а Since they can be individually negotiated, exactions allow more flexibility than fixed impact fees discussed later.а The revenue collected by monetary contributions, or represented by cost-savings on facilities built, could be significant.
Limitations: Since they are individually negotiated, exactions are not considered as predictable or equitable as impact fees.а Fairness may be decreased if politics enter into private negotiations.а The revenue source is only as predictable as the economic conditions affecting the construction industry.
Reference for Further Information:а National League of Cities (NLC), Research Report on AmericaТsа Cities: City Fiscal Conditions in 1994, Washington D.C.а July 1994.
FEEDSTOCK CHARGES
Description:а Feedstock charges typically are taxes levied on the primary chemicals that produce hazardous products and, ultimately, hazardous wastes.
Actual Use:а A federal tax on petrochemical feedstocks finances the Superfund Trustа Fund.а New Jersey has a tax on petroleum and chemical feedstocks that is used to fund hazardous waste clean-up.а Florida has a tax on perchloroethylene (dry cleaning solvent).а However, State use of feedstock charges has been rare.а Such charges probably are not suitable for localities.
Potential Use:а The use of feedstock charges has yet to be fully tested by States.а For example, obvious candidates include chlorine used for disinfection processes, and chlorinated solvents, acids,а andа photochemicals used by industry, in addition to the federal petrochemical excise taxes.а
Advantages:а Because the tax base is potentially so broad, significant revenues could be raised by the imposition of charges at relatively low rates.а Some of the complexities in the design of equitable rate structures based on receiving water or air quality for effluent and emission charges could be avoided because "receiving" environmental quality is not at issue here, rather simply the toxicity of the original chemical.а Some cost/benefit relationship is sustained if revenues are dedicated to site remediation or other environmental projects.а Environmental incentives for reduction of feedstock use or substitution of other chemicals, i.e., pollution prevention, may be achieved.
Limitations:а Disadvantages are several.а Sometimes product substitution is not an option, or governmental regulations require on-site remediation, e.g., chlorine used for disinfectionа and permit requirements for de-chlorination.а Double counting, or double taxation, may be an issue when products are already taxed as green product sales, under federal law, or the industry is already charged a waste-end, effluent or emission fee.а Standard toxicity measurements likewise do not exist.а Information on feedstock use is not recorded on an industry-by-industry, so costly new administrative reporting and collection systems may need to be devised, which may be easily evaded.а Imports must be accounted for.а These factors raise administrative costs, and reduce the equity, ofа tax imposition.а Pollution prevention goals are extremely worthwhile, and feedstock taxes may be best implemented with behavioral change as a primary goal, when product substitutes are known and product costs are similar.а However, caution must be exercised to avoid the complex pitfalls of feedstock charges implemented with revenue generation in mind.
Reference for Further Information:а аU.S. EPA Report to Congress, Alternative Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University, June 1996.
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа IMPACT FEES
Description:а Impact or development fees are one-time charges to new users of government services,а to pay for the expansion of the services that they require.а Some are similar to waste and sewer connection fees, but differ from developer exactions in that they are paid by a broader segment of the population.а Impact fees typically are assessed when building permits or certificates of occupancy are issued.
Actual Use:а Impact fees are limited to local government, and are not considered УtaxesФ.а Many localities have wide-ranging impact fee programs requiring new residents and businesses to pay set charges for police, fire, water, natural resources, and wastewater services, such as the service cost-recovery fee system in Loveland, Colorado.а Parks and recreation facilities are increasingly financed by these fees.а More than twenty States have impact fee laws governing local use as a revenue source, and fees are an increasingly important response to local budget problems.
Potential Use:а Impact fees could be used to finance any environmental service or additions to services that increased or transient population makes necessary.а For example, local governments could use impact fees to finance landfills, stormwater and flood control in addition to more traditional services.аа In Florida, impact fees were used as partial security for bonds issued to finance sewer improvements.а Communities attracting high tourism could also expand the use of these fees to such temporary facilities.а Higher fees could be assessed on development in sensitive areas, such as development in flood plains, tidelands, agricultural lands, or open space.а Fees can be graduated depending on the kind of development and affordability, such as in Olathe, Kansas.
