0001
01 DIVISION OF ADMINISTRATIVE HEARINGS
01 DEPARTMENT OF ADMINISTRATION, STATE OF FLORIDA
02
02 SUGAR CANE GROWERS COOPERATIVE OF )
03 FLORIDA, a Florida agricultural )
03 cooperative marketing association; ROTH )
04 FARMS, INC.; AND WEDGWORTH FARMS, INC., )
04 )
05 and )
05 )
06 FLORIDA SUGAR CANE LEAGUE, INC.; UNITED )
06 STATES SUGAR CORPORATION; AND NEW HOPE )
07 SOUTH, INC., )
07 )
08 and )
08 )
09 FLORIDA FRUIT AND VEGETABLE ASSOCIATION,)
09 LEWIS POPE FARMS, W.E. SCHLECHTER & )
10 SONS, INC., and HUNDLEY FARMS, INC., )
10 Petitioners, )
11 )
11 vs. )CASE NOS. 92-3038
12 ) 92-3039
12 SOUTH FLORIDA WATER MANAGEMENT DISTRICT ) 92-3040
13 an Agency of the State of Florida, )
13 )
14 Respondent, )
14 )
15 and )
15 )
16 THE UNITED STATES OF AMERICA, )
16 MICCOSUKEE TRIBE OF INDIANS, the )
17 FLORIDA DEPARTMENT OF ENVIRONMENTAL )
17 REGULATION, the FLORIDA WILDLIFE )
18 FEDERATION, et al )
18 )
19 Respondent-Intervenors )
19
20
20
21 **************************************
21
22 DEPOSITION OF F. LARRY LEISTRITZ
22
23 **************************************
23
24 VOLUME I
0002
01 On the 8th day of February, A.D., 1993, between
02 the hours of 9:10 A.M. and 12:30 P.M. and 1:50 P.M. and
03 5:30 P.M. in the offices of the United States Attorney's
04 Office, 816 Congress Avenue, Suite 650, Austin, Texas,
05 before me, DOTTIE NORMAN, a Certified Shorthand Reporter
06 in and for the State of Texas, appeared F. LARRY
07 LEISTRITZ, who, being by me first duly sworn, gave his
08 oral deposition at the instance of the United States of
09 America in said cause.
10 This deposition is being taken in accordance
11 with the Federal Rules of Civil Procedure.
12 ************
0003
01 APPEARANCES
01
02 For the Sugar Cane Growers Cooperative of Florida,
02 a Florida agricultural cooperative marketing
03 association; Roth Farms, Inc.,; and Wedgworth Farms, Inc.:
03
04 HOPPING, BOYD, GREEN & SAMS
04 By: DONNA STINSON
05 Post Office Box 6526
05 Tallahassee, FL 32314
06
06 For The United States of America:
07 By: ROBERT ROSENBERG
07 Assistant United States Attorney
08 Southern District of Florida
08 155 South Miami Avenue
09 Miami, Florida 33130
09
10 -and-
10
11 KEITH E. SAXE
11 U.S. Department of Justice
12 Environmental and Natural Resources
12 Division
13 P.O. Box 663
13 Washington, D.C. 20044-0663
14
14
15 Also Present: Lonnie Jones
15 Ron Luke (until lunch recess only)
16
16
17
17
18 INDEX
18
19 Page
19 Direct Examination by Mr. Rosenberg 6
20
20
21
21
0004
01 EXHIBITS
01 Page
02 Deposition Exhibit No. 1 8
02 Personal Resume of F. Larry Leistritz
03
03 Deposition Exhibit No. 2 21
04 Letter dated 2-3-93
04 to Rosenberg from Leistritz
05
05 Deposition Exhibit No. 3 41
06 Memorandum dated 8-19-92
06 to Leistritz from Luke
07
07 Deposition Exhibit No. 4 51
08 Letter dated 10-13-92
08 to Luke from Leistritz
09 with Enclosures
09
10 Deposition Exhibit No. 5 53
10 Facing Economic Adversity: Experiences
11 of Displaced Farm Families in North Dakota
11
12 Deposition Exhibit No. 6 68
12 The Consequences of the Farm Crisis
13 for Rural Communities
13
14 Deposition Exhibit No. 7 82
14 Economic Impact of Leafy Spurge
15
15 Deposition Exhibit No. 8 106
16 Economic Impacts of New and Expanding
16 Firms in the Upper Great Plains
17
17 Deposition Exhibit No. 9 111
18 Socioeconomic Impact of the Conservation
18 Reserve Program in North Dakota
19
19 Deposition Exhibit No. 10 114
20 Landowner Characteristics and the Economic
20 Impact of the Conservation Reserve Program
21 in North Dakota
21
22 Deposition Exhibit No. 11 140
22 Rural Environments
23
23 Deposition Exhibit No. 12 152
24 The Economic Contribution of the Sugarbeet
24 Industry of Eastern North Dakota and Minnesota
25
25
0005
01 Deposition Exhibit No. 13 157
01 Contribution of Public Land Grazing
02 to the North Dakota Economy
02
03 Deposition Exhibit No. 14 159
03 Developing Economic-Demographic Assessment
04 Models for Substate Areas
04
05 Deposition Exhibit No. 15 197
05 Task Description
06
06 Deposition Exhibit No. 16 207
07 Memorandum dated 7-1-92
07 to Rhoads from Johns
08
08 Deposition Exhibit No. 17 209
09 Handwritten Notes
09
10 Deposition Exhibit No. 18 211
10 Handwritten Notes
11
11 Deposition Exhibit No. 19 212
12 Handwritten Notes
12
13 Deposition Exhibit No. 20 212
13 EAA Poverty Profile
14
14 Deposition Exhibit No. 21 214
15 Sugarcane Outline Labor Market
15
16 Deposition Exhibit No. 22 215
16 EAA Farm Worker Profile
17
17 Deposition Exhibit No. 23 216
18 Handwritten Notes titled
18 "Everglades Report"
0006
01 F. LARRY LEISTRITZ,
02 the witness hereinbefore named, being first duly cautioned
03 and sworn to testify the truth, the whole truth and
04 nothing but the truth, testified as follows:
05 DIRECT EXAMINATION
06 QUESTIONS BY MR. ROSENBERG:
07 Q. Professor Leistritz, I'm Robert Rosenberg. I'm
08 an Assistant United States Attorney. I will be taking
09 your deposition today and tomorrow also.
10 Let me talk to you about a couple of
11 matters first. If you can't answer a question because I
12 haven't formed it properly or spoken too quickly, it
13 doesn't make sense to you, please tell me. I'll try to
14 repeat or reconstruct the question as needed.
15 A. Yes.
16 Q. If you don't know something in response to a
17 question, it's permissible to say, "I don't know. I don't
18 know that."
19 We're here not to trick you, but we are
20 here to seek information.
21 A. Yes.
22 Q. And I'll try to be as direct as possible in my
23 questions. I'm not an economist and so I would be asking
24 you to define terms. Sometimes expert witnesses throw
25 jargon around.
0007
01 A. Yes.
02 Q. Somebody is going to read this deposition, and
03 that person may not be an economist. So I may ask you, if
04 you could, to define some terms. That would be helpful I
05 think.
06 A. Yes.
07 (At this time there was a brief discussion
08 off the record.)
09 QUESTIONS BY MR. ROSENBERG:
10 Q. If you want a break for one reason or another,
11 just tell me.
12 A. Okay.
13 Q. We'll try to be fairly liberal with breaks
14 here. Just say so. I will ask, however, that when you
15 answer questions you answer verbally.
16 A. Yes.
17 Q. Nods and uh-huhs and things like that can't be
18 picked up. If you are referring to a document -- and I'll
19 try to do the same thing -- refer to it by the exhibit
20 number as opposed to this or that, things like that.
21 Sir, do you have your curriculum vitae with
22 you? Did you bring a curriculum vitae?
23 A. I did not bring -- I do not have an extra copy.
24 Q. Let me go through that with you. Allow me to do
25 this if I can. Let me hand you this.
0008
01 A. Yes.
02 Q. And I think we may want to mark that as an
03 exhibit. That is a little thicker than the document your
04 counsel gave you.
05 A. Right.
06 Q. That appears to me to be a curriculum vitae
07 together with a collection of publications, list of
08 publications.
09 A. Yes.
10 Q. Would you look that over for me and tell me if
11 that is complete.
12 A. Uh-huh.
13 (The instrument referred to was here marked
14 as Deposition Exhibit No. 1 for identification.)
15 THE WITNESS: Yes, sir. The document
16 labeled Exhibit 1 is complete as of August 1992. There
17 might be a few more publications that have occurred since
18 then.
19 QUESTIONS BY MR. ROSENBERG:
20 Q. Okay. My understanding is that you have at
21 least 250 publications.
22 A. Something on that order.
23 Q. Am I right?
24 A. Yes.
25 Q. When we talk about publications, just for my
0009
01 reference, does that include studies you have undertaken
02 or research projects you have undertaken?
03 A. Yes.
04 Q. And impact statements you have done?
05 A. Yes, uh-huh.
06 Q. So the 250 documents would include every
07 document you have generated whether it's a book, an
08 article, impact statement or study report?
09 A. The attempt was to list all of those here, that
10 is research reports, books, journal articles and the
11 like.
12 Q. Okay. Would you state for me your educational
13 background starting with your high school, please?
14 A. Okay. Yes. I graduated from Rushville Public
15 High School in Nebraska in 1963. I received my Bachelor's
16 degree in Agricultural Economics at the University of
17 Nebraska-Lincoln in 1967; Master's degree in Agricultural
18 Economics, University of Nebraska, 1968; and completed my
19 Ph.D. at the University of Nebraska in 1970.
20 Q. At any time did you undertake any other
21 training, whether it's reflected in your academic
22 credentials or not, that bears in any way on the work you
23 have done in the present case?
24 A. In terms of formal training, classes?
25 Q. Or seminars or conferences or other matters, any
0010
01 training sessions.
02 A. Okay. We have, of course, participated in a
03 great variety of scientific conferences both in the U.S.
04 and abroad but no essentially formal training programs as
05 such.
06 Q. Did any of those -- did any of those conferences
07 concern economic impacts regarding water resources?
08 A. Certainly. Yes.
09 Q. Which ones?
10 A. Oh -- well, many of our scientific conferences
11 will cover -- will cover a broad range of topics. Like
12 our annual conferences of our Agricultural Economics
13 Association will typically have -- will have within them
14 special sessions or symposia dealing with such topics as
15 water resource projects or community impacts and that sort
16 of thing.
17 Another association that I've been active
18 in in recent years is the International Association for
19 Impact Assessment. And, again, these conferences, which
20 are a multiday affair, will have -- will have within them
21 then special sessions on perhaps economic impacts or
22 alternative ways of measuring economic impacts, community
23 impacts of natural resource development and the like.
24 Q. Are these people presenting papers? Is that
25 what is happening?
0011
01 A. Yes, that's a very typical format. There are
02 some variations. Sometimes they are termed symposia or
03 round tables or whatever. It's basically presentation of
04 papers, that sort of thing.
05 Q. But those aren't actual training sessions?
06 A. Right.
07 Q. Those are simply a gathering of --
08 A. Yes, and reporting.
09 Q. -- people like you?
10 A. Yes, uh-huh, people like myself reporting on
11 things that they have been doing.
