 Okay, since I find my agenda, we're off. Yes, so I'm here, and we're going to start. Yeah, because Senator Sorokin and I are supposed to be at the Pro Tem's office, but I don't think we're going. And then the next bill we're doing is his. So we're going to start and walk through this. And Senator, do you want to say anything about this bill? Sure, I am. Peter, you can come on up. It's just for senators that I'm not sure I appreciate indulging me. I just, I'm hoping we can get an overview. The Governor and Commissioner, excuse me, Deputy Secretary Wach announced in December that they're exploring this transportation climate initiative that's sometimes called TCI. He knows everything about it. I know nothing about it other than that. But it is an idea that is crudely parallel to Reggie in the transportation sector and could have an impact on our utilities. Clearly has an impact on the potentially climate. And I end up being handled by the executive branch rightly. So I was just hoping we could understand some of the decision making, some of the principles that they're looking at. You know, are there milestones where they will say yes or no along the way, just kind of that structure just for our curiosity and potentially our work. Assume that the truth, we know nothing and bring us up to speed. Great. For the record, I'm Peter Wach, Deputy Secretary of the Agency of Natural Resources. Thank you for having me in. Transportation Climate Initiative has been going on since 2010. Usually, Justin Johnson falls me around as I do this roadshow and he was the first A&R Deputy Secretary to sign on. He might have been a DC Commissioner when he signed upon the TCI. It has been a group of transportation and energy and environmental officials from each of the states talking about ways in which to reduce greenhouse gas emissions from the transportation sector. The region, the TCI region is every state along the Eastern Sea Ward from Maine to now Virginia, including Pennsylvania, which is so much different from the Treasury. It also includes the District of Columbia as well. So that group has been discussing various policy ideas and doing the research around what it would take to do certain things in the transportation region since 2010. There have been a few steps along the way. Most recent there was a regional listening tour that brought together stakeholders to talk about various potential options. The idea that was coalesced around was to explore what a cap and trade system for transportation might look like, transportation emissions. For reference, we have a cap and trade system for our power production sector. So our utilities operated under a cap and trade system called REGI, Regional Greenhouse Gas Initiative. So we announced in December that the nine states I believe in the District of Columbia would work together to see if we could develop a policy proposal for each state to then review and decide whether or not they wanted to participate. So that's, we get ourselves 12 months to complete that review and then next December the state decides whether it's going to interact. There are many steps along the way and decision points along the way. Cap and trade systems, which I'll go through sort of generally where they are, are somewhat complicated, but they are effective in their efficiency at getting the market to drive behavior in a cost-effective way. So, but there are lots of, lots of points of discussion and we work generally on consensus as you can imagine. Trying to get nine states with lots of different interests engaged and make decisions in meaningful ways is a challenge. And so when I have talked about this with other committees, I just want to make sure everybody's aware that a year of timeline to make these decisions kind of scares the living crap out of me in terms of all the things we have to do. There are issues related to who are we regulating? What level is this happening? Who are, what does the cap look like and how does it decrease over time? What are the market mechanisms in place to make sure that there's not speculation on the market, which drives prices higher than we can sustain all sorts of pieces of play? So, but generally speaking, a cap and trade system is one where the government entities set an initial cap on a mission. So we want no more than a thousand metric ton equivalent of carbon dioxide to be emitted for the transportation center. From the transportation center. Whatever that might be. So this has to, just to do with the transportation center. And then we say over time we wanted to get to 800 in the course of 10 years, whatever that slope is on that graph. The market then responds by buying what we call allowances from government to basically say we think we can reach that goal at this price per ton of carbon. And so then the market sets the overall price for the cost of carbon. And then the cap forces that trajectory to go down over time. So that trajectory forces. So then we get to greenhouse and gas emission directions that we're looking for. And then typically in reggie, those proceeds have been reinvested into programs that help help for monitors achieve the goals that they more easily. So it could result in the revenues being sent on helping