Tuesday, October 28, 2008

The Economics of Conservation

October 28, 2008, 6:45 a.m.

Economic Analysis of Conservation Bond

The Johnson County Board of Supervisors has put a conservation bond issue proposal on the November 4 ballot.

I've been asked, now repeatedly, whether I think it makes economic sense for Johnson County's property taxpayers.

The short answer is "yes;" the longer answer continues below.

There are over 100 organizations, and thousands of individuals, whose recreational activities involve the use of Eastern Iowa's land and water. Iowa ranks near the bottom of the 50 states in public land. So many of them have been having to contribute their own land, money and efforts to improving Iowa's status.

But that's not the way our nation, and the other 49 states, have gone about creating this fundamental public asset over the last 200 years. They view this as a public function, appropriate for public expenditure.

Now Johnson County voters are being given the opportunity to join the rest of the nation. We get to vote on whether we want to invest $1 million a year over the next 20 years for the acquisition of private land voluntarily offered for sale. (This is not an "eminent domain" undertaking.)

Readers' comments. I welcome "comments" about my blog entries, and often benefit from their constructive criticism. But I don't use the blog to carry on an ongoing debate. I figure I have my say in the blog, and those making comments should be permitted their say unchallenged, leaving it to readers to sort it all out. So all comments except for overt advertising are retained on the blog.

But a recent anonymous comment directly asks for a response, and involves the conservation ballot issue:

Anonymous said...

People have been watching your blog for some type of analysis of the conservation vote coming up, the one where you and your wife sit on the board? You know, an analysis of the budget, the business plan, etc. The detailed plans about what happens to the land after purchase and who pays for it...the answering of questions related to conflict of interest...why we are expected to give away $20,000,000 without no more information that a one-page flyer and the exact one-page website???

We have come to expect greater thought on matters pertaining to our tax dollars. We expect more of you, Nick. How would a banker analyze your request for tax dollars? How should the general public? How can one vote on something with no details? Is it a desert topping or what?

10/22/2008 10:37:00 AM
I decided this was one comment that really did require a response, which I prepared over the weekend and intended to use today. Yesterday, he or she was back again, and after quoting from the "Missions and Metrics" blog entry of October 24, added a comment including this excerpt:

. . . These are the same issues being demanded regarding the $20 million conservation vote. All based on a one-page business plan? Give me a break Nick. By ignorning the issue you are agreeing with every argument the opponents of this handout have.

10/27/2008 11:33:00 AM
While I rather suspect that "Anonymous" is opposed to the bond issue, and will remain so regardless of what I write, it makes more sense to give him/her the benefit of the doubt and treat the comment as a serious inquiry.

Comparing Apples and Automobiles. While the implied economic questions can be and will be addressed (whether or not to the satisfaction of the author of the comment is another matter), there are some basics to address first.

1. Public money, private projects. Most of my concerns about public finance, expressed in newspaper columns and blog entries, have involved the transfer of taxpayers' money to private individuals and the bottom lines of for-profit corporations: the recent $700 billion bank bailout; earmarks such as the $50 million from Senator Grassley for the indoor rain forest proposal from Ted Townsend, Governor Ray, and Dave Oman; a vast array of other "corporate welfare" subsidies and programs; and locally the equivalent forms of gifts from the City Council to businesses in the form of TIFs and direct expenditures.

Such spending (rule by joint corporate-government authority is central to the classic definition of "fascism") should raise serious ideological problems for "free private enterprise" and "marketplace" advocates. But if it is going to be done anyway, I've argued, then claims such as those of projected ticket sale revenues, as for the rain forest or Stories Project, need to be subjected to the kind of analysis the author of the comment expresses as, "How would a banker analyze your request for tax dollars?"

2. Public money, public projects. By contrast, public projects, serving public purposes, that come from public bodies -- especially those funded with bond issues voted on by taxpayers -- are an entirely different matter.

That doesn't mean they should be exempt from economic analysis, only that comparing the issues they raise to those of typical corporate welfare projects is like comparing apples to automobiles.

When local school district residents voted a $40 million bond issue for more schools I had laid before them an alternative that would have eliminated the need for the $40 million. But enough voters were sufficiently uncomfortable with what the alternative involved (a modification of the high schools' senior year, and a different system for assigning elementary students to schools) that they thought the $40 million well worth it. And that was fine with me.

Taxpayers have as much right to make an additional contribution to new schools, or more conservation land, as they have to increase their tithe to their house of worship. (And yes, I understand that, unlike the voluntary tithe, once 60% or more of the voters vote for a bond for something those who voted against the proposal will also have to pay their fair share of the property tax used to pay it off.)

