Citation
Strategies to manage growth from energy development

Material Information

Title:
Strategies to manage growth from energy development
Creator:
Wilson, Mary Pat
Publication Date:
Language:
English
Physical Description:
x, 80, [3] leaves : ; 28 cm

Subjects

Subjects / Keywords:
Energy policy -- West (U.S.) ( lcsh )
Energy policy -- Colorado ( lcsh )
Economic policy ( fast )
Energy policy ( fast )
Economic policy -- West (U.S.) ( lcsh )
Economic policy -- Colorado ( lcsh )
Colorado ( fast )
United States, West ( fast )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Bibliography:
Includes bibliographical references (leaves 81-83).
General Note:
Submitted in partial fulfillment of the requirements for a Master's degree in Planning and Community Development, College of Design and Planning.
Statement of Responsibility:
Mary Pat Wilson.

Record Information

Source Institution:
University of Colorado Denver
Holding Location:
Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
09030146 ( OCLC )
ocm09030146
Classification:
LD1190.A78 1980 .W56 ( lcc )

Full Text
ENVIRONMENTAL DESIGN
AURARIA LIBRARY
STRATEGIES TO MANAGE GROWTH FROM ENERGY DEVELOPMENT
Mary Pat Wilson December 5, 1980


December 5, 1980


TABLE OF CONTENTS
Page
INTRODUCTION ......................................................... v
I. HISTORICAL BACKGROUND ........................................... 1
II. CHARACTERISTICS OF TYPICAL COMMUNITIES .......................... 5
III. TYPICAL IMPACTS ON ENERGY-PRODUCING COMMUNITY ................... 9
Employment .................................................... 9
Population.................................................... 10
Public Revenues .............................................. 12
Taxing Mechanisms ............................................ 14
Wages......................................................... 16
Housing....................................................... 17
Summary....................................................... 19
IV. SOURCES OF ASSISTANCE TO COMMUNITIES ........................... 21
Assistance from Local Government ............................. 21
Assistance from State Government ............................. 25
Assistance from the Federal Government ....................... 31
Assistance from the Private Sector ........................... 35
Summary....................................................... 36
V. STANDARDS FOR EVALUATION OF EFFECTIVE STATE
POLICY AND PROGRAMS............................................. 38
Fair Distribution of Costs.................................... 39
Timely Delivery of Assistance ................................ 42
Adequacy of Local Participation in Assistance
Delivery Decisions ........................................ 44
Protection of Community Against Economic Decline .... 46
Summary....................................................... 49
VI. POLICY AND PROGRAM RECOMMENDATIONS ............................. 52
Creation of State Energy Development Policy and Plan . 53
Creation of a Comprehensive Economic Development
Strategy and Plan.......................................... 58
Strengthening the Management Capacity of
Local Governments.......................................... 62
Enactment of Legislation to Provide Financial
Assistance to Impacted Areas .............................. 66
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TABLE OF CONTENTS (cont'd)
Page
VII. CONCLUSIONS........................................................ 72
Surrenary of Argument............................................ 72
Summary of Findings............................................. 72
Further Research ................................................ 77
FOOTNOTES............................................................. 78
iv


INTRODUCTION
Rapid large-scale development of energy resources in the Rocky Mountain region has changed the social and economic environment in many small communities throughout the West. Reaction to the increased development is mixed. Viewed as both an opportunity and a problem, the growth of the energy industry throughout the West has created impacts requiring unique responses from the public and private sectors. The purpose of this paper is to identify and evaluate the methods by which a state can manage the social and economic impacts of rapid growth induced by energy development. Particular attention is focused on Colorado's experience, including an overview of energy development and its impacts in the state, and a description of the major programs of state assistance to units of local governments.
Premises
The premises of this paper are that:
rapid energy-induced growth places stress on the social and economic environment of the community
few communities have sufficient resources to manage the growth
v


existing sources of management and financial assistance are inadequate
state government has a responsibility to deliver assistance to its political subdivisions
local participation in decision-making, an equitable distribution of the costs of energy development, early delivery of assistance, and protection against future economic decline are essential components of an assistance strategy
Approach
The approach to testing these premises follows these steps:
Description of the social and economic environment of typical communities prior to energy development. An examination of common characteristics shows that these communities are usually small, isolated, economically dependent on agriculture or ranching, socially and ethnically homogeneous, and inexperienced in managing population and economic growth.
Identification of typical impacts of energy development.
A rapid influx of new residents changes the social and economic environment by placing additional demands on existing community infrastructure (water and sewage
vi


systems, streets and highways, schools, police and fire protection), housing, retail goods and services, and supply of local capital. Integration of the newcomers into the previously homogeneous community is often difficult.
0 Review and analysis of various sources and kinds of
assistance available to communities for growth management. Local government's ability to finance and manage the growth impacts, as well as the availability of assistance from the state and federal government and from the energy developer, is found to be inadequate and ineffective. Too little help arrives too late to address the growth issues before they become problematic.
0 Description of elements essential to effective growth management strategy and recommendation of state policy and programs. Four elements were found to be important to any proposed strategy: fair distribution of costs, timely delivery of assistance, local participation in decision-making, and protection against future economic decline. These elements were used as evaluative criteria for four major policy and program recommendations:
1) creation of a state energy development plan and policy,
2) creation of an economic development strategy and plan,
3) strengthening the management capacity of local governments, and 4) enactment of legislation to provide financial
vi i


assistance.
Methodology
The method of research and study consists of three major components: 1) review and analysis of published reports, studies, and articles representative of the field of current research and literature on energy impacts and state assistance to units of local government; 2) interviews with key state and local officials, program managers, planners, and economists familiar with existing energy impact assistance programs; and 3) my own professional experience and observations over the past three years, during which I studied and analyzed the patterns of financial and growth management assistance which states deliver to local impacted jurisdictions.
Scope of Study
The purpose of this paper, to recommend state policies and programs for growth management assistance to energy-impacted communities, necessarily limits its scope to a state government perspective. No attempt is made to prescribe a role for the federal government or the energy industry in delivering impact assistance. An examination of the effects of energy development on the physical environment is outside the scope of this study, which limits itself to the social and economic impacts on the community. The review and analysis of
viii


existing sources of assistance is confined to those programs which provide technical and management assistance to local governments and programs which finance capital improvements. I do not attempt to identify sources of financial assistance for the operational costs of those facilities, nor do I inventory the range of human service programs available.
The paper is strategic rather than tactical. In that regard, the paper does not examine the implementation or execution of proposed policies and programs. In the evaluation of my proposals I do, however, alert the reader to potential difficulties with their implementation.
Evaluative Criteria
The criteria used to evaluate both existing and proposed programs and policies were developed on the bases of interviews and readings, and represent my own professional judgments, experience, and values. It is likely that a different set of criteria could be chosen, respectively, by elected officials, by residents of the impacted areas, by industry management, and even by residents of energy-consuming states.
Findings
This study concludes that its original premises are valid and that an effective strategy can be developed for state growth
ix


management assistance. The recommended policies and programs address the needs of impacted communities which are inadequately met by existing programs. The recommendations retain their validity when assessed by the evaluative criteria.
I have selected a small number of policy issues for examination, analysis, and recommendations. While they are not exhaustive, they represent, in my opinion, the most important issues facing decision-makers confronted with energy impact problems.
x


1
CHAPTER I
HISTORICAL BACKGROUND
Since the early 1970s, the United States has sharply increased its domestic energy production. Colorado, as well as much of the West, has witnessed an accelerated development of its vast energy fuel reserves, including underground and surface mining of coal, construction of mine-mouth generating plants, oil and natural gas production, oil shale exploration and demonstration projects, uranium mining and milling, and the establishment of a new synthetic fuels industry. Stimulus for this increased production came from a number of sources.
Following the Arab oil embargo of 1973, President Nixon proposed, and Congress supported, a policy initiative known as Project Independence. Its objective was to decrease U.S. reliance on foreign oil imports by increasing domestic production of oil and other energy fuels. Coincident with this event came a realization that natural gas supplies were being rapidly depleted, and that both industrial and residential dependence on natural gas would have to shift to other energy sources. Development of domestic coal reserves was seen by many as a solution to natural gas shortages, especially among industry and electrical utilities, where coal could replace natural gas as a fuel for steam generation.


2
The emerging federal policy was reflected in many ways.
Federal leases were issued for off-shore oil exploration and production, and competition increased within the oil industry for choice inland properties. The new demand for low-sulfur western coal caused the coal industry to accelerate its production throughout the Rocky Mountain region. Leasing of private and state-held lands accelerated sharply, but major environmental litigation limited new production on federal lands to short-term and other limited leases until federal coal leasing was reinstituted in 1980. Many existing leases were activated. Public utilities and industries began to switch from natural gas to coal in response to price and supply constraints. Construction began on scores of electrical generating plants located adjacent to large coal supplies, capitalizing on the economic advantage of transporting electricity over shipping coal. Expansion of western uranium mining and processing began, helping to meet the demands of nuclear-fired utilities in the Midwest and Northeast.
In April 1977, President Carter announced his administration's energy policy goals, contained in the National Energy Plan (NEP I). Legislation enacting that plan was finally approved by Congress in October of 1978, and the resulting National Energy Act^ encourages
utilization of coal through its disincentives on oil and natural gas.
2
The Energy Security Act of 1980, part of a subsequent package of presidential proposals known as NEP II, stimulates the production of domestic fuels. One provision of the Act offers financial assistance to the synfuels industry for commercialization of such technologies


3
as oil shale production, coal gasification and liquefaction, and fuel
alcohol production. Presidential, Congressional, and federal agency
actions continue to support the policy of accelerating domestic
energy production in order to achieve greater energy independence.
Vast amounts of federally owned land in the western states
have significantly influenced development activities and patterns.
Leasing policy is expected to reflect more and more the national goal
of increasing domestic fuel production. Much of Colorado's coal and
uranium reserves, for instance, and all of its known oil shale
3
reserves, underlie federally owned lands. Until recently, federal leasing decisions were made with little or no input by state and local governments, forcing them into a reactive position once leases were awarded and production plans announced. Greater state participation in the tract selection and leasing processes appears to be 4
evolving.
However, even with increased predictability surrounding leasing of federal lands, uncertainty continues to be a major problem for energy producing areas. The uncertainty is based on a number of factors:
industry's inability or unwillingness to disclose employment and production projections
price fluctuations in the international and domestic markets
frequently changing environmental performance standards and permitting procedures


dependence on a finite and declining resource base
delays in project completions resulting from labor disagreements, cost overruns, and technological breakdowns
The latter poses a particularly difficult problem in the oil
shale regions, where industry must cope with the unpredictabilities
of still-emerging technologies. One area in western Colorado, for
example, has been awaiting the development and commercialization of
5
oil shale for nearly two decades, while technological setbacks and the absence of federal subsidies are alternately blamed for continuing delays. Meanwhile, half a dozen small communities sit poised for a future which none of them can influence or even predict.