Advantages:а The beneficiaries of services pay specifically for the extension of local government facilities to them, rather than being subsidized by current users.а This results in enhanced equity and a close cost/benefit relationship.а Impact fees cover non-subdivision projects such as condominiums and commercial developments. From a developerТs perspective, impact fees may replace more unpredictable, negotiated exactions.а Impact fees may help local governments to plan for growth.
Limitations:а Impact fees do not provide capital much in advance of development, unless impact "rights" are sold up-front.а It may be hard for localities to ascertain capital needs and thus size fees.а Impact feesа are criticized for deterring development and increasing new housing costs, and resulting in interjurisdictional competition.а Also, communities may change their policy preferences depending on economic conditions, for example, finding a need to subsidize new development rather than the reverse.а Developers may well pass on impact fees to residents.а
Reference for Further Information: National League of Cities (NLC), Research Report on AmericaТs Cities, July 1994. National Conference of State Legislatures (NCSL),а The Fiscal Letter: "Impact Fees Can Alleviate Local Growing Pains", Denver, CO, July/August 1991.а
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааа SEVERANCE TAXES
Description:а A severance tax is a charge on natural resources extracted from the land or waters of a State.а Direct water withdrawal fees, discussed earlier, are a type of severance program.а Other types of severance taxes include fuel/mineral taxes (based on the volume of coal, gas, oil, uraniumа and other minerals withdrawn), timber taxes (based on the volume of timber logged), and oyster/shellfish taxes (based on the volume or value of shellfish harvested).
Actual Use:а Severance taxes on coal and gas are used by mining States generating considerable revenues.а For example,а Montana collects $66 million annually from its coal severance tax, and Wyoming collects $20 million annually.а However, these States apply most revenues to general State budgets, dedicating only the interest on the funds to environmental protection.а Other States with mineral severance taxes include Louisiana (oil), Nebraska (uranium), New Mexico (all minerals and fuels, dedicated to the protection of natural areas and endangered species), and Pennsylvania (coal).а Timber taxes used in Alabama, North Carolina, Washington, and Wisconsin generally are dedicated to State forestry replenishment programs.а Maryland and Georgia use revenues from shell fish taxes to fund shellfish replenishment programs and State fisheries administrative costs.
Potential Use: These taxes could be used by any State, and dedicated to activities thatа mitigate the environmental impacts of natural resources extraction, such as habitat restoration.а Salt mining and wetland drainage could be included.а Revenues could provide insurance for extraction companies.
Advantages:а Severance taxes can yield significant revenues, which could be sufficient to dedicate to environmental infrastructure capital-generation.а Charges are highly equitable especially when based on the current market value, not volume, of material mined or harvested.а When dedicated promptly to activities that mitigate impacts, particularly near the same site, these taxes have a high cost/benefit ratio.а For sensitive activities such as timber cutting, andа wetland alteration,а the State will be given advance notice of impending activity.а
Limitations: Severance tax revenues depend on the level of extraction activity, or price of the material extracted.а If the tax base or commodity price fluctuates (e.g., shellfish harvest varies yearly as do oil and gas prices), revenues may not be suitable for funding environmental costs that require stability.а Some States have defeated passage of severance taxes and resisted dedication.аа No amount of revenue can mitigate the effects of some extraction activities, such as in the Alaskan tundra.
Reference for Further Information:а U.S. EPA Report to Congress, аAlternative Funding Study: Water Quality Fees and Debt Financing Issues, Syracuse University, 6/96;а Report from the Governor's Panel, Financing Alternatives for Maryland's Tributary Strategies, University of Maryland Sea Grant College, 8/95;а Montana Department of Natural Resources and Conservation, Flow of Funds for the Coal Tax: FY 96-97.
аааааааааааааааааааааааааааааааааааааааааааааааааааааа SPECIAL ASSESSMENTS
ааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааааа
Description:а Special assessments are recurrent charges levied by
local jurisdictions on a sub-group of population.а The sub-group receives benefits from an environmental service or
improvement not enjoyed by others in the area.а
For example, if a community wants to finance treatment plant
improvements that contribute to lake clean-up, residents with waterfront
property, or residents not hooked up to the central sewerage facility but
enjoying recreational benefits from clean water, could be assessed a special
surcharge.а When benefits accrue to
residents outside the improvements area, the benefits typically must be shown
through some measure, such as higher property values, increased business activity,
or frequent use of recreational sites.а
Special assessment/ improvement districts could be used to define the
geographical boundary of any environmental improvement, e.g., a sewer or
stormwater management district.
