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GUEST SPEAKER: Dear
Governor, as you

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know, we're currently
facing a controversy

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around the funding for cleanup
of a highly polluted Superfund

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site.

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Before delving
into some details,

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I wanted to divide my
talk into three parts.

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First, I'll walk you
through why this has become

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a controversial topic today.

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Secondly, I'll walk
you through how

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you can apply
cost-benefit analysis

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in this particular case.

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And finally, I'll close
with some observations

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around possible gaps
and recommendations

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on how to move forward.

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So first some background.

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A decade ago some abandoned
underground storage tanks

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from a former foundry leaked
into neighboring wetlands.

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Given that the company
had gone out of business,

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it was impossible to
hold them to account

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for the cost of the cleanup.

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As a result, we put in $3
million to cap the site

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and sequester the
polluted water and soil.

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Today this issues resurfaced
because the city wants

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to build a new mall on
the site and has requested

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that the state government fund
the construction of a road that

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would link this area
near an interstate.

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This sparked debate
around who should

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fund the cleanup, which is
estimated to cost $35 million.

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The local government argues
that the economic benefits

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of the mall on this site will be
widespread so the state should

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cover these costs.

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However, the
transportation agency

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believes that the developers
should cover these costs given

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that they will gain much
of the economic benefits.

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To develop a position, you asked
me to work on a cost benefit

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analysis, and I'll walk
you through the process

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of this analysis.

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As you know the purpose
of a cost benefit analysis

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is to determine whether
the social benefits exceed

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the social costs.

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The benefits are an increase
in the human environmental

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well-being, while the
costs are the reductions

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in this well-being.

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To sum the benefits, we would
calculate the willingness

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to pay for benefits
or accept compensation

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for any losses that might occur.

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We also determine the
standing, in other words,

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the stakeholders whose costs and
benefits are to be considered,

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and the time over which
these costs and benefits are

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to be counted and
discounted over time.

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Finally, to compare
the costs and benefits,

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we use that present value.

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In other words, the discount
of these values over time.

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And then that present
value is important

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because it helps us
rank our options.

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And we should only
consider implementing

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those that have a positive
net present value.

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For this particular
case here are

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some of the most
important direct

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and indirect costs and benefits
that we could focus on.

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Some of the potential costs
of development of this mall

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would be the actual
cleanup of the site

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and the ongoing monitoring of
any lingering contamination,

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certifying compliance
and authorizing

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sites for redevelopment,
building, maintaining a road

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or necessary structures such
as bridges or parking lots,

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loss of revenue of existing
local and state businesses,

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increased traffic, as well
as air and noise pollution

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in the area and any resulting
shifts in demographics

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of these areas.

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Some potential benefits
could be economic activity

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and generation of business
revenues, employments, wages,

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and benefits that can affect
household income, which

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in turn can propel the economy,
and state and local taxes

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can increase revenue
for the government.

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It's important to note
that many of these issues

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can be seen as either
cost or benefits

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depending on different
stakeholders point of view.

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For example, a
large new mall could

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increase the property value
in some surrounding areas

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and decrease it in others.

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As far as time
frame, it would be

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important to capture
each phase involved

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from the cleanup of the
development construction

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to its functioning
in the long-term,

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so we can project the potential
long-term costs and benefits.

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Ideally, a lot of
psychoanalysis that

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captures the impacts of
the mall from construction

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to deconstruction
would be carried out.

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Regarding the
geographic scope, it's

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key to include in the
study the actual site

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plus a certain
radius of surrounding

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areas and neighboring towns
to ensure that cost benefit

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analysis gains the full picture
of the impacts of the project.

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Each cost benefit would
require a different scope

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depending on the impact
and how far it would

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reach the surrounding areas.

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Consultation with
local stakeholders

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can be helpful in
determining the scope.

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Finally, regarding the question
of inevitable distribution

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of costs and benefits.

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We may give higher
weight of cost benefit

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for particular stakeholders
who may experience the impacts

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at different rates due
to particular situations

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or locations such as
indigenous peoples

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with cultural and physical
survival may be at stake.

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Those who are negatively
affected by it

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would carry higher
costs, and therefore that

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should be factored in.

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To wrap up, I just wanted to
offer some recommendations

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and closing thoughts.

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One, issues that
we're discussing,

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two, scenarios
keeping the site as is

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or conducting cleanup for a
new development such as a mall.

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To make an informed decision and
given that environmental groups

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claim that there have
been long-term health

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effects experienced by
water users in the area,

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it would be key to carry out
environmental health risk

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analysis of the
current site, so we

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know what we're comparing the
action of redevelopment to.

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In this case, non-monetary
costs and benefits

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should be given a score so
that the two options of action

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and non-action can be compared.

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Moreover, I would also encourage
us to consider other options

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aside from the
construction of a mall

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as a form of redevelopment.

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It would be
important to consider

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other alternatives
that might generate

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higher benefit at a lower cost.

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Taking these steps and
conducting a cost benefit

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analysis will give us a
more comprehensive picture

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of the situation and fill
in some important gaps

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of information that
we currently face

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to make an informed decision.

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A well done cost
benefit analysis

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will help us determine
which course of action,

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as well as how much each party
should contribute to make

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this plan actually happen.

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Thank you.