CHAPTER II
CHARACTERISTICS OF TYPICAL COMMUNITIES
The expansion of the energy industry has typically occurred in isolated rural areas, often creating a new set of problems and opportunities.^ Frequently such areas have had a stagnant or declining population prior to the energy boom, and the prospect of population increases and economic stimulation offers understandable appeal to many local residents. In many communities, population growth is viewed as a necessary and acceptable prerequisite to economic growth, and sometimes rightly so. To a small town or rural resident, an increase in population can often lead to an increase in job opportunities, a broadened range of retail, recreational, and cultural choices, and numerous additional advantages which economies of scale afford.
However, local reaction to proposed development is usually mixed. Some long-time residents fear the influx of newcomers and the inevitable change in lifestyle that will accompany the growth.
In areas with significant scenic and recreational amenities, construction of mines and related facilities can threaten the tourist-based economy. Similarly, a local economy based on irrigated agriculture is threatened when a highly water-consumptive industry such as an oil shale or electrical generating facility diverts scarce


6
water resources.
Regardless of local reaction to proposed growth, rapid population gains in a community lacking the proximity of an urban support system results in significantly greater impacts than one could expect from most industrial sector growth. The level of public services in remote areas is generally less developed than one finds in urbanized areas, reflecting a kind of pioneer ethic still prevalent in many rural communities in the West, and reflecting, too, the absence of a healthy revenue base. In many instances the local economy is based on agriculture and ranching, and the wholesale and retail market for goods, as well as a market for the service sector of the economy, is relatively undeveloped. Such rural economies can be overwhelmed by the introduction or expansion of large-scale energy development.
Another similarity among many western boomtowns is the presence of federal land nearby. The federal government, through the Bureau of Land Management, leases mineral rights to its holdings.^ The proximity of federal lands can influence patterns of energy development, as well as residential, commercial, and other land use patterns, and can affect the local community's dependence on federal energy policy.
The small rural community located near the energy development activity has become, to most observers, the "typical" energy impacted community. However, other communities not located in the immediate area of development often absorb very substantial impacts as a result of the energy activity. For instance, each of the western states can


7
point to at least one city within a multi-county energy producing region which serves as a center for supplies, marketing, transportation, and administrative offices. In Colorado, Grand Junction performs those functions for most of the counties on the western slope. The fact that there is substantial coal mining taking place in adjacent Mesa County does not, alone, account for Grand Junction's importance as a regional support center for the energy industries.
Its size, its isolation from other middle or large-sized cities, its location on major transportation routes, its history as an agricultural marketing and construction center, and its proximity to energy resources in all directions mark it as a high growth center. Mesa
County already has an annual growth rate of more than 3%, a rate which
8
many feel could double over the next several years.
In addition to the market or trade centers which are growing
as the result of increased energy production, communities located
along major transportation corridors are also impacted. Because
g
most western coal is transported by rail, and because many towns in the West grew up around the railroad station or along railroad tracks, the shipment of coal to markets outside the region can cause serious effects in communities which may be located hundreds of miles from the mine site. The expanded rail traffic can result in population increases, especially at locations where switching, repair, or maintenance activities are carried out. More often, however, the impacts are limited to noise, dust, and traffic disruption. Where grade separations do not exist, unit trains of 100 cars in length


8
can tie up traffic for up to 30 minutes several times a day.^
In conclusion, we can make some general statements about a hypothetical energy-impacted town. Despite the range of diversities, enough similarities exist to allow a "typical community" to emerge. Those similarities include:
small size
rural location, often isolated and unable to "borrow" services from neighboring population centers
local economy based on agriculture, ranching, or recreation and tourism
limited provision of public facilities and services, such as water, sanitation, and transportation systems, health care, recreational opportunities
declining or stagnant population prior to the energy boom, with large out-migration of young adults
proximity to federally-owned lands with attendant restrictions regulating, taxing, or annexing the land
deferred maintenance of existing capital infrastructure
mostly homogeneous population with limited experience in assimilating in-migrants


9
CHAPTER III
TYPICAL IMPACTS ON ENERGY-PRODUCING COMMUNITY
While this paper addresses the problems created by rapid energy development, most energy development projects can also be fairly assessed as generating some positive benefits to the host community(s).
Employment
Increased employment opportunities resulting from a new mine or facility are frequently available to area residents, and even when they are not, the in-migration of a new population can lead to jobs in the secondary employment market. Support services and spinoff industries often create enough jobs to stimulate what may have once been a sluggish local economy. Expanded job opportunities can slow or reverse the out-migration of young adults from the community.
A number of factors affect the degree to which local residents have access to the newly created jobs.11 The local unemployment rate, the work force participation rate, the level and range of employment skills in the area, the industry's level of recruitment efforts, the area's vocational-technical training capabilities, and the differential between the local pay scale and that introduced by the new


10
firm(s) all influence levels of in-migration of new workers.
Population
In spite of the potential economic gains inherent in some energy projects, their social and economic costs continue to pose difficult management problems. The first and most obvious manifestation of the impacts of new energy development activity is the rapid increase in population needed to build and operate the energy facilities.
It is almost certain that some of the new jobs will be filled by workers from outside commuting range. Their arrival typically occurs over a very short period of time, causing the population to swell quite suddenly. The nature of the energy activity determines whether or not workers are accompanied by families. In the case of construction of a large power generating facility, for example, workers with highly specialized skills arrive at the site in phases and leave upon completion of their portion of the total project. As the construction project proceeds, it demands other skills, and a new wave of employees arrives, often before the previous crew is finished.
During the construction of a multi-unit coal-fired power plant, for instance, numerous work crews will come and go over a period of two to three years.
The large, but temporary, construction crew is usually
replaced by a smaller and more permanent operating work force. This
residual force may be only 20-30% of the size of the construction 12
force. In most instances, the employees who actually work the


11
mines or oil fields, or who operate the generating or conversion
facilities, become relatively permanent members of the community
whose jobs continue to exist for many years. When workers arrive
from outside the area to fill these permanent positions, the impacts
on the host community are markedly different from the impacts
created by a group of temporary workers. Not only does the length
of residency vary, but workers in-migrating for permanent positions
are often accompanied by families, who place significantly higher
demands on public facilities and services. The greatest impact, of
13
course, is on local schools. There is a greater likelihood that the temporary workers will be single adults.
This population increase is rarely matched by an expansion of private or public facilities and services. Community infrastructure, including water and sewer facilities, roads, schools, health and recreational facilities, can easily become overburdened. Additionally, public services such as police and fire protection, municipal administration and management, health care and mental health services, are generally unable to meet the increased demands. Few energy-producing communities are located within easy access of the facilities and services of a metropolitan area, and are unable to "borrow" on nearby municipal services as many suburban communities do, at least during the early growth years.
Unlike more traditional growth patterns, these large and sudden population increases cannot be accommodated by routine expansion of services based on population trend projections. Under normal


12
growth conditions, as the use of a facility approaches its design capacity, new facilities are planned, allowing a lead time based on recent growth rates. However, a sudden and/or unexpected population influx shortens the response time, causing even three-year and five-year needs assessment and capital improvement programs to become obsolete.
Public Revenues
The inability of many communities to anticipate and plan for
increases in public facilities and services is only part of the
problem. Financing the needed improvements presents an equal
challenge. Increased demand on existing public services precedes
the ability of the jurisdiction providing those services to tax the 14
new growth. Commonly referred to as lag time or lead time, there can be a period of up to three years before the taxing jurisdiction generates revenue from the new industry (and its employees) commensurate with its corresponding outlays. For example, most counties and school districts are heavily dependent on property tax revenues. However, before the taxing entity can capture the potential revenue base created by a new facility, it must wait for completion of the project, then a property reassessment, and finally an annual property tax billing based on one previous year's ownership of the property. Meanwhile, the facility and its employees are creating new demands for water, sewage treatment, street and road maintenance, and police


13
and fire protection, and a range of other services provided by the local government.
Communities have traditionally financed improvements or
15
expansions in their public facilities in one of two ways. The most common method has been to spread the costs of public facilities and services to all taxpayers in a given jurisdiction. A municipality may earmark a portion of its revenue for capital improvements, thus building up a fund for that purpose. More often, however, a community will indebt itself, through issuance of revenue bonds or general obligation bonds, for the construction of a needed improvement, such as a railway overpass, a new hospital wing, or extension of water or sewage lines. In either case, the costs are spread throughout the entire taxing jurisdiction, irrespective of actual use of the new facility. This method is based on the premise that the improvement to the municipal infrastructure is a public good, and will indirectly benefit the entire community.
During the past decade, in response to an increased awareness of the "real costs" of new growth, taxpayers have started to demand that new residents partially or wholly finance their own public sector needs.^ This attitude, with its more critical assessment of the costs and benefits of population growth, has been partly responsible for the creation of special improvement districts and other taxing sub-units within the larger jurisdiction. Another manifestation of the demand that new growth finance its own needs are the agreements being negotiated between residential or industrial land developers


14
and the municipal or county authorities. Such agreements often stipulate that a developer will provide a needed public facility (such as a school, streets, a park, utility extensions) in exchange for a necessary building permit, zoning change, or annexation.
Taxing Mechanisms
The actual location of the new industry can have a significant influence on the degree to which a community can capture increased revenue. While the location decisions of most industries involve consideration of many criteria, choices for energy development are limited to where resource deposits exist. Mines and large industrial facilities are commonly located outside the incorporated areas of a county, and unless a tax sharing agreement exists between the county and the municipality, increased property values will benefit only the county and, in most cases, the school district. Yet the employees of those same industries often reside in the adjacent community(s) and place growing demands on municipal services. This jurisdictional mismatch between the entity able to capture an increase in revenues on the one hand, and the entity required to provide increased services on the other, is common throughout the West.^^ (The municipality can, of course, tax the residential property of those employees residing within its jurisdiction; however, the potential revenues from residential property are significantly lower than those derived from industrial or commercial properties.)