Where
the benefit clearly is shown via higher property values, "Tax Increment
Financing" (TIF) can be used.а TIF
generates revenue from the incremental change in property values caused by the
improvementа financed.а After creating a special district, two sets
of tax records are maintained -- one reflecting the property's value up to the
time of enhancement, and a second reflecting growing assessed value after the
enhancement.а In some cases, governments
issue tax increment bonds for revitalization projects, with the bonds being
backed, in part, by the anticipated increase in property values resulting from
the investment (i.e., value capture).
а
Actual Use:аа Special assessments are
generally limited to local government and often barred by constitution as a
State tool.а While not used as much for
environmental purposes as for urban redevelopment and sports facilities, water,
stormwater,а and wastewater treatment
have become more commonа recently.а Fast growing States like Florida and Arizona
use special assessments and tax increment financing for many such
projects.а
Potential Use:а Special assessments could be used more widely for park
and other open spaces, lake and stream rehabilitation, estuary and bay
protection, and even for solid waste management such as recycling and resource
recovery centers.а Assessments usually
are recurrent charges, but the concept could cover one-time charges too.
Charges could be graduated depending on ability to pay and other benefits to be
obtained.
Advantages:а The advantages of this tool relate to the potential
revenue yield, which could be stable, and to increased equity and an improved
cost/benefit relationship.а Extending
revenue requirements to suburban residents, who may have lower infrastructure
costs and greater ability to pay, can relieveа
the burden on inner city residents.а
Asking inner city residents to pay for suburban developments may prove
inequitable.а Incentives recognizing the
true costs of environmental services is important.
Limitations: Assessments
require the ability to pass local ordinances and create special
financing districts, which may require State approval, which is often
difficult.а They require administrative
systems that may be costly to manage over time. It is not possible to achieve total
equity, as there may be no ability to collect, for example, from downstream
users benefitting from upstream water quality improvement.а Assessments based on predictions of property
value increases, and documentation of results, requires strict record-keeping
and periodic reassessments which may require special management tools
unavailable to communities.а
а
Reference for Further Information:а Report from The Governor's Panel, аFinancing Alternatives for Maryland's Tributary Strategies, University of Maryland Sea Grant College, August 1995.
ааааааааааааааааааааааааааааааааааааааааааааааааааааааа WASTE-END CHARGES
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааа (Special
Industry Fees)
Description:а These charges are applied most notably to the hazardous waste industry, and are intended to capture revenues from the potential negative impacts of that industry.а Structuring the charges is complicated, and often the most simple method is followed.а For example, special industry fees for hazardous waste may be assessed against waste generators, storers, treaters, or disposal facilities.а Fees may be flat charges on the volume of waste produced, stored or disposed, or be based on the waste or disposal method.а The number of methods used by States reflects the complexity of measuring hazardous waste, and differences in their accounting and tracking systems.а For hazardous waste, waste-end charges are similar to effluent and emission charges for water and air dischargers.
Actual Use: Numerous States use these taxes to finance hazardous waste programs, including Connecticut, Indiana, Minnesota, New Jersey, and Washington.а The first three assess the charge onаа generators, while Washington uses three separate taxes; a hazardous substance fee, a generators' fee, and a tax on the volume/toxicity of substances produced.а Other kinds ofа industry waste-end charges are a resource recovery facility charge in Connecticut, and a petroleum wholesalers tax in Nebraska.
Potential Use:а аWaste-end charges might be placed on industrial solid waste as a whole, where the revenue potential is huge., e.g., a $5 per ton tax would raise over $1 billion annually nationwide.а However, there is little documentation for solid waste collected and disposed of on behalf of industry.а The waste-end idea could also be extended on an industry-by-industry basis.а Revenues could go to special insurance funds, resource recovery projects, and brownfields redevelopment.
