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Academic Case Studies Useful For Answering Questions on the Natural Resource Curse

Botswana has 40% of GDP stemming from diamonds, is landlocked and has a predominantly tropical climate; all factors that by destiny could be assumed to make Botswana susceptible to the resource curse. However, it has actually sustained the highest rate of per capita growth in the world for the last 35 years (Acemoglu et al, 2002).

Acemoglu et al. suggest this economic success reflects the strength of the institutions in the country which have protected the property rights of investors, provided political stability, constrained the elites within a strong political system, and ensured the political participation of a broad cross section of society. Acemoglu et al. argue that the strength of Botswana’s institutions can be explained with reference to the country’s history. Botswana traditionally had tribal institutions which encouraged broad participation and restraint of elites, the peripheral status of Botswana in the British Empire meant that these tribal structures were not totally obliterated by the colonial structures. agriculture essay

It is possible to contrast Botswana, a country with traditional institutions able to overcome the resource curse, with Somalia where the traditional institutions are not sufficient to maintain political stability (Acemoglu et al. 2002).

Again, British colonial rule had limited effect on the structure on the Somali society. Although its economy is dominated by agriculture and so is not subject to the same resource curse as Botswana it illustrates the effect on an economy of having weak institutions, we could possibly assume that conditions in Somalia would be even worse if it did have a natural resource abundance. Somalia’s industrial sector, based on processing agricultural products, has mostly been looted and sold as scrap metal, it has no effective national government, and conflict is common (CIA Factbook). Clapham (1986) writes that Somali society was traditionally nomadic with intense conflict over available resources. These pre-existing tribal foundations to Somali society provide an unsuitable basis for government in which allocation of resources can occur without ethnic and cultural conflict.

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Commercial Casinos Energy Policy Act Tax Opportunity

The Casino Environment

Before the recent economic downturn, commercial casinos collected at least $30 billion in revenues each year from 2005 through 2008.1 During this period, US casino owners built new facilities and expanded the size of their existing facilities. As a result of the economic downturn, new US commercial casino construction has come to a screeching halt and casino operators are now focused on existing facility cost reduction.

The Section 179(D) Tax Provisions

Increasingly, casino operators are taking advantage of the EPAct IRC section 179(D) commercial building energy efficiency tax provisions, which have been extended through 2013. EPAct tax deductions are available for qualifying energy reductions in lighting, HVAC(heating, ventilation, and air conditioning), and building envelope. (Building envelope consists of the building’s foundation, walls, roof, windows, and doors, all of which control the flow of energy between the interior and exterior of the building.)

The Nature of Casino Properties

Commercial casinos often encompass hotel resorts, which offer attractive packages of services for their corporate and family customers. Casinos are particularly suited to EPAct because of their large gaming floors, hotel occupancy rooms, meeting halls, and parking garages. Each of these features typically consumes large square footage and the EPAct benefit has a potential for up to 60 cents per square foot for each of the three measures described above. Some of the smallest commercial casinos are about 50,000 square feet while most American casinos are typically over 100,000 square feet. One of the largest ones, MGM Grand on the Las Vegas strip is almost 2 million square feet. Hotels themselves are the most favored of Section 179 building category. (See “Hotels and Motels Most Favored Energy Policy Act Tax Properties”)

It is common to think of commercial casinos as located in two states Nevada and New Jersey. While it is true that these two states have the largest commercial casino revenues, there are 12 states with commercial casinos in the United States, the other commercial casino states are: Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, Pennsylvania, and South Dakota. Members of the American Gaming Association have publicized some of their commitments to energy reduction. Reporting casinos include Boyd Gaming Corporation, Harrah’s Entertainment, Inc., and MGM Mirage. They have projects which include significant energy savings via cogeneration, ERV(energy recovery ventilation), more efficient HVAC units, replacing incandescent lights with energy efficient lightings, windows with energy efficient day lighting systems, solar thermal storage and numerous other energy saving initiatives.

The underlying rule set to qualify for the Section 179D lighting tax deduction makes casinos and particularly casino hotels the most favored property category for the tax incentive. The rule set requires at least a 25% watts-per-square foot reduction as compared to the 2001 ASHRAE (American Society of Heating Refrigeration and Air Conditioning Engineers) building energy code standard. Full tax deduction is achieved with a 40% watts-per-square foot reduction compared to the ASHRAE 2001 standard. The ASHRAE 2004 hotel/motel building code standard requires 40% wattage reduction, which means that any hotel or motel lighting installation that meets that building code requirement will automatically qualify for the maximum EPAct tax deduction.

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Occupancy Rooms

For most other building categories, the Section 179D tax provisions require compliance with the bi-level switching requirement. The comparison is always based on wired rather than plug-in lighting. Casino hotel occupancy rooms have a major advantage in that they often use plug-in lighting, and because these rooms function as hotel and motel spaces, they are specifically excluded from the tax bi-level switching requirement. Since occupant rooms are usually one of the larger spaces in hotel casinos, casinos are typically able to use energy efficient lighting to generate large EPAct tax deductions for the facility.