15
The most prevalent mismatch occurs between counties and manicipalities, but similar situations exist between two adjacent conmunities when one is host to the revenue-producing industry and the other plays the role of bedroom community, with responsibility for expensive public services. Inequities among taxing jurisdictions are also found between counties and along borders of adjacent states.
A partial solution to the jurisdictional mismatch is the use
of a sales tax to finance the needed improvements and expansions in
municipal services. Among the advantages of a sales tax is its
18
faster response time. There is no delay in revenue capture such as that associated with property tax. Revenues can start to be generated as soon as the new population begins arriving. Another major strength of the sales tax is that it frees the municipality from dependency on the siting decisions of the new industry; a sales tax can usually be administered by the same jurisdiction which must provide residential services.
There are, however, disadvantages to exclusive reliance on the sales tax. First, it spreads the burden throughout the taxing jurisdiction instead of targeting the burden on the industry most directly responsible for new public costs. Property taxes can internalize costs more directly to the energy industry. A second obstacle to effective use of the sales tax is the fact that many impacted communities lack the wholesale and retail markets necessary to capture adequate sales tax revenues. Large industrial equipment


16
and supply purchases are usually shipped in from cities outside the immediate region. In similar fashion, local residents often travel to nearby market centers for such purchases as automobiles, appliances, and other major expenditures. Without a developed wholesale/ retail market, local sales tax revenues must depend on small, but recurring purchases such as groceries, clothing, and convenience goods.
Resistance on the part of long-term residents to help pay for
the public services demanded by the new population can be partially
explained by the fact that the anticipated economic and population
growth is dependent upon a finite and declining resource base. Unless
the area is able to diversify its economy, full resource recovery is
likely to lead to an economic decline or "bust." Many long-time
residents, having witnessed earlier boom-bust cycles in surrounding
communities (or perhaps even their own) want to avoid repayment for
a public facility years after the energy-related workers have moved
on. The situation is intensified when these residents, because of
inadequate skills, are excluded from the new employment opportunities.
More and more frequently, voters are defeating bond issues and tax
19
increases designed to meet the growth demands.
Wages
The impacts created by the arrival of the energy-related employees are not limited to deficiencies in public facilities and


17
services. Because of the historical shortage of capital in the West, most large-scale energy operations are financed with "outside" capital, frequently through parent or related national corporations. Because they are not bound to the wage and price balance of the local economy, they can offer more attractive wages and benefits than most local employers can afford. Employers outside the energy industry often have difficulty retaining their workers or attracting new ones because they cannot compete with the inflated job market.
Competition for other community resources and amenities exists, too. Until the local market can respond to new demands, retail and wholesale goods may be in short supply, driving prices up. The increased earning power of the new residents can keep prices above their pre-boom levels, beyond the reach of those residents still tied to the pre-existing wage scale.
Housing
Among the most difficult impacts to alleviate are housing
shortages. At least two factors contribute to the problem. In the
first place, the housing needs of temporary employees are different
20
from those of the permanent labor force. A large percentage of the temporary workers are young, single males whose housing needs are often met by campers or mobile homes, by doubling up in local rental units, or by commuting to available housing in nearby communities. Construction of pre-fabricated one- and two-bedroom rental units, and other attempts to quickly expand the community's stock of temporary
r


18
housing, does not solve the subsequent demands for larger and more permanent housing.
The second reason that housing shortages pose special problems is that housing is traditionally planned, financed, and constructed by the private sector, with little public input or direction. In a more conventional growth situation, new housing starts keep pace with demand as private investors, and developers respond to changes in the housing market. Small communities, however, seldom have an abundant supply of investment capital. Bankers prefer to invest their deposits in automobile and personal loans, with shorter terms and higher interest rates than home mortgages. Developers wanting to speculate on a number of houses, as well as the individual wishing to purchase a new or existing home, have difficulty getting local financing.
The reluctance of the local lending institutions to invest in the housing market is partly based on the uncertainty which surrounds many energy development projects. Industry's employment projections are based on such unknowns as future demands and prices, government's energy policies, possible permitting and construction delays, and the continued economic recoverability of the energy reserves in question. Given such uncertainties, lenders are understandably hesitant to finance residential developments for a future population which may or may not materialize.


19
Summary
In summarizing the problems and opportunities facing energy-producing communities, rapid change is the one element which underlies all of them. Many of the social and economic changes are disruptive, and each reinforces the other.
The availability of new jobs creates competition both among the "native" residents and between them and the newcomers. With the higher wages of the new jobs, the community's wage structure changes, resulting in double wage standards. Prices for goods are driven up by increased demand. The higher costs for labor and goods has an overall inflationary effect on the local economy, creating special hardships for those on fixed incomes, particularly the elderly.
The presence of a new population, perhaps unaccustomed to or unaccepting of local customs, is often viewed with distrust by the existing population. Because the newcomers are in direct competition for the high-paying jobs, and because they place instant and dramatic demands on the corranunity's infrastructure and services, they are often viewed as an expensive disruption to the local lifestyle and economy. These reactions by the natives frequently prevent the integration of the new population into the local society, and add to the alienation felt by the in-migrants.
Overcrowded living conditions, inadequate public services, and rising costs, although experienced by old and new residents alike, frequently pit one against the other.


I
20
I
I
1
A number of responses have developed in both the private and public sectors to assist communities in managing their growth, and in preventing or mitigating its negative impacts. Many of those responses are adaptations of conventional assistance mechanisms; others are innovative approaches to the unique circumstances of rapid energy development.
I
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21
CHAPTER IV
SOURCES OF ASSISTANCE TO COMMUNITIES
The kinds of facilities and services required by energy-impacted communities are no different from those of most other communities. The differences are ones of timing and magnitude of the demand, and the duration of the revenue base. Most existing sources of financial assistance, especially governmental assistance, are designed to respond to "normal" magnitudes of growth, occurring at a "normal" rate, and with "normal" long-term projections for a revenue base.
This chapter will examine the assistance programs of the local, state, and federal government, as well as the availability of assistance from non-government sources. The chapter will also assess the adequacy and appropriateness of those forms of assistance in addressing the particular needs of the impacted community.
Assistance from Local Government
The traditional financing mechanisms for municipal and county governments are the property tax and the sales tax. They provide the bulk of revenue for most local governments, and the energy-producing community is no exception. The sales tax, though less progressive,


22
is quicker to respond to change than the property tax, and therefore has some advantages to high growth communities. It is also a more accessible form of revenue for municipalities in energy development regions since the increases in property values due to industrial development usually occur outside the city.
Annual county budgets, as well as those for small municipalities, derive about half of their income from one or both of 21
these sources. (The remainder comes from additional taxes and fees, and from state and federal transfers.) Local school districts, on the other hand, depend almost exclusively on property tax and direct state aid.
Other forms of taxes, and some fee assessments, are used by local governments, but they generally comprise a small portion of the total revenue. Excise and franchise taxes are levied by some communities. Typical fees include those assessed for water and sewer service.
These various sources of revenue usually comprise only the operating budget of a county or municipality; that is, the recurring personnel, equipment, and supply costs of delivering public services. Few public entities are able to directly finance major capital facilities from these sources. When large capital improvement expenditures must be made, local governments and special districts generally issue bonds in order to spread the costs over time.
There are two kinds of municipal bonds which are used almost exclusively to finance capital improvements. The general obligation


23
bond is issued in the name of the entire taxing jurisdiction and is secured by the full faith and credit of the issuing jurisdiction.
For example, when a community issues a $2 million general obligation bond for construction of a new hospital, general tax revenues are used to service the bonds and are pledged to its repayment in case of default. The life of the bond usually matches the expected life of the facility being constructed. A percentage of the full issue comes due every year.
Most states impose limitations on the borrowing power of their
local governments. Typical limitations include a requirement that
issuance of debt be approved by referendum and a ceiling on debt as
22
a percentage of the property tax base. These limitations have stimulated the use of alternative borrowing mechanisms.
One result has been the proliferation of special districts and authorities which are bound to the same ratio of debt to property value. Another device which has growth in use in recent years is the revenue bond, for which interest and principal are payable exclusively from the earnings of a specific enterprise. Because these debts are not serviced from general revenues, they are not subject to state-mandated borrowing limitations. This method is frequently used for such improvements as public utilities, recreational facilities, and toll bridges and roads. Because revenue bonds are not secured by the full faith and credit of the issuing entity, their maturity period is usually longer than that of general obligation bonds, and they carry a higher rate of interest.


24
Both general obligation and revenue bonds are used extensively by growth communities in energy-producing areas. Many of these communities are approaching or have reached their debt ceiling. Increasingly, however, incurrence of full debt capacity is being prevented by public reaction. Rejection of bond issue proposals in energy-impacted areas may be more than a demand for taxing and spending limitations. Many see it as a refusal by the existing residents to help finance growth which they may not want, or the benefits from which they may not share.
A typical example of voter resistance occurred in Moffat County, Colorado. Residents of the county, especially those living in and around the county seat of Craig, have witnessed accelerated energy development since the early 1970s. Principal impacts have occurred from surface mining operations and construction of power generating facilities. Public facilities became increasingly burdened, and taxes increased. Twice, voters in the Moffat County School District refused to approve a bond issue for construction of a new high school, even though the school was operating at close to 200% capacity. School district officials explain the defeat by pointing to the large number of senior citizens living on fixed incomes and
on the antagonism which exists between long-time residents and 23
newcomers.
Although it is a viable alternative for financing many public needs, bonding in anticipation of increased revenues has limited utility for impact areas for the following reasons:


25
small communities often lack a bonding history
the uncertainty attached to the energy development reduces the attractiveness of the community's bond offerings
impacted communities often encounter political difficulties in winning voter approval because existing residents are not convinced that energy development will bring financial benefits to their communi ty
Even when a community overcomes these barriers, local borrowing may not be sufficient. A good example is Hayden, Colorado, which has had the highest mill levy in the area for the past several
years. The city is bonded to capacity, but still has not been able
24
to generate sufficient operating revenue to meet its fiscal needs.
Assistance from State Government
As local revenue sources become increasingly inadequate for financing growth costs, municipal and county governments become more dependent on outside funds. Assistance is usually sought from the state and federal government, and sometimes from the energy industry.
State assistance to local units of government falls into two general categories: financial and technical. Colorado awards grants to local governments for a variety of purposes, including aid to education, highway construction and maintenance, and construction


26
of small water and sewer systems. Some grants are less restrictive than others and allow local officials more discretion in their application and administration. One example is revenue from federal mineral leasing. Each state in which federal lands are leased for mineral development receives one-half of the leasing royalties collected by the federal government. Since the passage of the Mineral Lands Leasing Act of 1920, states have enjoyed almost total autonomy over their portion of the revenue. The 1976 amendments to the Act, which increase the states' share from 37.5% to 50%, stipulated that the full 12.5% increase be distributed to "those units of local
government which are socially and economically impacted by energy 25
development."
In order to comply with that federal mandate, many states have reallocated their share of the revenue. Colorado allocates its portion of leasing revenue in a manner similar to many western states
50% returned to the county of origin with maximum amount per calendar year of $200,000 (the excess over $200,000 reverts to the Public School Fund)
25% to the Public School Fund for support of public schools in the state
10% to the Water Conservation Board Construction Fund
15% to the Local Government Mineral Impact Fund
The $200,000 which is returned to the county of origin is generally earmarked by county commissioners for schools, roads, and