Advantages:а Specific waste-end industry taxes have the advantage of collecting revenue from selected industries considered especially dangerous to the environment, without the legal and administrative steps of collecting from a broader range of industry, or solid waste in general.
Limitations:а Charges are not necessarily equitable,
since they are so industry specific, and the cost/benefit relationship is not
clear because revenues may be applied to any clean-up site. Tax
assessment methods are extremely complicated, contributing to revenue
instability.а Taxes may be easy to
circumvent and illegal dumping may result.а
Pollution "havens" between States may be created when charges
are dissimilar.а Hazardous waste disposers
may have multi-State disposal options, which increase transportation costs and
risks, but these options are limited and may be prohibited by some State
laws.а Theа hazardous wasteа industry
already is highly regulated.
Reference
for Further Information:а National
Conference of State Legislatures (NCSL), Earmarking State Taxes, Denver,
CO, April 1995;а Natural Resources
Defense Council (NRDC) Reprint, "Life and Taxes", The Amicus
Journal, а1995; U. S. EPA,
Environmental Finance Advisory Board, аPublic Sector Options to Finance Environmental Facilities,
March 1992.
OTHER
а
Description:а
Actual
Use:а
Potential
Use:а
Advantages:
Limitations:а
Reference
for Further Information:а
ааааааааааааааааааааааааааааааа COMPARISON MATRIX FOR SPECIAL CHARGES
|
Criteria/ Special Charge |
Actual Use |
Revenue Sizeаааааааааааааа |
Revenueа Stability |
Adminis-trativeааа Ease |
Equity |
Cost/аааа Benefitа Ratio |
Environ-mentalааа
Benefits |
|
*Directааааааааааа Water |
Mod. |
аMod. |
Mod. |
Mod. |
High |
Mod. |
High |
|
а Effluent аааааа |
Low |
Mod-аа High. |
Mod. |
Mod. |
Low- Mod. |
Mod. |
High |
|
а Emission |
Low |
Mod.-High |
Mod. |
Mod. |
Low-Mod. |
Mod. |
High |
|
*Exactions |
High |
аHigh |
Low |
High |
Low-Mod. |
Mod.-High |
High. |
|
а Feedstock |
Low |
Mod.-а High |
Low |
Low |
Mod. |
Mod. |
High |
|
*Impact |
High. |
Mod.-а High |
Mod. |
Mod. |
High |
High |
High |
|
*Severance |
Mod. |
High |
Mod.-ааааааааа High |
Mod. |
Mod. |
Mod.-High |
Mod. |
|
*Specialааааааааа Assessment |
High |
High |
Mod. |
Mod. |
High |
High |
High |
|
аWaste-End |
Low |
Mod.-а High |
Mod. |
Low- Mod. |
Low-Mod. |
Low-Mod. |
Mod. |
High -а High use (over 25 States/many localities); criteria score high (many advantages);
Highа revenue yield (over $20 million annually in State revenue currently).
Mod.-а Moderate Use (10-25 States/many localities); criteria score in medium range;
Moderateа revenue yield
Low -аа Low or rare use; criteria do not rate well (many limitations, one or more major
implementation problems).
*а Star indicates best rated mechanism
1.D.а FINES AND PENALTIES
ааааааааааааааааааааааааааааааааааааааааааааааааааа 1.D. аFINES AND PENALTIES
Description:а Violators of federal and/or State environmental laws and regulations are frequently subject to the payment of monetary fines and penalties.а Many of these violators also are subject to court adjudication.а The amount of fines or penalties generally is outlined in federal and State statutes, but the actual sum imposed typically results from specific administrative or judicial decisions, and may only occur after repeated violation on the part of offenders.а Both municipalities and the private sector are covered by fines and penalties, although historically prosecution of private sector cases has been more vigorous.
Cases may be either civil or criminal, depending on the degree of negligence.а For example, civil cases may involve a fine measured in thousands of dollars for failure to file documents such as discharge monitoring reports for wastewater and laboratory testing results for drinking water.а Criminal penalties resulting from intentional polluting behavior are rare, but the resulting penalty may be measured in millions of dollars.а Each federal environmental statute outlines different types of fines,а penalties, and administrative and judicial procedures, including review provisions.а Lawsuits may be filed against an offender by government, or as a result of citizen suits which are provided for in all federal environmental statutes.а Foundations such as the National Resources Defense Council, Environmental Defense Fund, and Atlantic States Foundation, have all been successful in achieving financial settlements as a result of citizen suits.