Back of the House Spaces

Casinos often have large kitchen, storage, and laundry (so called back of the house) spaces that have historically used T-12 fluorescent lighting. This lighting is so energy inefficient compared to today’s lighting products that it will be illegal to manufacture in the United States after July 1, 2010.4 Once manufacturing of these prior generation lighting products ceases, the cost of replacing these inefficient bulbs will increase. Simply stated, casinos should consider acting now to replace these lighting fixtures to save both energy and lamp replacement costs. The EPAct lighting tax incentive can be used to address the opportunities related to these legally mandated product changes

Ball Rooms, Banquet Rooms and Restaurants

These areas of casinos have historically used designer type lighting that is energy inefficient and often very expensive to maintain and replace. In particular, replacing bulbs and lamps in high ceilings is very costly since expensive mobile hydraulic platform equipment must be rented or purchased to handle the replacements. New lighting products and, in particular, light emitting diode (LED) products, use a fraction of the energy and have a much longer useful life and are now being substituted. The combination of large energy cost reduction, operating cost reductions, utility rebates and EPAct tax deductions can greatly improve the economic payback from these more costly lighting upgrades.

Parking Garages

Many casinos have large adjoining parking garages that can save substantial energy costs and generate large tax deductions by upgrading to energy efficient fixtures. In Notice 2008-40 issued March 7th, 2008, the IRS announced that parking garages are a property class that is specifically entitled to use the EPAct tax deductions. Also, parking garages are excluded from the tax bi-level switching requirement. Please see the September, 2008 International Parking Institute article devoted to parking garages EPAct lighting deduction tax opportunities.5

Slot Machines and Gaming Floors

One of the biggest energy users on hotel gaming floors is slot machines. Although these were early adapters of fluorescent technology, even these energy efficient bulbs normally have to be changed 3 times a year because of 24/7 operating hours. Due to the high labor maintenance costs, casino owners are now transitioning to LED technology in their slot machines. LED’s, while they have higher up front costs, have high energy efficiency and much longer life cycle, offering significant savings in labor and maintenance costs.

HVAC

Casinos because of their typical 24 hour occupancy can achieve significant energy cost savings from energy efficient HVAC systems. In particular, Nevada’s hot climate further makes energy efficient HVAC a very worthwhile investment. Fortunately. Nevada with the highest revenues from casinos has America’s second highest capacity for energy efficiency through renewable geothermal energy.6 Certain categories of very efficient HVAC investments will often qualify for the HVAC EPAct tax incentive including geothermal and thermal storage.

LEED Casinos

We expect to see more casinos obtain LEED status. (See LEED Building Tax Opportunities Article7). In 2008, The Palazzo, Las Vegas Casino became the largest LEED certified building and one of the first certified LEED casinos in the US.8 Casinos and hotels find that certain categories of frequent travelers are very interested in staying in facilities that have clearly demonstrated they are focused on the environment and sustainable design. To become LEED certified, a casino must have a building energy simulation model created by a qualified engineer. Modeling is also required for the EPAct, HVAC and Building Envelope tax deductions. Qualified tax experts that know how to make the adjustments to convert LEED computer models to EPAct tax deduction models can evaluate LEED models and determine whether large tax deductions are probable. For example, a 500,000 square foot LEED casino that qualifies for the maximum EPAct tax deduction will receive an immediate tax deduction of $900,000 =(500,000*$1.80). Casino owners who understand the magnitude of these benefits can use the tax savings to help justify the costs related to achieving LEED status.

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Separate Mortgage Advice

When considering almost any independent mortgage advice, the idea is essential to know the particular mechanism of Usufructuary Home loan. Under this mortgage, typically the mortgagor gives control in the property or even binds himself, either expressly or maybe by implication, to provide such possession to often the mortgagee. The mortgagee will be authorized to keep his possession over the property until the settlement involving the home loan funds can be made and to be given rents and profits accruing from the property and even to correct the very same in lieu of fascination or perhaps in transaction of the loan income or perhaps in both.
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The primary features of usufructuary mortgage is usually the transfer of this control over the mortgaged property into the mortgagee, who also is entitled to obtain income accruing these to and from appropriate the same in direction of the transaction of often the mortgage money and interest thereon. The the liability associated with the mortgagor is hence gradually reduced.

It will be worth mentioning in this consideration that it is not necessarily necessary that a behavior of mortgage must generally consider a particular charge of interest. It is definitely undoubtedly open to typically the parties for you to agree of which the income from the home accruing over a selected period will be ample to hide the principal mainly because well as the curiosity. When it comes to a usufructuary mortgage loan, the mortgagor and typically the mortgagee concur that typically the entire amount scheduled by simply the mortgagor for the mortgagee should be recouped because of the mortgagee by the enjoyment of the usufructs from typically the subject property over the specified period of time. The document may not refer for you to any interest payable in the principal, even though the element of desire and even its rate and income from the property may well have long gone into their own calculation, when the functions determined the number of years during which this mortgagee was authorized to remain in possession of typically the mortgaged property or home for this purpose of reimbursing him or her self.