27
bridges, a pattern which dates back to the original enactment in 1920.
Additionally, most states, including Colorado, assist with
the "local match" for select federal grants. One example is the
Environmental Protection Agency's (EPA) Sewage Disposal Construction
Grants. EPA funds 75% of the eligible project costs, requiring a
25% match by the grant recipient. Depending on local need, the
Colorado Department of Health allocates state monies to communities
to cover a portion of the local share. A majority of states administer
aid in this manner for at least some of the federal assistance 27
programs.
In addition to the more general financial assistance programs, several states have established specific impact assistance programs. Funding for these programs is usually derived from mineral development or processing, and include mineral leasing royalties, and mineral severance and conversion taxes. The state of Colorado, for instance, administers two such programs. One is funded from a 15% share of the mineral severance tax, and the other from the 15% set aside from the mineral leasing royalties. Although these funds are separate in
origin, they are similar in administration and, from a local govern-
28
ment perspective, are often considered as one source of assistance.
Funding requests by local governments are submitted to a review committee and are prioritized quarterly according to the following criteria:


28
the number of employees of energy facilities establishing residence in the community within the past three years compared to the total employment of the coircnunity
the estimated five-year population growth rate of
the community due to the location of energy facilities in the area
the ability of the community to finance a project from its own resources
Additionally, the committee which reviews applications adheres to two other guidelines. Money from these two impact funds must be used primarily as supplemental grants for that portion of any project which cannot be financed through local government revenue sources, conventional capital markets, or state or federal assistance programs. Also, the project must be a high priority for the community as determined by a local impact assistance team.
Although the configuration of funding sources and allocation formulae varies from state to state, the special impact assistance fund (sometimes known as a community development fund) has become a corranon element in the states' delivery of assistance to local governments. Grants from these special funds have been used for
capital improvements such as schools, water and sewer systems, health facilities, libraries and recreation centers, as well as for delivery
of services such as planning and technical assistance, health and


29
recreation programs, feasibility studies, and municipal administra-29
tive services.
Most states also administer a loan program for local governments. Loan capital may be created from state-generated revenues or may be a deposit of a federal grant with which the state sets up a revolving fund for local entities. One example of the latter in Colorado were loans established under Title IX of the Economic Development Act, which were used for water projects in impacted areas. Repayment of the loans makes additional funds available for similar projects.
Besides financial assistance, states provide services to local units of government in planning, management, administration, and technical assistance. Through state-appropriated funds or through the use of such federal programs as HUD's 701" comprehensive planning grants, Economic Development Administration (EDA) technical assistance grants, and EPA's "208" wastewater treatment planning programs, states assist communities with data collection, user surveys, plan preparation, economic analyses, industrial development efforts, preparation of grant applications, growth monitoring, and many additional administrative functions. The Colorado State Division of Planning staff includes several planners and economists whose duties are limited solely to providing planning assistance to local governments. The thirteen Councils of Government in Colorado also receive direct assistance from state agencies.


30
With the exception of special energy impact assistance funds,
most states provide no more and no less assistance to impacted areas
30
than to other areas throughout the state. Eligibility for most state assistance programs, and for most programs administered by the federal government, is based on a formula, and very little discretion exists in the allocation of funds.
Controversy surrounds the eligibility restrictions on many state programs. Those in favor of giving a larger share of assistance to growth-impacted areas argue that distribution formulas which aim for a geographic or population balance are too restrictive, and that aid should go to areas of greatest current need, regardless of statewide funding imbalances. Those opposed to relaxing distribution restrictions and targeting additional money to impacted areas claim that such a "tilting" of funds is unfair. First, they point out,
it pulls state aid away from non-energy communities, creating a
31
backlog of needs which may lead to serious problems. Secondly, a reprioritization of existing programs becomes in effect a statewide subsidy of energy development with ultimate benefits accruing to the impacted areas and to the energy industry.
Nowhere is the controversy more apparent than in state legislatures, where representatives from energy development areas oppose those from non-energy areas over distribution formulas for a statewide mineral severance tax fund. The impact regions, one group claims, contain the mineral resource and experience the impacts of its recovery, and therefore should receive a considerable proportion


31
of its tax revenue. Legislators from outside the development areas see the severance tax as a way to recover wealth lost to the state by the removal of the state's non-renewable resources, and that all of a state's present and future residents should benefit. They propose that severance revenues be deposited in a statewide trust fund and/or the state general fund. During the last three years intense legislative debate has surrounded this issue in at least three western states which levy a severance tax (Colorado, Montana, and New Mexico).
Assistance from the Federal Government
The federal government, through its various agencies, administers literally hundreds of financial assistance programs to state and local governments, including both grants and loans. Only a few dozen, however, are designed to fund capital construction projects. In a survey conducted by the National Governors' Association (NGA) in 1977, state and local officials in energy-impacted states in the West
and in Appalachia were asked to identify the federal programs most
32
responsive to their capital facilities needs. No more than seven programs were found by the responders to be applicable to boomtown problems. The list included:
t two loan programs administered by the Farmers' Home Administration; one for water and waste disposal systems and the other for community facilities


32
one grant program administered by the Department of Health, Education and Welfare (HEW) for the construction of community mental health centers
the community development block grants administered
by the Department of Housing and Urban Development (HUD)
sewage treatment construction grants administered by the Environmental Protection Agency (EPA)
the Economic Development Administration (EDA) public works program and programs sponsored by EDA's Title V Regional Commissions
In addition to the above programs, western states also mentioned the Department of the Interior's mineral leasing royalties as a useful and flexible source of funds. (The Farmers' Home Administration's "601" program, which provides grants for planning and loans for community facilities in impacted communities, was not in effect at the time of the NGA survey.)
The discretionary programs (such as HUD's block grants and EDA's public works and Title V programs) are highly favored over the categorical grants by both state and local officials. They allow greater flexibility on the part of local officials and avoid the difficulty of trying to tailor community needs to fit available assistance.
Many impacted communities have difficulty meeting eligibility criteria for federal programs, especially for the categorical grants


33
33
and loans. Many federal programs are administered according to a formula favoring areas of high unemployment and low per capita income. This pattern is as true for the capital facilities programs as for service delivery programs. Energy-impacted areas rarely reflect either of those characteristics. New jobs constantly being created assure nearly full employment, and the high-paying energy-related jobs bring the overall per capita income well above federal ceiling. For these reasons, most state and local governments seeking federal assistance for energy impacts prefer programs allowing maximum discretion.
For programs in which the governor or a state agency has allocation discretion, the question of "tilting" arises. The effectiveness and the equity of distributing federal funds in favor of impacted areas is argued, much as it is with respect to state funds. In its grant program for construction of sewage treatment facilities, EPA allows each state to rank the numerous applications which pour in annually from various municipalities, counties, and sanitation districts. The ranking is restricted by guidelines which take into account population increases and level of water quality. Because the funding requests always exceed the amount available for the state, the ranking process is very influential. This program, like others administered similarly, allows the state the opportunity to target federal assistance to impacted areas. The decision to do that, of course, results in facility shortfalls in those areas of
the state not funded.


34
Funds administered through the Economic Development Administration's Regional Commissions offer another example of federal assistance over which the state has allocation discretion. The Commissions were established under Title V of the Public Works and
34
Economic Development Act of 1965 to assist sub-state economic development districts and regions with an array of economic development problems. Colorado is one of five states in the Four Corners Regional Commission.
Title V assistance is available in two forms, technical assistance and supplemental grants. Supplemental grants, the mainstay of the Commissions, require a local match of at least 20 percent. Technical assistance is directed toward economic development studies, planning, vocational education programs, and demonstration projects having economic development thrusts. One such program in Colorado involved training Coloradans for energy-related jobs. The flexibility of these funds is their major strength.
The state receives 50% of federal mineral leasing royalties. One-fourth of the state portion must be used for energy impact mitigation. The remainder of the leasing revenue may be distributed in whatever manner the state sees fit. Historically, these monies have been used to supplement state highway and education funds, though their allocation remains a state prerogative.


35
Assistance from the Private Sector
A small but important source of funding for impacted communities are direct contributions by the energy industry. Contributions vary from cash to in-kind services. The circumstances surrounding the contribution also vary from formal to informal arrangements. Unlike the company towns of several decades ago, present-day boomtowns either negotiate or demand industry's assistance with certain financial needs. Through informal negotiations between industry management and city officials, a company's interest in the community welfare, and/or in its own public image, can be translated into contributions of cash, equipment, land, or services.
Colorado's impacted communities have been somewhat successful
in obtaining contributions from energy development industries. A
1978 survey of six counties in northwest Colorado revealed that
during a three-year period, cash contributions by industry totaled
35
nearly half a million dollars. In-kind services amounted to an additional $400,000, though that figure is more difficult to calculate and document. Examples of in-kind contributions include donations of equipment and labor to improve and maintain roads with heavy coal traffic, provision of land for municipal solid waste disposal sites and sewage treatment facilities, and assistance with the construction of community recreation centers. Some companies agree to prepayment of property tax as an additional aid to overburdened city and county budgets.


36
Some state and local governments have institutionalized the industry contribution by tying it to issuance of necessary permits. State energy facility siting laws and local planning ordinances and subdivision regulations have been used in a limited way to insure that industry provides mitigation assistance for problems it helps create. The potential of this technique to require that industry internalize more of its costs, and to manage growth, is relatively untapped. One example occurred in Wheatland, Wyoming. Basin Electric Cooperative agreed to provide 1,900 housing units and other assistance in return for its permit to build a power plant.
The level of industry assistance is not consistent. Because of the ad hoc nature of the contributions, they cannot be considered a reliable or predictable source of money for local governments.
Summary
The intent of this chapter was to examine and assess various sources of impact assistance available to communities. Four major sources, and the kinds and amount of assistance available from each, were addressed: local government, state government, federal government, and the energy development industry.
Each source has its limitations, both with respect to magnitude and flexibility. Very rarely are any two public programs coordinated, even those funded from the same level of government. Locating and securing financial assistance is a difficult task; its


37
success often depends more on skilled grantsmanship or solicitous relationships with the local industry than on actual need.
In summary, most existing assistance programs offer too little too late. Their major shortcomings are that the amount of assistance is frequently inadequate and that eligibility for assistance is often based on severely deteriorated social and economic conditions. These findings indicate significant weaknesses in existing programs and show a need for change.
In the following chapter I will suggest the elements necessary to effective assistance programs.