In addition to monetary payment of fines and penalties, responsible party reimbursements toа government occur as a result of contingent liability laws under the federal Superfund statutesа are evaluated in this section.а Although not fines or penalties per se, reimbursements on the part of industry, municipalities or individuals for past contamination of waste sites subsequently categorized as hazardous may be paid to the federal government, or in some cases to States.
Where appropriate, enforcement settlement agreements may include commitments for direct funding of "environmental benefit" projects, or "supplemental environmental projects" as they are called currently.а Such projects, which may be on- or off-site of the location where the violation occurred,а are made in lieu of dollar penalties, as determined by the courts or in out-of-court settlements.аа Such projects may entail contributions in the form of land, wetlands restoration,а environmental education or in-kind services, and similar types of projects.
Advantages: The revenue benefits from fines and penalties, as well as from environmental benefit projects implemented in lieu of direct payment by offenders, could be considerable.а Of large significance, however, are the environmental improvements to be achieved when compliance is attained through the avoidance of such fines and penalties.а The deterrence value of fines andа penalties may large, depending on the viewpoint of a particular municipality or business, andа the trade-off between prompt compliance and paying the fine or penalty must be carefully evaluated.а Fines are considered equitable by much of the public, because they emphasize the "polluter pays"а principle.а Large fine and penalty revenues are best suited to fund State endowments or trust funds
for future capital expenses, and smaller fines can contribute monies to specific remediation or restoration projects.а Both have been used to cover unanticipated budgetary shortfalls in a number of States. Non-revenue contributions can also be important, and create environmental incentives and attract additional resources.а
Limitations:а The revenue stream resulting from fines and penalties is highly unpredictable, both because it is unclear when and if a violation may occur, and also because court actions and appeals may occur over a long time period with the final outcome highly uncertain.а Thus, these moniesа are not suited to fund environmental program operating costs on a regular basis.а Moreover, since most fines and penalties by law are deposited initially in State treasuries, or the U.S. Treasury in the case violations of federal law, States must take specific legal steps to dedicate funds to environmental purposes instead of general budgetary support.а The total amount of revenue generated often depends on the number of staff available to inspect and monitor activities to uncover violations.а
The potential for a conflict of interest between collecting fines and penalties, and gaining compliance without the necessity of payments, is an ongoing and extremely delicate issue.а Fines and penalties may also result in inequities and have a weak cost/benefit relationship, since small offenders or offenses may cost considerable sums of money while larger offenders, both municipal and industrial, may be let off the hook.аа It is often difficult to assess fines against small communities and industries in financial difficulty.
Summary:а Fines and penalties can be a source of funds for environmental programs, as well as environmental benefit projects in lieu of direct payment by violators, but should be considered as a last resort to encourage municipalities, industries or businesses to comply with State regulations or to submit to a compliance schedule.а Monetary payments will not generate a steady, dependable stream of income.
Three sources of environmental funding from fines and penalties are discussed following: environmental benefit projectsа in lieu ofа financial payments, monetary payments of fines and penalties, and reimbursements to Superfund site cleanup.
ааааааааааааааааааааааааааааааааааааааааааааааа LIST OF FINES AND PENALTIES
(In Alphabetical Order)
*1.а Environmental Benefit Projects (Supplemental Environmental Projects)
*2.а Monetary Payments
*3.а Reimbursements (Superfund Liability Cost Recoveries)
*а Stars indicate most highly rated mechanisms as described in the Comparison Matrix at the endа of the narratives.а See Introduction to the Guidebook for a description of the criteria used.а Ratings of УHighФ, УModerateФ, and УLowФ are for comparison purposes only, as some ratings are necessarily subjective and data are incomplete.