There's an enormous difference between, on the one hand, four individuals (Grassley, Ray, Townsend, Oman) deciding to spend $50 million of federal taxpayers' money on a private project in Iowa (their indoor rain forest idea), without meaningful consideration (if any) by the other 99 of the 100 senators, any of the 435 of the members of the House, or the White House staff, and no vote of Iowa's (let alone the nation's) taxpayers; and, on the other hand, the citizens of Johnson County voting to spend $1 million a year for the acquisition of additional public land for conservation and recreation in Johnson County.

Unlike transferring taxpayers' money to for-profit corporations, there are basic community functions and infrastructure that have historically been well within the role of state and local government.

Of course, public expenditures on public projects should be undertaken with as much administrative and managerial expertise, efficiency, and attention to alternatives and cost control as possible.

But there is relatively little debate that public projects can appropriately be undertaken by government -- at some time, in some way, to some degree. I would include in this category our public library, schools, roads, bridges, sewer system, and water plant.

Clearly, public parks and forests; wetlands, lakes and rivers; recreation areas and trails, have been seen to be an appropriate public purpose, and expenditure, since the time of the Boston Common in 1634.

3. "Our Land, Water and Future" and the conservation bond. Is the conservation bond proposal another example of for-profit corporations or wealthy campaign contributors trying to enrich themselves with taxpayer money? No.

This is clearly not only a "public money, public project" proposal, but one that originated with the Johnson County Conservation Board, with the approval of the Johnson County Board of Supervisors.

I had earlier been researching, writing about, and had created a Web site for "greenbelts," and had made efforts to contact the Conservation Board, although unsuccessful in doing so. Frankly, I had not thought about a bond issue, had not a clue the Conservation Board was thinking about such a thing, and was stunned (though pleased) when I first heard that a bond issue was in the works.

The comment indicates that my wife and I are on the "board" of "Our Land, Water and Future." In fact, the organization is sufficiently informal that it does not have a "board" as such, only a "steering committee" more or less make up of everyone who came to the first meeting, along with a couple of "co-chairs."

Certainly the organization did not exist prior to the notice of the bond issue, and thus neither it, nor to the best of my knowledge any of its supporters -- unlike the rain forest project's promoters -- could have been instigators of the conservation bond idea.

The closer analogy would be to the "Yes! for Kids" group, organized after the school bond proposal was put forward and made up of those who thought it a good idea.

The conservation bond details. How much detail can a voter reasonably expect from a bond issue proposal? It's one of the questions put by my anonymous comment writer.

Another Anonymous person (not me, obviously) actually responded with a comment of his or her own on this point, quoting the ballot language:

Shall [a] the County of Johnson, State of Iowa, [b] be authorized to acquire and develop lands [c] with public access provided, [d] to be managed by the Johnson County Conservation Board, [e] in order to protect the water quality in rivers, lakes and streams; protect forests to improve air quality; protect natural areas and wildlife habitat from development, and provide for parks and trails, [f] at a cost not exceeding $20,000,000 and [g] issue its general obligation bonds [h] in an amount not exceeding $20,000,000 for that purpose, [i] to be repaid in not more than 20 years? [j] All expenditures will be subject to an annual independent audit. [letters added]
This is about as detailed as you're likely to get from any comparable proposal.

Bonds to build schools don't indicate where the schools are going to be, the precise land and building costs for each, what the architectural plans are, the schools square footage and number of classrooms, how many students will attend, what neighborhood areas they'll come from, who the teachers will be, or where the bus routes will run.

And of course, like schools, it would be both difficult and unwise to identify precise parcels at this point because it would drive up the cost of those parcels for the public, and because it cannot be known, today, precisely what land will become available for voluntary sale, and thought to be most appropriate to the conservation purposes, 5, 10 or 15 years from now.

So what is the economic value of this proposed conservation bond? A part of our "apples to automobiles" problem involves the calculation of the economic value of public projects. It's not that it can't be done, and I'm about to show how it can be.

But you can't measure the "economic" return on a community's investment in libraries, schools -- or parks -- with the same approach you'd use to evaluate the investors' return on their investment in a hotel or shopping mall. Public libraries and schools were never created with the expectation of the "profits" they would spin off. The economic return they provide benefits not only those personally involved, but the community as a whole -- from the enhanced education and information possessed by the citizens, entrepreneurs, workers, and public officials in that community.

Similarly, there is no universally agreed upon single measure of the value of conservation, but these approaches may help:

(a) It's what the Mastercard advertisements call "priceless." What's it worth to you, today, to know that your grandchildren will have access to land in addition to that which is located in a suburban development of homes, or under the parking lots of super malls? What's it worth to you to take a bike ride along a trail through the woods and along a stream? Or to cross-country ski that same trail on a new winter's snow? To spot a rare bird in a forest? To play a game of ultimate Frisbee? To go fishing or hunting with one of your children? To camp overnight along a river?