38
CHAPTER V
STANDARDS FOR EVALUATION OF EFFECTIVE STATE POLICY AND PROGRAMS
As a first step in proposing policy and program recommendations, it is necessary to establish evaluative criteria. This chapter proposes four standards by which to evaluate state growth management and impact assistance programs, and explains the rationale behind the choice of these standards.
The selection of criteria is based on an analysis of the strengths and weaknesses of existing state programs, and on readings, interviews, and personal observations regarding the application of growth management theory and principles to energy-impacted communities.
I suggest that the following characteristics are essential in the evaluation of state growth management and impact assistance policies and programs:
fair distribution of costs
timely delivery of assistance
adequacy of local participation in decision-making
adequate protection of community against economic decline


39
Fair Distribution of Costs
Over the past four to five years, the protest from energy-producing areas over unfair cost burdens has become increasingly vocal and widespread. The outcry is not limited to the isolated rural communities of the Rocky Mountain West. Coal towns in Appalachia and coastal communities impacted by offshore oil production are among other areas feeling energy-induced growth pressures.
However, despite a growing national awareness of the financial inequity that rapid energy development can mean to the host communiites, local governments continue to bear what they believe is an unfair share of the costs. In order to fairly distribute the costs of energy development, it is necessary first to identify the beneficiaries of the development and growth. Perhaps the most obvious beneficiary is the energy consumer. The notion of passing development and production costs on to the user is especially popular among state and local officials of producing states, since most of the oil, coal, and uranium extracted from the Rocky Mountain states is transported out of the region. This "internalization" of costs within the industry can be accomplished through such measures as taxation of mineral severance and mineral conversion, and the assessment of corporate income tax at the state level, and at the local level chiefly through the property tax and negotiated contributions.
The major constraint felt by state and local governments is the need to maintain a competitive position. A perennial argument in opposition to establishing or increasing a coal severance tax,


40
for instance, is that mining companies will gravitate to those states with a low or non-existent tax. The same logic can be applied to the region as a whole: Some fear that once all or most of the western states institute a severance tax, the region will lose its competitive advantage vis-a-vis other coal-producing regions. So far, however, the physical and geologic characteristics of Rocky Mountain coal (i.e., large, easily-assembled tracts; vast deposits recoverable through surface mining techniques; low sulfur content) continue to make its development economically attractive.
Predictably, consumer states oppose greater cost internalization to industry and, ultimately, to the end user. Regions of the country dependent on imports for their energy needs point out that the creation of new jobs and the associated economic stimulation experienced in the energy-producing areas should generate enough revenue to mitigate impacts without resorting to further direct taxation on production. Residents of regions outside the West also feel a sense of ownership over much of the West's energy reserves since large amounts of it underlie federally-owned lands. The entire nation, they reason, has access rights to those resources lying within the public domain.
Besides the consumers, other beneficiaries of the current energy development are the states in which the development occurs. Federal leasing royalties, mineral severance and/or conversion revenues, tax liabilities on personal and corporate income, and sales tax revenues are all certain to increase with accelerated


41
mining and industrial activity. Increases in energy-related revenues represent a direct benefit to the state, as well as a responsibility to absorb a portion of the associated costs.
Positive benefits also accrue to the local governments in the immediate producing area which are separate and distinct from those gained by the state as a whole. For instance, municipal and county governments can reap the benefits of a local sales tax, property tax, and in some cases, public facility user fees. The tension between the costs and the net gains from energy development is greatest at the local level because that is where the positive and negative impacts are the most visible and most direct.
One important consideration in establishing a fair cost-benefit balance is the fact that only the economic costs of development are divisible and distributable; most of the social and environmental costs, by their very nature, must be borne at the local level. Since social disruption and environmental degradation cannot be transferred equitably to all the beneficiaries of the energy development, it may be reasonable to compensate those most affected socially and environmentally through additional economic support from those not so directly affected.
The wide variation among beneficiaries (out-of-state energy consumers, state governments, local governments, the industry itself) necessitates a wide distribution of costs. Achieving an equitable cost distribution is difficult since the definition of equity varies widely, too.


42
Timely Delivery of Assistance
Many observers believe that, over time, energy development results in net economic gains for state and local governments. The belief is premised on the theory that the host community will arrive at a steady-state economy and that the front-end costs will be recovered through future energy-related revenues. Notable exceptions exist, in which the jurisdiction absorbing the initial costs has not been able to realize increased revenues. Communities can fail to recover costs when
development or production stops abruptly, due to market fluctuations, labor problems, environmental permits,
or inaccurate projections of the recoverability of the resource; or
jurisdictional mismatches cannot be solved, and costs continue to be met by one entity while an adjacent jurisdiction experiences increased revenues.
The consequences of such events can be long-lasting and devastating to the local economy. The community may return to preboom population and income levels but still face the bonded indebtedness incurred during a period of high fiscal expectations.
While it is important to know the potential for fiscal insolvency, the majority of energy-impacted communities will probably realize net gains from the energy development. Their most critical need is for front-end financing during the time in which community


43
infrastructure and public services are rapidly expanding.
Local mechanisms for financing expensive capital facilities have historically been limited to general obligation or revenue bonds. The size of the bond issue is usually based on population and revenue projections during the life of the issue, thus recruiting the future population to help pay for the needed facilities.
Some communities, as well as counties and school districts, have negotiated with industry for prepayment of taxes. This approach is successful only when the impacting industry(s) can be clearly identified, and when the industry is interested in establishing or maintaining good community relations. Prepaid taxes deposited in the general fund can be used for operating expenses and delivery of services, as well as for capital construction, a flexibility not possible with municipal bonds.
State mechanisms for advancing start-up capital to local governments have generally consisted of increased aid through existing grants and loans programs. The tilting of state funds to impacted areas has provided start-up assistance in several states. In Colorado, for instance, Colorado Water Conservation Fund loans for
development of municipal water systems were for a number of years
37
disproportionately directed toward impacted communities.
Likewise, states often deliver front-end capital by diverting to impacted areas of the state federal funds over which they exert control. Most federal funds, like many state funds, have rigid eligibility criteria based on existing conditions, making it difficult


to direct assistance to front-end funding. One exception is the money available through the Title V Regional Commissions. Between 1975 and 1978, Colorado allocated substantial amounts of its portion of Four Corners Regional Commission money to projects in energy-impacted areas, far in excess of a straight per capita distribution.
Front-end assistance from the federal government consists primarily of planning grants and grants for feasibility and engineering studies of planned capital improvements. Grants and loans for early construction of community facilities are limited.
The uncertainty and risk associated with the rapid growth of domestic energy development account for reluctance by all levels of government, as well as private investors, to provide front-end capital. A viable solution would have to establish a link of responsibility between the decision to develop the energy resource and the early financing of related capital improvements.
Adequacy of Local Participation in Assistance Delivery Decisions
Discussion of public participation requires a clear definition of the public or publics whose participation is sought. The typical impacted community contains a number of parties-of-interest, each of which has a stake in the timing, magnitude, and method of assistance delivery. Sometimes at variance with each other, at other times in agreement, identifiable interests may include:


45
energy industry management
energy industry employees
long-time residents of the community
newcomers to the community
citizens on fixed incomes
property owners
residents outside the incorporated municipalities
non-energy businesses and industries
Coalitions generally form around specific issues, only to disband and re-form with a slightly different constituency on a new issue. While that is not unique to energy-producing communities, it is a factor to be considered in developing an effective state policy on impact assistance. Consensus will be most difficult to achieve between those participating and benefiting from the economic boom and those who feel excluded from the economic gains and who perceive the boom as creating mostly negative impacts.
Local governments generally have an established method for obtaining citizen input on large expenditures of local tax money, but citizen involvement in the allocation and use of state funds is less developed, and non-existent for most state programs. Public participation may take on greater importance, however, as both the federal and state governments move toward grants and loans programs allowing greater local discretion. Colorado uses local citizen "impact teams" to assess needs and prioritize projects before


46
submitting requests to the joint impact fund. A local decision to incur debt carries with it a greater burden for citizen participation than would a grant request for a similar purpose.
The type of assistance sought (grants, loans, loan guarantees, industry contributions or prepayment of taxes), the terms and amount of the local share, and the degree to which the requested assistance would serve the entire community are all issues warranting citizen input. An effective state policy would assure adequate local participation in the allocation and use of state funds.
Protection of Community Against Economic Decline
The temporary nature of an energy boom presents a constant threat, even during the early stages of the boom economy. The dependence of economic growth on a finite resource base helps explain the exploitive attitude especially common during the silver and gold rushes of the last century. Though less common today, the take-it-' and-run attitude still exists, especially in some of the new communities which lack long-time residents and a history of cohesiveness and community interest. Communities which had a strong identity prior to the energy boom often have an established population which insists that the community and its residents receive lasting benefits from the development.
Assurance of post-boom fiscal solvency is one of the most pressing needs of local governments. The prospect of a rapid population


47
loss a few years in the future explains the reluctance of many communities to indebt themselves to provide needed facilities. In the event of an abrupt stop to the energy development, the community would be without a major source of employment and tax revenue.
The private economy is equally vulnerable to a sudden "bust." Wholesalers, retailers, manufacturers, and the service sector expand to meet increased demand. A sharp reduction in personal income, such as would occur with a shutdown of mining or conversion activities, would spell disaster for many local businesses.
Local interests are best served when the scope and pace of development are managed in such a way as to ease the transition into a post-boom economy. Most communities, especially those a few years into the boom, attempt to diversify the local economy in order to prevent or minimize a future economic bust. They reason that the boom offers the optimum economic climate in which to create jobs independent of the energy resource. Certain areas obviously have more options than others in terms of available investment capital, size and skills of local labor force, proximity to needed materials and to important economic centers, and the extent of existing transportation and communication networks. Without careful management of the resource development, future options could be precluded. For example, water diversion projects or long-term consignment of water rights to energy uses affect local agriculture and can permanently erode a once-thriving agricultural economy. Likewise, deterioration of air quality from siting of coal-fired power plants or disturbance