people, you know, helping more public transit happen or people get into electric vehicles or any number of things that help make our transportation system more efficient. The way reggie has worked is all of those proceeds we said we have efficiency Vermont already. It's doing what it needs to do from an efficiency perspective, from an electrical efficiency perspective. So the legislature decided to invest those proceeds into thermal efficiency, which are programs that are run through BED, efficiency Vermont and Vermont gas as the efficiency, energy efficiency in terms in the thermal sector. So where we are now is really we're at the sort of forming stage of this process. We have to decide as a group of states how we are going to make decisions, whether we're going to continue to operate in our consensus. Decisions we have to make in order to narrow the field of policy choices. And then how do we engage stakeholders and engage our legislators along the way. There are a lot of potential variables that could go into this and go into our evaluation. We need to limit what some of those are. And we have experience through reggie and other programs to kind of know what levers we want to pull and where we want to set things. But we have to come to agreement on that. And then we need to do some some economic modeling to show what we think the outcomes are going to be and what the effect on prices will be. So people have a general sense of what this might mean for Vermont. And so that we can make informed decisions about whether to participate or not. Because it's not clear at this point without doing this analysis what exactly it will mean for Vermont. You know when we do cap and trade we're talking about utilities. We have some control over utilities. When you talk about transportation you're generally talking about individual people over whom we have less control. And I believe it's been said that that is one of the more elastic sections of people's budgets. So what kind of things are you looking at? So that speaks to exactly the people don't respond to the price. They respond to opportunities to make a decision when they're making a capital purchase to save money on operating and going forward. So you and I when we decide when we're looking for an x vehicle are going to be saying well the price is trending upwards. So I'm going to look for something that's more tool efficient or I'm going to try to get into a vehicle where I can separate that equation all together. That's where the most action takes place and that's where the reinvestment of proceeds and incentives and other things can become incredibly invaluable. Because you get that virtuous cycle piece. Because you're right that we people can cut out some of their driving generally but not very much of it. And we generally see more people over as prices go up slowly over time they sort of just deal more and complain more than we're changing behaviors. I remember the gas crisis when on Saturdays you often saw the commuter car on the parking lot. People were out and then it went over to was the van was in the parking lot on Saturdays and the people were out were out shopping on Saturdays. And we're making changes. So we're and we certainly saw that post Katrina when gas prices went up but people started to make different decisions. But as the prices have generally come back down and stayed relatively low. We're seeing right now the more and more people are going back to crossovers and SUVs and they were when they're buying smaller cars. And it's for the late 2000s. And so there are lots of the sort of automobile market places of a difficult one to take on. And it's all of us. It's all our individual choices. I think that the hard part about what we've created over the past 100 years is we've created a automobile focused society that is where what you drive is a lifestyle choice. And right now there aren't a lot of options in the electric vehicle marketplace to really sort of match what people want to get out of the performance of their vehicle. And so that that is going to be in terms of whether that be an all wheel drive model or a pickup truck or any number of things about what people want. Something we can deal with mud season. Exactly. For instance. Hopefully we've got enough snow that it should be about May by the time we get into mud season. It's true. So yeah. So that's the that there's a you know that it's it is way more complicated than the. And that's for the reason why Reggie started there. There was always the thought that it might expand into other sectors. But our both our transportation and our heating building heating are which are two biggest emissions sectors are. They are we don't change the capital equipment we use to dictate what fuel we can consume very often. So you need to we need to find ways to change the behavior at point of purchase rather than to just have to expect the price of it. So I so I understand in a sort of traditional cabin trade model. Everyone. Falls under all actors. As I understand it to my limited knowledge around what's your time in this industry. And so they're forced to ratchet down emissions and somebody says well I can actually make it down here. This guy's great. I'll buy that credit. So