(b) Economists say it's not "priceless"; they attempt to put a value on it. They say that, at a minimum, recreational land is worth what you are willing to pay to enjoy such pleasures: the mileage cost of driving your car there; the cost of the boat and motor; the outdoor clothes; the sporting, hunting and fishing equipment; the mountain bicycle -- possibly even an RV. In fact, this understates the value; I suspect most of us don't think about the dollar value of such pleasures, and if we did would value them far higher than our mere out-of-pocket expenses -- indeed, if the benefit from the cost was only a wash we probably wouldn't buy the stuff in the first place. And, of course, what's a "cost" (and a "value") to you is a "profit" to some local merchant. So, while I haven't run the numbers, it seems reasonable to assume that there's at least a $20 million return over 20 years from this analysis alone.

(c) Cost avoidance. What did the most recent flood cost us? I don't know the total, but I do recall a University of Iowa estimate of, was it $250 million? It was something over $200 million. And that's just one institution's loss from one flood -- over ten times the cost of the bond!

Greenways and wetlands; prairies, pastures and recreational lands in floodplains; and buffers of filters along rivers can both reduce the number and severity of floods and virtually eliminate the damage to homes and businesses. Cost avoidance alone makes the bond one of Johnson County taxpayers' best investments.

(d) Matching funds. I don't emphasize the proponents' suggestion that the $20 million can and will be "matched" with state, federal and private funds (though I have no reason to doubt them). It may be. But I haven't seen the details on that, so I'm not including it here. Obviously, however, if our $20 million ends up producing $80 million that would be another very positive economic return in the equation.

(e) "Return on investment." From the time of the Boston Common until now, America -- indeed the world -- has had a serious commitment to public lands. And for many good reasons, not the least of which is "return on investment."

"Now is not the time," say some of the bond issue's opponents. But do you know when is the absolute worst time to acquire public land? Next year. Conditions are never better than right now, whenever "right now" and "next year" may be.

It was not easy for the New York legislature to buck the political opposition 150 years ago and come up with the $50,000,000 then necessary to buy what is today Central Park in New York City. But do you know what its value is today? Some 10,000 times that much: $500 billion dollars!

Over the years, from the Boston Common and Central Park, through our vast system of national and state parks and forests today, Americans have seen that kind of return on their investment. Some 23-76% of the land in our 12 western-most states is public land. The National Forest Service alone holds 8% of all the land in America, about 193 million acres.

Imagine what our little $20 million investment will be worth 150 years from now!

(f) We know of the contribution of public lands to Iowa's ability to hold our graduates here, and encourage the immigration of others -- and the economic value that must represent, even if it cannot be measured accurately.

But even more significant, and more difficult to measure, is the contribution of conservation to the continuation of life itself. A reliable water table. Clean water in lakes and streams. The wildlife that help keep both plant and animal life in balance. The retention of our topsoil. The forests that help keep our carbon footprint and greenhouse gases in check. Healthy air to breathe. We cannot continue to take and take and never give back and expect to survive. Survival; that's truly "priceless."

Opposition to all public expenditure. There is a political/economic philosophy held by some that we should eliminate virtually all public expenditures for public purposes and "privatize" most of those functions: schools, jails, libraries, water, trash pickup, and turn the Interstate system into toll roads; give Disney the national parks. (Even these individuals might be able to concede that there's something different about meeting conservation needs essential to continued human life that have not, and will not, be satisfied with "marketplace forces.")

But unless you agree with that approach to government (or, rather, doing away with government) there is no reason to take seriously the arguments of those who do hold that view when they oppose the conservation bond. They are not really arguing against the wisdom of the conservation bond as such -- any more than they argue against schools, libraries and jails as such -- so much as they are arguing against any and all public projects.

(There are also, of course, arguments that it would be more fair and just to provide public funding for public projects with an appropriately progressive income tax rather than property tax, but that, too, is no more program-specific as an argument -- nor likely to be adopted -- than doing away with all public projects.)

As I began, "There are over 100 organizations, and thousands of individuals, whose recreational activities involve the use of Iowa's land and water." My thanks go out to all of them, as diverse in purpose as they may be, for what they have done with their own time and money -- most recently pulling trash out of the Iowa River. Rachel Gallegos, "Difference Makers; Volunteers Help with Iowa River Cleanup," Iowa City Press-Citizen, October 26, 2008 (available as, Rachel Gallegos, "More than 100 attend 'Make a Difference Day,'" Iowa City Press-Citizen, October 25, 2008).

"Flipping the ballot" and voting "Yes" for the conservation bond issue is a way we can all work together to further multiply their efforts -- while, in my humble opinion, getting one of the best returns on an investment of public money we're ever likely to enjoy.

# # #

1 comment:

Brad said...

Wow! That was a great blog entry. Thanks for your insight Nick. I think this really puts into persepctive the issues that people are having with this bond. I hope and pray for my children's future that this our community will pass this bond issue.