Masters Theses

Date of Award

3-1984

Degree Type

Thesis

Degree Name

Master of Science

Major

Agricultural Economics

Major Professor

William M. Park

Committee Members

Charles B. Garrison, Thomas H. Klindt

Abstract

Landfilling is one of three alternatives presently available for disposing of solid waste, along with recycling and incineration. Landfilling appears to be the most cost efficient alternative for the foreseeable future. Landfills do have a limited life, so the problem of siting periodically recurs. It has been estimated that 72% of the county landfills in operation in Tennessee in 1979 will require location within 10 years of that time. A well-managed sanitary landfill is considered by some to be a nuisance free method of waste disposal; however, acceptance of a site is often difficult due to adverse public reaction. Real or at least perceived external effects have been shown to depress nearby property values. These external effects can be estimated and explicitly included in the siting decision-making process. Conflicts over siting decisions may be more readily resolved through identification of the social cost-minimizing site and the use of a tax compensation scheme to adjust location incentives facing operators and reduce protest and approval costs.

The objectives of this study were to estimate the costs associated with landfilling which vary with the distance a site is located from a population center and derive implications from these estimates for siting and tax-compensation strategies. Transportation costs were expected to increase with distance, while external costs, protest costs (the legal fees, time expenditures, and other costs incurred by nearby residents in opposing a potential site), and approval costs (the legal fees, time delays, and other costs incurred by the operator due to protest activities) were all expected to decrease with distance. It was thus hypothesized that there would be some distance from the population center where the sum of these costs would be minimized.

Two scenarios were then examined to determine what the cost-minimizing distance would be in each. The first was the case of no internalization of the external costs by the operator or compensation to affected residents. Under this scenario cost-minimizing distances for the landfill from the operator's perspective and from society's perspective would diverge. Under the other scenario internalization of the external costs was accomplished through placing a tax on the operator. The revenue raised from the tax would then provide the financing for compensation payments to affected residents. This would serve two purposes: 1) the operator's costs would more fully reflect the true social costs of the landfill, correcting his location incentives and 2) the affected residents would be less inclined to protest the landfill being placed nearby, which would reduce their own protest costs and, subsequently, the approval costs of the operator. Under this scenario the optimal distances for the operator and society would be the same, and total social costs of landfilling would be lower because of the shift away from the population center and the reduction in pro test and approval costs.

Empirical illustration of this approach was done using a case study area. Variable transportation costs were estimated, based on data covering a full year for the twenty-two mile round trip from a transfer station to an existing landfill. External cost estimates were developed based on a coefficient for distance from a landfill in Baker's hedonic price model. Percentage reductions in property values which varied with distance from a landfill site were applied to census information on numbers and value of residential property for sites along a ray from a transfer station through an existing landfill in order to develop the external cost function. The distance at which the sum of transportation and external costs were minimized was identified. Due to the limitations inherent in the data and methodology, analysis was undertaken to determine how sensitive the conclusion as to social cost-minimizing distance was to variations in transportation and external costs.

The level of external costs at the social cost-minimizing distance suggested an appropriate level for the tax and compensation payments. Average annual compensation per household for several ranges of distance from the site was indicated. Several alternative methods for compensation were outlined. The cost of compensation in terms of increased costs per household in the case study area for solid waste disposal services was estimated.

The basic conclusion of the study was that the conceptual framework developed provides a useful way to address systematically the problem of landfill siting and tax-compensation schemes, as the empirical illustration demonstrates. Limitations inherent in the data and methodology and suggested areas for further research were outlined.

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