1999 Main Street Fights Back - ILSR

NEWRULESE X P L O R I N G C O M M U N I T Y, M O B I L I T Y, S CA L E A N D T R A D E • S U M M E R 1 9 9 9

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Main Street Fights Back

Creating Up-Close Capitalists

Can Taxing Land Curb Sprawl?

Antitrust Packing Laws Sweep the Plains States

Main Street Fights Back

[ c o n t e n t s ]

F e a t u r e s4 The Buck Starts—and Stops—Here

Thousands of communities have lost local businesses to theclout of national chain stores. But other towns have protectedtheir homegrown economies with zoning ordinances that limitlarge-scale retail and favor local ownership. By Stacy Mitchell

9 Getting a Slice of the PieEmployee ownership may be one way of lessening the capital-ism-driven income gap between rich and poor. By Jeff Gates

12 States Take the Bull by the HornsFamily farmers cheer as plains states pass legislationintended to break up concentration in the meat packingindustry. By Stacy Mitchell

14 No, We Have Plenty of BananasBut soon none of them will be grown by independent farmers—if the WTO has its way. By Daniel Kraker and David Morris

16 Microradio Struggles to Regain a Place on the DialThe FCC has an opportunity to encourage more locally controlled, community-based radio programming, butbroadcasting conglomerates say no. By Daniel Kraker

18 Outlandish TaxesProperty taxes encourage speculation, sprawl and propertydepreciation. Switching to a land value tax could help com-bat these urban ailments. By Pam Neary

D e p a r t m e n t s1 editor’s note

We should cease to think of increasingly concentratedownership as an inexorable, unstoppable force of history.We make the rules and the rules make us.

2 place rulesConsumer coupons could boost local business in Japan. Indiebookstores break ground online at booksense.com. Mayorsand counties charge pro-industry slant on Congressionale-commerce tax commission.

Editor in Chief

David Morris

New Rules Staff

Nicholas Hanlon, Daniel Kraker, Stacy Mitchell,

David Morris, Elizabeth Noll

Art Direction

Studio Flux Co.

ILSR President

Neil Seldman

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NEWRULESThe

E X P L O R I N G C O M M U N I T Y, M O B I L I T Y, S CA L E A N D T R AD E

[ e d i t o r ’ s n o t e ]

Traditionally, liberals and con-servatives have agreed on atleast one central idea: a robust

economy and a vibrant democracydepend on the broadest possibleownership of property. Sadly, today’sliberals and conservatives also agreeon another central idea: concentratedownership marks the next stage ofeconomic evolution.

The tension between our ideal—distributed ownership—and what webelieve we must accept—concentratedownership—illuminates much of cur-rent policymaking. Some of this ten-sion would disappear if we ceased tothink of increased concentration asan inexorable, unstoppable force ofhistory. We forget that unlike anapple falling or the sun rising, themegastore and the megamerger cannotappear without our permission. Wemake the rules and the rules make us.

Take the case of bananas. AsDaniel Kraker and I point out in thisissue, the European Union’s bananapolicy, which guarantees a market forCaribbean producers, has nurturedegalitarian economies inhabited by tensof thousands of independent farmersand farm workers who earn a decentliving. By contrast, Central America is

characterized by low paid and depen-dent banana workers, concentratedeconomic power, absentee ownership,and stark inequality. This spring theU.S. successfully petitioned theWorld Trade Organization to declarethe EU’s banana policy a violation ofGATT. It was a truly hollow victory.

On the domestic front, the own-ership of radio stations has become farmore concentrated since Congressionalpassage of the TelecommunicationsAct of 1996 allowed far more concen-trated ownership. Yet technologicaldevelopments raise the promise of a

dramatic decentralization of owner-ship in this sector. At this writing,the Federal CommunicationsCommission (FCC) has issued pro-posed rules for licensing thousands ofnew microradio stations. Will therules promote a diversity of views andcommunity-serving stations, or willthey encourage the same organiza-tional structures and formats as currentcommercial radio stations? We reporton the controversy.

While Kraker examines policiesthat can nurture the widest possibleownership of radio, Stacy Mitchelllooks at rules that can nurture thewidest possible ownership of retailstores. In an excerpt from her new publication, The Home TownAdvantage, Mitchell reports on whatlocalities and states are doing to favorenterprises whose relationship totheir communities goes beyond simplyselling goods or services.

Jeff Gates looks at ownershipthrough a wider lens. He argues thatalthough half of all households ownstock, most own very few shares andthat the vast majority of us own nowealth-producing assets aside fromour own labor. He argues that democ-ratic ownership should become a cen-tral tenet of public policy. Gates has thecredentials to make the case, since hewas one of the original designers of the1974 law that created employee stockownership plans (ESOPs). Today thereare more than 10,000 ESOPs in theUnited States, and Gates urges us toexpand that distributed ownershipmodel into new structures, like cus-tomer stock ownership plans and community stock ownership plans.

From bananas to radio, fromretail stores to manufacturing, thisissue of The New Rules offers evi-dence that rules matter. The decisionswe make today influence the wayour communities and our economieslook tomorrow.

—David Morris

Democratizing Ownership

We forget that unlike an apple

falling or the sun rising, the

megastore and the megamerger

cannot appear without our

permission. We make the rules

and the rules make us.

Summer 1999 THE NEW RULES 1

2 THE NEW RULES Summer 1999

[ p l a c e r u l e s ]

Japan Jumpstarts Its Economy by Focusing on Local BusinessesMired in a decade-long recession, andfrustrated by failed attempts to increaseconsumer spending through traditional

means such as tax cuts,the Japanese govern-

ment has instituted anovel experimentto boost its econo-

my and encourageits small, struggling,

independently ownedbusinesses: it has given

away money. By the end of March the govern-

ment had put $6 billion in shoppers’hands in the form of 1,000 yen($8.60) coupons. Elderly Japaneseand those with children youngerthan 15 (about 35 million people)were eligible for approximately $170worth of coupons. The vouchers aregood for six months and cannot beexchanged for cash, nor can shop-pers receive change for them. Inshort, they have no alternative butto spend them.

Each municipality has been giventhe authority to design rules as towhere the coupons may be spent.Most have used this opportunity tofavor their local businesses. In mostcases they must be used in the com-munities where they are issued.Moreover, some localities havefavored small, locally owned busi-nesses by forcing residents to wait 40days before they can use the couponsat large, absentee-owned departmentstores. Other towns printed half oftheir coupons in one color that couldonly be spent at small stores, whilethe other color of coupons could bespent anywhere.

In an additional effort to helplocal business, the government hadeach municipality find its ownprinters, dye specialists and paper-makers to design and print theirown local currency.

As to be expected with any neweconomic experiment, there have

been bumps in the road. One majorproblem is that some frugal Japaneseconsumers are spending the couponsbut then saving an equivalent amountof cash.

Nonetheless, as the first suchexperiment anywhere in the world,the plan signals a growing realizationthat for a nation’s economy as a wholeto prosper, small-scale, independentand locally owned businesses mustalso flourish.

Booksellers Hit the Web En MasseIndependent booksellers have joinedtogether to launch an e-commerceweb site. The American BooksellersAssociation expects the $2 millionventure, Booksense.com, to be up andrunning in August. Until now, inde-pendent bookstores have largely beenleft out of online book retailing,which is expected to reach $1.2 billionin sales this year.

Booksense.com will enable localbooksellers to take advantage of a siteas sophisticated as Amazon.com whileretaining their individuality on theweb. The “back end” functions like thedatabase, search engine, and transac-tion mechanism will be shared. Eachbookstore will develop its own web site(or select a template provided by theABA), enabling it to retain its distinctidentity and provide tai-lored content likestaff book reviews,store events, andlocal informa-tion. Customersw h o v i s i tBooksense .comwill be promptedto click on a linkto their localbookstore.

The data-base will include 1.6 million titles.Orders will be shipped from the localbookstore if the title is in stock orfrom Baker & Taylor, a national bookdistributor. In both cases, the sale is

credited to the local store and itsname will appear on the packing slipthe customer receives. Participatingbooksellers will be charged a one-time fee of $500 and monthly chargeswill range from $175 to $400.

The web venture is part of a larg-er Book Sense marketing campaignlaunched by the ABA in May. BookSense is aimed at developing a collec-tive brand identity for independentbookstores through in-store promo-tions and national print and televisionads. The ABA has taken care not togive consumers the impression thatBook Sense is just another chain. Theads emphasize the knowledge, com-munity roots, and unique character ofindependent bookstores. The com-mon brand enables publishers andauthors to refer consumers to BookSense stores in their own advertising.At the end of April, 800 bookstoreshad signed on.

Local Commerce Tangled in a Tax-free NetDespite its rhetorical embrace ofdevolution, Congress has againrefused to grant any local authorityover internet commerce—even whenits own laws mandate it do so.

The Internet Tax Freedom Act(ITFA), passed in October 1998,established a three-year moratori-um on new internet taxes. The

bill also created the AdvisoryCommission on Electronic

Commerce (ACEC), to be madeup of sixteen Congressionalappointees: eight representa-tives each from business and

from local and state government.Their charge is to beginstudying ways to tax theinternet in a manner fair tostate, local and federaljurisdictions—as well as

online merchants and their customers.Yet when Congress unveiled its

list of appointees in March, ten werefrom high-tech industry leaders,including AOL, Netscape and AT&T.