the sort of the regulation is clear and the motivation. And as you understand this framework are all. People who are using transportation subjects to the cats or so the way it hasn't. So that's one of the decision points. That's one of the decision points we have to come to. Because what that point of regulation is because it's really easy with the utilities because they're both the generators and the appliances right. We're all the generators. Yeah. And so where that point of compliance matters. But you can't do it so far. We all can enter the marketplace and decide how many allowance we need. We'd never be able to do that. So the cost to operate that system would be astronomical. Upstream to a wholesaler to the rack to any number of different options of where you could put that point of regulation. And so they can then trade within their peers to who can make the most reductions. Can you give me an example of what I trade? So a car dealer? No. It would be a fuel supplier. So a fuel wholesaler that's sort of not as. It's not even at the gas station. It would be up another sort of tier in the air. They'll work it. So it. I think we need to see what it's going to mean. This is an information gathering period, but we need specifics to work with to know what we're looking at. And it helps to sort of see what each state is comfortable with in that process. So that if we do move forward or pass the step of sort of negotiating out the details, and have negotiation negotiated out the details of many people like it, they can do it. If not, they don't have to. That's a good question about timing. I mean, so the analysis and talking with possible partners, how long does that take? It's going to take most of, I would say, until early to mid fall. And then we have, we're going to have basically have like a two month period of intense negotiation to try to figure out what the outcome, the final outcome is. And in the way we typically do it with Reggie is there are certain proposals that get modeled, certain variables that get modeled so people can see what the price impacts are, what the impact on emissions might be by taking different approaches. And then it gives people something substantive to comment on, rather than just sort of general sort of general commentary. And what I spoke with your colleagues in Senate transportation about was, we'll be at a place where we'll have that to happen kind of late summer, which is not ideal for your timing perspective. But there's no way we're going to get to that before then. If there's a way for me to provide that update in some ways to perform to the community or to some set of the Senate, I'd be happy to do that at that point. We understand that you'll be interested and we understand that you're asking us to sort of stay with this process. At this point, I'm not asking you for a role from you. In some ways, I would ask for you to take a, come back to me, sort of come back to us, sort of a role for please. Alright, so we're thinking about, we'd like to have a role. Yeah, and so the way it's worked, the way it worked already is sort of the administration negotiated lots of pieces and then came back to you to talk about sort of overall authority to run the program. Rulemaking authority to be able to put the specifics in place. And then you decided what to do with the proceeds. So by next January when we're back, this will be pretty... It should be, it should be baked at that point. It looks like it's... Right. Okay. And just for the committee's, that map chair's information, I did ask the Ledge Council to help me understand what we did in the Regi era, which is similar. It was a Douglas administration initiative. We didn't do anything until it was signed and then we were asked, and the legislature did, very quickly actually respond and put into statute different elements that we now think of as Regi. We're in a reactive role, man. I'll certainly defer to Ledge Council, but you have over the past several years put laws and books that encourage us to pursue these items and to go for it and to work on regional solutions to climate crisis. I think they'd be much more effective. I mean, considering the number of cars in Vermont and the number of cars in any of those other states and the density, they're going to have a lot more impact than we are if we all do something like that. We have a massive impact if we do something at the regional level. Yes. And if we do, if we in Vermont did something that was more likely to lower greenhouse gases, would we receive benefits from the other states then? So it's per person? It's all about, it's, so we, we have, the we is a little bit different. If the, if our regulated entities do things that, that are cost-effectively saving money, then, then, and so don't need to buy as many allowances, and therefore are passing on as much price to consumers than we would in that scenario. Compared to the other states. Other states. Right. It's a little bit different than in Regi where, where they're, they're fixed and we know where they are and we know where the power is going. It's a little bit different, but we, so, for instance, in when, when we joined Regi, we argued for and got more sort of a healthy, healthier share