Agenda - Council - 10/25/1983 - Laserfiche WebLink

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I I I I i I I I I I ! I I I I I I I capitalization effect suggests that costs of the accident are per- ceived as short-term and are offset by expectation of damage awards. The author's analysis failed to disclose any statistically significant. decline in residential property values in the vicinity of TMI. The results suggest that the costs of the accident were perceived as short- term or at least any expected future costs have not been capitalized into the value of residential property. The+ authors speculate on what might.be some of the reasons that no capitalization effect has shown up. They note the likelihood that the TMI accident would be cleaned up promptly and that federal and state assistance would be forthcoming; hence, the value of such expectations are positively capitalized which offset the negative effect of the accident. The authors write: This possibility, if accurate, means that any program designed, to guard against present or future losses from nuclear accidents will fall into what Tullock (1975) calls 'the transitional gains trap.' To elaborate briefly on this point, suppose that greater protection against losses is provided to residents near nuclear plants. The expected value of such protection will be capitalized into property vales and reflected in sale prices. Subsequent owners are no better off as a result of. the protection than they would have been had the protection never been afforded, since in the event of an accident the compensation received will be equal to the premium paid for the property. The effect of such legislation is to create potentially large windfall gains or transfers to those homeowners who sell out at higher capitalized values, while the successors, to the original owners will not normli~ gain in the event of an accident. But once the additional protection is in place, its cancellation would create a potentially large class of windfall losers, thereby creating incentives for special-interest lobbying and other actions designed to prevent such losses. "An Assessment of Land Values for Properties Adjacent to and Removed from Land Application of Sludge Sites," by Larry Adams-Walden' and Max Richards, U.S. EPA Region V, July 1982. ~ U.S. EPA conducted a study to determine if changes in land values at properties adjacent to existing sludge application sites varied significantly from changes in land values at other properties (not adjacent to sludge application sites) in the same county. Twelve sludge sites were selected in several states that had sludge applied on them for at least three successive years on at least 100 acres or more of agricultural land. Then, an adjacent land area was selected for the experiment. In addition, a comparable property was selected some distance away from the sludge site, but within the same county, as a control. The authors reached the conclusion that there was no statistically significant difference between the annual rate of increase of land valuations for the two groups of properties.