None represents the interests of mainstreet businesses, which are more like-ly to support internet taxation. Evenafter Senator Tom Daschle replaced aCisco Systems executive with a formerstate legislator, and former NetscapeCEO Jim Barkdale voluntarily gaveup his seat to Delna Jones, a countycommissioner from WashingtonCounty, Oregon, the scales are stilltipped in favor of anti-taxation inter-ests. At least one government repre-sentative (Virginia governor and com-mission chair Jim Gilmore) is an oppo-nent of e-commerce taxation.

In response, the NationalAssociation of Counties (NACO) andthe U.S. Conference of Mayors filed alawsuit on March 8 in U.S. DistrictCourt, charging that the commission“is stacked against local government,”thus violating the intent of ITFA. The

groups then filed a preliminary injunc-tion to keep the commission fromholding its firstmeeting, sched-uled for June21. GovernorGilmore has calledfor the first meeting tobe held as planned.

The Justice Departmenthas appointed attorneyAllie Giles to defend thebusiness interests in the law-suit, showing that the government istaking a real interest in protectingthe make-up of the panel.

Industry leaders claim the tax banis necessary to further the internet’sgrowth, but it’s clear that the inter-net’s explosive success is due to itsconvenience, low cost, and ability to

The New Rules webpage brings together the rules needed for

creating politically strong, economically vibrant communi-

ties. From land use to electricity, from interna-

tional trade to mainstreet business, weÕll

give you the laws, regulations and court

r u l i n g s

that can help strengthen communities in this

time of technological and economic change.

store huge amounts of information—not its sales tax exemption.

The internet will continue togrow regardless of any taxes

placed on it. There is noreason to tilt the playingfield further in favor of

absentee retailers with anonline presence, or to jeop-ardize the services provid-

ed by local governments.Retail sales on the inter-net surged to $9 billionin 1998, and the growth

curve is nearly vertical. Larry Naake,executive director of NACO, esti-mates that states, counties and citiescould lose as much as $50 billion peryear in tax revenue by 2005. The resultwill inevitably be either a decline inservices or an increase in property andincome taxes. [ ! ]

Visit the New Rules Webpage: www.newrules.org

The New Rules Project Announces Two New Reports…

To order call 612-379-3815 or e-mail [email protected]

Seeing the Light: Changing the Power RulesÑBy David Morris

State legislatures, utility commissions and the U.S. Congressitself are busily revising the structure and scale of electricitydistribution. Seeing the Light proposes policies that candemocratize, decentralize and decarbonize our power future.

The Home Town Advantage: Keeping Retail Locally OwnedÑBy Stacy Mitchell

Communities across the U.S. have lost local businesses as aresult of the proliferation of chain stores. Now some towns arefighting back. The Home Town Advantage looks at policiesthat citizens are using to defend their homegrown economies.


R e s o u r c e sFor examples of

laws mentioned in this article, see

the Main Streets section of the

New Rules website atwww.newrules.

org/biz/mainstreets/index.html.

The Buck Starts—and Stops—HereThousands of communities have lost local businesses to the clout of national

chain stores. But other towns have learned how to protect their homegrown

economies. By Stacy Mitchell

Stacy Mitchell is a researcher with The New Rules Project of the Institute for Local Self-Reliance. She is the author of The Home Town Advantage: Keeping Retail LocallyOwned, forthcoming from ILSR.

In 1992, Warr Acres, a town of 10,000 located about25 miles from downtown Oklahoma City, experi-enced what thousands of other communities have:

Wal-Mart constructeda 120,000-square-footstore on the outskirtsof town.

Just seven yearslater, Wal-Mart hasdecided to abandonWarr Acres in favor ofopening a 200,000square foot super-center c loser toOklahoma City. WarrAcres stands to lose$500,000 in taxes annu-ally, nearly 8 percent ofthe town’s budget.

This is the secondtime Wal-Mart hasdealt a blow to WarrAcres. When the giantretailer came to townin 1992, several localbusinesses, includingthe town’s grocerystore, were forced toclose their doors.

The loss of localmerchants and growingdependence on absentee-owned corporate retailers isa predicament Warr Acres shares with most of thenation. Large national corporations now dominate

much of the retail and service sector, while inde-pendent, locally owned businesses are struggling,and often failing, to survive.

The level of retail con-solidation is staggering.Wal-Mart alone, with3,400 outlets and $139billion in sales last year,now commands 6 per-cent of all retail spend-ing. Borders Books andBarnes & Noble aredriving out indepen-dent booksellers,whose market sharehas declined from 58percent in 1972 to just17 percent today. Whilemany communities havelost their neighborhoodhardware stores, the twogiants of this business,Home Depot andLowe’s, now account forone-quarter of all hard-ware sales. Thousands ofcommunity pharmacieshave closed their doors,while Walgreen, CVS,and Rite Aid haveexpanded to a combined

total of 9,000 stores and $37 billion in annual revenue.Proponents of chain store expansion insist that

corporate retailers have brought a host of benefits toconsumers including wider selection, greater conve-nience, and above all, lower prices. Chain stores doachieve certain efficiencies in distribution and man-agement, but while these efficiencies translate intolower prices initially, in the long term consumers mayfind that they got less than what they bargained for.

The Buck Starts—

Profits from local enterprises circulate within the

local economy, and independent retailers rely on

other local businesses for services such as banking

and printing. Local merchants have a vested inter-

est in the health and welfare of their communities.


Chain stores tend to price low when entering a newmarket and, unlike their smaller competitors, canafford to operate at a loss for many months. In somecases chains will price entire lines below acquisitioncosts, as Wal-Mart has done with its pharmacy depart-ment, in order to gain market share. Once rivals havebeen eliminated, prices tend to rise. In Virginia, forinstance, researchers found that prices on specificitems at several Wal-Mart stores varied by as much as25 percent depending on the level of local competition.

While a large-scaleretailer will initiallyprovide a small com-munity with a big boostin terms of selection andconvenience—some-times doubling a town’stotal retail space—retail spending is a rela-tively fixed pie. Gainsat one location will beoffset by losses at exist-ing businesses. A townof 10,000 might support50 to 60 small mer-chants, providing eco-nomic diversity and sta-bility. When a large cor-porate retailer movesin, the host communityas well as several small-er towns in the vicinityoften lose their mainstreet merchants alto-gether, leaving many ofthe region’s residentswith little option but todrive long distances foreven the most basic of daily necessities. As Warr Acreshas discovered, this dependency carries risks. Whilelocal merchants will do their best to weather economichard times, absentee owners are far more mobile andwill abandon a community if profit margins do notmeet their expectations.

Public officials often court corporate chains on thebasis of new jobs and higher tax revenues. These gains,however, will invariably be offset by job and tax losses at

other retailers, producing only marginal improvement oreven a net decline in some cases. The public costs of devel-opment—expanding roads and providing services suchas water and sewer—combined with declines in propertyvalues and sales taxes in existing retail centers may actu-ally exceed the tax revenue generated by the new retailer.

Locally owned businesses provide economic andqualitative benefits to the community unmatched bycorporate retailers. Profits from local enterprises flownot to distant corporate headquarters but circulate with-

in the local economy,and unlike their corpo-rate counterparts, inde-pendent retailers rely onother local businessesfor services such asbanking and printing.Local merchants arerooted in the places theyserve and have a vestedinterest in the healthand welfare of our citiesand towns. They givemore to local causesthan their big competi-tors. While chain storesprefer uniform, single-purpose shopping cen-ters, often on the edgeof town, local retailersform the pillars of ourneighborhoods and citycenters, providing asense of place and dis-tinct local identity. Losing community tothe designs of corporateretailers is far from an

inevitable process. A number of towns have organizedagainst an invading retailer, turning once quiet planningboard meetings into centers of noisy democracy. Buteven when communities do put up a fight, they lose theseDavid and Goliath battles as often as they win them.

Rather than reacting to corporate expansion as itcomes our way, communities can sustain theirhomegrown retail and service businesses by design-ing rules that put community first. ➔

—and Stops—Here

R e s o u r c e sCape Cod Commission3225 Main Street, Barnstable, MA 02630;telephone 508-362-3828; websitewww.capecodcommission.org.

VermontEnvironmental BoardNational Life RecordsCenter BldgDrawer 20Montpelier, VT 05620;telephone 802-828-3309;website www.state.vt.us/envboard/

Public officials court chains on the basis of new

jobs and higher tax revenues. But the public costs

of development and declines in property values and

sales taxes in existing retail centers may actually

exceed the tax revenue generated by the chain.


The authority of communities to nurture anddefend local businesses is substantial. Courts consis-tently grant local governments considerable leeway toexercise their authority to preserve the physical andcommercial character of the community. Increasingnumbers of communities are using this authority tofashion regulations and ordinances that encourage amore rooted economy. The rules they are adoptingtend to fall into five major categories.

Limiting SizeBigness, absentee ownership, and concentration ofretail power tend to gohand-in-hand. Morethan half of all newretail space in the U.S.in recent years has comein the form of super-stores or “big boxes.”These massive retailoutlets range from90,000 to 250,000 squarefeet, two to five timesthe size of a footballfield and 20 to 50 timesthe size of a typicaldowntown retailer. Newstores of this magnitudealmost certainly lead tosignificant sales lossesand potential failures atdozens of existing busi-nesses. Moreover, thesesprawling, monolithicstructures place tremen-dous burdens on publici n f r a s t r u c t u r e —especially roads—andare at odds with thecompact, walkableneighborhoods that many communities prefer.