12 Q. Would you describe for me your employment
13 history in chronological order starting from your
14 undergraduate days?
15 A. Okay. Yes. As an undergraduate, I was employed
16 on an hourly basis in the Department of Economics, in the
17 Department of Agricultural Economics. As a graduate
18 student, I also was employed by the Nebraska Agricultural
19 Experiment Station as a graduate research assistant.
20 During that period of time, I worked on a study of the
21 Nebraska land market. And we -- it's had about three
22 different publications resulting from that work.
23 Q. Do me a favor. Give me years when you say this
24 or ranges of years.
25 A. Yes. This was -- graduate school was 1967 to
0012
01 1970. Okay. In 1970 I joined the faculty at North Dakota
02 State University in the Department of Agricultural
03 Economics. I have been a faculty member at North Dakota
04 State University ever since. This included one year when
05 I was on leave and spent 1978-79 as a visiting -- as a
06 visiting professor at Texas A&M University. I also,
07 during the period 1975 to 1978, was on loan on a half-time
08 basis from the university to our state legislative
09 counsel, the legislative research --
10 Q. State of North Dakota?
11 A. State of North Dakota, yes. So I guess those
12 would be -- also during the period 1979 to 1982 at North
13 Dakota State University I was attached on a half-time
14 basis to our University Office of -- Office of Research
15 Administration and had the title Director of Sponsored
16 Programs during that period.
17 Q. What did that mean?
18 A. Grants and contracts. We were essentially
19 trying to establish a grant and contract office there at
20 the school, provide information to people who are working
21 on grant proposals and that sort of thing. But
22 essentially from 1970 up to date I've been a faculty
23 member there in agricultural economics at North Dakota
24 State University.
25 Q. So on one side your formal employment has been
0013
01 as a professor or as a teacher --
02 A. Uh-huh.
03 Q. -- at North Dakota State?
04 A. Uh-huh.
05 Q. Have you had other employment, that is contract
06 employment, project employment in that period?
07 A. Yes. In fact, we've engaged in quite a wide
08 variety of grant and contract research. Most --
09 Q. When you say "we," I'm not sure who the we is.
10 A. I have been engaged in quite a variety of grant
11 and contract research, often in association with other
12 faculty members and also generally -- many of these
13 projects would involve other individuals who did a lot of
14 the work. I would sometimes call them research assistants
15 and the like. I guess that over the -- over the 22 years
16 that I've been at North Dakota State University, I have
17 acted as project leader or project director, some such
18 title, for grant and contract projects something in excess
19 of three million dollars.
20 Q. How many projects was that?
21 A. Okay. I would have to go back and count.
22 Q. You can -- a round figure will do.
23 A. 30 or more.
24 Q. When you were working with these projects, was
25 that actual hands-on work or were you simply the
0014
01 coordinator several levels above the project?
02 A. Much of it we could say -- we could say most of
03 it would be actual hands-on work.
04 Q. And what -- what types of projects were these?
05 A. Okay. Again covering quite a range of subject
06 matter, but generally relating to economic impacts or
07 economic implications of different kinds of research
08 development alternatives including water projects,
09 including projects where we looked at the "economic
10 contribution" or economic impact of different industries
11 in the state or the region such as the sugarbeet industry
12 in the Red River Valley of North Dakota, Minnesota, the
13 potato industry in the Red River Valley and so on. The
14 general theme then would be economic impacts really,
15 economic including fiscal impacts of natural resource.
16 MR. SAXE: Off the record for a minute.
17 (At this time there was a brief discussion
18 off the record, during which time Ron Luke entered the
19 room.)
20 QUESTIONS BY MR. ROSENBERG:
21 Q. So these 30 or so projects were in the nature of
22 economic impact projects?
23 A. Right.
24 Q. Economic impact assessments?
25 A. Right. And most -- the result of most of those
0015
01 was one or more research reports. So as you look through
02 the list of research reports, you get a pretty good idea
03 of the subject matter of these projects.
04 Q. I looked at one called leafy spurge.
05 A. Yes.
06 Q. Is that in there?
07 A. Yes. Uh-huh.
08 Q. What is that leafy spurge thing about?
09 A. Leafy spurge is a perennial weed, a noxious
10 weed, which is widespread in the Northern Plains Region of
11 the U.S. and into Canada. It is a serious economic
12 problem for people that raise cattle in North Dakota,
13 Montana and some of the adjacent states.
14 The plant -- it spreads both by seed and by
15 rhizomes. It will form virtually a mono-cultural
16 community or stand. Cattle won't eat it. In fact, in
17 quantities it's poisonous to cattle.
18 Anyway, we were asked to take -- to
19 basically make an assessment of the economic impact of
20 leafy spurge to the livestock industry.
21 Q. You did that?
22 A. Yes, we did that.
23 Q. I asked you a question earlier -- I asked you a
24 question: Is there any other training that bears on the
25 work you have done in this case?
0016
01 You told me about the seminars. Let me be
02 more specific.
03 Was there any other specific training,
04 other than your academic training, that bears in any way
05 on the work you have done in this case, anything you can
06 point to specifically?
07 A. In terms -- I don't --
08 Q. In terms of a postgraduate course of some sort
09 or postdoctoral course, in terms of an extended seminar
10 where the subject matter was such that it was useful in
11 this case?
12 A. I wouldn't identify -- I don't think I can
13 identify specific formal courses. We have obviously
14 prepared several books, some of which have been -- some of
15 which are used as texts for some of the courses that you
16 are talking about.
17 Q. Have you ever had a Florida study or Florida
18 case that you worked on?
19 A. No. This is the first one.
20 Q. Are you familiar with the Florida State
21 requirements, whether statutory or regulation requirements
22 in Florida?
23 MS. STINSON: I object to the form;
24 overbroad.
25 MR. ROSENBERG: Let me back up.
0017
01 QUESTIONS BY MR. ROSENBERG:
02 Q. Regarding economic impact statements, economic
03 impact studies, are you familiar with Florida statutory or
04 Florida regulatory requirements?
05 A. This is a topic that we're planning to pursue
06 further. I have not had -- I have not had opportunity to
07 study -- study the Florida regulatory requirements and so
08 on in detail at this point.
09 Q. When are you planning this? Where does this fit
10 in?
11 A. Okay. As our study progresses here over the
12 next few months basically, we would, of course, be
13 examining the Florida requirements and so on in additional
14 detail.
15 Q. Are you familiar with Florida water law
16 requirements, statutory or regulatory?
17 A. No, not in any detail.
18 Q. Is this the first contact you have had with an
19 economic impact study or statement in the State of
20 Florida?
21 A. Yes.
22 Q. Have you ever taught any courses that relate to
23 your work in this case?
24 A. Yes. I have taught on several occasions a
25 course in what we have termed socioeconomic impact
0018
01 assessment where we cover economic impacts, demographic
02 impacts, public service effects, fiscal impacts, and
03 including also mitigation measures and this sort of
04 thing.
05 Q. Let me back up.
06 The term "socioeconomic impact" -- would
07 you define that for me?
08 A. Yes. The socioeconomic impact studies are
09 generally regarded as including some or all of the
10 following components: Economic impacts, which have
11 generally been the effects of a particular action or
12 policy or program on --
13 Q. Or stimulus of any sort?
14 A. Stimulus on employment and on levels of business
15 activity in different economic sectors, for instance,
16 changes in retail, in the sales volume in the retail trade
17 sector, or changes in the level of income and activity in
18 the construction sector. So that would be the economic
19 impacts.
20 Demographic impacts would be a second major
21 component of many of these studies. This has basically
22 been changes in the number and composition of the
23 population of a given area, be it a state, a county, a
24 town.
25 Public service impacts, that is changes in
0019
01 demands for different kinds of public services --
02 Q. Is this a third phase?
03 A. That would be a third phase, would be the public
04 services: education, healthcare and the like.
05 Fiscal impacts, basically then changes in
06 costs and revenues of governmental units, would be --
07 Q. Is this another phase, the fourth phase?
08 A. Would be the fourth phase.
09 So we said economic, demographic, public
10 service, fiscal. I guess the last phase which is often
11 addressed is the "social impacts". And the latter
12 component would be -- would be one that I have not dealt
13 with to any great extent.
14 Q. Tell me if I have it right.
15 A socioeconomic impact takes -- the first
16 part or first phase is economic impact, and that is a
17 direct impact of the stimulus, indirect impact of the
18 stimulus --
19 A. Yes, uh-huh.
20 Q. -- and the induced impact of the stimulus?
21 A. Right.
22 Q. And that would be the economic impact assessment
23 part of this thing?
24 A. Right. Uh-huh.
25 Q. The second phase -- not necessarily related to
0020
01 the first, is it -- is a demographic study? Is that
02 true?
03 A. Right. Yeah.
04 Q. A third phase would be -- well, fiscal is the
05 fourth phase.
06 A. So the public services I guess.
07 Q. The public service sector is the third phase?
08 A. Uh-huh.
09 Q. Is this sequential?
10 A. Very often -- we often think of the economic
11 changes as often being a stimulus then to changes in
12 population, for instance, with expanded economic activity
13 creating more jobs and leading to an inmigration of
14 population or conversely, for instance, if you were
15 looking at a situation of, say, closing a military base,
16 with the closing of the base then there are secondary
17 impacts leading to reduced business activity, reduced
18 employment which might be seen as likely to lead to the
19 outmigration of a portion of a population.
20 Q. You are in a demographic stage right now.
21 A. So we often see the demographic impacts as being
22 at least in part affected by, driven by economic changes.
23 The changes in population then are typically one of the
24 major factors that are seen as causing changes in public
25 service requirements, people moving in bringing children
0021
01 that need to go to school. And the changes in public
02 service demands, requirements then are one of the major
03 factors that lead to the change -- well, that affect the
04 costs and revenues of governmental units, public service
05 requirements affecting then the costs for the
06 jurisdictions that need to provide the services.
07 Q. So my question was: Are these sequential? And
08 I think you are telling me the answer --
09 A. I'm saying the answer is generally yes in large
10 measure.
11 Q. And they would all flow from that first economic
12 impact statement, either demographics or the public
13 sector, fiscal?
14 A. Uh-huh. The economic changes would be seen as
15 affecting the demographic, the public service and the
16 fiscal, yes.
17 Q. In this case I have here -- I'm sorry -- a
18 letter of February 3rd from you to me.
19 A. Right, saying here are a lot of documents.
20 Q. Is that your letter to me, February 3rd?
21 A. Yes.
22 (The instrument referred to was here marked
23 as Deposition Exhibit No. 2 for identification.)
24 QUESTIONS BY MR. ROSENBERG:
25 Q. Do you recall what documents you sent with
0022
01 that?
02 A. Yes. You had sent a list, basically pages
03 copied out of my vitae, where you had checked off
04 documents that you wanted us to -- of which you wanted us
05 to provide a copy. And I believe the set of documents
06 that I sent to you then was essentially everything you had
07 marked, I think, with possibly -- I believe there was one
08 or possibly two documents I couldn't immediately put my
09 fingers on. But it was essentially then a couple of
10 books, a number of research reports, and quite a number of
11 journal articles, book chapters and the like.
12 MS. STINSON: For the record, I asked him
13 to do it directly to save the day's mailing time.