of the allowance, the proceeds of the auction than we might get under a different scenario. And so it's always been a relatively good deal for Vermont. What happens in the transportation sector who becomes, you know, business, this is TV, it's, so it's hard to know exactly how that would check out, but we can get the best, the best estimates we can. I know yourself. Very well. You too. All right. It's just very helpful. Yeah. Okay. Encourage him. And yeah. Yeah, get down and see. So are you the lead between the states? I mean the sound side. Yes. Okay. Yes. Now we're still working out schedules. So, yeah. So the, and then so just a little more on timeline. We're actually down in D.C. flying down tomorrow to participate in the first phase meeting since the announcement in December. We've been doing a lot of like work around sort of trying to come up with some of the pieces, but we really need to get in the same room and kind of talk through what are the initial points and what, what is the annoying fruit that we can just decide on now to help that frame up more of the rest of the system. Is the attitude generally positive or? Every step, you know. Yeah. What's it, what's. I would say the, the attitude from all the states that are working on this is, is positive and, you know, but they all want to see the details just as we do too. Right. It sounds potentially effective and potentially cost effective, but we need to see what the economic modeling tell us is likely to happen. And it may go, we may get the results back and see that the prices are higher than we're willing to accept. And that's a place where I think all those things are. They want to see what the details are. And they want to be able to, to see whether it makes sense. So it's not, it's not sort of a, everybody's cautiously optimistic, I guess I would say. The only, I shouldn't know if the only states that are not in, of the group, is Maine, New Hampshire and New York. Maine is coming in, we believe, now that they've changed administrations. New York, New Hampshire had a seat at the table and the discussions, they're, it's unclear what they're doing. New York, New York had a little hiccup right before the announcement, but we do believe they will eventually participate. Thank you. So there may be a change. We've, we've already gotten positive indications that Maine is, while they're not official yet, they're likely to become. Got a new administration that might. Yeah, there's a slightly different feel around it. Okay. Yes, I'm surprised New York isn't. New Hampshire, not so much. New York is not a policy issue. I worked in New York for two or three and a half years. I know exactly what happened. I'm going to let them have their issues and. They'll work it out. And justize them when we need to. Okay. He's still here, possibly. Oh yeah, they're, they're at the table. They're negotiating. We need their expertise. We need their, honestly, their, their issues and proceeds. Yeah. And so. I think we all understand how little snap moves can happen. It never happens here. Sure. I think, I think, I think of Maine. When I think of Maine, I realize they have some refineries there. And are we one of the only states in the. We're not. Discussion without any. I mean, we just don't have that fossil fuel. Yeah. We are, I don't know if we're the only, but there aren't very many that don't the other question. So one of the other major questions is which fuels are covered. It seems fairly obvious to us that's gas and non-road diesel. But what about ports? What about air traffic? Right. Just think of as a kid riding through Newark and New Jersey. Yeah. Right. So. New York and New York. New York and New Jersey is it, you know, if that's included in Bunger and Bunger fuels are included. That's a whole different discussion. And I would imagine that those states are going to feel pretty strongly that if, you know, if it's not the full region, that they're going to have a hard time accepting that because people have choices where they pull it. Yeah. So, yeah. Ports must going to have to be in there in New York and New Jersey and Baltimore, Baltimore, Philadelphia, all of the majors. So all of those are in right now. But they're in, as I describe it, it's a two-gate process. In for the discussion on the policy development. And then you have to decide whether it's something you actually want to do. Okay. And we're in the first gate. Okay. Sounds like a committee can talk about it. Yeah. Sounds okay. Any other questions? Are there any things that we could do to make some inroads? What do we consider it? Bigger picture. Well, I think we're, there are lots of things that we're already working on that are making inroads. I would, I would ask, I would, you know, your transportation committee is doing some interesting work on how do we, how do we work on it? So I don't like to be able to, but also make sure that over time that as we transition to a more electrified transportation system that the transportation system gets funded and making sure that that phases in over time. Because they're not paying the gas tax. They're still riding on the right. Exactly. So there's great stuff happening there. The VW settlement money, the big $18.7 million slug, which