Property taxes depend on property values. Some environmental improvements increase property values and, thereby, also increase property taxes. Its possible that jurisdictions can fund environmental improvements with the increased property tax revenues. Suppose that a community knows that cleaning up an old landfill will cost $800,000 today in clean up expenses, and $100,000 each year, starting next year and continuing for a total of 10 years. The communitys economist has projected that on average property values will be increased by $500 starting next year and continuing for a total of 10 years. There are 450 homes in the community. Suppose the community could collect community revenues in the amount of 90% of the increase in property value as a community property tax, yearly. Assume that the discount rate is 10%. All values have been deflated (there is no inflation).

a) The table below shows the annual stream of costs, from the initial year (year 0) to the last year of the project (year 10). The current value (before discounting) of annual community revenues is fixed from year 1 to year 10 and is denoted as X in the table. What is the value of x?

b) Given the amount of tax revenue it can collect, relative to the cost of the improvements, could the community afford to take on the project of cleaning up the old landfill (assume that there are no other costs or benefits associated with the landfill or the landfill project)? Make sure to describe how you have reached your decision (what values have you used, what decision rule have you used?). Note that this is not technically a benefit cost analysis as you are only evaluating the tax revenues collected against the program costs and not all benefits and costs. (10 marks)

c) In practice what would the difficulties be in setting up such a program to fund environmental improvements?

Question 1 (20 points) Property taxes depend on property values. Some environmental improvements increase property values and thereby, also increase property taxes. It's possible that jurisdictions can fund environmental Improvements with the increased property tax revenues Suppose that a community knows that deaning up an old landfill will cost $800.000 today in clean up expenses, and $100.000 each year, starting next year and continuing for a total of 10 years. The community's economist has projected that on average property values will be increased by $500 starting next year and continuing for a total of 10 years. There are 450 homes in the community. Suppose the community could collect community revenues in the amount of 90% of the increase in property value as a community property tax, yearly. Assume that the discount rate is 10% All values have been deflated (there is no inflation) a) The table below shows the annual stream of costs, from the initial year (year Oj to the last year of the project (year 10). The current value (before discounting of annual community revenues is fixed from year 1 to year 10 and is denoted as X in the table. What is the value of X? (5 marks) Page 2 Year Costs Community Revenues 0 0 X 1 2 3 5 800,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 X X 6 7 8 9 X X 10 b] Given the amount of tax revenue it can collect, relative to the cost of the improvements, could the community afford to take on the project of cleaning up the old land assume that there are no other costs or benefits associated with the landfill or the landfill project? Make sure to describe how you have reached your decision (what values have you used, what decision rule have you used?). Note that this is not technically a benefit cost analysis as you are only evaluating the tax revenues collected against the program costs and not all benefits and costs. (10 marks) c) In practice what would the difficulties be in setting up such a program to fund environmental Improvements? (5 marks) Question 1 (20 points) Property taxes depend on property values. Some environmental improvements increase property values and thereby, also increase property taxes. It's possible that jurisdictions can fund environmental Improvements with the increased property tax revenues Suppose that a community knows that deaning up an old landfill will cost $800.000 today in clean up expenses, and $100.000 each year, starting next year and continuing for a total of 10 years. The community's economist has projected that on average property values will be increased by $500 starting next year and continuing for a total of 10 years. There are 450 homes in the community. Suppose the community could collect community revenues in the amount of 90% of the increase in property value as a community property tax, yearly. Assume that the discount rate is 10% All values have been deflated (there is no inflation) a) The table below shows the annual stream of costs, from the initial year (year Oj to the last year of the project (year 10). The current value (before discounting of annual community revenues is fixed from year 1 to year 10 and is denoted as X in the table. What is the value of X? (5 marks) Page 2 Year Costs Community Revenues 0 0 X 1 2 3 5 800,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 X X 6 7 8 9 X X 10 b] Given the amount of tax revenue it can collect, relative to the cost of the improvements, could the community afford to take on the project of cleaning up the old land assume that there are no other costs or benefits associated with the landfill or the landfill project? Make sure to describe how you have reached your decision (what values have you used, what decision rule have you used?). Note that this is not technically a benefit cost analysis as you are only evaluating the tax revenues collected against the program costs and not all benefits and costs. (10 marks) c) In practice what would the difficulties be in setting up such a program to fund environmental Improvements