14 (At this time there was a brief discussion
15 off the record.)
16 QUESTIONS BY MR. ROSENBERG:
17 Q. Have you ever conducted a cost/benefit study?
18 A. Not a formal cost/benefit study per se.
19 Q. What types of cost/benefit studies have you
20 conducted?
21 A. Okay. Certainly many of the studies that we
22 have been involved in would include -- would include some
23 of the elements that are often included in a cost/benefit
24 study. And certainly some of these economic impact
25 assessments would fall under that category.
0023
01 Q. What are these elements?
02 A. Okay. Well, for instance, the benefits to
03 different groups, different economic sectors from -- well,
04 looking, for instance, at some of this work with the leafy
05 spurge and so on, we are looking at the cost to the
06 livestock growers from expanded leafy spurge infestations.
07 And then the people who were sponsoring the study,
08 basically the USDA group that are involved in different
09 programs to control noxious weeds, would be looking at the
10 costs of the weed infestations to the stockmen. That could
11 also be looked at as a benefit from a more effective weed
12 control program. Similarly then we were looking at also
13 the effects for other sectors of the state economy.
14 Q. Let me back up.
15 When economists refer to cost/benefit
16 studies, that term means something to them.
17 A. Yes.
18 Q. What does that mean to you?
19 A. Okay. Cost/benefit studies typically are an
20 attempt to make as comprehensive as possible an assessment
21 or a statement of the costs of a particular action and the
22 benefits, including non -- including what are often termed
23 non-market benefits or costs. And then basically --
24 basically also identify those groups that would be -- that
25 would be experiencing the costs or receiving the
0024
01 benefits. And, of course, then the -- what I would see as
02 one of the hallmarks of a cost/benefit study, as I
03 understand it, is the effort to come up with a formal
04 cost/benefit ratio which is then an effort to -- through
05 this cost/benefit ratio to determine whether the project
06 should be seen as desirable or undesirable.
07 Q. If I understand your testimony, you have never
08 directly done a cost/benefit study; am I correct?
09 A. We have never done a -- I have never done a
10 study where we attempted to ultimately come up with a
11 final cost/benefit ratio for a project.
12 Q. Instead, in some of your economic impact studies
13 you have shown where there would be benefits to certain --
14 A. Right.
15 Q. Certain entities?
16 A. Right, and costs to certain entities.
17 Q. When a cost/benefit study is conducted, does it
18 list benefits to other sectors in the economy or in
19 society?
20 A. Okay. There are different -- there are
21 different viewpoints about the appropriateness of
22 including "secondary benefits," for instance. And
23 different -- so there are -- there are different
24 viewpoints whether the secondary benefits to other sectors
25 should be included and in what way.
0025
01 Q. When you did your studies, did you -- even
02 though they weren't formal, they were informal, did you in
03 your economic impact studies relate to these other
04 sectors?
05 A. Yes. Well, I think the issue associated with
06 this "secondary impacts" or "secondary benefits" has to do
07 with basically the area -- well, one could say has to do
08 with one's accounting stance. That is to say if a
09 particular action is to be taken -- let's say in the
10 Austin, Texas area we're going to build a water project or
11 something of that nature. Okay. This will have -- there
12 will be direct effects in terms of additional employment
13 and so on. There will also be secondary effects.
14 The debate, as I understand it, about
15 whether to include -- whether and in what way to include
16 secondary benefits has to do with whether the secondary
17 effects of building the project in the Austin, Texas area
18 is really just a transference of activity that otherwise
19 would occur somewhere else. Okay. And if, on the other
20 hand, the -- so if the question relates to the
21 desirability of investing, say, Federal funds to build a
22 project in the Austin, Texas area versus using those funds
23 for some other purpose or building something in Florida,
24 then one can say perhaps -- one can argue that some of
25 these secondary effects are sort of a wash.
0026
01 On the other hand, if the objective is to
02 try to identify what will be the effects of building the
03 project for the communities nearer where the project is
04 built, then very definitely the secondary effects are just
05 as relevant as the direct effects in terms of trying to
06 describe what's the change in employment, what's the
07 change in population, public services and so on.
08 Q. I was going to ask you. Would you define
09 "secondary effects" for me. That's one of those terms
10 economists know what it means. Other people like me may
11 not.
12 A. It's also possible -- good to define these
13 terms.
14 If we were thinking about a water project
15 or something like this, we might talk about the direct
16 effects basically involving the people actually employed
17 building the facilities, the companies that -- the
18 expenditures made directly by the project proponent to
19 local firms for supplies, materials and the like.
20 Q. Those are direct effects?
21 A. Direct effects, also sometimes referred to as
22 first-round effects. Okay.
23 Then the secondary effects are those that
24 result from subsequent rounds of spending. For instance,
25 we said that the people employed directly on the project
0027
01 and their wages and so on -- that would be part of the
02 first round or direct effects. Okay. These construction
03 workers then spend part of their income at local stores or
04 for lodging at local motels and so on. So then the
05 additional receipts by the motel owners, the shopkeepers
06 and so on -- that would be part of the secondary effects.
07 Q. Is that the same as an indirect effect?
08 A. Yes. Indirect or secondary are --
09 Q. Synonymous?
10 A. -- used pretty much synonymously.
11 Q. Then what is an induced effect?
12 A. Some would use secondary and indirect
13 synonymously. To some, when the term "induced" is used,
14 the meaning there or the distinction is that the induced
15 effects are those that flow from the -- from people
16 spending their additional income, additional spending by
17 households as distinguished from indirect effects that
18 would flow from the expenditures of a project for supplies
19 and materials and the like.
20 Q. Give me an example in the instance you are
21 telling us about the project that comes here, the laborers
22 get some money.
23 A. Right.
24 Q. What is the induced effect, for example?
25 A. The induced effects would come both from the
0028
01 laborers spending their additional income and also the
02 shopkeepers, the motel owners and so on that we referred
03 to as a result of selling more goods in the shop, as a
04 result of having higher occupancy in the motel. Part of
05 that additional revenue becomes income to the proprietor
06 or income to people that work in these establishments.
07 They, in turn, then will typically spend some of their
08 additional income locally for goods, services and the
09 like.
10 The distinction is perhaps most important
11 when one gets into the actual -- what one might say the
12 mechanics of estimating the impacts or estimating the size
13 of the "multiplier effect" through such devices as
14 input/output models and so on. There are -- multipliers
15 have been computed either -- both alternatively including
16 and excluding the "induced effects".
17 Fundamentally you get different numbers,
18 different multipliers, depending on whether you include or
19 exclude the induced effects.
20 Q. In your answer -- tell me if I got it right. I
21 may not. You use a term "spent locally".
22 A. Yes.
23 Q. Now, is there a component in this system here of
24 geographic area?
25 A. Okay. When we refer to expenditures made
0029
01 locally, what we're really referring to is we -- as we
02 attempt to assess the impact of a project, it is important
03 early on to identify basically the bounds of the study
04 area, the area of interest or whatever term we might be
05 using. Region of influence is a term that's also
06 sometimes used. Then expenditures within this region of
07 influence study area or whatever are typically referred to
08 as local expenditures. Essentially, we have divided the
09 world into the region of interest and the rest of the
10 world.
11 Q. How is that done?
12 A. Okay. Well, there are at least I think two
13 answers to the question. One depends on essentially the
14 objectives or the impetus for the study. If, for
15 instance, one of the concerns was to somehow measure the
16 impacts, the costs and benefits, if you will, for, let's
17 say, the state, the State of Florida, the State of Texas,
18 then you would be concerned about all expenditures that
19 were made within the state.
20 Very typically, though, if the -- and this
21 is often done. Okay. Very typically, if the interest is
22 primarily in trying to measure the impacts on those
23 communities that would -- that would somehow be directly
24 affected by the project, then the study area or region of
25 influence would be defined based on several criteria, one
0030
01 being where will the people that actually are working on
02 the project likely live, where are those communities where
03 the people will live.
04 Another factor and also an important factor
05 may be regional trade patterns. Okay. For instance,
06 while the people actually working on the project may live
07 in several small communities near the project site, they
08 may do a great -- the regional trade patterns may suggest
09 that they will do a great deal of their shopping and so on
10 in a more distant sort of regional trade center.
11 In this case, at least for some purposes,
12 one might wish to include the relevant regional trade
13 center in one's analysis, at least for some purposes.
14 Q. Those are two of the criteria.
15 A. Yes.
16 Q. Are there other criteria for selecting the
17 geographic area?
18 A. Yeah. There are certainly a wide range of
19 criteria. One of the others that come to mind include
20 political jurisdictions, for instance, that is -- you
21 know, our states tend to be divided up into counties. We
22 also have municipalities. We have school districts and
23 sometimes special districts. And these different units
24 then have various kinds of responsibilities.
25 So another kind of a pragmatic but
0031
01 nonetheless relevant issue is basically certain kinds of
02 data are available only at certain jurisdictional levels.
03 For instance, some kinds of information are available at
04 the county level, not readily available for subcounty
05 areas. And so defining the study area then becomes --
06 becomes one of the -- one of the important things that the
07 analyst or the team of analysts need to do. It's not --
08 it's not a, you know, simple, easy, one-criteria, you
09 know, you look at the county where the thing is located,
10 but rather one needs to kind of balance a number of
11 considerations in trying to settle on the study area.
12 And, again, for some -- one may define a
13 study area for purposes of community impacts, but at the
14 same time some calculations might be made to show some
15 effects -- some of the economic effects or likely tax
16 revenue effects or whatever at the level of the state, for
17 instance.
18 Q. Does that mean you would have different areas?
19 Some would be larger and some smaller? One would be a
20 fiscal impact area? One would be a social impact area?
21 One would be a demographic impact area?
22 A. Certainly it might be very relevant to talk
23 about more than one geographical level of analysis, that
24 perhaps much of one's community level analysis, public
25 services, fiscal, demographic might focus on a relatively
0032
01 restricted area where most of the -- where most of the
02 project-related people might be expected to live, where
03 their kids might go to school and so on, but one might
04 also -- it might also appear relevant to do -- to look at
05 some perhaps broader economic, demographic, fiscal
06 dimensions for a larger area, perhaps even as large as the
07 state. That is providing estimates that we think that the
08 project will totally lead to this level of additional
09 employment, this level of additional income, this level of
10 additional tax revenues and so on for the state.
11 Q. Is it important to set this geographic area
12 early in your study, to set it late in your study? When
13 in your study is it set?
14 A. Normally defining the study area is something
15 that would be an issue quite early in the study.
16 Q. Sir, have you ever been a litigation expert in a
17 case?
18 A. Yes.
19 Q. Have you ever testified in court?
20 A. Yes.
21 Q. And what's the most recent case you testified
22 in?
23 A. The most recent case I testified in I guess was
24 -- must have been about 1988 or '89. It was a -- it had
25 to do -- it was a tax case in Federal court in Grand
0033
01 Forks, North Dakota.
02 Q. What was briefly the substance of that case?
03 You told me it was a tax case.
04 A. The substance, as best I can relate it -- okay.
05 During the late '70s and early 1980s, we had a series of
06 large power plant construction projects in West Central
07 North Dakota. Several large power plant facilities,
08 coal-burning power plants were built very much like some
09 of the lignite-fired facilities here in Texas.
