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The polluter pays principle and Everglades restoration

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Abstract

Florida’s Agricultural Privilege Tax (APT) is a unique example of the “polluter pays principle” applied to reduce nonpoint source pollution. It has been more than 20 years since the APT was enacted as a building block for restoration of the Everglades ecosystem, the most extensive environmental restoration project in the world. This article provides a historical perspective on the environmental, socio-political, and institutional factors that led to the enactment and evolution of the APT. The efficiency and equity of the tax as part of a broader program to achieve water quality goals for the Everglades are also evaluated. A key result of this evaluation is that the APT has encouraged reductions in nutrient loads from agricultural areas, but these contributions have been limited. Dramatic increases in abatement costs to treat nonpoint outflows with stormwater treatment areas have occurred, and the timeline to achieve water quality objectives has been pushed forward by decades beyond the original goal. Contrary to the polluter pays principle, political compromises that have shaped the APT since its inception have shifted an increasing share of the burden to the public to reduce the flow of nutrients into the Everglades. An inconsistent regulatory approach to reduce nonpoint sources throughout the Everglades watershed may be the most important impediment to Everglades restoration.

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Notes

  1. The APT is a type of “ambient tax” with a collective penalty for each polluter when the aggregate emission levels of pollution reduction across a group of sources are below the reduction target or an incentive credit when aggregate emissions reductions exceed the target. For references to the APT, see Hoffman and Boyd 2006; Karp 2005; Kling 2013; Nanda 2006; Ribaudo 2004; Segerson 1997; Selman and Greenhalgh 2009; Vossler et al. 2013; Willinger et al. 2014; Xepapadeas 2011.

  2. Total costs would be divided equally between federal and nonfederal (state and local) governments. Initial cost estimates for CERP were $8.2 billion over 30 years (NRC 2007, p. 76). More recent estimates are that CERP will take more than 50 years and at least $16.4 billion to complete (Stern 2017).

  3. The Central and Southern Flood Control District was initially created by the Florida Legislature in 1948 to be the local partner for the C&SFP. As the name suggests, the primary purpose was flood protection. It would be renamed the “South Florida Water Management District” in the Water Resources Act of 1972. Both entities were given ad valorem tax authority to meet the local cost-share for the C&SFP (Swihart 2011, pp. 23–33).

  4. Not all groups who were involved in the litigation were satisfied with the settlement terms in the decree. The Miccosukee Tribe and environmental groups, in particular, argued that the terms failed to set a timetable to control pollution and did not require sufficient financial responsibility for agricultural landowners in the EAA (Bovard 2004; Fuller 2011; Kenworthy 1993).

  5. All dollar values for the APT are in nominal $ to be consistent with the language of the EFA legislation over time.

  6. The majority of the land area and taxable value in the SFWMD is in Dade, Broward, and Palm Beach counties that includes Miami, Ft. Lauderdale, and West Palm Beach as well as other heavily urban communities. Because of the large taxable assessed value in these counties, the EFA tax rate is capped at 0.1 mill or $10 per $100,000 of taxable value.

  7. The “polluter pays” amendment was one of three ballot initiatives sponsored by the citizens group Save Our Everglades, Inc. Another initiative was a “fee on Everglades sugar production” that would impose a 1-cent fee per pound of sugar grown in the EAA. The third initiative would create the “Everglades Trust Fund” to be administered by the SFWMD for the purpose of resource conservation and abatement of water pollution. The 1-cent fee initiative was defeated after an aggressive campaign by the sugar industry (Santaniello 1996). Both the polluter pays and trust fund initiative were approved and were enacted as constitutional amendments.

  8. It should be noted that the land area for the FEBs in Restoration Strategies was originally intended for storage reservoirs under the CERP plan. The reservoirs would have provided new water flow to the remnant Everglades rather than directing existing flows to the STAs. These changes along with other modifications have reduced the expected new flows to the remnant Everglades by more than 50% from the original CERP plan (NRC 2016, pp. 156–159).

  9. Runoff is highly dependent on rainfall, so the baseline load is flow-weighted and is predicted with a regression model that accounts for the variability between current year rainfall and the baseline period of 1978–1988 (Davison et al. 2018, pp. 4-14–4-21). The target load is the predicted load reduced by 25%. Despite changes in cropping patterns in the EAA in the past two decades, the baseline period to measure TP load reductions has not changed.