A number of cities and towns have responded tothis problem by capping the size of new retail devel-opments. Skaneateles, New York, for instance, limitsretail development to no more than 45,000 square feetand shopping center sites to no more than 15 acres.Westford, Massachusetts, enacted a zoning ordinancebanning retail stores larger than 60,000 square feetand requiring a special review and permitting processfor stores between 30,000 and 60,000 square feet.

The weakness of municipal zoning restrictions inthe age of the automobile is that large-scale retailersdenied approval in one community may well findacceptance in an adjacent town. These retailers arelarge enough to affect an entire region’s economy, and

the town that declined the development may find itselfnot only lacking the new tax revenue generated by theretailer but with a shrinking local economy as well.

Regional cooperation offers a solution to this prob-lem. A handful of regions have taken this approach,creating joint planning agencies charged with review-ing applications for developments that exceed a certainsize. The Cape Cod Commission, established by CapeCod voters in 1990, has the authority to approve orreject proposals for new construction larger than10,000 square feet and changes of use for commercialsites that exceed 40,000 square feet.

Assessing Community ImpactT h e C a p e C o dCommission’s reviewprocess involves a pub-lic hearing and focuseson the project’s impacton the environment,traffic, communitycharacter, and localeconomy. Applicantsbear the burden of prov-ing that the project’sbenefits outweigh its detriments. Cape Cod’s regionalpolicy plan, whichprovides guidelines forreviewing developmentapplications, statesthat the Commission“should take intoaccount any negativeimpacts that the projectwould have on theCape Cod economyand should encourage

businesses that are locally-owned and that employ CapeCod residents.” Armed with strong land use rules, CapeCod residents have given a number of corporate retail-ers the cold shoulder, including Wal-Mart and Sam’sClub in 1993, Costco in 1994, and Home Depot in 1997.

Vermont pioneered this approach on a statewidelevel in 1970 with Act 250 that requires developments ofregional impact to obtain a land use permit from one ofthe state’s district environmental commissions. Districtdecisions may be appealed to the state environmentalboard and ultimately the Vermont Supreme Court.

In most cases, commercial developments requireAct 250 review when they encompass ten or more acresof land. Approval depends on meeting several condi-tions that focus on the project’s environmental and

R e s o u r c e sFor information

and strategies for communities trying

to halt corporate retaildevelopment, contact

Al Norman, Sprawl-Busters, 21 Grinnell

Street, Greenfield, MA 01301; telephone

413-772-6289; websitewww.sprawl-busters.com

For information on revitalizing Main

Street, contact the National Trust’sMain Street Center

1785 Massachusetts AveNW Washington, DC

20036; telephone 202-588-6219; website

www.mainst.org

For information on organizing a

community-wide coalition of indepen-

dent businesses, contact Jeff MilchenBoulder Independent

Business AlliancePO Box 532 Boulder, CO

80306; telephone 303-402-1575; websitewww.boulder-iba.org

The authority of communities to nurture and defend

local businesses is substantial. Increasing numbers

of communities are using this authority to fashion

regulations and ordinances that encourage a more

rooted economy.


R e s o u r c e sFor the complete 1997 opinion of theVermont Supreme Courtupholding theEnvironmental Board’sdecision to reject a proposed Wal-Martstore under Act 250review, seewww.newrules.org/cgi-bin/access/rules/biz/court/walmart.html.

economic impacts. Act 250, for instance, discouragessprawl and scattered growth and specifies that devel-opments must not exhaust a town’s ability to accom-modate growth or place unreasonable fiscal burdenson the ability of local governments to provide services.

Act 250 has limited the number of large-scaleretailers in Vermont. The state was the last U.S. fron-tier for Wal-Mart, which opened its first store there in1995. The state now has four Wal-Marts, but as aresult of Act 250 review, three of these stores are abouthalf the size of a typical Wal-Mart and are located inexisting buildings, one of which is in a downtown.

Demanding DiversityLocal retail businessesreflect the diversity ofour local cultures andenhance our sense ofplace and communityidentity. As theseretailers are displacedby national chains,America’s towns arebecoming marked by astark uniformity. Retaillandscapes are oftenindistinguishable fromplace to place.

Thanks to a cre-ative local ordinance,this is not the case inBainbridge Island,Washington . “Westruggle with how wecan legally keep ourisland from becomingAnyplace , USA,”remarked Mayor AliceTawresey in 1989, fol-lowing the town’sadoption of a zoningordinance banningformula restaurants. The law defines a formularestaurant as a food service establishment that isrequired by contract to have standardized menus,food preparation techniques, and decor and is virtual-ly identical to restaurants in other locations. In short,the rule prohibits chain restaurants.

In the mid-1980s, Carmel, California, became thefirst town to adopt a formula restaurant ban. Since thenseveral communities have followed Carmel’s lead. Oneof those towns, Solvang, California, also consideredbanning formula retail establishments. At the time thetown decided that such a ban was not necessary to pro-tect its local merchants and ultimately dropped the

proposal. To date no community has enacted such anordinance, but the language Solvang considered pro-vides a useful model for others to follow. A formularetail business was defined as “a single-source, hightraffic retailer operated directly by, or under contractwith, a manufacturer of the merchandise offered forsale therein, and required to adopt standardized layout,decor, uniforms, or similar standardized features.”

Favoring Community-Serving RetailLarge-scale retailers draw customers from a wide area,inundating neighborhoods with traffic and pollution and

often diminishing thequality of life and prop-erty values of area resi-dents. An invasion ofnational retailers draw-ing from a regionalmarket may also driveup commercial rents,making survival diffi-cult for neighborhood-oriented businesses thatsupply basic daily goods. Enacting a town-serving zoning ordi-nance, as Palm Beach,Florida, has done, pro-vides a solution to thisproblem. This islandcommunity requiresretail and service busi-nesses in its main com-mercial district to besmaller than 2,000square feet and to pri-marily serve those liv-ing and working onthe island. Businesseslarger than 2,000square feet may applyfor a special permit

provided that they can satisfy the town council thatnot less than 50 percent of their anticipated customersreside or work in Palm Beach. The ordinance wasupheld in a 1991 court case in which the judge deter-mined that the law served legitimate public interestsand reflected the community’s desire to “limit dis-placement of businesses serving the Worth Avenueneighborhood by larger, regional establishments.”

Favoring Local OwnershipZoning rules provide citizens with powerful tools forshaping the retail character of their communities andencouraging a locally rooted economy. Zoning, ➔

The Cape Cod Commission has the authority to approve

or reject proposals for new construction larger than

10,000 square feet and changes of use for commercial

sites that exceed 40,000 square feet. Armed with strong

land use rules, Cape Cod residents have given a number

of corporate retailers the cold shoulder.


F. Y. I . Last year the Irish government issued a directive that temporarily bans new retail developments of more than 32,000square feet until a study is completed on the implications of large-scale retail developments on local business. This year theNorwegian government announced a similar five-year ban on large shopping centers outside city centers to help revive ailingdowntowns and reduce automobile pollution.

however, cannot be used to ban developments on thebasis of ownership; that is, communities cannot legal-ly exclude absentee-owned retail stores. As mentionedbefore, however, they can use “local ownership” as oneof the criteria used to decide whether to grant a permitto a new business.

Communities may also have the authority toimpose special taxes on absentee-owned stores. Suchtaxes were once fairly common.

The first wave of U.S. chain store expansionoccurred following World War I when the marketshare of chain stores shot up from 9 percent of allretail sales in 1926 tomore than 25 percentin 1933. This trendmet with vigorousopposition. Unlike thenarrow focus on effi-ciency and consumerwelfare that domi-nates current debatesabout corporate retail-ers, Americans in the1930s were primarilyconcerned with com-munity. Many wereconvinced that absen-tee ownership woulddrain local economiesand undermine democ-racy by concentratingeconomic power.More than half thestates responded byenacting chain storetaxes designed to curbthe growth of corpo-rate retailers. Mostof these laws werechallenged in thecourts, but in 22 states they survived.

Chain store taxes usually took the form of agraduated license or occupation tax that increasedaccording to the number of outlets operated by achain. Some were fairly mild at $25 to $30 per storeper year. Other states were more aggressive. Texas,for instance, assessed $750 per store for systemswith more than 50 outlets. This was fairly substan-tial considering that the average annual net profit

for grocery stores was $1,694 in 1929 and $950 in1935. Iowa collected both a per-store tax of $155for chains with more than 50 units and a gross-receipts tax of 10 percent on income exceeding $1million. Most states counted only those outletswithin their borders. The exception—Louisiana—based its tax on the number of stores the chainoperated nationally.

The anti-chain store movement began to fadeby the late 1930s, in large part due to a massivecampaign mounted by corporate retailers whoargued that the community-building aspects of

local retailers weremerely secondaryfunctions. Their pri-mary purpose was tobenefit consumersthrough selection andlow prices, and here,they argued, thechains were enor-mously successful.No new chain storetaxes were enactedafter 1941, and overthe years all of theexisting state taxeswere repealed. The decline of inde-pendent retailers isby no meansinevitable. Indeed,the displacement ofthese businesses bynational chains hasbeen aided in nosmall way by publicpolicy. Land userules have all toooften ignored the

needs of communities and undermined the stabili-ty of existing retail centers. Development incen-tives frequently favor national corporations overlocal merchants.

Increasing numbers of communities are begin-ning to use policy to nurture rather than harmhomegrown businesses. These new rules put com-munity first, intent on restoring the vitality of localeconomies and resurrecting main street. [ ! ]

R e s o u r c e sTo view the Irish

government’s tempo-rary ban on large

retail developments,see www.newrules.org/cgi-bin/access/

rules/biz/nonus/index.html.

