Auction and Lease Fees Paid for Public Assets

Policy Paper
Sept. 13, 2002

The nation’s airwaves are the most precious natural resource of the Information Age, highly sought after by a range of commercial firms—from broadcasters to cell phone companies and taxis—that use them as an input to production. The airwaves, more technically called the radio spectrum, are also a publicly owned asset like the navigable waterways, the atmosphere and the mineral wealth under federal land. As with these other public resources, policymakers need to find a way to ensure that citizens receive a fair return from the private use of this public resource.

Where scarce and valuable public assets are made available for commerce—such as the lease rights to extract coal and oil, cut timber and graze herds on public lands—a combination of auctions and lease fees generate billions of dollars in public revenue. Auctions, fees and royalties are typically used to allocate public assets for three reasons. One is to ensure that a scarce resource is assigned to firms that value it most highly. A second reason is that internalizing the opportunity cost of alternative uses gives licensees a financial incentive to use the resources efficiently. A third objective is to provide a fair return to the public, revenue that can either help to reduce other taxes, or which can be earmarked to pay for public investment in the same sector. Here are some examples of lawmakers’ efforts to ensure that citizens receive a fair return on the commercial use of public assets.

For the complete document, please see the attached PDF version below.

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