  10. The percentage reduction in 1996 was 68% which exceeded the credits needed to lower the APT to the minimum rate. The extra credits were carried forward to reduce the rate in the following years, such as 1998, when the actual reduction would not fully reduce the tax to the minimum rate.

  11. Land, design, and construction costs are based on SFWMD (2017). All cost figures for STAs are nominal because the SFWMD does not provide an annual historical record of expenditures and there is no other official source for cost data. Projected land and construction costs after 2016 are from SFWMD (2014). Operating and maintenance (O&M) costs prior to 2011 are from Entry and Gottlieb (2014) and after 2011 from SFWMD, various years. O&M after 2016 are based on the 2012–2016 annual average of $26.3 million with 2% annual inflation. Acreage is from Pietro (2012) and represents the total surface area of the STA; the effective treatment area is approximately 57,000 acres.

  12. When the APT converted to a flat tax with no future incentive credits in 2013, the cumulative basin-wide total was more than 300 credits (Pescatore and Wang 2014). If the target reduction was not met and actual reductions were 0%, the cumulative credits would have still reduced the tax rate to the minimum for at least another decade.

  13. This estimate is based on an average of 460,000 acres/year in production during 1996–2016 and assumes no change in the acreage planted in the EAA for 2017–2026. The Florida Legislature in 2017 authorized $1.5 billion for a new reservoir in the EAA near the existing STAs and new FEBs. As of 2018, most of the acreage for the reservoir is publicly owned land and the SFWMD has purchased approximately 500 acres for the reservoir (SFWMD 2018).

  14. A variety of alternative dynamic tax structures for the APT could have provided stronger incentives to improve efficiency and address equity concerns. For example, Lee and Milon (1999) proposed a two-tier structure for the APT that would integrate the costs of STAs into the tax rate so that the full costs of TP abatement were considered in cropping and production practices within the EAA. For a more general discussion of alternative tax approaches, see Goetz and Martinez (2013) and Vossler et al. (2013). Kling (2013) also suggested that a permit trading program between nonpoint sources in the EAA could improve efficiency.

  15. This shifting of financial responsibility in public funding for the EAA is certainly not unique to water quality. The cost-sharing agreement for the original C&SFD that created today’s EAA had a federal cost-share of approximately 60% with the non-federal share funded mainly from ad valorem taxes on nonagricultural lands in South Florida and general revenues from the State. In his classic book on the early history of environmental policy in Florida, Luther Carter observed that cost-sharing for the C&SFD “…has favored agricultural interests – and especially the corporate farming enterprises of the Everglades Agricultural Area – in an outrageously unfair way” (Carter 1974, p. 96). Since agricultural lands south of Lake Okeechobee were a primary beneficiary of flood control yet paid a minimal share of the costs for the C&SFD, more land was brought into cultivation in the EAA than economically justified.

  16. Other explanations are also possible. Knox (2013), for example, describes the narrative of “Everglades restoration” as public policy designed to promote vague goals about benefits for the environment. At the same time, economic activities that benefit special interests are maintained even though these activities are detrimental to meaningful restoration.

Abbreviations

APT:

Agricultural Privilege Tax

BMP:

best management practices

CERP:

Comprehensive Everglades Restoration Plan

C&SFP:

Central and South Florida Flood Control Project

CWA:

Clean Water Act

DOJ:

Department of Justice

EAA:

Everglades Agricultural Area

EFA:

Everglades Forever Act

ENP:

Everglades National Park

EPA:

Environmental Protection Agency

EvPA:

Everglades Protection Area

FEB:

flow equalization basin

NRC:

National Research Council

PPP:

polluter pays principle

SFWMD:

South Florida Water Management District

STA:

stormwater treatment area

TMDL:

total maximum daily load

TP:

total phosphorus

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  1. Department of Economics, University of Central Florida, Orlando, FL, 32816-1400, USA

    J. Walter Milon

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Milon, J.W. The polluter pays principle and Everglades restoration. J Environ Stud Sci 9, 67–81 (2019). https://doi.org/10.1007/s13412-018-0529-y

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