is going towards primarily towards vehicle, heavy duty vehicle transformation projects, right? So changing out buses from diesel to electricity and other things. But that nature is going to have a huge transmission on the system. I think the approach that we've taken from the bus flow is to, because there are complications with winter weather driving and how the buses perform relative to that, we have put out for RFP a pilot project for a combination of both transit bus and school bus pilot to better understand that so that we can have the data and the support for, for school districts and for transit fleet managers as they make that transition so it's not just putting out a set of money and sort of money goes where it goes. This we hope to have the data and the support for folks to be able to make that transition when it becomes simply economical on its own. But it's getting closer to that with the amount of money saved on operations and maintenance and fuel and other stuff. Okay. Thank you. Thank you for putting up with our scheduling issues. As we said, it's the first time that's happened. It's crazy. It's not this place where I'm like, attention. Thank you. Thank you. Thank you. Okay. Peter, I think we're going to go with you since Senator Sorokin is missing. There was one sighting. The field trip was late getting back. He came in, hung up his coat and left. And we thought he might be in the meeting that he and I were supposed to have at 1.30, only no one's there. So we're here until notified otherwise. Great. So Peter Griffin, Office of Legislative Council to walk the committee through S8. I was trying to remember, this came to the point in the session where there's a lot of things going on. And I was walking in here and I thought, I think I've talked to these guys about this subject before. And you have not seen this bill before, this language. I did come in earlier in the session and did a short presentation on online travel companies. And that's what it was doing for me. So this is the bill that makes some changes to the definitions in the rooms text that Vermont imposes on the rental of a room. And it creates a category of people called booking agents. And two types of operators are going to fall into this new definition of booking agents. Let's back up for a second, I guess. The room tax is due on the rent collected by an operator of a hotel. So what the changes in this bill do is bring into the definition of operator, booking agents. And booking agents are going to include two groups of people or two businesses primarily. The online travel companies like Expedia collect rent and the short-term rental platforms like VBRO that collect rent. Basically, there's been a compliance problem with the short-term rentals online when small operators or small operators are renting through those platforms. And there was also a problem, if you remember, with the online travel companies about the increment. Companies like Expedia were not remitting the tax on the increment that they collected over the wholesale price of the room. Basically, what this language does is it says anybody who collects rent has to collect and remit the room's tax. So the impact would be that an online travel company like Expedia, they collect the money from the person who makes the reservation. They need to collect and remit the room's tax on the entire map. If you are an internet platform, like a home away, that collects the rent from the person making the reservation, you have to collect and remit the entire room's tax. If you don't collect the rent, if you're somehow just a vehicle, like people can find things, like there's something like Craigslist, or if you're an internet site or an entity that is not collecting the rent, you aren't brought in through the booking engine language. But it's designed basically to bring in those two groups, the online travel companies, in the short-term rental platforms. What about traditional travel agents? So traditional travel agents don't typically collect the rent. They usually set it all up and get a fee, either from the traveler or from the entity. So they wouldn't pay the travel agent if center companies were going to Northeast Kingdom for some kind of special weekend, she pays the travel agent. They don't pay the travel agent the 2000 to cover all expenses eventually in the last weekend. That's my understanding of the traditional... I'm going to go to Alcapulco somewhere. Well, I go to the Kingdom, so... I can't remember. All right. Okay. Let me walk you through the question. The typical arrangement, such as a rental that you make online, and you pay at the hotel, that transaction is entirely taxable. Does, in that situation, is it typical that there's a fee that the hotel pays the list separately? How does the agent, when a transaction is paid for at a hotel, for example, how does that agency get paid? So my expertise in this area is not deep. My understanding is that, and maybe this isn't the question you're asking, one model is that I own a hotel and I have my own website. Is that what you're asking? No. No, I'm not. For example, you might do a rental with Expedia in which you don't pay Expedia or a company like that. Right. You pay at the hotel when you