As local retailers are displaced by national chains,

America’s towns are becoming marked by a stark uni-

formity. Retail landscapes are often indistinguishable

from place to place. Thanks to a creative local ordinance,

this is not the case in Bainbridge Island, Washington.


R e s o u r c e sShared CapitalismInstitute, 1266 West Paces FerryRoad NW, Suite 284 Atlanta, GA 30327; telephone 404-386-6643;website www.shared-capitalism.org

Getting a Slice of the PieCapitalism has done a lousy job of rewarding workers who help build corporate

profits. But through new ownership solutions, more “up-close capitalists” could be

created. By Jeff Gates

For the first time in human history, a singleeconomic system encircles the globe. Yet even ascapitalism reigns triumphant, its deficiencies are

becoming ever-more apparent. The fundamental prob-lem is that while capitalism has proven a remarkable sys-tem for increasing wealth, it has been far less effective atincreasing ownership. And it is the ownership of produc-tive assets, not, as the conventional wisdom would have it,hard work, that increases income and wealth. In brief,capitalism has done a lousy job of creating capitalists.

The data tell the tale. In the United States, the most capitalist country on

earth, total assets increased threefold from 1980 to1992 while median householdincome declined. From 1989 to1995 the stock market soared butthe net worth of the typical house-hold, including home equity, wasthe same as in 1989. One reason isthat 71 percent of American house-holds own no shares at all or lessthan $2,000 in any form, includingmutual funds, according to MITeconomist James M. Poterba.

The net worth of the top 1 per-cent of U. S. households, accordingto the Federal Reserve and theInternal Revenue Service, is greaterthan that of the bottom 90 percent.Though average household incomeclimbed 10 percent between 1979and 1994, 97 percent of that gainwent to the most well-to-do 20 percent. The top fifthof Americans now claim 48.2 percent of the nation’sincome, according to the Census Bureau, while thebottom fifth gets by on just 3.6 percent.

As the United States goes, so goes the world. Inthe past 30 years, the poorest 20 percent of the world’speople saw their share of global income decline from2.3 percent to 1.4 percent, according to the UnitedNations. Then they were 30 times worse off than peo-ple in developed countries. Now they are 82 timesworse off. From 1965 to 1980, 200 million people sawtheir incomes drop; from 1980 to 1993, 1 billion expe-rienced falls in their income.

The concentration of wealth has reached breath-taking proportions. In 1998 the assets held by theworld’s 225 billionaires exceeded the combinedincome of 2.5 billion of the world’s poorest people.

The UN’s conclusion: “Development that perpet-uates today’s inequalities is neither sustainable—norworth sustaining.”

Today’s capitalism is also increasingly uncoupledfrom place and community. More than $12 trillion—up from just $673 billion in 1970—is invested by ahandful of institutional fund managers in pursuit of asolitary goal: financial returns.

Capitalism is at a cross roads. The most produc-tive economic system ever designed is channeling ➔

Jeff Gates is president of the Shared Capitalism Institute inAtlanta and was a counsel to the U.S. Senate Committee on Finance. He is the author of The Ownership Solution(1998, Perseus Books).

10.5% 15%

22.5%

The bottom 20%receives only 3.6%

of the nation’s income.

INCOME STRATIFICATION OF THE U.S. POPULATION

The top 20%recieves 48.2% of the nation’s

income.

to enhance social well-being, including the well-beingof those communities in which the moral nature ofhumankind takes form.

We need an ownership solution that democratizescapitalism and roots it in a sense of place and commu-

nity. And we need government touse all the tools it possesses toencourage personalized, localized,and community-wise ownership.In 1975 the federal governmenttook the first step by offeringhandsome tax incentives to busi-nesses that made their employeesstock owners. The EmployeeStock Ownership Plan (ESOP)was born. Today more than 10,000companies have ESOPs. Nine mil-lion employees are members. Andrecent studies indicate that thosecompanies that give employees asignificant ownership stake andmore decision-making authoritydo better than those who do not.We need to extend andstrengthen the concept of ESOPs.Related Enterprise Share

Ownership Plans (RESOPs) could encourage compa-nies to include as stockholders not only their directemployees but also those employed by companies withwhich the sponsoring business has an ongoing relation-ship, such as distributors or suppliers. Jamaican lawnow encourages this structure, and one chicken proces-sor has extended stock ownership to its contract farm-ers and those employed by contract truckers.

resources in a way that is making us less secure, moredependent, and, on average, poorer. Unless reconnect-ed to personal concerns of real people in real commu-nities, today’s detached and indifferent capital mar-kets are destined to evoke a pageant of unsustainablepractices based on financialcriteria that often fail to takeinto account legitimate eco-nomic, environmental, andsocietal concerns. The resultwill be an even greater dividebetween the haves and have-nots and a greater concentra-tion of assets—and power—in fewer and fewer hands.

There is a solution. I call itup-close capitalism, where atleast some component of own-ership is physically proximateto productive assets so thatsomething more complex thanfinancial values can informeconomic decision making.Ultimately, this solution viewsownership as a social tool forlinking people not only to pro-ductive assets, but also to each other, to their commu-nity, and to their endangered environment.

This strategy can return us to the vision of capital-ism expressed by its intellectual founder, AdamSmith, who was first and foremost a moral philoso-pher. Financial calculation is part of who we are, hewrote, but it is only one part. Smith’s goal for privateenterprise was not to maximize financial returns but

Today’s detached and indiffer-

ent capital markets are destined

to evoke a pageant of unsus-

tainable practices based on

financial criteria that often fail

to take into account legitimate

economic, environmental, and

societal concerns.

F. Y. I . This year, the population of the world is supposed to hit 6 billion people. The 225 richest people in the worldmake more money than the poorest 2.5 billion people combined. The net worth of the richest 1 percent of theAmerican population is now greater than the net worth of the entire bottom 90 percent combined.



Customer Stock Ownership Plans (CSOPs) wouldallow customers to become owners. For example, overtime, bill-paying customers of investor-owned utili-ties could accumulate shares out of revenues that arenow paid to people outside the community.

Depositor Share OwnershipPlans (DSOPs) would enabledepositors to own shares in abank. That makes sense. If peo-ple have sufficient confidence totrust a bank with their savings,the bank may be able to draw onthat good will to persuade thosecustomers to buy shares. Banksgain an opportunity to strengthencustomer loyalty, and customerswould become up-close capital-ists—both as savers and as poten-tial borrowers, secure in theknowledge that their borrowingenhances the earnings of a bankin which they own a stake.

ESOP-like self-financingtechniques can also be used toexpand ownership beyond economic relationships basedeither on employment or consumption. One such mech-anism is the General Stock Ownership Corporation(GSOC) in which ownership is based on geography orcitizenship. In the only version of a GSOC thus far enact-ed into federal law in 1978, a for-profit corporation char-tered by a state could operate tax-free provided it com-plied with the ESOP’s three operational principles: (1)each citizen of the state must be included—the democra-tic principle, (2) individual ownership was limited to tenshares—the antimonopoly principle, and (3) 90 percentof the company’s earnings must be paid out to sharehold-ers on a current basis—the private property principle.

Congress, and perhaps state legislatures, couldmake RESOPs, GSOCs, and CSOPs a legal reality.Meanwhile, government should exercise its authorityto make local ownership a public policy priority. Theaphorism I recommend to policy makers is simple:where the cash flows, ownership grows. For example,roughly one of every six dollars spent in the UnitedStates originates with government, whether federal,state, or local. Procurement contracts and other tax-payer-funded commercial ties could be crafted to pro-mote broad-based local ownership. Imagine, forexample, if during Eisenhower’s Administration allthose contracts for the building of our interstate high-way system had examined local ownership as part ofthe bid screening process.

The same preference can apply in trade assistanceprograms such as the Export-Import Bank. Fannie Mae,for example, could purchase mortgages only of lenders

that sponsor substantial Employee Share OwnershipPlans, and it could limit its securities dealings to thosefirms in which a broad base of employees own shares.

As William Greider has proposed in One World,Ready or Not, the Federal Reserve system could buy the

debt paper of employee-ownedor community-owned truststhat finance new capital forma-tion. When these ventures payoff the debts on their newmachines and factories, the loanpaper would be retired, andordinary citizens would holdtitle to the new capital stock.The use of government pro-curement or investmentauthority to support socialends is not unprecedented. We have Buy America provi-sions, small business prefer-ences, and minority enterprisepreferences. On the environ-mental side we have recycledcontent preferences and, more

recently, environmentally preferable purchasing.Democratic capitalism can—and should—be a

key goal of government policy. With the benefit of hindsight, policy makers in both

the public and the private sector can sort through histo-ry’s dustbin of failed ownership solutions (collectiviza-tion, plutocratization, etc.) and construct a political andcommercial environment that evokes the best featuresof those that flourished while avoiding those that failed.Where successful, this ownership engineering will suc-ceed in restoring to capitalism a sense of place and scale.

This is not meant to suggest that other components ofa community’s social capital are unimportant; families,religious organizations, schools, and civic associations areall integral to a vibrant community. A poorly conceivedownership policy—or none at all—however, is destinedto undermine attempts to strengthen civil society. It is inour relationships with each other that the notion of com-munity either gains in strength or surely atrophies. It isthose associations and connections, both personal andcommercial, that give a community its texture and tone.