10 The point at issue was that the gentleman
11 who was involved in the case then maintained a permanent
12 residence in Eastern North Dakota. His wife, family lived
13 there. He was employed pretty much continuously for a
14 number of years working on several of these power plant
15 construction projects out in the western part of the state
16 200 and some miles away. And so the issue then was
17 whether he could -- whether he could deduct his expenses
18 for living away from home, living out there in the coal
19 fields while he worked on those projects.
20 And basically then some of the -- some of
21 the points of issue were --
22 Q. Let me ask you this: What was your role as a
23 witness in this case?
24 A. My role was to basically relate then the history
25 of the development of the several construction projects
0034
01 and including basically questions of was there a
02 reasonable expectation of how long these construction
03 projects would continue, of whether there was likely to be
04 subsequent projects after the initial one and so on. So
05 that was -- I was providing I guess you could say that
06 kind of background.
07 Q. Who were you employed by in that case?
08 A. I was testifying on behalf of the Department of
09 Justice.
10 Q. United States Department of Justice?
11 A. Uh-huh.
12 Q. Have you ever testified in any other case?
13 A. Other cases? There were I believe two -- there
14 were two related cases in this whole tax business, as I
15 recall. The first one was probably 1986 and the second
16 one in 1988.
17 Q. And your role in these cases was to be the
18 historical expert; am I correct?
19 A. In large measure, yes.
20 Q. Have you ever testified in a case other than
21 being an historical expert?
22 A. I don't recall. I don't think so.
23 Q. Okay. Other than the tax cases, have you ever
24 been deposed?
25 A. No.
0035
01 Q. Aside from those cases that went to court, have
02 you ever been hired as a consultant in cases that were
03 being litigated but didn't testify in court?
04 A. Well, let me see. I have worked with RPC on one
05 some years ago, the first-use tax case. Would that --
06 Q. You have got to answer my questions. You can't
07 ask her.
08 A. Okay. Yes. About 10 years ago I was a
09 consultant for RPC. And this was a case called Louisiana
10 First-use Tax Case. It had to do with the State of
11 Louisiana imposing a tax on -- it was natural gas being
12 produced in the Outer Continental Shelf. This I don't
13 believe went to court. Certainly I was not involved in
14 testifying.
15 Q. What was your role as a consultant?
16 A. I was part of the RPC team that was basically
17 examining the impact of -- impact of OCS gas development
18 on Louisiana and Louisiana communities.
19 Q. What was your specific role?
20 A. I was involved in helping to assess then the
21 economic and fiscal impacts of OCS energy development on
22 the State of Louisiana.
23 Q. Does RPC stand for something or is it just
24 called RPC?
25 A. Research and Planning Consultants.
0036
01 Q. But everybody calls it RPC?
02 A. Uh-huh.
03 Q. And you have had an association with them for
04 how long, sir?
05 A. Since 1979.
06 MR. ROSENBERG: In the deposition -- after
07 we've been taking the deposition, somebody came in. He's
08 not identified on the record. I'm going to ask him to
09 identify himself so we know on the record who is here.
10 MS. STINSON: I'll identify him. It's Ron
11 Luke just sitting in.
12 QUESTIONS BY MR. ROSENBERG:
13 Q. Sir, to your understanding, what connection does
14 Ron Luke have with RPC?
15 A. Ron Luke is the president of RPC.
16 Q. Okay. And RPC is your present employer in this
17 case?
18 A. Yes.
19 Q. You are doing work for RPC now?
20 A. Right.
21 Q. Have you ever had a prior case that has involved
22 the same issues as are present in this case: SWIM plans,
23 water resources, matters such as that?
24 A. Not a legal case, no.
25 Q. Or as a consultant? Have you ever worked as a
0037
01 consultant on a case that has involved the same issues
02 that are present in this case?
03 MS. STINSON: I object to the form. I
04 request clarification.
05 When you say "case," do you mean a matter
06 in litigation or a research project or either?
07 MR. ROSENBERG: Let me see if I can
08 reconstruct it.
09 QUESTIONS BY MR. ROSENBERG:
10 Q. Have you ever worked on a matter, whether it's
11 been a case -- have you ever worked on a matter that's
12 been a case, a litigation case that's involved the same
13 issues as are present in this case?
14 A. I think I should answer yes, and then I would
15 say that, for instance, the Louisiana first-use tax case
16 involved some of the same kind of issues, that is
17 community impacts of particular kinds of development
18 activities or options and essentially distribution of the
19 costs and benefits and this sort of thing. And certainly
20 many of our other projects then have dealt with similar
21 kinds of issues, again attempting to assess economic,
22 demographic, and fiscal impacts of different kinds of
23 development or resource management activities or
24 alternatives.
25 Q. Have you ever worked on a case or a study in
0038
01 which the stimulus was a SWIM plan or the effect of water
02 resources?
03 A. Yes, several of our studies have involved water
04 resources in one way or another.
05 Q. You say "our studies".
06 A. Studies that I have worked on.
07 Q. What are they?
08 A. Okay. Starting maybe chronologically back about
09 20 years ago, I was part of a team that undertook a -- I
10 guess we could say a major study to examine the potential
11 effects of weather modification in North Dakota, that is
12 effects of added rainfall.
13 Okay. Subsequent work then involving
14 development of energy resources in the Northern Great
15 Plains. We had about a three-year project in the late
16 1970s, the title of which was I believe "Water as a
17 Parameter in the Development of Energy Resources in the
18 Northern Great Plains."
19 I think it would have been just slightly
20 subsequent to that study I worked on a project with the
21 Harza engineering firm out of Chicago which was basically
22 looking then at the issue of water resource demands
23 related to development of energy resources in the
24 multistate area of the Dakotas, Montana and Wyoming.
25 So those would be -- those would be some
0039
01 specific studies that I can point to.
02 Q. What do those studies have in common with the
03 study regarding the EAA, as you understand it?
04 A. Okay. What I guess -- what they generally have
05 in common with the study of the EAA then is basically the
06 issue -- important issues include the issues of both sort
07 of direct farm level effects and also community level
08 impacts of alternative natural resource, in this case
09 water resource management options. And so that while the
10 setting is different, many of the same tools, techniques
11 and so on are relevant whether one is looking at the
12 community impacts of water management in Florida or
13 community impacts of water resource development in the
14 Northern Great Plains. The same kind of issues and the
15 same kind of tools become -- tools as in input/output
16 models, demographic projection techniques, fiscal analysis
17 and the like.
18 Q. Now, in these water studies or any of your
19 studies, whether in cases or academic studies, have you
20 ever used or have they ever involved the FLIPSIM model?
21 A. F-L-I-P-S-I-M. That's an acronym, FLIPSIM.
22 Q. Have any of these studies or cases ever --
23 A. No.
24 Q. Sir, you are the author of -- I should say:
25 What is your relationship with this book, "Impact of
0040
01 Growth"?
02 A. "Impact of Growth." Yes. I was one of the
03 three authors of the book that you are holding there.
04 And, essentially, I was responsible for one chapter there
05 which I can identify for you.
06 MR. ROSENBERG: Off the record.
07 (At this time there was a brief discussion
08 off the record.)
09 QUESTIONS BY MR. ROSENBERG:
10 Q. Do you know, without me showing you the book,
11 what chapter you wrote on?
12 A. It was basically a chapter on impact models.
13 Q. Chapter 2 is entitled "Selection of Economic/
14 Demographic Models."
15 A. Yes.
16 Q. Chapter 3 is entitled "Public Service Impacts."
17 Chapter 4 is entitled "Social Impacts." Chapter 5 is
18 "Fiscal Impacts."
19 A. Selection of the models was the chapter that I
20 was involved in.
21 Q. 2?
22 A. Uh-huh.
23 Q. Would you consider this book authoritative on
24 the other chapters also?
25 A. I would think so, yes.
0041
01 (An instrument was here marked as
02 Deposition Exhibit No. 3 for identification.)
03 QUESTIONS BY MR. ROSENBERG:
04 Q. Sir, I'm showing you Exhibit 3. And that is a
05 memorandum to you. Am I correct?
06 A. Yes.
07 Q. Are you familiar with that?
08 A. To me from Ron.
09 Q. Let me ask you a couple of questions, please.
10 A. Yes.
11 Q. What is a SEARS?
12 A. Okay. The SEARS model -- don't you love these
13 acronyms -- is a socioeconomic impact assessment model
14 which was developed basically by myself and -- well,
15 primary developers were myself and Dr. Steve Murdock at
16 Texas A&M University. The acronym stands for
17 Socioeconomic Assessment of Repository Siting because the
18 major impetus for developing the SEARS model was a
19 long-term contract that we had at that time with the U.S.
20 Department of Energy relative to their attempts to site a
21 geological repository for high-level radioactive wastes.
22 Okay. The SEARS model in, you know, different variations
23 has been used by myself and others at North Dakota State
24 University, by Dr. Murdock and his group at Texas A&M
25 University. It has also been used by RPC on several
0042
01 studies.
02 Q. Is it being used in the present matter?
03 A. Not the SEARS model per se. The SEARS model,
04 however, basically -- we would be using similar types of
05 techniques, input/output models, demographic forecasting
06 methods in the present matter, not the SEARS model per se.
07 Q. So what model are you using in this case in
08 place of SEARS?
09 A. Okay. What we are using for the economic -- for
10 the economic assessment is the RIMS input/output model
11 developed by the U.S. Department of Commerce. And then
12 for our demographic work we rely heavily on demographic
13 forecasting models that have been developed at the Bureau
14 of Economic and Business Research at the University of
15 Florida. We're also then -- we will be doing public
16 service and fiscal analysis using -- well, not -- I'm
17 trying to think of the best way to say this. Not using a
18 formally identified named model, but, in fact, using what
19 we regard as sort of standard procedures for that type of
20 assessment.
21 Q. Okay. In the assessment you are making now in
22 this case -- excuse me. Let me withdraw that and give you
23 this question.
24 When you run the SEARS model, how do you
25 get direct impacts into the SEARS model? Where do you get
0043
01 the direct impacts from?
02 A. Okay. One way of answering that is to say that
03 clearly -- with the SEARS model or with any similar model
04 that I'm aware of, it's -- it is imperative to have some
05 detailed information about the project, the proposed
06 action, as it were, which generally is obtained from the
07 proponent.
08 What kind of information are we talking
09 about?
10 Employment, how many people are employed in
11 different phases of the project and perhaps what's the
12 duration of employment, short-term construction people
13 versus more permanent employees, sometimes information
14 about skill levels and so on, especially as it might
15 relate to whether the jobs can be filled out of a local
16 labor pool or whether a large portion of the work force
17 have to be inmigrants.
18 Another important dimension is the
19 expenditures that are going to be generated by the
20 project, what kind of purchases of goods and services,
21 supplies and materials and so on.
22 Q. Let me back up for a second here.
23 In what you are doing in this case, where
24 did you get the direct impacts?
25 A. Okay. At this point -- at this point that
0044
01 analysis is still going on. But essentially we'll -- the
02 process will be that based on the SWIM plan and different
03 alternative scenarios that might be developed consistent
04 with the SWIM plan we would then, relative to best
05 management practices, known as BMPs, relative to number,
06 size and location of stormwater treatment areas, known as
07 STAs, and some of these other things, then the first step
08 in the analysis would be a -- what we might call a
09 farm level analysis using -- presumably using the FLIPSIM
10 model.