check in, like on bookings.com. You pay, you may pay, I think it's bookings, you want to get it, you pay at the hotel, and you pay whatever the amount is that you charge. Presumably, there is some fee that the booking agency is getting from somewhere, and my question is, do you know where? Do I know where their fee is coming from? I do not. What you're describing, although it's happening online, sounds more like what I understand traditional travel agency arrangement. Exactly. Where someone is making the arrangements and either collecting a fee from you, the traveler, or from the places where you're booked. Yeah, but it's not typically in those situations. It's not connected. You come after a traveler. Right. And the situation you're describing would not be one where the third party making the reservation would be required to collect and admit here. If you showed up at the hotel and paid the bill at the hotel, it would be the hotel's responsibility to collect and admit, even under this language. It's driven by where the money exchange happens. That's essentially, yeah, and that's why this language is designed to try and capture who is being paid the rent in the first instance and not worrying about the secondary transactions between expedients. I don't mean to quite as speedy in particular, but trying not to look at the secondary transactions between the online travel company and the hotel. Maybe they pre-bought the rooms or maybe they have some sort of agreement to pass the cost through automatically. What this language does, it says if you collect the rent, you can collect and admit the rooms tax as well. I mean, the language today is not complicated. There's only a few sections. The definition of operator on the first and second page is a single line for the booking agents. In the definition of rent, a single line that says rent shall include all amounts collected by booking agents except for the tax that's required to be collected under the section. And then it defines a booking agent down the bottom of page two, the top of page three of the major person that facilitates the rental of an occupancy and collects rent for an occupancy and who has the right accessibility or authority with internet transaction or any other means to offer reserve book range for remarket. Distributed broker resale or facilitated occupancy that is subject to the tax under this chapter. The second section simply has kind of a conforming change. Right now, if you're someone who is required to collect and admit the meals tax or the rooms tax, you're supposed to get a license. And the conforming change just makes it clear that booking agent only needs one license. They don't need a separate license for each property that has a rental where they have facilitated. Kind of changes made a few years ago when vending machines were brought into the meals tax. You didn't need a license for every vending machine. You just needed one signature. Senator Soraki, is it your understanding that we're not getting a lot of times the monies that are due to the state and therefore this is why you're proposing this? This is for efficiency. There's two elements and I guess we'll have joint fiscal people in its own focus. They've done analysis on it. One is the commissions are not being the tax on the commissions are not being submitted to the state. And other states have packaged the higher costs of the rental including commissions into the taxable income. So as we were talking about, if you book directly from a hotel and you pay $200, you pay the tax not $200. If you go through a booking agent, they may take out $30. You don't pay the tax and you pay the dollars. So there wasn't an adding crime. Probably the bigger thing in this bill is now what they're doing is the same situation we had with Airbnb where we were able to collect all the taxes on short-term rentals that were booked through Airbnb. Now they're going to be able through this language to collect it on other big platforms. And we had at our committee, we had somebody from Expedia, who owns BRBO, and they said that they finally have brought their platform technology up where they're going to be able to cut the same kind of arrangement with the state of the month at Airbnb. So we should see a significant amount of money because this platform can now be collecting all the taxes on these individual platforms. And they won't be, they will, so the $30 fee that they might charge, that will also be part of the tax now. That's separate. That's through Expedior or booking.com. Yeah. So that's not part of this bill. You're not trying to get it to work. Right. Okay. I have to... You're supposed to go across the line. Yes. Thank you. Okay. You're very popular. We missed our meeting, right? Yeah, we did. Because you weren't there. We thought the pro tem was on your trip. So they'll catch us. Maybe they can catch us on our break. Okay. Other questions? I don't know. I don't know. I think I got a point. We're going to go with the future. Okay. I don't know that he might testify. I think Graham has done a fiscal note. Okay. This was supposed to be our initial walkthrough. But Graham was here. He's gone. He's testified to another committee, which may be what we're going to get