What I suggest is the broad outlines of an uncom-mon social contract, one like we have not seen to dateand one that focuses not only on quantities but also onqualities. My hope is that the notion of ownership as atool for fostering economic, social, and ecological“connectedness” might provide a useful focal pointfor injecting a harmonizing and humanizing elementinto the fractious, disconnected, and often disempow-ering notions that characterize so much of today’sdecision making, both in politics and in business. [ ! ]

It is in our relationships with each

other that the notion of communi-

ty either gains in strength or sure-

ly atrophies. It is those associa-

tions and connections, both per-

sonal and commercial, that give a

community its texture and tone.

R e s o u r c e sFor additional informa-tion on employee-owned companies,contact:

ESOP Association,1726 M Street NW,Suite 501, Washington,DC 20036; telephone202-293-2971; websitewww.the-esop-emplowner.org.

National Center forEmployee Ownership,1201 Martin LutherKing Jr. Way, 2nd Floor,Oakland, CA 94612;telephone 510-272-9461; websitewww.nceo.org.


Outraged voters, tight city budgets andintractable urban problems have all combined toencourage public and policymakers to explore

alternative forms of taxation, especially a tax that couldreplace the vilified property tax. One of the “new” taxesunder increasingly widespread examination is the landvalue tax—first proposed over 100 years ago by politi-cal economist Henry George. Can a land tax reducesprawl and strengthen urban economies? The evidenceis persuasive, but notconclusive, and manythings have changedsince 1879, whenGeorge published hisfamous book, Progressand Poverty.

Henry George livedin San Francisco duringone of California’s manyland booms in the 1860s.During that time heobserved that increasingpoverty usually accom-panied rapid economicgrowth, and a correla-tion existed between theincreased wealth oflandowners and thedecreased wages ofworkers. He believed itwas because land specu-lators withheld theirholdings from produc-tive activity in anticipa-tion of greater returns in subsequent years, forcing thecosts of production up and the level of wages down.

George’s solution to this dilemma was simple yetrevolutionary—abolish all taxes except for a tax on land.This single tax would eliminate land speculation and

thus make more land available for production. And byremoving all other taxes, higher wages and lower priceswould result, raising the standard of living for all.

Because land is immobile and fixed in supply, own-ers cannot manipulate or hide their assets to avoid a tax.In contrast, a property tax on buildings offers abundantopportunities for manipulation. Tax theory predicts thatpeople will alter their economic behaviors in response totaxation and history bears that out. Witness the unusual

placement of houses inold Charleston, wherecity lots were taxedaccording to the lengthof their road frontage.Not surprisingly, itdidn’t take long to real-ize you could build avery nice mansion on along, narrow lot andforego the roadfrontage. You can seethe interesting effects ofthat tax policy todaywhen you gaze at the lovely antebellumhomes that line thestreets of old Charleston.Nearly every home issituated so that the narrow end of the housefaces the street and thelong, porch-lined frontextends along the sideyard gardens of the

typical deep and narrow Charleston city lot.As James Howard Kunstler expressively describes

some of the impacts of our current property tax sys-tem in Geography of Nowhere,

Our system of property taxes punishes anyonewho puts up a decent building made of durablematerials. It rewards those who let existingbuildings go to hell. It favors speculators who siton vacant or underutilized land in the hearts ofour cities and towns. In doing so it creates an

R e s o u r c e sLand Value Taxation:

Can it and will it worktoday? Dick Netzer, ed.(1998, Lincoln Institute

of Land Policy).

OutLANDishTAXes?It may be time to stop thinking about taxes as a necessary evil and start thinking

about them as a tool for building healthy cities. By Pam Neary

Pam Neary is a consultant and speaker on urban affairs and anadjunct fellow to the Institute for Local Self-Reliance. She canbe contacted by email at <[email protected]>.


artificial scarcity of land on the free market,which drives up the price of land in general, andencourages ever more scattered development, i.e.,suburban sprawl.…

Is Georgist tax a remedy? The evidence is convincingthat it should be an element in any comprehensivestrategy. But a land tax in and of itself will not revi-talize our central cities nor end urban sprawl.

How a Land Value Tax Works

Current property taxes are based on the valueof property, reflecting both the land and struc-ture value, as determined by local property

assessors. Assessments are based on the sales of comparable property or, if commercial property, onrevenue streams. Decisions to reinvest or remodelcurrently result in higher assessment valuations andthus higher taxes. Conversely, there is no penalty to undermaintain your property. In fact, if your property value goes downbecause you refuse to paint,maintain or upgrade yourbuilding, you are “rewarded”with reduced property taxes.

A Georgist land tax wouldnot include the value of thestructure and so the tax wouldnot be applied to the individualefforts to improve the property.If entire neighborhoods wereimproved, over time land valueswould also rise, reflecting high-er community amenities, andthe tax would capture the col-lective efforts of the communityat improving their properties.In this way, reinvestment would not be discouragedand property owners would be encouraged to maxi-mize the use of their properties.

There is widespread disagreement as to what por-tion of property value is attributable to land. Currentassessments capture both the public value (neighbor-hood amenities, public infrastructure, quality ofschools, etc.) and the private value (quality and designof the building). Taxes are levied on the whole andthere is no incentive to try and attach a true value tothe land portion only. Because of this, the value ofland as a percentage of overall property values varieswidely between cities. In Minneapolis about 28 per-cent of value is land and 72 percent is structure. InQuebec municipalities, the land is worth about 47 per-cent, the structure 53 percent. In Pittsburgh, wherethey use a split rate tax on land and structures (seebelow), residential land is valued at only 20 percent of

the total property value. These wide differentials arenot due to real value differences, but to differentassessment practices.

Land values should be determined by the valuesomeone would be willing to pay for vacant land thatcould be used for similar purposes as those surround-ing properties. In its simplest form, this would meanthat cities could be mapped as gradients of land value,similar to a topographical map. The highest gradientswould be where there are high public amenities orinvestments, such as transportation systems, parksand well-designed neighborhoods. These gradientswould reflect the land values due to public invest-ments and communal investments. Lots situated nextto each other would have the same values regardlessof whether used for office building or parking lot,apartment or single family home.

Using any of the ratios from the examples givenabove, a land tax could significantly reduce the taxeson structures since the value of structures is rela-

tively high when compared tothe value of land. A land taxshould be high enough to total-ly replace the revenues of thetax it replaces. The beneficialaspects of the land tax originateboth from the characteristicsinherent in the tax—neutraland nondistorting—and fromthe elimination of the negativecharacteristics of the tax that isreplaced. Therefore if the landtax replaces the current prop-erty tax, one could expect tosee more reinvestment andhigher densities.

The Evidence

Only a handful of places in the United Statestax land much more heavily than buildings.None has instituted a tax only on land, as advo-

cated by Henry George. Pittsburgh, Pennsylvania, has used a 2-tiered tax

since 1913, when the land portion of property valuewas taxed at a twice the rate of buildings. Largelybecause of the vested political interests at the time—steel company executives with large land holdings—the differential remained at this relatively low spreaduntil 1979. By the 1970s steel had lost its clout andPittsburgh was reeling from the economic fallout. In1979, Pittsburgh decided to increase its land tax tonearly 5 times the rate on structures in order to inducereinvestment in the city. Today, Pittsburgh taxes landat $18.45 per $100 of the assessed valuation of land,➔

Because land is immobile and

fixed in supply, owners cannot

manipulate or hide their assets to

avoid a tax. In contrast, a property

tax on buildings offers abundant

opportunities for manipulation.

R e s o u r c e sLincoln Institute of Land Policy113 Brattle StreetCambridge, MA 02138-3400;telephone 617-661-3016or 800-LAND-USE (800-526-3873); websitewww.lincolninst.edu


and $3.20 per $100 of the assessed valuation of allbuildings. On the other hand, neither Pittsburgh’sschool district nor Allegheny County uses the split ratetax on property, so the overall tax rate on land remainsat about twice that of structures. Properties outside thecity are subject to the usual property tax system inwhich land and structures are taxed at the same rate.

Several researchers have tried to analyze the effectsof the Pittsburgh policies. The results are somewhatinconclusive. Construction in Pittsburgh did makedramatic gains in the years following the 1979 taxchange. During the decade of the ‘80s, the value ofPittsburgh’s building permits rose by over 70 percentrelative to the two decades that preceded the taxreform. Other Rust Belt cities showed either static ordeclining construction activity in the same period.

But it is hard to conclude that the land tax was a key cause of Pittsburgh’s revived economy. Severalmajor corporations decided to expand their headquarters in Pittsburgh and were offered publicassistance to construct a seriesof major office complexes.Virtually all of the increasedconstruction activity was incommercial and industrialbuildings. Pittsburgh’s residen-tial construction barely movedin the ‘80s.

Perhaps the differentialbetween suburban propertytaxes and Pittsburgh land taxesinduced at least some of theconstruction activity. Since landtaxes have not been enacted on a regionwide orstatewide basis, structures in Pittsburgh clearlyreceive beneficial treatment when compared to thesurrounding communities. Some researchers believethat it is this differential that most influencedPittsburgh’s construction since 1979. Given that moreexpensive structures benefit the most from a land tax,it is perhaps not so surprising that commercial con-struction activity increased most noticeably.

Many other cities in Pennsylvania have experi-mented with the split rate tax system, includingAliquippa, Carbondale, Clarion, Coatsville, Du Bois,Duquesne, Harrisburg, Hazleton, Lock Haven,McKeesport, New Castle, Oil City, Pittsburgh,Scranton, Titusville, Uniontown, and Washington. In1998, Pennsylvania enacted Act 108, which permitsthe state’s nearly 1,000 boroughs with a population of2.5 million to implement split-rate property taxation.