11 Q. That's what I'm getting it. When you say this
12 analysis is going on, are you now using a FLIPSIM model to
13 construct the direct, indirect and induced impacts?
14 A. Not as yet. And there has been -- there has
15 been some uncertainty about I guess the relative roles of
16 some of the different parties here relative to the
17 farm level analysis, FLIPSIM and the like.
18 Q. I don't know what that means. What are you
19 getting at?
20 A. Okay. I or the RPC team has not as yet been
21 doing analysis with the FLIPSIM model. It may develop
22 that we will be -- that we will be responsible for doing
23 some of this analysis. That's -- I guess up to this point
24 it has not been clear what our responsibility might be
25 relative to doing the analysis of that level. But the --
0045
01 but if I might say then, the FLIPSIM analysis is one step.
02 And then subsequent to the FLIPSIM analysis, regardless of
03 whether we are responsible for doing it or whether someone
04 else -- whether we obtain FLIPSIM results from another
05 entity, then the analysis goes on downstream with economic
06 impacts and the like.
07 Q. Well, what's the problem? I'm not sure I follow
08 you. You say you are not doing the analysis or you are
09 going to or you are getting information from another
10 entity. I'm not sure I'm completely following you here.
11 A. Okay.
12 MS. STINSON: May I confer with my client?
13 MR. ROSENBERG: Let's go off the record.
14 (At this time there was a brief discussion
15 off the record.)
16 THE WITNESS: Okay. The question was:
17 What about FLIPSIM?
18 And the answer is yes. We intend to use
19 the FLIPSIM model for the farm level -- assessment of the
20 farm level impacts which then become input to subsequent
21 steps of the process. We have obtained a copy of the
22 FLIPSIM model and so on.
23 QUESTIONS BY MR. ROSENBERG:
24 Q. When was that done? When did you get a copy of
25 the FLIPSIM model?
0046
01 A. Okay. We, in this case being RPC -- I cannot
02 say with -- it seems to me that it's been -- it's been
03 perhaps a month or more ago. I cannot say for certain
04 exactly when --
05 Q. Last six weeks or so?
06 A. I can't say for sure. I think it might have
07 even been a bit longer ago than that.
08 Q. Earlier in questioning here I asked you to go
09 through levels of impacts. I asked you if these were
10 sequential.
11 Do you recall that?
12 A. Uh-huh.
13 Q. And I want you to help me out because I'm not
14 sure I understand.
15 You were talking about fiscal impacts or
16 social impacts or public impacts.
17 Now, in order to get to that, you have to
18 get to direct impacts. Am I right?
19 A. Yes.
20 Q. Where did you get the information for direct
21 impacts if you haven't been using the FLIPSIM model?
22 A. In our earlier work, we had essentially taken
23 the FLIPSIM derived results from the Hazen and Sawyer
24 report. And basically then we were using those as the
25 basis for opinions about economic, demographic, public
0047
01 service effects. So we were basically in the earlier work
02 using the Hazen and Sawyer results as a starting point.
03 Q. You say "in the earlier work". That's in
04 comparison to what? Is there later work?
05 A. Okay. The work that RPC had been asked to do
06 and which I have been asked to help in was in -- well, the
07 first two phases were -- one back in August, we reviewed
08 the two Hazen and Sawyer documents and prepared an
09 analysis of those two documents.
10 Then during the period September, October,
11 we prepared basically some opinions relative to community
12 impacts. And it was in preparing those opinions for the
13 date of August -- October 26th sticks in my mind as a date
14 when certain opinions needed to be delivered. We were
15 basically using the Hazen and Sawyer report and the
16 FLIPSIM results and so on from that report as our starting
17 point in a sense.
18 Okay. It has -- subsequent to that work
19 then, it has seemed to us that perhaps we would need --
20 more analysis would be needed, including analysis of
21 additional scenarios, analysis over a longer time frame
22 and so on which would involve then the need to do analysis
23 with the FLIPSIM model itself.
24 Q. So you are going to go back to the point of
25 beginning and reconstruct the whole project? Is that what
0048
01 I hear?
02 A. Not per se, but it seems to us that probably
03 there will be a need to use the FLIPSIM model to analyze
04 some alternative scenarios, perhaps both alternative
05 without-project scenarios and also then project
06 scenarios. So it will require some analysis or better
07 definition of direct impacts followed then by the analysis
08 of secondary impacts -- economic, demographic and the
09 like.
10 Q. Let me ask you this: The memo in front of you
11 is August 1992.
12 A. Uh-huh.
13 Q. We're already in February of '93. Is that memo
14 correct that -- it says that "There seems to be general
15 agreement that FLIPSIM should be used for the farm level
16 analysis."
17 Is that your understanding?
18 A. The question, as I understand it, is: Is there
19 agreement that FLIPSIM is an appropriate tool to use for
20 the farm level analysis?
21 Yes. That's -- I would agree with that.
22 Q. Okay. When did you first know that? Did you
23 know that in August of 1992?
24 A. The question, as I understand it, is at what
25 point did we determine that we believed FLIPSIM was an
0049
01 appropriate tool to use for farm level analysis.
02 Yeah, I would say that's -- August of '92
03 would be an appropriate date to identify -- as identifying
04 when we thought FLIPSIM would be an appropriate tool.
05 Q. Why didn't you get it in August of '92?
06 A. Perhaps one -- at least one way to answer that
07 question would be that at that point in August I think
08 about all we had been requested to do or at least all I
09 had been requested to do was to basically review the two
10 draft documents from Hazen and Sawyer. So it had not at
11 that point been determined whether we would be -- would be
12 asked to do any further analysis besides just reviewing
13 the documents.
14 Q. When did you think you would need FLIPSIM for
15 further analysis?
16 A. Again, I would -- in terms of identifying a
17 date, I would say perhaps November, based on -- again, our
18 work has been conducted in a series of phases. And so
19 during September, October we were basically -- basically
20 then engaged in developing -- developing opinions about
21 community impacts. So I guess it was after that. At
22 around about the latter stages of that work would have
23 been when we probably identified the need for additional
24 -- the fact that additional FLIPSIM-type analysis would be
25 desirable.
0050
01 Q. Okay. Why didn't you then obtain a copy of
02 FLIPSIM in November?
03 A. One response to that question would be that
04 basically -- with the way that the work of the RPC team
05 has been structured, basically Dr. Luke has been the
06 person responsible for obtaining copies of models and that
07 sort of thing. So one way of responding to the question
08 is I personally was not kind of directly involved in
09 discussions relative to obtain a copy of FLIPSIM.
10 Q. Even though you weren't directly involved, do
11 you know why FLIPSIM didn't come in November or it wasn't
12 obtained in November and only came -- was only obtained
13 recently?
14 A. I can't -- I don't -- I'm not sure that I feel
15 comfortable with commenting on exactly when FLIPSIM was
16 obtained. I simply don't know exactly when RPC did obtain
17 a copy of FLIPSIM.
18 Q. I'm not asking for a specific date. I'm asking
19 why there was a delay in obtaining FLIPSIM and what the
20 problem was.
21 A. Okay.
22 MS. STINSON: I object to the form.
23 You can answer if you can.
24 QUESTIONS BY MR. ROSENBERG:
25 Q. The question is: What was the delay in
0051
01 obtaining FLIPSIM?
02 A. To the best of my understanding, one delay was
03 occasioned because basically when a copy of FLIPSIM was
04 requested from Texas A&M University, I believe that the
05 response was negative, as I understood it. And I'm not --
06 I'm not totally -- I'm not totally informed about the
07 different discussions that occurred between that --
08 between that point and ultimately obtaining a copy. Dr.
09 Luke I think could probably address some of that much more
10 effectively in his deposition.
11 (At this time a brief recess was taken,
12 during which time an instrument was here marked as
13 Deposition Exhibit No. 4 for identification.)
14 QUESTIONS BY MR. ROSENBERG:
15 Q. I hand you a copy of Exhibit 4. Tell me what
16 that is.
17 A. Okay. These -- Exhibit 4 is a letter from
18 myself to Dr. Ron Luke dated October 13. And it says,
19 "Enclosed are the Table of Contents for two edited books
20 dealing with economic adjustment, closure, dislocation, et
21 cetera."
22 These were two documents that I had
23 identified as being possibly useful resource materials for
24 our project because, as I indicated, they did deal with
25 economic -- well, basically impacts of economic decline,
0052
01 closure of facilities and those kinds of topics.
02 Q. Now, one of those attachments is "Economic
03 Adjustment and Conversion of Defense Industries"?
04 A. Yes.
05 Q. Am I correct?
06 A. Uh-huh.
07 Q. Okay. Can you tell me whether the Department of
08 Defense uses economic impact analysis in its decisions to
09 close a base or facility?
10 A. Okay. The answer is yes, that the Department of
11 Defense, in the process of decision-making relative to
12 base closings, does routinely undertake studies of
13 economic, fiscal and other related impacts of such a
14 closure decision. And what I would -- what I'm less clear
15 on is exactly what role economic impacts play relative to
16 other considerations in the decision process. But
17 economic and fiscal impact studies are undertaken
18 routinely by the defense department. They have an office
19 which used to be and maybe still is called the Office of
20 Economic Adjustment within DOD which is involved in those
21 kind of activities.
22 Q. Do they conduct the economic impact analysis
23 before or after they decide to close the base?
24 A. That is a point on which I am less clear as to
25 just the timing of the studies relative to the decisions
0053
01 and announcements of those decisions and so on.
02 Q. And what effect, if any, does the economic
03 impact analysis have on closing a base?
04 A. Okay. That is -- that is a question that I
05 don't really feel well-prepared to answer. Again, we know
06 that -- we know that those kinds of studies are done. But
07 what the role of economic and other impacts is in closure
08 decisions as opposed to -- as opposed to community
09 adjustment, once a closure decision has been made, I don't
10 -- I don't really know the answer to that.
11 (An instrument was here marked as
12 Deposition Exhibit No. 5 for identification.)
13 QUESTIONS BY MR. ROSENBERG:
14 Q. Let me give you a copy of proposed Government
15 Exhibit 5. Can you tell me what it is?
16 A. Yes. Exhibit 5 is a copy of a research report
17 published in 1989 titled "Facing Economic Adversity:
18 Experiences of Displaced Farm Families in North Dakota."
19 And this report then summarizes findings from a statewide
20 survey of farm families who had left farming during the
21 mid 1980s. And this was a study I believe of -- it was
22 well over 100 farm families that we contacted. And we
23 were basically asking them questions about the whole
24 process of leaving farming, had they relocated, what were
25 they doing now and these kinds of questions.
0054
01 Q. Professor Leistritz, let me back up. You again
02 said "we".
03 A. Okay. There are four names on the report. I
04 was the project director, project leader. Three other
05 people worked closely with me in doing a lot of the work.
06 I also list them on the report.
07 Q. Did you conduct the study?
08 A. Yes.
09 Q. You were intimately involved with the study, its
10 purposes, its direction?
11 A. Yes.
12 Q. From what you know in that study, can you relate
13 to me the similarities and differences between the farmers
14 in the EAA and those in the study group?