ENVIRONMENTAL BENEFIT PROJECTS
(Supplemental Environmental Projects)
Description:а Environmental benefit projects, or supplemental environmental projects as they are currently labeled, are special environmental improvement projects undertaken at the expense of the violator of an environmental regulation or specific permit requirement.а They may be in lieu of or in addition to direct monetary payment by the offender, and may be arranged by adjudicatory authorities or in out-of-court settlements.а
Actual Use:а Many States have instituted environmental benefit programs in the last five years. аSuch projects may result either from government action or citizen suits.а First preference is given to remediation of an environmental hazard in the same geographical area, i.e., the particular plant, city, or water body, but funds cannot used by the offender to comply with violations which resulted in the fine or penalty in the initial instance.а Examples of environmental benefit projects include purchases or donations of land for open space or recreational uses, park and nature facilities, improved lake access for boating and hiking, aquariums, construction of recycling facilities, environmental monitoring and testing, hands-on environmental education projects, and even reduction in pollutant loading by the same company in another geographical area.а Use of environmental benefit support for research and planning generally is not considered the best use.
Potential Use:а The environmental projects that might be included are many, in all environmental media, and Federal policy has been somewhat flexible.а Commingling of supplemental environmental benefit project funds in single governmental trust accounts might permit funding of larger projects on an ongoing basis, although this undercuts the geographical proximity criterion.а
Advantages:а Special environmental projects undertaken in this fashion may be those which otherwise would not be pursued due to budgetary constraints, and thus can be very important in creating environmental incentives and generating broad interest.а The potential exists for leveraging other governmental funds, once seed money is provided.а Such projects also enable the original offender to undertake a "greening" action, thus saving face.аа Ifа the project result from a citizen suit, citizens may have a large input and community-based environmental values will be enhanced.
Limitations:а Environmental benefit projects may not be equitable, nor support a strong cost/benefit relationship, because they may not compensate for the environmental damage caused by the violation, and it may be very difficult to put a monetary number on the damage.а Moreover, because such projects may have to be specially designed, they may be very small and developed piecemeal with no assurance of continued support.а Critics complain that they may have limited utility.а
Reference for Further Information: New York State Department of Environmental Conservation, The Conservationist, June, 1996.
аааааааааааааааааааааааааааааааааааааааааааааааааааааа MONETARY PAYMENTS
Description:а Fines and penalties for environmental violations range from the very small in the case of administrative citations or civil penalties, to huge monetary penalties for criminal violations yielding millions of dollars in a single suit. In general, federally-prosecuted cases requireа monetary penalties be deposited in the U.S. Treasury, although they then may be dedicated to States.а Most cases settled under State law or pursued by State officials may accrue to the State.а However, States must have specific delegated program authority, such as federal delegation of the NPDES permit program under the Clean Water Act, or drinking water primacy, to have enforcement authority under federal programs. The major local governmental legal authority occurs for delegated industrial pretreatment programs.а Fines and penalties resulting from citizen suits must be deposited in government accounts.а Oil spill cases are pursued by the Coast Guard, not USEPA.
а
Actual Use: Most States collect fines and penalties, and dedicate them to environmental programs.а Many have set up trust funds to receive the payments and then spend monies for environmental purposes (includesа Florida, Indiana, Massachusetts, Missouri, Montana, Ohio, Pennsylvania, New Jersey, New York, Virginia, Washington and Wisconsin). Most of these States collect several millions in fines and penalties annually, with New Jersey heading the list with almost $500 million in one year.а For example, New York collected a $3 million criminal penalty in 1994 from one company, which also had to build a $20 million industrial pretreatment facility.а The Virginia Environmental Endowment is a sizable trust fund begun 20 years ago with contributions of almost $10 million from two companies, which supports research and special projects.а Some fines are dedicated to local projects, such as the Massachusetts Bay Trust Fund and Massachusetts Bay Credit Project, that fund Boston Harbor clean-up, beach and salt marsh restoration, and estuary programs.
Potential Use:а Fines and penalties could be used by States and localities for any environmental purpose.а States also can pursue out-of court monetary settlements, thus reducing costs.
Advantages:а The potential to generate considerable revenues from fines and penalties exists. When commingled in State trust fund accounts, revenues will continue to grow and be sufficient to use for infrastructure construction.а Interest income is also generated.а
Limitations: Revenue streams are unpredictability and delicate.а УBounty huntingФ often has been raised when the seeking of fines or penalties appears more important than gaining compliance on the part of the offender.а Citizen suits have this potential, since nonprofits may recover expenses and legal fees.а The costs ofа documenting enforcement cases and collecting fines are very high, and must be weighed against the likelihood and importance of gaining compliance without fines.