48
of visual amenities from inadequate mined land reclamation can impact an area's tourism and recreational value. It is important, therefore, that a community retain its options and that the future be planned for and accommodated at a time when its direction can be most influenced.
Obviously, one of the key considerations in any long-term
economic development strategy is the creation of new jobs to replace
those lost with the depletion of the energy resource. Scores of
communities in Appalachia, with the support of the Appalachian
Regional Commission, have lured diverse industries to their areas
by offering industrial sites and public services to employers at 38
attractive prices. Local vocational training is being offered area residents in order to equip them with the skills necessary to fill the anticipated jobs.
Some areas will depend on local renewable resources as a base for future economic development. Many regions in the West, for example, are planning for a regeneration of agricultural and ranching activity after the energy boom peaks. Other areas will rely on logging and year-round recreational activities to seed the post-boom economy.
In some cases, of course, there are few if any alternatives to future economic decline. A bust may be inevitable where the ability of the local economy to diversify is marginal, and where the duration of the energy-related employment is less than five years. In these instances, the population and employment increases


49
should be managed as temporary phenomena. Large public and private capital investments should be minimized, and temporary housing, shared public facilities, and commuting from existing population centers should be encouraged.
Summary
In conclusion, I propose four criteria by which to evaluate an effective state policy on the management of energy impacts.
Present policy, when judged by those criteria, fails to provide adequate guidance and management of energy-related growth.
First, an equitable distribution of costs is not achieved under present policy. Too often, the energy-producing community bears an unfair portion of both the economic and social costs of energy development. Existing state and federal programs do not provide adequate financial assistance to local governments, nor do most states mandate a fairer cost distribution by enlisting the help of the energy industry.
Second, growth management assistance to local governments is rarely available prior to or at the onset of the growth impacts. The availability of most public aid is based on the presence of overloaded facilities, inadequate services, and deteriorated social and economic conditions. The state does not play a strong role in assuring timely delivery of assistance. Impact projections and mitigation strategies are rarely part of a state's decision to permit development.


50
Third, local participation in energy development decisions is usually minimal. Not only is the actual siting decision made without local input, but responses to the impacts created by those decisions usually lack local involvement. Considerations such as the nation's energy needs, the state's economic condition, and the profit potential for private industry sometimes influence state policy on energy development and growth management more than do concerns over the local social and economic impacts.
Fourth, few states have developed an aggressive and effective strategy for diverting economic decline after recovery of the energy resource. Public enthusiasm over the economic potential of a present-day boom results in a neglect of post-boom economic planning. Political pressure to harness the resource for its maximum potential revenue often wins out over suggestions to divert some of the public revenues to preparing for a viable economic future.
Existing methods for accommodating energy-related growth impacts show a serious deficiency when measured against the four criteria for effective energy impact management described above. Present state policy needs to change in order to better deliver both financial and management assistance to local governments. Several states have developed innovative programs in their attempts to provide growth management assistance to impacted communities. Others have combined conventional assistance delivery mechanisms in ways specifically tailored to mitigating energy-related impacts. Still other techniques have been proposed by local officials, planners,


51
economists, consultants, social scientists, and academicians. Based on these proposals and on my personal observations and experience, I suggest that there are several tools which a state can use to implement its policy on energy-related growth management. I present those proposals in the following section.


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CHAPTER VI
POLICY AND PROGRAM RECOMMENDATIONS
In the preceding chapters, existing assistance programs were reviewed and evaluated, and criteria were established for assessing effective assistance policy and programs. This chapter proposes and evaluates four policy/program recommendations for strengthening state growth management and financial assistance to impacted communities. Criteria used for the evaluation were developed in the preceding chapter.
After assessing the strengths and weaknesses of the proposals, I describe the potential obstacles to the implementation of the recommended action. Although tactical considerations fall outside the scope of this paper, it seems important to alert the reader to the practical economic and political feasibility of the proposals.
The choice of these recommendations is based on a review of the existing state role, the apparent needs of the growth communities, the various options available for revenue collection and distribution, and available assistance delivery mechanisms. I suggest four major recommendations:
1. Creation of a state energy development policy and plan
2. Creation of a comprehensive economic development strategy
and plan


53
3. Strengthening of the management capacity of local governments
4. Enactment of legislation to provide financial assistance to impacted areas
1. Creation of State Energy Development Policy and Plan
State government, until the very recent past, has reacted to private energy development proposals on an ad hoc basis, generally consisting of little more than issuance of regulatory permits. The concept of a public entity actively influencing the siting, timing, and magnitude of energy-related development is relatively new, especially in the West.
If states are ready to abandon their reactive mode for a stronger, more active and influential role in growth and development, it is because population growth pressures and other results of private development decisions have pointed to the need for a strong expression of the public interest. Development decisions made unilaterally by private industry have become increasingly unacceptable.
The accelerated development of energy resources over the past five years has pressured most states into a hard look at their own goals and available techniques for managing their resources. Formulation of a state energy policy is a difficult task. Colorado, typical of many western states, is currently engaged in the process of creating a comprehensive state energy policy and plan.


54
A strong, clearly articulated plan is critical to the effective management of energy-related growth. An effective energy development policy and plan must contain the following elements:
Development of a complete inventory of known energy resources (including data on location and size of reserve, ownership, accessibility, economic recoverability, current and projected market demands and value) and assessment of future energy demands in the state and determination of desired levels of energy exports to other states and to foreign markets.
Establishment of a monitoring system which integrates new projects in the pre-permit stage; receives continuous data on actual and projected levels of production and employment; and maintains current profiles of community infrastructure, human services, housing, and fiscal capacity.
Identification of the social and economic resources needed to develop the energy (including public and private capital, labor, transportation systems, community facilities and services, housing, construction materials and equipment, water, and land).
A recommended siting and timing sequence for phasing the energy development to minimize negative effects on the physical, social, and economic environments, with consideration given to the cumulative effects of two or more projects in a given area.


55
Establishment of a simplified review process for proposed energy facilities. Colorado has initiated a joint review process which consolidates many of the required federal, state, county, and municipal permit reviews into a single time period. Other states are considering similar approaches to simplifying and expediting the permitting process. "One-stop permitting" offers the project developer insurance from expensive delays and a predictable time frame in which to base decisions. It can mean savings of time and money for permitting agencies, also, and if properly conducted, result in a more careful and comprehensive proposal review.
Establishment of federal-state cooperative agreements to assure a strong role for the state and its subdivisions in decisions regarding federal policy. Areas in which agreements would be useful include decisions on the allocation of federal dollars for synfuels commercialization, the pace and tract selection of federal coal and oil shale leasing, the state and county regulation of leaseholders' activities on federal lands, and other areas in which the state needs authority in order to implement its energy development policy and plan.
Enactment of a state energy facility siting act to assure that issuance of necessary permits is tied to the developer's compliance with the state energy plan and


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with state and local land use and environmental regulations. The legislation would create a review board authorized to make project approval contingent upon adequate public and private financial assistance for impact mitigation, and to assign financial responsibility to the appropriate sector. The legislation would earmark a portion of the permit fees, as well as other revenue if necessary, to assist local governments in the enforcement and administration of the project agreements.
Discussion: Major Strengths and Weaknesses of an Energy Development Policy and Plan
The compilation of a data base and the establishment of a monitoring system will strengthen the ability of local governments to assess the impacts of proposed energy facilities, and to plan and budget for needed improvements. Participation by local citizens in the decision-making process will also be enhanced by a comprehensive base of information on known reserves, projected demand, and existing and planned development.
A simplified review and permitting process will enable local officials to provide a more thorough and coordinated review and will become a more accessible vehicle for local citizen participation.
Cooperative agreements with federal agencies will also


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strengthen the growth management capability of local governments by assuring that local laws and regulations govern the activities of private lessees on nearby or adjacent public lands owned by the federal government.
Enactment of a facility siting act will help distribute the costs of energy development more equitably by assigning certain financial responsibilities to the developer, and ultimately to the energy consumer.
Development of an energy development plan will take time and may cause delays in projected start-ups. These delays could postpone the collection of needed revenue to help pay for those facilities already under construction or
in operation.
Preparation of an energy development plan which reflects the needs and priorities of all the citizens of the state will not be as representative of local attitudes as decisions made on a site-by-site, project-by-project basis.
Tactical Difficulties in Implementing an Energy Development Policy and Plan ~
Preparation of an energy development plan will be expensive and time-consuming, and decisions over development goals will generate controversy.
Development and continuous updating of a data base and monitoring system will also be expensive.


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The energy industry may voice strong objections to
establishment of a facility siting review board empowered to require impact mitigation measures in exchange for necessary state permits.
2. Creation of a Comprehensive Economic Development Strategy and Plan
The economic growth and development of the energy-producing regions of the state will of course depend largely on the mining, processing, and conversion of those energy resources. A realistic economic development strategy for such regions must be based upon the energy development plan described above, and must also include consideration of other growth inducers. A strategy for regional development must be created, considering such variables as the availability of other natural, refined, or manufactured resources, the region's proximity and accessibility to needed market centers, the presence of a skilled labor force, the threshold or carrying capacity of the regional environment, the availability of local investment capital, and the fiscal capacity of the local units of government.
The economic development plan must also include a long-range strategy for the region, considering the effects of energy resource depletion on the regional economy. An investment plan using public and private monies, similar to that used at the peak of energy-related activity, must be established for post-peak years in order to avert an economic decline.