15 A. Okay. Yeah, probably more -- a lot of
16 differences probably because most of the people that we
17 had contacted here -- okay. These were folks who were
18 independent farm operators operating what, by Florida
19 standards, would be relatively small farms, relatively
20 little hired labor and so on. And these people then also
21 -- perhaps a salient characteristic, compared to what we
22 understand about many of the farm workers in Florida,
23 these people were relatively well-educated. Almost all of
24 the operators and their spouses were high school
25 graduates.
0055
01 Q. "These people" being the people in the study
02 group?
03 A. The people in our North Dakota study group.
04 Q. Okay.
05 A. And a good many -- I would say close to half had
06 some sort of post-secondary education. Perhaps as a result
07 of this we found then that their experience in finding
08 alternative employment had been relatively favorable.
09 Very few were unemployed at the time of the study and most
10 of them reported a relatively short job search to find
11 alternative employment. These were some of the findings.
12 Q. Are there any other similarities or differences
13 between the farmers in the EAA and those in your study
14 group?
15 MS. STINSON: Object to form.
16 QUESTIONS BY MR. ROSENBERG:
17 Q. Do you know of any other similarities or
18 differences between the study group farmers and the
19 farmers of EAA?
20 MS. STINSON: Object to form still, but you
21 can answer.
22 THE WITNESS: Well, I would say probably
23 substantial differences. One, again, based on
24 considerable differences in the type of agriculture that
25 these farm and ranch operators that we had studied in
0056
01 North Dakota tend to be then what we would term family
02 farmers. They are operating as, in a sense, independent
03 entrepreneurs using a combination of owned and rented
04 land, again relatively little hired labor as such. So
05 there was not in this area a large sort of agricultural
06 worker population. There was not a substantial seasonal
07 worker population. So those would be just some
08 differences that kind of come to mind.
09 QUESTIONS BY MR. ROSENBERG:
10 Q. Have you ever been to the EAA?
11 A. Yes.
12 Q. When?
13 A. Early September 1992.
14 Q. How long were you there?
15 A. Just one day.
16 Q. And what time did you arrive and what time did
17 you leave?
18 A. We must have arrived like at 9:00 o'clock in the
19 morning and left probably about 4:00 o'clock in the
20 afternoon.
21 Q. And where did you go?
22 A. Okay. We went basically to the co-op sugar
23 plant near Belle Glade.
24 Q. And did you spend all of your time in the sugar
25 plant?
0057
01 A. Spent essentially all of our time in the sugar
02 plant and going to and fro.
03 Q. Is that out to lunch and back? Does to and fro
04 mean out to lunch and back?
05 A. Well, from West Palm Beach to the plant and
06 returning and so on.
07 Q. And who did you meet with at that meeting?
08 A. Okay. There was a room full of people, but
09 basically most of them were officials of the sugar co-op.
10 Q. Did you take notes in that meeting?
11 A. Not probably very well-organized ones.
12 Q. What was the purpose of the meeting?
13 A. The purpose of the meeting really was to talk
14 about what the RPC group might do relative to analyzing
15 community impacts and related issues relative to the SWIM
16 plan.
17 Q. In your trip to the EAA -- that's your only trip
18 to the EAA, right?
19 A. Uh-huh.
20 Q. Did you do anything to fly over the EAA, walk
21 through the EAA?
22 A. No.
23 Q. Drive through the EAA?
24 A. We drove -- we drove basically from West Palm
25 Beach to the plant, but we did not try to -- we did not
0058
01 try to do sort of a circuit of the area or whatever.
02 Q. You drove from the airport to the plant, went to
03 lunch, back to the plant and back to the airport?
04 A. That's essentially correct, yes.
05 Q. And have the only farmers you have met in the
06 EAA been those farmers you met at that meeting?
07 A. Yes.
08 Q. Can you tell me whether in your view the
09 structure of the EAA, the farming structure of the EAA is
10 different than the farming structure of the study group in
11 North Dakota?
12 A. Substantially, yes.
13 Q. What is the difference?
14 A. Basically that within EAA there are a number of
15 very, very large corporate farming entities which do not
16 really have counterparts in our part of the country. That
17 would be probably the single most important difference.
18 A second difference, which again relates to
19 the type of crops and so on, would be the extensive use of
20 seasonal hired labor by many of the farms in the EAA which
21 again has very little counterpart in our type of
22 agriculture I guess.
23 Q. Would it be fair to say that the EAA farming is
24 substantially agribusiness-type farming?
25 A. I would not -- I would agree with that
0059
01 assessment.
02 Q. Now, in your North Dakota study, does it show
03 that any farmers went bankrupt?
04 A. Yes. These -- the people involved in our study
05 had basically left farming because of financial
06 adversity. A certain segment of those had gone through
07 bankruptcy. As I recall, it would have been less than 20
08 percent that had actually gone through bankruptcy. But
09 they had essentially liquidated most or all of their
10 assets as they left farming.
11 Q. Okay. What happened to the land that they
12 farmed on after they went into bankruptcy?
13 A. Okay. I suspect -- I think the question you are
14 trying to ask is was the land -- did the land continue to
15 be farmed or did it stand idle.
16 Q. Was the land still in production after that?
17 A. Yes. With -- almost without exception, the land
18 stayed in production.
19 Q. It was taken over by somebody else?
20 A. Yes, uh-huh.
21 Q. The next farmer?
22 A. Right.
23 Q. Somebody else took over the land and the land
24 stayed in production?
25 A. Uh-huh.
0060
01 Q. The farmer who had previously farmed the land,
02 he went into bankruptcy or he left the land or went into
03 the city, and the land continued to produce?
04 A. Yes.
05 Q. Am I correct?
06 A. That has been the pattern not only in our state
07 but apparently throughout the Upper Midwest during what's
08 often termed the farm crisis of the 1980s, exactly.
09 Q. In North Dakota in your study of those farmers
10 that went bankruptcy, left the land, the land stayed in
11 production, is that land still producing the same amount
12 and mix of crops that it was when the previous farmer was
13 farming it, the now bankrupt farmer?
14 A. The general answer -- general answer is -- we
15 think the answer is yes. There probably has not been a
16 major change in mix of crops and so on. One thing that
17 has occurred in that part of the country -- one thing that
18 occurred in that part of the country during the same time
19 period was a government land retirement program called
20 Conservation Reserve Program. And something -- in some
21 counties, more than 10 percent of the cropland has been
22 enrolled into this Conservation Reserve Program.
23 Q. Is that what I would call a soil bank or is that
24 what you would call -- or 20 years ago we called a soil
25 bank?
0061
01 A. Exactly, like a 10-year contract to take the
02 crop out of crop production.
03 Q. That would be the least productive land somebody
04 has?
05 A. Uh-huh.
06 Q. But if land would be productive or more than
07 margin productive, it would stay in production. If it was
08 less than margin productive, it would be put in a soil
09 bank. Am I right?
10 A. Right. Essentially the question -- the question
11 did farm bankruptcies lead to substantial acreages
12 standing idle for substantial periods of time, the answer
13 would be no.
14 Q. And would you say that is a general rule of
15 farming that even though a farmer went bankrupt if the
16 land is productive it would be taken over by somebody else
17 and they would produce in that way?
18 A. If -- if the -- to respond to your question, if
19 the -- what we might say the fundamental economics of
20 producing the particular crop are still favorable, which
21 is to say then that the producer can expect -- can
22 reasonably expect to cover their variable costs of
23 production which in a longer term planning horizon would
24 include capital replacement, machinery and the like, then
25 one could expect that the land would stay in production,
0062
01 albeit being operated by someone else.
02 Certainly, by the same token, when the
03 costs and returns from producing a particular type of crop
04 become unfavorable, that is producers can no longer
05 anticipate covering their costs, this would suggest a need
06 to either change crops or in -- in some cases certainly we
07 have substantial history in the United States of land
08 going out of crop production, whether it be returning to
09 grassland in some parts of the Great Plains or whether it
10 be returning to forests in some of the -- for instance,
11 Northern Minnesota, which I'm kind of familiar with
12 because it's very close to where we live, there are
13 substantial acreages that at one time were farmed and they
14 have basically gone back to trees. And in many cases the
15 land is owned by the county based on the previous owner
16 didn't pay his taxes.
17 So one I think needs to distinguish between
18 the situation of the economics producing a crop being
19 unfavorable versus the situation of a particular operator
20 finding themselves with an untenable debt load and that
21 sort of thing.
22 Q. When new farmers take over the land of the
23 bankrupt farmer, are they more efficient? Or what is it
24 that makes their farm or farming practices successful as
25 opposed to these bankrupt farmers?
0063
01 A. Okay. Reflecting on what we've seen in the
02 Upper Midwest, it -- in the farm surveys we've done, the
03 major factor that -- the major factor that was associated
04 with success or lack thereof during the 1980s was the --
05 basically the operator's debt load at the beginning of the
06 period. So that many of the -- apparently many of the
07 operators who took over land that was relinquished by
08 someone who was going out of farming -- often the person
09 who took that over was able to -- was able to farm the
10 land without major additional investments in machinery,
11 without incurring substantial additional debt and that
12 sort of thing.
13 In our work, we were not able to identify
14 any major differences in production efficiency, management
15 efficiency or, for that matter, in the general types of
16 crops raised and that sort of thing.
17 Another thing, of course, that might be a
18 factor for the individual who is taking over the land
19 might be the -- well, for want of a better term, the cost
20 basis that they might have in the property, that is land
21 -- it was not uncommon in the Upper Midwest during sort of
22 the depths of the farm crisis for land to be selling at
23 little more than half of what it had sold for a few years
24 before.
25 Likewise -- likewise, farm -- used farm
0064
01 machinery that was sold when farms were liquidated was
02 probably being sold at only a fraction of its new cost
03 which might have been only a relatively few years before.
04 So that would -- that would have some influence on the new
05 operator's -- well, for want of a better term, their cost
06 basis in the operation.
07 Q. If we could relate this to the EAA or focus on
08 the EAA. If a farmer in EAA would go bankrupt because he
09 was overextended like many of the farmers in North Dakota
10 -- say he's an independent grower. To your understanding,
11 who would be likely to take his land over?
12 A. I think that's a topic that -- I don't -- at
13 this point I guess I feel -- I don't feel I know the
14 answer to that question. That's one of the areas we need
15 to explore.
16 Q. Let me back up. Would you expect that that
17 farmer's land would be taken over by another farmer?
18 A. Really, there are -- it seems to me there are
19 two logical possibilities. One is that -- one is that the
20 land would be taken over by another farmer, another
21 farming operation, whether it be an independent grower or
22 one of the larger entities. That would be one possibility
23 with the land remaining in production.
24 The other possibility would be that if, in
25 fact, the combination of circumstances were such that the
0065
01 crop -- in this case sugar cane -- is no longer profitable
02 on that land, then the possibilities are either an
03 alternative crop which might have different input
04 requirements, labor requirements and so on or, in the
05 extreme, another possibility is for the land to go out of
06 production.
07 Q. In the case I have just given you, if the farmer
08 who owned the land went out of farming because he
09 overextended himself, would you expect his land to be
10 taken over by another farmer?
11 A. Okay. That would -- okay. If we're assuming
12 then that there has not been a major change in the cost of
13 return situation for the crop, that we're merely in a
14 situation where an isolated -- an isolated situation where
15 a grower has overextended himself and cannot -- cannot
16 service his debt or whatever, then it would seemingly be
17 logical that the land might then be operated by another
18 farmer. That would be -- that would be a logical
19 consequence.