Reference for Further Information:а Discussion with nonprofit legal foundations: Atlantic States Foundation, Natural Resources Defense Council (NRDC).
аааааааааааааааааааааааааааааааааааааааааааааааааааааааааа REIMBURSEMENTS
аааааааааааааааааааааааааааааааааааааааааааааа (Superfund Liability Cost Recoveries)
Description: These fine or penalty-type reimbursements arise because of the "joint and several liability" laws under federal Superfund statutes (both CERCLA and SARA), as well as State hazardous wasteа laws.а Under these contingent liability provisions, all past and present users of sites designated as federal Superfundа sites, and many State-designated sites, are liable for damage cost recovery, including abandoned sites.а Users, called responsible parties, include waste generators, transporters who select the disposal site, and disposal facility owners and operators.а Responsible parties are liable for both clean-up costs and related damage to natural resources.
Actual Use:а Currently, 70 percent ofа site cleanups are funded by private parties found responsible for waste at Superfund National Priority List sites.а Cost-recovery is primarily for the federal government, but States also have cost-recovery programs.а However, reimbursements under Superfund statute clauses on the "replacement and acquisition of natural resources" have been rare.
Potential Use:а The potential for cost-recovery is, theoretically,а huge.а However, the legal difficulties in collecting reimbursements mean that negotiations have beenа protracted and expensive, particularly for abandoned sites and non-industrial parties.а Interest on Superfund settlement accounts also can be large, and amendments to existing law might create the ability to use such funds for State purposes off-site, such as credit enhancement for SRF activities,а liability insurance funds for small facilities,а and brownfields redevelopment.а The Superfund natural resources damage lawsа might be more widely usedа ifа ecological damage could be more readily valuated.
Advantages:а The benefit of vigorously pursuing Superfund liability cost-recovery is not only in the potential cost-savings, but also in creating environmental incentives for pollution prevention, including illegal dumping, in the first place.а Equity and the cost/benefit relationship is strongly upheld if more responsible parties contribute to clean-up, although cost-recovery must be based to some extent on ability to pay which is not acknowledged in Superfund statutes. Many financial leveraging possibilities exist.
Limitations:а The revenue potential is highly unpredictable, and administrative and legal costs of pursuingа offenders may be prohibitive.а Moreover, all negotiations are protracted,а and may delay site clean-up activities.а The joint and several liability clauses of current Superfund statutes are the subject of large debate, and many "softening" Congressional amendments add to uncertainties.
Reference
for Further Information: The Congressional Research Service (CRS),
Report for Congress, Summaries of Environmental Laws Administered by the
Environmental Protection Agency, Washington, D.C., January 1993; U.S. EPA,
Environmental Finance Advisory Board, "Preliminary Analysis of Using the
Superfund Program as Cross-Collateralization",а June 1995.
OTHER
Description:а
Actual
Use:а
Potential
Use:а
Advantages:
Limitations:а
Reference
for Further Information:а
аааааааааааааааааааааааааааа COMPARISON MATRIX FOR FINES AND PENALTIES
|
Criteria/ааааа Fine orа Penalty |
Actual Use |
Revenueаа Size |
Revenueа Stability |
Admini- strative Ease |
Equity |
Cost/ Benefit Ratio |
Environ- mental Benefits |
|
*Environ- а mental а Benefit а Project |
High |
Low |
Low |
High |
Mod. |
Mod. |
High |
|
*Monetary а Payments |
High |
Low -Mod. |
Low |
Low |
Mod. |
High |
High |
|
*Superfund а Reim burse- а mentsааа |
High |
Mod. |
Low |
Mod. |
Mod. |
Mod. |
High |
High -а High use (over 25 States/many localities); criteria score high (many advantages);
High revenue yield
Mod.-а Moderate use (10-25 States/many localities); criteria score in medium range;
Moderate revenue yield
Low -а Low or rare use; criteria do not rate well (many limitations)
аааааааа
* Star indicates best-rated mechanisms