Studies of other Pennsylvania cities have beenmore supportive of the benefits of land value taxation:

• Stephen Cord compared Scranton and neigh-boring Wilkes-Barre, cities with nearly equal revenue

per capita, as well as similar ethnic characteristics. In1979, Scranton nearly doubled the tax rate on landand removed the property tax from new constructionwhile Wilkes-Barre kept the standard flat-rate prop-erty tax. In the two years following the tax change,average annual building permits increased 22 percentin Scranton and decreased 44 percent in Wilkes-Barrefrom the three previous years.

• In 1980, McKeesport increased the tax rate onland, decreased the tax rate on buildings, and offeredthree-year tax abatements for new construction.Cord found that construction in McKeesport rose in1980-81 relative to the preceding three years but fellin two neighboring cities that maintained the stan-dard property tax.

• In an analysis by the Center for the Study ofEconomics, Washington, which adopted a graded tax in1985 and expanded it throughout the next decade, compared favorably with the similar, neighboringUniontown, which also adopted a graded tax but

quickly rescinded the tax afterone year. Average annual con-struction per person over the1987-1995 period was 23 percenthigher in Washington. NewCastle experienced a 70 percentincrease in the number of build-ing permits issued within athree-year period following itschange to a graded tax.Neighboring towns retainingtheir flat rate experienced a 66and 90 percent decrease.

Challenges for the Land Tax

Despite these fledgling successes, there areobstacles to implementing an effective land valuetax. One is zoning, an urban planning tool intro-

duced after Henry George’s time. Zoning is impor-tant for thinking about property tax policy becausezoning plays a major role in determining the value ofland and buildings. Zoning is also subject to politicalmanipulation, which means that speculative opportu-nities are difficult to eradicate from this process.

George advocated a universally applied land taxbased on the value of land in its best economic use—as determined only by market forces. But marketforces do not necessarily create the best communities.In Henry George’s era, cities were organized arounda central core with most of the public investment con-centrated in a relatively small area. Land values weredetermined by locational benefits with land near thecore being more valuable. But the value of the corehas changed as the economy has changed and as pub-

With a changing economy and

unsolved public policy challenges,

the time seems ripe for redefining

our tax and revenue structures.

R e c o u r c e sLand Value Taxation

CampaignThis UK-based organi-

zation advocates forthe adoption of land

value taxation.www.landvaluetax.org


InternationalExperience WithLand ValueTaxes

• In Denmark, as early as 1844, the nationalproperty tax was assessed on the value of the landbut not the improvements on the land. The site-value property tax was abolished in 1903 andreplaced with a flat rate on the total value of landand improvements. However, this tax change hurtthe many small farmers in Denmark who hadinvested heavily in improvements but had limitedholdings of land. These farmers joined together tolobby for a return to the site-value tax. Today, allcities in Denmark use a graded property tax. Theeffects of a graded tax on development have notbeen studied extensively in Denmark despite thewidespread use of the graded tax because the pro-portion of overall revenues raised by the propertytax has decreased with time.

• Prior to 1976, all of the states in Australiataxed property based on the value of the unim-proved land. Today, all but the state of Tasmaniacontinue with the land tax, although the revenueraised by the states is relatively small. Many localgovernments in Australia also use variants of thegraded tax. Sydney, for example, began levying atax on the unimproved value of land in 1916.Valuation of land is based on fair market value,which implies that it is based on the property’svalue in the highest potential use and not currentuse. This is in contrast to methods employed in theUnited States, where typically site value is assessedas the “land value proportion of the current marketvalue of an improved property.”

• From 1903 to 1913, Canada introduced site-value taxation in the western provinces in aneffort to encourage the breakup of large areas ofland held by absentee owners, to prevent landspeculation, and to spur construction. Assessmentsreflected the highest and best use of the land inquestion. Provinces have since turned over theproperty tax to the municipalities. Today, cities inthe four western provinces either exemptimprovements from the property tax base, orrecord the improvements on the assessment roll ata percentage of their full value. [ ! ]

lic investments have become less centralized.Freeways now roam through rural areas and

skim by the edges of cities and towns. Without therestraint of zoning policies, there are many enhancedcommercial opportunities and higher correspondingland values along freeways. But do we really wantthe seemingly unending commercial strips thatwould then result? Many cities are trying to battlewasteful urban sprawl by creating new town centersand neighborhood commercial zones, requiringbusinesses to locate where pedestrians and transitcan easily access their services. The elimination ofzoning would undermine these fledgling efforts andcreate less than desirable communities.

But zoning also creates the opportunity for specula-tive activity. A major reason for implementing a landvalue tax is to eliminate land speculation. It’s a tensionthat land value tax proponents must attempt to resolve.

For example, at the fringes of most Americancities, you will find farmers fighting to retain theiragricultural zoning…until it’s time to retire. At thatpoint, many farmers determine that their land has

“lost its agricultural productivity” and they petitionfor a rezoning to residential or commercial uses,which will bring a higher selling price for the retiree.This process is a form of speculation that will be dif-ficult to deter, even with a land tax, unless our localland use practices are also reformed.

Communities may choose to apply only parts ofHenry George’s theory, but that leaves one wonderingwhether the difficulty of enacting the change is worththe more limited benefits it would bring.

With a changing economy and unsolved publicpolicy challenges, the time seems ripe for redefiningour tax and revenue structures. The land tax, a con-cept new to some but with a dignified history, is wor-thy of revisiting. It clearly contributes to better equitythan does the current property tax system. A land taxcaptures the value of public investments, but leaves thebenefits of private activity in private hands. And in anever more mobile economy, a fair but immobile taxwith which to sustain our cities and towns will be animportant factor in improving and maintaining theviability of our communities into the 21st century. [ ! ]

R e c o u r c e sCommon Ground-U.S.A.P.O. Box 57, Evanston,IL 60204; telephone847-475-0391; website www.progress.org/cg


R e c o u r c e sCommittee on

DemocraticCommunications

558 Capp St.San Francisco, CA

94110; telephone 415-522-9814;

websitewww.nlgcdc.org

Daniel Kraker is a researcher and writer with The New RulesProject of the Institute for Local Self-Reliance. He maintainsthe New Rules website <http://www.newrules.org>.

Fighting Corporate Power with Low PowerFCC could pave the way to a more democratic and locally

controlled radio dial. By Daniel Kraker

In January, FCC Chairman William Kennardpushed through a tentative plan to legalize low-power FM radio stations. Such a move—seemingly

a huge victory for microradio advocates, who havespent the past decade fighting the FCC’s 20-yearban—could have disastrous consequences. As itstands, Kennard’s proposal would turn over most ofthe remaining spectrum to for-profit enterprises.Noncommercial, community-ori-ented and locally produced pro-gramming—what microradiobroadcasters have fought for—would be virtually eliminated.

The standardized, homoge-neous content we hear on thedial today is not the result of thefree market, nor even the nat-ural evolution of the radio andmedia industries. It is the directbyproduct of rules we have cre-ated over the past sevendecades—such as the microra-dio ban—that have movedradio stations further and fur-ther from the communities theyserve and slowly transformed the radio spectrumfrom a diverse, noncommercial world of ideas to astale, corporate model dictated by the whims ofnational advertisers.

In the early 20th century, radio flourished as ademocratic, noncommercial medium. Tens of thou-sands of entrepreneurs, community groups and every-day citizens took to the airwaves. By the 1920s, therewere twice as many noncommercial stations as for-profit broadcasters. To cope with radio’s exploding

popularity, Congress passed the Radio Act of 1927,which created the Federal Radio Commission (FRC).

The Act viewed the radio spectrum as a publicresource and directed the FRC to regulate airwaves“in the public interest, convenience and necessity.” Butgovernment immediately began to treat the airwavesmore as private property than a public resource.Nonprofit stations were awarded fewer hours of air

time and radio license termswere shortened to only threemonths, straining the alreadylimited finances nonprofit sta-tions had to apply for licenses. By 1934, when the FederalCommunications Act replacedthe FRC with the FederalCommunications Commission(FCC), noncommercial pro-gramming comprised only twopercent of air time.Although leaning toward aradio spectrum dominated byprofit-oriented firms, the FCCdid enact several measures thatrequired such firms to serve the

“public interest.” The Fairness Doctrine, adopted in1949, required radio stations to provide opposingviews on issues of interest to the communities theyserved. The FCC also required eight percent of AMair time and six percent of FM air time be set aside forpublic affairs programming. Both requirements wereaxed during the Reagan years. The end of theFairness Doctrine gave birth to the now-ubiquitouspartisan talk show.

In 1948, in an effort to encourage more diversityand more community-oriented programming, theFCC began to issue Class D low-power licenses tocommunity groups, colleges and churches. Thirtyyears later, under pressure from National PublicRadio (NPR), which was aggressively seeking to con-

In the early 20th century, radio

flourished as a democratic,

noncommercial medium. Tens of

thousands of entrepreneurs,

community groups and everyday

citizens took to the airwaves.


R e c o u r c e sThe MicroradioEmpowermentCoalition; telephone212-591-2446; [email protected]; websitewww.nlgcdc.org/mec/index.html

Radio 4 All,www.radio4all.org, An information clearinghouse for themicroradio movement,with links to manyother sites.2355 Fairview Av.#156Roseville, MN 55113;telephone 612-874-6521;website www.radiodiversity.com

ply because it might be inconvenient for those whoalready have these opportunities,” says FCCChairman William Kennard. But while the FCC’sproposal is certainly a step forward, it is just as cer-tainly not a cure-all solution. Among its shortfalls:

The FCC discriminates in favor of for-profit sta-tions. The FCC proposes to create three separateclasses of microradio stations: 100-1000 watts and 10-100 watts, which would consist of commercial sta-tions, and 1-10 watt stations, which would be reservedfor noncommercial stations. The 10-100 watt stationswould be designated “secondary” stations, meaningthey could be bumped by larger, “primary” stationsthat wanted to increase power.