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An economic development strategy should contain the following components:
Provisions for dispersed deposit of state funds in local banks and lending institutions in order to enhance local investment opportunities.
Strengthening of state-sponsored commerce and development programs, such as vocational-technical education; commercial and industrial recruitment; assistance to industry marketing and trade councils; targeting of discretionary state and federal funds for economic development projects.
Earmarking portions of energy development revenues (e.g., mineral leasing royalties, severance tax revenues, corporate income tax revenues) for the long-range economic development of the region from which the revenue was generated. Emphasis should be on strengthening the economic diversity of the area. Some of the revenue should be used to create development "banks" which would offer low interest business and agricultural loans, and which would help underwrite tax-exempt bonds for financing needed transportation systems, industrial parks, and other support facilities for new industry.
Discussion: Major Strengths and Weaknesses of an Economic Development Strategy and Plan
Depositing state funds in banks located in targeted


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economic development regions of the state makes much-needed capital available to lenders. Common practice is to place state deposits in institutions bidding the best terms and highest interest rates, with no geographic considerations. Strengthening of local capital formation efforts can help small business and other commercial and industrial development occur alongside but independent of the energy-based industries.
State vocational training programs which prepare local residents for jobs in the energy industry result in greater local participation in the boom economy and reduce the need for immigration of skilled labor. Likewise, vocational education programs paired with the recruitment of non-energy industries aid in the post-boom economic diversification and development.
$ Earmarking energy-related revenues for the special needs of impacted communities brings about a more equitable distribution of the social and economic costs of energy development. Using portions of these revenues to create development banks strengthens the non-energy sector of the local economy by providing affordable capital to local business ventures.
Development of a strategy which considers the economic development needs of the entire state may dilute local participation in decision-making. It is conceivable that


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such a strategy would not represent the priorities of an impacted community, especially in the selection of areas in which to target economic development programs.
For example, an energy-producing community may prefer state assistance with developing its energy resource instead of help with diversifying the economy.
An economic development plan may advocate a distribution of costs (and benefits) which seems unfair to the impacted community. This would be likely to occur if much of the energy-generated state revenues are directed to non-energy-producing areas of the state.
Tactical Difficulties in Implementing an Economic Development Strategy and Plan
Use of state deposits as an economic development policy tool will result in a lower financial return to the state than if deposits were to be made simply on the basis of the highest yield. Taxpayers as well as banks outside the impacted areas would likely object to this practice.
The creation of development banks, capitalized with public revenues and able to offer sub-market interest rates, would compete with, and be opposed by, conventional banks and other lending institutions.
t Unions and trade organizations might object to large-scale vocational-technical training programs, fearing that a


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surplus (or even an adequate supply) of skilled laborers would cause a decline in existing pay scales.
3. Strengthening the Management Capacity of Local Governments
Recent energy-related growth in the West has mostly occurred in areas with sparse populations near communities offering minimal public services. Municipal and county governments in many of these areas have historically been operated on small budgets with few if any full-time paid staff. Elected officials often serve with little or no compensation.
Accelerated growth has forced many communities to expand their services and facilities to a level which requires professional expertise. Local governments in these regions need assistance in land use planning, zoning, and regulation; taxation; annexation; fiscal planning and management; capital construction and maintenance; human services delivery; public safety, as well as other areas.
Local units of government need assistance in developing a capability to plan for an manage the expected growth. State or federal financial assistance alone is not an effective response to growth pressures. Municipal and county governments need to upgrade their professional and technical expertise in order to help local residents make and carry out wise growth management decisions.
There are a number of steps a state can take to build a stronger management capacity in local units of government:


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States could provide circuit riders with professional expertise to communities whose population (and budget) is insufficient to support full-time positions. City managers, planners, lawyers, economists, and budget officers are a few examples of the kind of staff which can be shared by two or more municipalities or counties.
States could offer training workshops and seminars for elected officials, community leaders, and other local decision-makers to make available to them information on growth management techniques, and anticipated effects of population growth on existing infrastructure and services.
t States could help local governments identify and secure federal financial assistance by providing them with information on grant criteria and availability and by assisting with the preparation of grant applications.
States could assist local governments in establishing a data base to be used in zoning, permitting, taxing, and other growth-related decisions. The data base should include information on water supply and quality, transportation networks, population, land ownership and use, wildlife, energy minerals and other natural resources. States could provide information for establishment of the initial data base and could help build a process for continuous updating of the systems as new information becomes available.


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t States could strengthen local governments' citizen participation process by providing community development specialists on temporary assignments to impacted communities to help local leaders strengthen public information programs and to train local residents as facilitators for public discussion.
t States could stipulate, in their cooperative agreements with federal agencies, that local governments be adequately represented and consulted in federal decisions which affect them. Examples include federally-subsidized water projects and energy conversion facilities as well as federal leasing decisions on nearby public lands.
Discussion: Major Strengths and Weaknesses of Strengthening the Management Capacity of Local Governments
Assignment of state-funded professionals as part-time circuit riders to impacted municipalities, counties, and school districts provides local officials with technical and other expertise which they could not otherwise afford. Giving local citizens access to growth management tools (e.g., land use planning and zoning, careful management of water and sewer services, effective financing and budgeting techniques, reliance on economic and environmental impact studies, etc.) increases local participation in the


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decision-making process and builds the management capacity of local units of government.
State-to-local assistance in identifying and securing federal grants helps deliver financial aid to impacted areas while strengthening the local capacity to seek and secure funding on their own. State governments have allocation discretion over some federal grant programs and are often able to "package" two or more federal programs to meet specific local needs.
Development of a comprehensive local data base gives local officials and staff a more credible voice in negotiating with prospective energy firms. It is also a valuable resource in determining anticipated costs and revenues of proposed development, a first step toward greater equity in cost distribution.
Tactical Difficulties in Strengthening the Management Capacity of Local Governments
Local units of government outside the energy-impacted regions may object to the targeting of state funds and personnel for programs from which they cannot benefit. However, some of the growth management skills, and most of the post-boom economic development programs, are transferable to communities throughout the state.


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4. Enactment of Legislation to Provide Financial Assistance to Impacted Areas
Adequate revenue is a key component in most growth management strategies. Energy-impacted municipalities and counties frequently point to constitutional and statutory constraints to their revenuegenerating authority as the cause of budgetary shortfalls and increasing dependence on federal assistance. Because counties and municipalities can exercise only that authority delegated to them by the state, they are dependent on state initiatives to expand their fiscal authority. Short-term strategic investments by the state in local government facilities can help strengthen the economic development of the region, and ultimately return dividends in the form of increased revenues to the state. There are a number of ways in which states could assist local governments in increasing their revenue base:
The "local" share of federal mineral leasing royalties could be increased. Colorado's present distribution allows no more than $200,000 per year of leasing royalties to be returned to the county in which the leasing and development occurred. Likewise, state severance tax revenues could be redistributed to provide larger allocations to impacted regions in the early years of development, followed by a decrease to those regions, once facilities and services are in place. The net result to the state general fund or a state trust fund could remain unchanged.


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The funding formula for state aid to education could be changed to provide for semi-annual determination of student population. Annual student counts result in longer tag times between enrollment increases and increased state aid.
0 Property tax assessment dates could be revised to provide for a mid-year re-examination of property values.
This measure, like the proposal to institute semi-annual student counts, benefits areas of rapid population and economic growth by making existing revenue sources more responsive to change.
t States could enact enabling legislation to allow for prepayment of ad valorem taxes by impacting energy industries. Local jurisdictions could establish mandatory pre-payment systems or voluntary ones, offering tax discounts or credits as incentive.
0 States could enact enabling legislation to allow multi-jurisdictional revenue sharing. A taxing "district" could be created which would encompass all the surrounding jurisdictions impacted by a certain facility.
Revenues from the facility's property tax could then be distributed by a formula based on criteria such as the number of facility workers residing in a given jurisdiction or the increase in a jurisdiction's population over that of a base year.


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States could establish a "community development authority" or similar public corporation empowered to guarantee local bond issues and to issue tax-exempt bonds. The sale of the bonds would provide funds for construction of needed facilities in impacted areas. The bonds would be repaid from revenue from the project or from state sales or severance tax. The authority could also provide mortgage assistance to homebuyers.
States could institute an energy conversion tax on electrical generating facilities. Revenues could be distributed in a manner similar to the present coal severance tax. This proposal would be fiscally beneficial and politically acceptable only when out-of-state export of electrical power exceeds in-state consumption.
The preceding measures require action by the state legislature. States could also exert pressure on Congress to adopt new legislation and amend existing measures which would increase funds available to energy-impacted areas. The relatively low populations of many energy-producing states accounts for small congressional representation and little influence over "regional" legislation. Western states have recently had moderate congressional "victories" and have found that sophisticated research and presentations along with skillful lobbying and coalition building can be effective. There are at least two energy impact-related issues on which states could attempt to wield influence:


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Efforts have been underway for three years to gain congressional approval of a comprehensive energy impact assistance bill. If enacted, the bill would authorize grants, loans, and loan guarantees for planning, land acquisition, and construction of highways and public facilities. Limited support for the bill outside the Rocky Mountain and Appalachian states has prevented its passage.
t Existing allocation formulas for many federal funds are based on criteria under which many small western communities fail to qualify. Eligibility criteria for many capital construction, housing, health and human services programs tend to favor areas with high unemployment, low incomes, and community infrastructure pre-dating 1940. Adjustments to criteria for some programs could be made by the federal agency administering the program; for others, congressional amendments would be required.
Discussion: Major Strengths and Weaknesses of Enacting Legislation to Provide Financial Assistance to Impacted Areas
The availability of additional money for growth management and impact mitigation, and more flexible eligibility criteria will help in delivering assistance in a more timely manner.
Earmarking revenues from energy-related taxes and fees


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contributes to a more equitable distribution of costs by internalizing a greater portion of actual energy development costs to the industry and, ultimately, the energy consumer.
Establishment of local taxing districts and community development authorities strengthens local decision-making by placing decisions on revenue distribution, bond sales, and loans in the hands of local citizens.
Tactical Difficulties in Enacting Legislation to Provide Financial Assistance to Impacted Areas
Targeting the revenues from leasing royalties and severance tax to impacted jurisdictions may be opposed by the non-impacted regions of the state on the basis that those revenues are meant to compensate all the citizens of the state for the loss of a non-renewable capital resource.
More frequent updating of indices for state aid to education and semi-annual reassessment of certain property may be opposed on the basis of increased administrative costs. Again, the opposition would probably come from those areas of the state least likely to benefit.
Mandatory pre-payment of property taxes would undoubtedly be opposed by the affected property owner. Mandatory prepayment should be instituted only if voluntary measures and incentives fail to produce the needed results.


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Establishment of multi-jurisdictional taxing districts
to share energy-derived revenues would probably be opposed by those jurisdictions presently receiving the most revenues and providing the fewest services. In most cases, those jurisdictions would be county governments.
Establishment of community development authorities whose bond sales are repaid from general revenues, such as state sales tax revenues, would likely be opposed by non-impacted areas of the state. "Tilting" of state funds to targeted areas would raise understandable controversy unless other compensatory programs were instituted.
Levying an energy conversion tax on electricity generated in the state would probably raise objections by consumers to whom the tax would be passed on. It may be possible to overcome those objections if most of the tax could be "exported" to electrical consumers outside the state, and the revenues earmarked for in-state consumer tax relief.