20 Q. Okay. Now, in your study, in your experience,
21 would you expect that that next farmer, the farmer taking
22 over, would be a larger farmer because it would be easier
23 for him to make it financially?
24 A. That would seem to be consistent with the
25 experience certainly through much of agriculture over the
0066
01 last decade or so.
02 Q. Is it consistent with your understanding of what
03 has been happening in the EAA?
04 A. Yeah. That would also seem -- with a trend
05 towards somewhat fewer and larger operations, I would say
06 so, yes.
07 Q. Now, if the farmer went bankrupt and left
08 farming, would you employ a multiplier against his loss of
09 production and include it as an economic impact?
10 A. That would depend -- that would depend on what
11 the analysis would suggest about whether the land remains
12 in production or goes out of production.
13 Q. If the land would remain in production, then
14 what would you do?
15 A. Okay. Then we might -- in the situation where
16 -- then we would want to look at the organization --
17 basically the production organization before and after the
18 change, that is is the land being taken over by a larger
19 farming operation. And then the major part of the
20 analysis, as I would see it, would be looking then at the
21 expenditure pattern of the larger farming operation versus
22 the smaller one both in terms of how the expenditures are
23 distributed by sector where -- a sector is one of the
24 economist's terms for a group of similar economic units,
25 the household sector, retail sector. Okay. Another
0067
01 consideration being whether there seemed likely to be a
02 difference in the geographical expenditure pattern of the
03 hypothesized smaller independent producer versus the large
04 agribusiness unit that might be taking over the land, that
05 is do these larger units tend to bypass local suppliers
06 and so on. So those would be some of the considerations,
07 some of the factors to be addressed in the analysis.
08 Q. Would you expect if in the EAA a larger
09 agribusiness-type farmer took over one of these farms, an
10 overextended farmer, that the economic impact of that
11 might well be positive for the EAA?
12 A. I guess I would say that that's -- that might be
13 termed an emperical question. That's the sort of thing
14 that we would hope to determine in the course of analysis:
15 What would be the net -- what would be the net effect if,
16 in fact, one of the results of some of these scenarios is
17 increasing concentration of production into fewer and
18 larger units?
19 I would also say that in terms of the
20 literature on this topic, there perhaps is less than a
21 clear consensus about the impacts of the change in farming
22 structure towards fewer and larger units.
23 Q. Have you studied that in the present case?
24 A. That's one of the topics we'll very likely be
25 addressing. We have not -- we have not -- we have only
0068
01 begun analysis in that direction.
02 Q. Okay. You tell me again we. Who is the "we"?
03 Is that you yourself or is it somebody else?
04 A. Myself and the RPC team.
05 Q. But that is something you will be looking into?
06 A. Sure.
07 Q. But you haven't yet?
08 A. Right.
09 (An instrument was here marked as
10 Deposition Exhibit No. 6 for identification.)
11 QUESTIONS BY MR. ROSENBERG:
12 Q. Can you identify that for me, please?
13 A. Yes. Exhibit 6, an article authored by myself
14 and one, two, three, four, five others, including Dr.
15 Steve Murdock at Texas A&M University. This is one of the
16 products of a multiyear study that we undertook back in
17 the mid 1980s basically examining community impacts of the
18 farm crisis, displacement of farmers and the like.
19 Q. Can I have you turn to page 128? That's Table
20 2.
21 A. 128, Table 2. Yes.
22 Q. Can you tell me what that table stands for, what
23 principles come from this table, if any?
24 A. Okay. Yeah. The table that we're addressing
25 summarizes results from two different surveys. We did --
0069
01 we did a survey of a cross-section of producers in North
02 Dakota and in Texas who were at the time of the survey
03 currently operating farms. And so then these individuals
04 represented a broad cross-section in terms of age,
05 experience, size of farm and, among other things, their
06 financial structure, their debt load and so on.
07 Q. The title is "Adjustments Made in the Farm
08 Operation of Former Farmers and Current Farmers
09 Experiencing Varying Levels of Financial Stress (Percent
10 Making Adjustment);" am I right?
11 A. Yeah, uh-huh.
12 Q. Now, tell me what is happening, what this table
13 shows.
14 A. Okay. In general terms, what we were finding
15 here was that those operators who had relatively high debt
16 loads were more likely to be reporting that they had made
17 a number of different kinds of adjustments in their
18 farming operation such as postponed capital purchases.
19 For those producers with no debt, only about -- well,
20 about half of those who had no debt said that they had
21 postponed capital purchases during the -- I believe it was
22 like a -- the past two years sticks in my mind as the
23 relevant time period whereas 89 percent of those who had a
24 debt-to-asset ratio of 70 percent or more reported
25 postponing capital purchases.
0070
01 Okay. Another example, renegotiated loans
02 to reduce principal, only five percent of those who
03 currently reported no debt, but 52 percent of those in the
04 highest debt category.
05 So essentially the overall finding was that
06 -- perhaps not a very surprising one -- was that those who
07 were relatively highly leveraged were more likely to have
08 engaged in quite a variety of farm adjustments that were
09 aimed at either changing their financial structure or
10 reducing their risk.
11 For instance, began using crop insurance,
12 46 percent of those in the highest debt category versus
13 only 16 percent of those with no debt.
14 Q. Okay. Now, tell me if I have it right. Could
15 the table stand for this principle: Farmers will make
16 adjustments when faced with financial crises? Is that
17 what is happening?
18 A. That would be a conclusion that would not be
19 inconsistent with what we were reporting in the table,
20 yes.
21 Q. And what you have done in the table is list a
22 number of the adjustments that farmers, in fact, do make?
23 A. Uh-huh.
24 Q. Am I right?
25 A. Uh-huh.
0071
01 Q. Okay. Now, would you expect that to be a common
02 principle throughout farming that farmers that are faced
03 with crises will make adjustments, and these are common
04 adjustments to make?
05 A. Yeah. I would agree with that statement.
06 Farmers -- perhaps farmers will attempt certainly to make
07 adjustments. Clearly from that -- the group in this table
08 labeled former producers then, former farmers suggest that
09 in some cases, despite -- despite whatever efforts at
10 adjustment, there were a group of our producers who were
11 unable to stay on the farm.
12 Q. Would increased debt be one of those matters
13 that would cause, in your terms, financial stress?
14 A. Increased debt.
15 Q. Or high debt?
16 A. Right. The -- yes. And I might say in our --
17 in our article here and elsewhere, we had generally
18 defined financial stress as including difficulty in
19 meeting debt service obligations, that is difficulty in
20 making principal and interest payments. So, yes,
21 generally those with higher debt loads were more likely to
22 experience financial stress so we find.
23 Q. Well, under your definition then, anybody who
24 has a debt load of any sort could be facing stress in
25 meeting that debt. The higher it is, perhaps the greater
0072
01 the stress, but even if it's lower there would still be
02 some stress. Am I correct in that?
03 A. I guess what we were -- okay. Maybe I didn't --
04 maybe I didn't make myself sufficiently clear in what I
05 said before. We were defining financial stress
06 essentially as inability to meet debt service requirements
07 and so on. But, in any event then, the response would be
08 that generally the finding has been those with -- those
09 with higher -- those with high debt loads were most likely
10 to experience financial stress.
11 Q. You used the term "inability". Can I substitute
12 the term "difficulty"?
13 A. Okay.
14 Q. Would that be fair?
15 A. It's probably not unreasonable, yeah.
16 Q. Okay. Are you familiar with the
17 Polopolous/Richardson model along these lines or the
18 points they looked at in terms of whether the Hazen and
19 Sawyer work was sufficient?
20 A. I have seen brief summaries of the Polopolous
21 and Richardson work only.
22 Q. Okay. One of the items that Polopolous and
23 Richardson criticize Hazen and Sawyer for -- tell me if
24 I am correct -- is debt.
25 A. Okay.
0073
01 Q. Or the absence of debt in her model. Am I
02 right?
03 A. Uh-huh.
04 Q. Now, in your Table 2 here you talk about
05 adjustments, that farmers who have difficulties will make
06 adjustments in order to service debt.
07 A. Uh-huh.
08 Q. Did you see anything in any of the Polopolous/
09 Richardson model or criticism to talk about adjustments
10 that farmers could make to meet debt servicing?
11 A. The answer is no. But, again, I would point out
12 that I have seen only brief summaries of the Polopolous
13 and Richardson work, essentially copies of -- primarily
14 copies of view graphs and the like.
15 Q. Copies of?
16 A. View graphs, transparencies from presentations
17 that were made.
18 Q. Let me ask you this: What is the relevance
19 within the context of the EAA which is largely
20 agribusinesses as you have just told me -- what are the
21 consequences of the shift of debt load where the -- let me
22 withdraw the question. It's not properly constructed
23 here.
24 Does it matter in your view whether the
25 farmers who are in this debt situation or agribusiness or
0074
01 mom and pop or smaller farmers -- let me ask the question
02 a different way.
03 Wouldn't agribusiness be better equipped to
04 meet financial stress points as opposed to a smaller or
05 mom and pop farmer?
06 A. Well, the question --
07 Q. Would they have more options open to them, a
08 longer time period to make adjustments?
09 MS. STINSON: Object to form.
10 THE WITNESS: I guess my response would be
11 that -- well, certainly the question is calling for an
12 opinion. It seems to me one might need to know more about
13 the specifics of the organization of either the -- you
14 know, the large agribusiness unit or the independent
15 proprietor farm situation. And one can -- one can point,
16 for instance, to an agribusiness firm as potentially
17 having greater total resources and perhaps having some
18 additional options. Thereby one can also point to how the
19 flexibility of the traditional family farm in American
20 agriculture where the operator and family provide much of
21 the labor and are, to some extent, able to adjust to tough
22 times by voting themselves a lower wage during tough
23 times. So I don't think that -- I don't think that there
24 is a simple yes or no answer that I could support from my
25 knowledge of the literature.
0075
01 QUESTIONS BY MR. ROSENBERG:
02 Q. What kind of additional information would you
03 need?
04 A. I think perhaps for -- for both types of units
05 it would be important to know, for instance, about their
06 overall financial resources, about where the -- for
07 instance, with the agribusiness firm, is the sugar
08 business their only business or is this -- is this just
09 one of their enterprises, are they vertically integrated
10 in one way or another. So these would be -- these would
11 be at least some of the things that I think would be
12 important to know, their cost structure and -- the cost
13 structure, including what costs are -- what costs are
14 deferrable in the short run and that sort of thing.
15 Q. In Exhibit 6 -- look back at your table.
16 Did you use any multipliers to estimate the
17 secondary impacts of farmers going out of business?
18 A. In --
19 Q. In the whole study.
20 A. In the whole -- in the whole study -- in the
21 whole study we did do some of that. And what we -- yeah,
22 kind of along the lines of what I had talked about
23 earlier, assuming that the land is staying in production
24 but that the -- that the mix of expenditures is different
25 with larger farming operations versus smaller ones and
0076
01 what did that mean then for community level impacts and
02 the like.
03 Q. Tell me what the methodology was again. I'm
04 sorry. I'm not fully understanding.