This rule will relegate noncommercial stations toa tiny transmitting radius and ensure that 1000-wattcommercial stations will dominate all communities.

Adding insult to injury, the FCC would restrictnoncommercial microstations to the noncommercialpart of the FM dial (88-92), in effect giving for-profitmicrostations 80 percent more spectrum space.

The FCC rules undermine the opportunity forcommunity-oriented programming and ownership.The FCC’s rules contain no local programmingrequirement. One company would be allowed to ownup to five low-power stations and would be allowed toprogram these stations by satellite from a remote cor-porate headquarters, with no local involvement—precisely what is occurring in today’s commerciallydominated radio environment.

Several organizations have been leading the fightto ensure that microradio truly serves communities.The Committee on Democratic Communications(CDC) of the National Lawyers Guild has formed theMicroradio Empowerment Coalition (MEC) to force-fully express their view that there is no point in legal-izing microradio if it will only create a group—asdescribed by CDC attorney Peter Franck—of “want-to-be Chancellor Media and NBC Radios.”

Americans for Radio Diversity (ARD), anothergroup advocating for the legalization of microradio, dif-fers from the CDC in that they believe some low powerFM (LPFM) stations should be for-profit. According toARD, small “mom and pop” stations could benefit fromadvertising, and the presence of community-centeredsmall businesses would strengthen local communities.

Both organizations support limiting the sizes oflow-power FM stations to 100 MW (except in veryrural areas, where the population is spread thinly andthe competition for spectrum space is less intense).Both support local ownership. CDC proposes that atleast 75 percent of any one station’s programmingmust be locally produced. ARD also proposes that amicroradio station license holder live within 25 milesof the transmitter (50 miles in rural areas).

solidate public affairs programming, the FCC bannedall stations under 100 watts.

Little was heard on the low-power FM dial until alone activist launched a tiny station out of the JohnHay public housing project in Springfield, Illinois, in1986. The FCC shut down M’banna Kantanko’s one-watt operation but so-called “pirate” radio stationsbegan to appear all over the country. Since 1997 theFCC has shut down 430 such stations, ranging inpower from 1 watt to 800 watts.

The passage of the Telecommunications Act of1996—one of the most heavily lobbied and leastdebated bills in history—further removed radio sta-tions from their listeners. Prior to the Act, no singlecompany could own more than 40 stations nation-wide, and no more than two AM and two FM stationswithin a single market. The Act abolished the nation-al cap, and allowed one company to own as many aseight stations in a single market.

Since 1996, more than 6,200 radio stations, worth$45 billion—one-third of the country’s total—havebeen bought, sold or merged. Small conglomerates havebeen gobbled up by mid-sized ones, which in turn havebeen devoured by the biggest players. If, as many ana-lysts expect, Chancellor Media soon merges with ClearChannel Communications, the combined entity wouldown 915 stations nationwide—23 times as many sta-tions as it could legally have owned only three years ago.

Radio conglomerates can now compete withnewspapers and television stations for big-time adver-tising dollars. They can also offer advertisers targetedaudiences—country listeners, teen top 40 listeners,etc.—for specific products. Simultaneously manylarge companies have slashed costs by pumping pro-gramming from corporate headquarters to their localoutlets, where sophisticated technology allows techni-cians to splice in some local news and weather to givethe appearance of local production.

The results are disturbing. Any remotely contro-versial content is stymied so as not to alienate poten-tial advertisers. Radio station owners are more andmore remote from the communities and local listenersthey serve. Locally focused, community-based pro-gramming is disappearing from the airwaves.

Communities, angry at this state of affairs, are peti-tioning to start their own low-power radio stations. Inthe last year, the FCC received 13,000 inquiries aboutstarting such a station. This flood of interest, alongwith the continual stream of legal challenges broughtby microradio stations operators who have been shutdown, prompted an about-face by the FCC on thisissue. In January the FCC issued proposed rules formicroradio. The comment period ends in August.

“We cannot deny opportunities to those who wantto use the airwaves to speak to their communities sim-

continued on page 21…


But soon none of them will be grown by independent, family farmers.

By Daniel Kraker and David Morris

The World Trade Organization has ruled thatEurope cannot give preferential treatment tobananas imported from its former Caribbean

colonies. What if instead Europe were to give prefer-ence to all bananas produced by independent farmerswho pay living wages? The WTO wouldn’t allow thateither. Welcome to the Brave New World of free trade.

In 1993, the European Union (EU) guaranteed aportion of its internal banana market to formercolonies in the Caribbean and Africa. In late 1995 theU.S. asked the newly created World TradeOrganization (WTO) to declare the EU’s actions a

violation of the GeneralAgreement on Tariffs

and Trade (GATT).In 1997 the WTOruled in favor of theU.S. and in March

1999, with theWTO’s approval,

the U.S. beganimposing 100

percent tar-iffs on

$ 2 0 0m i l -

lion

of European exports, from cashmere sweaters topecerino cheese, threatening the economic viability ofdozens of enterprises. A month later the EU agreed toeliminate its banana preference program by 2000.

The banana story generated little debate. Itdeserved better. It marks one more step in the creationof a new body of international law that will determinethe authority of nations and states and the structure ofcommerce in the next millennium.

Here’s the Background

The glowing, plump bananas in most Americansupermarkets sport the familiar decals of Chiquita,Dole or Del Monte (all U.S. companies) and comefrom Central America. In Europe, consumers choosebetween “dollar” bananas, as the fruit from CentralAmerican plantations is called, and the smaller,sweeter fruit of Europe’s former island colonies in theeastern Caribbean.

It is doubtful if Caribbean bananas could find asignificant market without a policy like that of the EUbecause their wholesale price is twice as high as thosegrown in Central America. Some of the increased costis due to natural factors (e.g. steep terrain), the limit-ed size of the islands, relatively poor soil quality andclimatic hazards (hurricanes and floods).

But the majority of the price difference resultsfrom the vastly different structures of the Caribbeanand Central American banana industries. The formeris characterized by many small, independent farmsand high-wage workers. The latter is characterizedby a few huge, foreign-owned plantations and low-wage workers.

No,We Have Plenty of Bananas


• The average size of a banana farm in theWindward Islands is less than four acres. The planta-tions that dot Latin American banana-growingregions range from 2,500 acres to more than 12,000.

• Caribbean farms are family-owned and inde-pendent. The Windward Islands host 24,000 indepen-dent farmers. The small scale of the farms and thewidespread ownership have had an equalizing effecton the income levels of the Windward Island popula-tions. In contrast, Central American plantations areeither owned directly by their parent multinational orcontracted to them. Chiquita employs about 38,000workers in its Central American plantations, and theinequality of income between owners and workers isstark. Carl Lindner, CEO of Chiquita, is worth wellover a billion dollars: people picking the bananas hesells make $12 on a good day.

• Caribbean banana workers earn a living wage.Their counterparts on Central American plantationsearn one-half to one-sixth as much.

On first glance, the U.S. intervention in thebanana issue seems odd. After all, the EU’s bananapolicy appears to be a perfect example of “trade notaid.” Rather than handouts to tiny nations, Europehas designed an effective policy that encourages hard-working, well-paying independent enterprises.

The Caribbean is overdependent on bananas anddiversification is undoubtedly a worthy goal. Butbananas are an excellent crop for these islands. Theirhilly terrain makes it difficult to grow other crops andbananas are resilient in the face of the numerous hur-ricanes that afflict the eastern Caribbean. Moreover,unlike other fruits, bananas are produced year round.

The elimination of the EU policy could have adevastating effect on the eastern Caribbean. In theWindward Islands some 70,000 persons are employedby the banana industry—roughly one-third of theentire labor force. In Dominica, the smallest bananaproducer in the Windwards, bananas account forbetween 60 percent and 80 percent of foreignexchange. Thirty-six percent of the country’s entirework force is employed in the industry.

“We are told that the world has changed, thatbecause of the WTO there must be a free market inbananas,” says Windward Islands banana farmer

Winston Graham. “But the marketshould not be so free that it candestroy people’s lives.” While the end of the EU policy willdramatically undermineCaribbean economies, its continu-ance only marginally affects theprofits of planetary corporations.As a result of the EU policy, thefour Windward Island nations

account for just 3 percent of the world market, com-pared to the more than 60 percent share owned byChiquita, Dole and Del Monte.

The U.S. grows no bananas. Few if any U.S. jobsare lost due to the EU policy. Some jaundicedobservers believe that the U.S. precipitated a trade warover bananas as a favor to Carl Lindner, CEO ofChiquita and a generous contributor to political cam-paigns. But others believe the U.S. intervention isspurred less by political expediency than byWashington’s desire to build a body of law that willfundamentally change the way nations and corpora-tions do business in the 21st century. With the creationof the WTO in 1995, the 50-year-old GATT was fun-damentally changed and strengthened, in effect creat-ing a global constitution. Decisions made now onissues such as banana trade will be used as precedentsin the future implementation of this framework.

As Renrick Rose, head of the Windward IslandsFarmers Association (WINFA), observes, “a numberof the WTO rules are still untested. The U.S., fromthe outset, wants to set the agenda and impose its owndirection and interpretation of WTO regulations. IfCaribbean banana producers have to suffer in theprocess, well too bad for us.”