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CHAPTER VII CONCLUSIONS
Summary of Argument
At the outset, my thesis was that the unique conditions and magnitude of energy-related growth require a thoughtful, broad-based, and creative approach. That proposition also envisioned a central role for state government in providing growth management assistance to impacted communities.
I wanted to show the inadequacy of existing assistance mechanisms, create standards for the "ideal" assistance programs, and propose realistic, effective measures to address the problems of rapid growth.
Summary of Findings
Pursuant to those goals, my approach followed these steps:
Chapter I examines the historical context within which domestic energy development began to accelerate. International events, combined with the geological richness of the region, caused a rapid increase in population and economic growth in many communities throughout the West. Because the country's dependence on foreign oil imports had created a national energy shortage, many of the


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decisions regarding the magnitude and timing of development were made by the federal government. The federal presence was evident in price controls, tax incentives, and leasing of energy resources on public lands.
Development of the West's coal reserves was one of the first responses to the call for energy independence." Communities in coal regions grew as mines opened or expanded and coal-fired power plants were constructed. Other communities, told that an emerging synthetic fuels industry would soon arrive, awaited an uncertain future. The promise of high-paying jobs in the expanding energy industry drew newcomers into the region, and with them, increased pressures on existing public and private facilities.
By any measure, it was clear that the effects of the nation's new energy policy would be felt on the western environment, economy, and lifestyle.
Chapter II describes the characteristics of many of the communities experiencing energy-related growth. Typically small and isolated, these communities usually have a homogeneous population and a local economy based largely on farming and ranching. In many cases, the energy boom has abruptly reversed a decades-long trend of declining population and economic inactivity.
Public revenues, mostly based on property and sales taxes, have been limited by low property values and an undeveloped market for goods and services. As a result, community facilities and services


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are minimal, and the maintenance of existing facilities has often been deferred due to inadequate funds. Likewise, local government management capabilities are poorly developed. Community facilities and services, and the personnel needed to direct and manage them, are minimal, leaving the community unprepared for the imminent growth.
Chapter III identifies the major impacts on the community resulting from the energy development: increased population, expanded employment opportunities and higher wages; localized inflation; housing shortages; overburdened facilities such as schools, hospitals, water and sewage systems, streets, and highways; inadequate public revenues to upgrade facilities and services; and antagonism between long-term and new residents.
The effect of these impacts is synergized and compounded by the rapidness of the change and by the knowledge that the economic growth is based on a finite resource subject to unpredictable market fluctuations. The speculative nature of the local economy contributes to community reluctance to address the impacts with long-term solutions.
Chapter IV inventories the forms and sources of assistance available to most impacted communities. Four major sources are identified: local government, state government, federal government, and private industry.
The chapter describes the various forms of technical, management, and financial assistance, and assesses several financial assistance


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programs for their applicability to energy-impacted communities. Taxing and other financing mechanisms, as well as their revenuegenerating capabilities, are described and evaluated.
Most assistance was found to be inadequate in terms of amount or flexibility. Very few sources of outside assistance are available to prepare a community for growth impacts; local sources of timely assistance are mostly limited to negotiated agreements with the energy development companies.
Pursuant to the objective of this paper (to propose a growth management role for state government), particular attention was paid to existing state programs. Their strengths and weaknesses were critically examined as a necessary step towards fulfilling that objective.
Chapter V establishes standards for evaluating an effective state growth management policy and program. The standards, based on an analysis of existing programs and the unique needs of the energy boomtown, include:
t fair distribution of costs
timely delivery of assistance
adequacy of local participation in decision-making
protection of community against future economic decline
While few if any programs meet all of these criteria, they represent important considerations in any effort to establish or expand growth management assistance programs.


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Chapter VI proposes recommendations for a strengthened state role in providing growth management and financial assistance to energy-impacted communities. The recommendations are based on the findings of earlier chapters, and represent the studied judgment of the author.
The recommendations fall into four major categories:
1) Creation of a state energy development plan and policy, including an inventory of supply and demand, an energy activity monitoring system, an expedited review process for proposed facilities, and enactment of an energy facility siting act.
2) Creation of an economic development strategy and plan, including deposit of state funds in banks within the impacted region, earmarking of certain energy-generated revenue for long-range economic development and diversification, and strengthening of such state programs as vocational education and industrial recruitment.
3) Strengthening the management capacity of local governments by providing professional technical and management assistance to impacted communities, by establishing a data base useful for local growth management decisions, and by insisting on local participation in federal decisions through cooperative agreements between the state and the federal government.
4) Enactment of legislation to provide financial assistance, including redistribution of mineral leasing royalties and severance tax revenues, creation of multi-jurisdictional taxing districts, and establishment of community development authorities.


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The recommendations are evaluated according to previously established criteria. Their major strengths and weaknesses are identified, and possible obstacles to their implementation are noted. Upon review and evaluation, my recommendations retain their strength and applicability to the problems of energy-related growth.
Further Research
My research for this paper has confirmed the validity of my original thesis. I feel strong in my description of what exists (e.g., history of the problem, typical communities, typical impacts, available assistance programs). I feel less secure with my program recommendations. While I feel confident that their implementation would lend significant assistance to impacted communities, my priority for further research would be to strengthen the evaluation of those recommendations and to refine them if indicated.


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FOOTNOTES
1. Public Law 95-620, The Powerplant and Industrial Fuel Use Act of 1979.
2. Public Law 96-294, The Energy Security Act of 1980.
3. Colorado Energy Fact Book 1980/1981, Editor: Linda Jade Stearns, Colorado Energy Research Institute.
4. Conversation with Doug Larsen, Executive Director, Western Interstate Energy Board, August, 1980. "The U.S. Department of the Interior has established Regional Coal Teams, composed of state and federal officials, charged with determining the pace and magnitude
of leasing to take place on tracts which they rank for environmental and economic feasibility."
5. Rocky Mountain News, "Colorado Fuels Eyed in Energy Proposal," by A1 Gordon, June 2, 1980, page 4.
6. "Local Fiscal Effects of Coal Resource Development: A Framework for Analysis and Management," Osbin L. Ervin, Policy Studies Journal, Autumn 1978, p. 9; and Boom Towns and Human Services, edited by Judith A. Davenport and Joseph Davenport, III, 1979, page 4.
7. "Managing the Public Lands," Bureau of Land Management, January 1980. Briefing paper prepared by BLM staff.
8. Conversation with Betsy Sturgess-Murray, Division of Impact Assistance, Colorado Department of Local Affairs, October, 1980.
9. Coal Data Book, The President's Commission on Coal, Washington, D.C., February 1980, U.S. Government Printing Office, page 198.
10. Energy Impact Assistance: Report to the President by U.S. Department of Energy, Assistant Secretary for Intergovernmental and Institutional Relations, Washington D.C., March 1978, Appendix A.
11. United States Environmental Protection Agency, "Part I, Managing Growth in the Small Community: Getting a Picture of What's Ahead," Action Handbook, Region VIII, Denver, Colorado, 1978.


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12. Council on Environmental Quality, "Socioeconomic Impacts of Western Energy Resource Development," Volume II: Assessment Methodologies, January 1979, pp. 51-61.
13. Ibid.
14. Tax Lead Time Study for the Oil Shale Region: Fiscal Alternatives for Rapidly Growing Communities in Colorado. Prepared for the Regional Development and Land Use Planning Subcommittee of the Governor's Committee on Oil Shale Environmental Problems. Colorado Geological Survey, Colorado Department of Natural Resources, 1974.
15. Financing State and Local Governments, James A. Maxwell and J. Richard Aronson, 1977, pages 189-214.
16. The Costs of Sprawl, by Real Estate Research Corporation, April 1974, pages 105-131. U.S. Government Printing Office Stock #4111-00024.
17. U.S. Department of Energy Comprehensive Community Planning for Energy Management and Conservation: Developing and Applying a Coordinated Approach to Energy-Related Community Development, Executive Summary, December 1977, pages 16-19.
18. Maxwell and Aronson.
19. Financial Strategies for Alleviation of Socioeconomic Impacts in Seven Western States, Leonard D. Bronder, Nancy Carlisle, Michael Savage, Jr., Western Governor's Regional Energy Policy Office, May 1977, pages 550-551.
20. "Growth Management Issues in Synthetic Fuels Production," paper prepared by Science and Public Policy Program, University of Oklahoma, Norman, Oklahoma, October 1979.
21. Maxwell and Aronson.
22. Ibid.
23. "Delivery of Federal Funds to Energy Impacted Communities," prepared for the U.S. Department of Energy by the National Governor's Association, December 1978.
24. Rocky Mountain News, "Boom Goes Bust in Hayden; Town May Default on Loans," Denver, Colorado, August 13, 1980.
25. Public Law 94-579, The Federal Land Policy and Management Act, 1976.


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26. "Energy Impact Assistance in Colorado: The Local Government Severance Tax Fund and the Local Government Mineral Impact Fund," briefing paper prepared by Paul Kinney for Colorado Department of Local Affairs, September 1978.
28. Interview with Burman Lorensen, Director of Energy Impact Office of the Mountain-Plains Federal Regional Council,
July 1978.
27. "Delivery of Federal Funds to Energy Impacted Communities.
28. Ibid.
29. Ibid.
30. "Managing the Impacts of Energy Development: A Policy Analysis from a State Government Perspective," James E. Monaghan, commissioned by National Governors' Conference (now National Governors' Association), April 1977.
32. Survey conducted by staff of the National Governors' Conference (now National Governors' Association) Energy Impact Subcommittee, September 1977.
33. "Delivery of Federal Funds to Energy Impacted Communities.
34. Public Law 89-136, Public Works & Economic Development Act of 1965.
35. "Delivery of Federal Funds to Energy Impacted Communities.
36. "Growth Management Issues in Synthetic Fuels Production."
37. "Delivery of Federal Funds to Energy Impacted Communities.
38. Ibid.


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Bronder, Leonard; Carlisle, Nancy; Savage, Michael; Financial Strategies for Alleviation of Socioeconomic Impacts in Seven Western States, for Western Governors' Regional Energy Policy Office, Denver, Colorado, May 1977.
Bureau of Land Management, Managing the Public Lands, Washington, D.C., 1980.
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Edited by Linda Jade Stearns, Golden, Colorado, 1980.
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Federal Role, Staff Working Paper, U.S. Congress, Washington, D.C., 1980.
Cortese, Charles and Jones, Bernie, The Sociological Analysis of Boom Towns, Western Sociological Review, Volume 8, Number 1, 1977.
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Mountain Plains Federal Regional Council, Socioeconomic Impacts and Federal Assistance to Energy Development Impacted Communities in Federal Region VIII, July 1975.
National Governors' Association, Delivery of Federal Funds to Energy Impacted Communities, U.S. Department of Energy, December 1978.
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Science and Public Policy Program, University of Oklahoma, Growth Management Issues in Synthetic Fuels Production, Norman, Oklahoma, October 1979.
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U.S. Department of Energy, Energy Impact Assistance: Report to the President, Washington, D.C. March 1978.
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United States Environmental Protection Agency, Part I, Managing Growth in the Small Community: Getting a Picture of What's Ahead, Denver, Colorado, 1978.
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