05 A. Okay. We were -- the basic method was an
06 input/output model, not totally -- not unlike the RIMS
07 model. And basically then the approach to the multiplier
08 analysis was assuming that the result of displacement of
09 farm families was that the land stayed in production, that
10 the net effect then was fewer and commensurately larger
11 farm units basically farming the same land. Okay. So the
12 impacts in this case were coming from a change in the mix
13 of expenditures. That is the expenditure pattern for the
14 larger farm unit was somewhat different than that for the
15 smaller farm unit and so on.
16 Q. What did the secondary impact analysis show?
17 A. In general, the secondary impact analysis then
18 indicated -- indicated economic, demographic, public
19 service effects for small farm-dependent communities.
20 That is to say with farm families being displaced, with a
21 substantial segment of those relocating from where they
22 had been living to the state's -- either to the state's
23 larger cities or relocating out of state, this then had --
24 this had ramifications for the retail businesses in these
25 smaller communities where the primary economic base is
0077
01 farming. It also had ramifications for school enrollments
02 and this sort of thing.
03 Q. What specifically was found, though?
04 A. Well, basically that there were substantial
05 negative impacts on the retail businesses in these smaller
06 towns, substantial reductions in school enrollments. One
07 thing that had -- one thing that was important in
08 conditioning a lot of these impacts was the age structure
09 of the farm operators that were leaving farming. That is
10 to say these were predominantly people in their 30s or
11 early 40s. These, of course, tend to be folks who have
12 school-age kids and that sort of thing. So that although
13 a county might be losing only hypothetically five percent
14 of its farm families through this displacement process,
15 this could also -- those families leaving might also
16 represent 15 or 20 percent of the school-age children in
17 the farm population because of the -- because the
18 displacement process was not neutral with respect to age
19 and that sort of thing.
20 Q. If the farm stays in production, taxes would
21 still be on the farm. The succeeding farm may be more
22 productive.
23 A. Another thing that was --
24 Q. Am I correct?
25 A. Well, I guess from the work that we had done --
0078
01 the work we did would not support really a conclusion that
02 the succeeding operation was fundamentally more or less
03 productive. It wouldn't support the conclusion that in
04 those circumstances that we had in that setting the land
05 -- the land was almost always staying in production with
06 the exception of that that went into the government
07 retirement program, but that's kind of a separate issue.
08 Q. If the succeeding farm was a larger farm or
09 larger business or larger entity, why wouldn't there be
10 greater economies of scale and therefore greater
11 productivity?
12 A. Generally speaking, the literature would suggest
13 -- would suggest at least some economies of scale in the
14 -- in the range which we're talking about. I would say,
15 though, that, you know, going back to your question of
16 what impacts did we see, a lot of the -- a lot of the
17 impacts had to do with -- well, farm operator displacement
18 leading to outmigration leading then basically to a
19 depopulation of these -- of these farm-dependent
20 communities.
21 Q. Let me --
22 A. And a migration which was -- migration which was
23 heavily skewed towards younger families in the area so
24 that the effects on some of the public services and so on
25 would be sort of disproportionate.
0079
01 Q. Let me back up for a second.
02 Would you not expect that the succeeding
03 farm that takes over the land of the bankrupt farmer, if
04 it were a larger entity, would be more productive because
05 of the economies of scale?
06 A. Okay. Again, while we haven't had the
07 opportunity to assess that issue from the EAA standpoint
08 in great detail, but generally -- but generally in
09 agriculture one does see the phenomena of economies of
10 scale or economies of size some would say up to at least
11 our larger farming units. And so -- and to the extent
12 then that the resources through some process are -- come
13 to be organized into fewer and larger producing units,
14 this has -- this has generally been associated with lower
15 production costs per unit of output.
16 Q. And greater productivity also?
17 A. Which you -- okay. The two are not necessarily
18 saying the same thing. Well, one way of defining
19 productivity perhaps is output per unit of -- input to
20 output per dollar of cost. Another way -- we need to
21 decide how we're defining productivity.
22 Are we talking about yield per acre or are
23 we talking about production efficiency in terms of cost
24 per unit of output?
25 Q. I don't know if there are two or three of those
0080
01 options there.
02 A. Right.
03 Q. Under all of those options, wouldn't you expect
04 greater productivity because of the economies of scale for
05 the bigger farmer and greater cost efficiency?
06 A. I would say that looking at the EAA specifically
07 that would be -- that would be a question that should be
08 addressed in the analysis per se so that we probably don't
09 have all the -- all the information to draw a conclusion
10 at this point. But generally that -- the conclusion that
11 through much of -- through much of agriculture we do have
12 economies of size at least up to -- through most of the
13 size range of units seems to be supported by the
14 literature, by studies and so on.
15 Q. Let me ask you this. I want to go back slightly
16 to your book, Impact of Growth. I understand the process
17 -- and tell me if I have it right -- is to create a
18 baseline --
19 A. Yes.
20 Q. -- regarding what these 30-year-old farmers
21 would do in North Dakota, how many would leave the farm
22 anyhow. You would create a baseline regarding what the
23 trends were. Then you would add to that baseline
24 something else where you put debt in there, and you would
25 have a baseline without debt and a baseline with debt.
0081
01 Would you do that?
02 A. Well --
03 Q. Because there are some folks that are going to
04 leave the farm anyhow because of one reason or another.
05 It may be that they simply can't be productive with or
06 without debt.
07 A. Let's --
08 MS. STINSON: Object to the form.
09 You can answer if you can. But if you
10 can't --
11 QUESTIONS BY MR. ROSENBERG:
12 Q. Do you want me to reconstruct that for you?
13 A. The general -- let me -- let me agree with your
14 statement that the general approach to an impact
15 assessment is typically to -- first develop a baseline.
16 This is also sometimes described as a projection of the
17 future without the proposed action. Here is what we think
18 the future looks like based on -- based on the past trends
19 and patterns that we see emerging and so on. And then
20 that baseline projection, as it were, serves as a basis
21 for comparison when one does projections of the effect of
22 the project, the action, whatever.
23 Q. Did you do a baseline when you did your study in
24 Exhibit 6?
25 A. Okay. The short answer is no. That was a --
0082
01 Q. Okay.
02 (An instrument was here marked as
03 Deposition Exhibit No. 7 for identification.)
04 QUESTIONS BY MR. ROSENBERG:
05 Q. This is my favorite.
06 A. "Economic Impact of Leafy Spurge."
07 Q. Did you do that study?
08 A. Yes.
09 Q. And what sort of study was that?
10 A. Okay. The objective of the study was to
11 evaluate the economic impact of the infestations of leafy
12 spurge, a perennial weed, on livestock producers and on
13 the rural economy in North Dakota.
14 Q. What was the purpose of the study?
15 A. The purpose -- the purpose was really to be able
16 to provide to policymakers and other interested parties an
17 estimate of how important the leafy spurge problem was in
18 the state. A secondary -- secondary purpose, I guess, was
19 to provide an attempt at quantifying not only the impact
20 to livestock producers but also to quantify how important
21 is this to the rest of the state economy, to retail
22 businesses in farm-dependent communities and the like.
23 Q. Who were you doing the project for? Who
24 commissioned the project?
25 A. The project was commissioned by the U.S.
0083
01 Department of Agriculture, specifically the Animal and
02 Plant Health Inspection Service better known as APHIS,
03 A-P-H-I-S, of USDA. This group has been engaged for a
04 number of years in research on control of leafy spurge as
05 well as other undesirable and noxious plants, animals,
06 screw worm flies and the like.
07 Q. You did that economic study for them?
08 A. Yes.
09 Q. Is this a socioeconomic study?
10 A. I would -- I would term it as -- really as just
11 an economic study. We did not get into many of these
12 other dimensions that we talked about earlier, the
13 population effects, community services and so on.
14 Q. Is that because of what the purpose of what the
15 study was to be used for?
16 A. In part or -- yeah, what the study was to be
17 used for, what people thought, what people felt were the
18 major questions or issues, as it were.
19 Q. Let me ask you about a couple of quotes here.
20 Let me point that out to you so you can follow it. Right
21 here.
22 MS. STINSON: We're on exhibit --
23 QUESTIONS BY MR. ROSENBERG:
24 Q. We're on Exhibit 7.
25 A. You have a different --
0084
01 Q. What do you have there?
02 A. I have "Economic Impact of Leafy Spurge."
03 (At this time there was a brief discussion
04 off the record.)
05 QUESTIONS BY MR. ROSENBERG:
06 Q. We're done with the leafy spurge. I have asked
07 you those questions. My notes got attached to the wrong
08 exhibit. I'll just back up.
09 MR. SAXE: The leafy spurge exhibit was --
10 excuse me.
11 MS. STINSON: Exhibit 7.
12 MR. SAXE: Exhibit 7?
13 MR. ROSENBERG: Right.
14 QUESTIONS BY MR. ROSENBERG:
15 Q. Let me back up, though.
16 You testified -- and tell me if I have it
17 right -- that there may be community impacts without land
18 going out of production?
19 A. Yes.
20 Q. Okay. And there may be these impacts if there
21 is a changing pattern of ownership succession?
22 A. Uh-huh.
23 Q. In this case, small operators would be taken
24 over by agribusiness. Is that true?
25 A. Is what true?
0085
01 Q. I'm just going through your testimony before the
02 break.
03 Is my summary true?
04 A. That that kind of a change in the structure of
05 agriculture ownership and control could have community
06 impacts even if no land leaves production. And, yes, that
07 represents --
08 Q. And is one reason for that because the
09 agribusiness people have different purchasing practices?
10 A. Yes.
11 Q. Different employment practices? Different ways
12 of doing business?
13 A. That could be one factor, yes.
14 Q. Okay. What sort of information would you need in
15 order to complete this assessment for the EAA?
16 A. Okay.
17 MS. STINSON: Excuse me. Objection to
18 form. I ask for clarification.
19 This assessment being?
20 MR. ROSENBERG: The assessment of community
21 impacts without land going out of production. He
22 testified before the break -- and again I just asked him:
23 Could there be community impacts without land going out of
24 production?
25 QUESTIONS BY MR. ROSENBERG:
0086
01 Q. And so my question is: In order to assess these
02 community impacts without land going out of production,
03 what sort of information do you need to make this
04 assessment?
05 MR. ROSENBERG: Do you still have an
06 objection?
07 MS. STINSON: No, not to that last
08 question.
09 QUESTIONS BY MR. ROSENBERG:
10 Q. What sort of information do you need to assess
11 this?
12 A. One would need information about basically --
13 one would need information about the expenditure patterns,
14 labor use and so on by the type of farms that are
15 disappearing from the scene and also the same -- the same
16 kind of information about the kind of farm that we would
17 have after the restructuring so that one could make some
18 assessments about changes in agricultural labor use and
19 also in the pattern of expenditures by the two kinds of
20 farms.
21 Q. Do you have this sort of information now?
22 A. No. That's one of the things that we will be
23 obtaining as part of our analysis.
24 Q. How are you going to obtain that information?
25 A. Okay. Basically from public sources.
0087
01 Q. And what specifically are you going to get from
02 public sources that will enable you to conduct your
03 assessment?
04 A. Okay. Well, basically production practices,
05 expenditure patterns, labor use. Sources that I would
06 think that we would look at would include USDA
07 information, also some of the re