One of the most controversial sections of theGATT/WTO is Article III, which prohibits countriesfrom discriminating against goods based on “processand production methods.” This provision has so farbeen interpreted as denying countries the right to banthe import of products produced in an environmen-tally harmful manner. The WTO has already struckdown an American import ban on shrimp caughtwith fishing nets not equipped with devices allowingsea turtles to escape, and a European ban on theimport of hormone-treated beef.

In 1993, when the EU agreed to enact its preferencepolicy for bananas from former colonies, it agreed tophase it out within ten years. Many Europeans haveproposed that it be substituted with a “fair trade” policyin which the EU would reserve a share of its market forbananas produced in an environmentally and sociallysustainable manner. Such a policy would allow anybananas to be sold in Europe so long as their growthnurtured rather than threatened the social, environ-mental and economic fabric of their host country.

If the WTO runs true to form, it will outlaw thatpolicy too. [ ! ]

R e c o u r c e sWindward IslandsFarmers’ AssociationRenwick Rose;[email protected]

Caribbean BananaExporters Association;website www.cbea.org

R e c o u r c e sBanana Link(a nonprofit coopera-tive campaigning onthe banana trade andworking towards fairtrade in bananas)Alistair Smith;[email protected]

Daniel Kraker is a researcher and writer with The New RulesProject of the Institute for Local Self-Reliance (ILSR). He main-tains the New Rules website <http://www.newrules.org>.David Morris is vice president of ILSR and author of Seeing TheLight: Changing The Power Rules, forthcoming from ILSR.


StatesTake Bull by the HornsNebraska, Iowa and South Dakota are leading the charge against a meat packing

monopoly that has brought many independent farmers to their knees. By Stacy Mitchell

While the federal government expresses itssympathy for the plight of family farmers—but fails to act to break up concentration in

meat packing—independent producers across theplains are pushing state lawmakers to take mattersinto their own hands.

Meat packers claim that a mismatch of supply anddemand is to blame for the woes currently facing hogand cattle farmers. But farmers insist the problemresults from concentrated power. Four companies—ConAgra, IBP, Cargill, and Farmland-National—con-trol 87 percent of the cattle slaughter, upfrom 36 percent in 1980, along with 54percent of the hog slaughter and 70percent of the sheep slaughter.

The farmers make a persuasivecase. This winter prices paid toindependent hog producers were attheir lowest since the Depression,while consumer pork prices climbed tothe second highest level ever. According to astudy released by Purdue University, meatpackers and retailers made at least $4 billionmore on pork this year than last, while thou-sands of hog farmers went bankrupt.

For beef, producers’ share of the consumer price hasfallen more than one-fifth over the last decade, whilepacking companies’ share rose 20 percent. IBP, thelargest beef packer (with more than one-third of themarket), had its second best year ever in 1998, earningnearly double the profits of 1997 despite declining sales.

Producers say that with so few companies control-ling the market, they can no longer get a fair price fortheir livestock. By maintaining a reserve of “captive sup-plies”—livestock owned or controlled by packersthrough forward contracts and other marketing arrange-ments—packers are able to control the number of hogsor cattle on the market and thereby manipulate the price.

Farmers also contend that a select few large feed-lots—many of which have financial ties to the pack-ers—are receiving preferential contract terms andprice premiums unavailable to smaller producers andfeeders. Packers are not required to disclose prices orcontract terms. They voluntarily report only about 10percent of sales, but producers believe only low pricesare being reported, which keeps the market value oflivestock artificially depressed.

In the early part of this century, when concentra-tion levels had reached significant levels, Congress

enacted the 1921 Packers and StockyardsAct to curb packing concentration andmaintain competition. The WesternOrganization of Resource Councils

(WORC), which represents thousandsof small producers, petitioned the U.S.

Department of Agriculture (USDA) in1996 to use its broad authority under the

Act to issue new rules that would limit verticalintegration and require packers to disclose

prices, but three years later USDA has yet to act(see “Place Rules,” Groundwork, Summer 1998).

Congress has also failed to act. This fall a mea-sure requiring price reporting was added to the

Agriculture Appropriations Bill, but under heavypressure from the packing lobby it was gutted duringlast-minute compromise negotiations between theadministration and Congress.

Tired of federal inaction, several states are takingmatters into their own hands. In March, to the cheersof hundreds of farmers crowding the balconies andhallways of the state capitol, South Dakota legislatorsoverwhelmingly endorsed two bills aimed at givingsmall producers a fair shake in the marketplace.

SB95 mandates that packers report prices daily onall livestock purchased directly or by contract. It barsprice discrimination for livestock of similar qualityand enables producers who receive discriminatorilylow prices to sue for treble damages. SB164 imple-ments portions of the Packers and Stockyards Act ona state level, authorizing the attorney general to inves-tigate and prosecute attempts to create a monopoly,manipulate prices, or otherwise restrain commerce in

R e s o u r c e sWestern Organization

of Resource Councils (WORC)

2401 Montana Ave. #301Billings, MT 59101-2336;telephone: 406-252-9672;website: www.worc.org

Center for Rural AffairsP.O. Box 406

Walthill, NE 68067-0406;telephone: 402-846-5428;website: www.cfra.org

National FarmersUnion

11900 E. Cornell Ave.Aurora, CO 80014-5500;telephone: 303-337-5500;

website: www.nfu.org

Stacy Mitchell is a researcher with The New Rules Project of the Institute for Local Self-Reliance. She is the author of The Home Town Advantage: Keeping Retail LocallyOwned, forthcoming from ILSR.


the livestock industry. Both laws take effect July 1. The new rules are an important first step for inde-

pendent producers, but proponents believe that themost significant aspect of the legislation is the messageit sends to Washington. This message is codified in theopening passage of SB164, which declares that the fed-eral government has been remiss in its duty to enforcethe Packers and Stockyards Act, leaving the state withno option but to act to protect its livestock producers.

Governor Bill Janklow argued that these “editor-ial comments” had no place in law and vetoed thebill, but state legislators overrodethe veto by 59-5 in the Houseand 33-1 in the Senate.

Although SB164 forbidsdiscrimination against anylocality, the industry hasimplied that South Dakota’sproducers will suffer as pack-ers bypass the state in favor oflivestock produced elsewhere.But this “soon to be socialiststate,” as one IBP representative put it, may not bealone for long. The ire of livestock farmers has lit upstate capitols across the plains.

In Iowa, mandatory price reporting legislationwas enacted in late April, but will not take effect untilJuly 2000.

Nebraska’s sweeping livestock legislation advanced43-0 out of committee in late March, and, as this jour-nal went to press, stands a strong chance of clearing thefull legislature in May. Like South Dakota’s SB164,Nebraska’s bill contains a searing rebuke of federal pol-icy, stating that “in the absence of any meaningful fed-

R e s o u r c e sThe South Dakota,Nebraska and Iowameat packing legislationcan be found atwww.newrules.org/cgi-bin/access/rules/biz/state/meatpacking.html

eral response” to packer concentration and verticalintegration, state action is needed to “restore the eco-nomic stability of Nebraska’s rural communities.”

The bill has provisions similar to those in SouthDakota’s legislation, requiring daily price reportingand barring discriminatory pricing. Nebraska’s pro-posal, however, goes further. It would prevent verticalintegration by prohibiting packers from owning,keeping, or feeding livestock, and restrict contractprovisions that allow packers to determine whendeliveries will be made.

Similar legislation has been intro-duced in Missouri and

Minnesota. Kansas passed aresolution calling on the fed-eral government to beef upantitrust enforcement in thepacking industry.Attorneys general from 21

states wrote to members ofCongress in March, urging them

to require packers to report prices andcontract terms, and give “whistle-blower” protectionto producers who accuse packers of wrongdoing.

Washington may be getting the message.Senator Tom Daschle and Representative JohnThune, both from South Dakota, have introducedmandatory price reporting bills (S19 and HR693)that are gathering supporters by the day. “We’vegot to save the independent producer who doesn’twant to be an employee of Cargill,” said SenatorBob Kerrey of Nebraska, a co-sponsor of S19. TheClinton Administration has announced its sup-port for reforms. [ ! ]

Fighting Corporate Power continued from page 17…On the other side of the spectrum, so to speak,

sits the National Association of Broadcasters(NAB), the powerful lobbying arm of the largestbroadcasters, which is opposed to microradio. It hasrecruited Rep. Billy Tauzin (R) of Louisiana, theChairman of the House telecommunications sub-committee, as its congressional flag bearer. A weekafter the proposed rulemaking Tauzin wroteChairman Kennard that the FCC should “take nofurther actions on this agenda.”

One key question regarding microradio iswhether their signals will interfere with existingradio stations. Microradio advocates say no.

Currently the FCC requires that local stationsnot only cannot transmit on the same channel asanother station but must not transmit on the first,second, and third adjacent channels. Yet because of

microradio stations’ limited power and with the useof technical devices to reduce interference, the FCChas provisionally stated that microradio would pose“minimal risk of interference to existing services,”even if the second and third channel protections areremoved. If the current levels of protection aremaintained, however, there would be so little roomfor low-power stations that the rulemaking wouldbe made essentially meaningless.

If microradio stations are to act as a counterbal-ance to the national programming of commercialconglomerates and NPR and reflect the diversity andculture of the neighborhoods they serve, then micro-radio must be reserved for local, community-basedradio service that is not based on a profit motive.

The FCC will make a final ruling based on thepublic comments and its own internal study. [ ! ]

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