into. But we should be able to move this out, I think, pretty quickly. We'll see where it goes. I think that's it. I saw David Mickenburg here. And now he's in Moscow. I see him. You want him now? Yeah. We do. He's lurking around in the halls. Okay. Committee AES 54. That's the cannabis bill. And this bill. Yeah. The film can move it right out. Okay. We're looking for David, the cannabis. Okay. He was just in here. He was just in here and left. Who else? I've been told we've done this bill three times, several times. And that a lot of it is going to be negotiated in the committee of conference. Because it's going to the house when it leaves here. And they have not come to terms with what they really want to do. So we've got some placeholders. And I just need to know who this committee would like to hear from. Mr. Mickenburg. Because it's turning out to be remarkably complicated. And something we're not going to do in two weeks in all probability in any detail. Because we don't know. We don't know the questions to ask. David, come on up. We're back to cannabis. There is a prevention bill being worked on in health and welfare. Which hopefully will combine all of our prevention programs. Drugs, alcohol, cannabis. And see if we can't pool our money and find a more effective way to use it. I haven't seen that yet. No, Senator Lyons is working on it. David Mickenburg on behalf of the Maryland Policy Project. I don't have a deep agenda, but I was here. I offered myself to the chair to answer some questions. I've been working on this issue for about 21 years now. And Vermont, I just want to say a sort of high level Vermont I think has done it the Vermont way with an incremental approach. And has culminated in a bill in S54 which is very consumer focused and reasonable with a regulatory regime in place which tries to protect the consumers and the public from not just sort of the ills of cannabis but importantly the ills of illegal cannabis. So one of the things I just wanted to offer is some thoughts on what is your discussing tax rates. Right now in the bill, it's a 10% excise tax and I just wanted to reflect on how that varies. As you've seen in your charts, it's all over the place in terms of other states. It's very creative I would say. It's all over the country. Washington has a 37% tax rate but there was in 2017, I think 1.3 billion in sales in the state of Washington. To date in Colorado, Colorado is slightly lower but to date since 2014 when their law went into effect there's been $6 billion worth of cannabis sales in the state of Colorado cumulatively and last year was in 1.1 billion dollars. So Senator Brock or Senator Sorrock and somebody had asked that question how do we know that we're undercutting the illicit market? Well there's a clear relationship between how much is being spent in the legal market versus what is being spent in the illicit market and while each state varies in terms of undercutting the illicit market the tax rate is an important component of that. In Colorado I think there was a question about why does the illicit market continue? Well Colorado is surrounded by states which do not have legal cannabis so I think there's flow outside of the borders of Colorado just as much inside. What's the tax percentage in Colorado? It's tax upon tax upon tax but in Colorado it's 15% retail excise and then 15% sales tax with a local option of up to 8%. So yeah and it depends on whether the local option is in place. So that's 30% right on the sale price. Now one thing you have to consider is that the price of cannabis as far as the dry flour is dropping every day. I mean there was talk of an ounce of cannabis being sold both in the legal and illicit markets at around $400 an ounce a few years ago now in Colorado, Oregon, places like that we're looking at $100 per ounce to $80 per ounce. Now for manufactured products that's different. I think the price continues to stay more stable because it's a lot harder to manufacture a product than it is to grow it. So... Added a better price. So really the headline or the one thing I wanted to say is the effect of rating Massachusetts is around 20% depending on whether the local option is put in and I would encourage you all to stay either at or slightly below. Well that's what I say rarely does Vermont have a chance to have a lower tax rate than one of our neighbors but here if you were slightly below in terms of the attractiveness of if people are price conscious it would be helpful on the borders. That's what we do with the price of gas. Yeah we are... Colorado's a big state surrounded by other big states you have to drive a long way. We're surrounded by states I guess New Hampshire's thinking but basically... What's out there? Fox. Oh yeah. There's a hound dog behind him. One day they went by with a beagle behind him and the next thing they know the beagle came back empty Fox. He comes back empty. You're saying in Williamstown, Massachusetts somebody might come up to town or... If you're a little lower they'll come over the border I think we might get some licenses requests from the Connecticut River border as long as New Hampshire is a no but people aren't going to drive from Massachusetts They wouldn't need to. I mean other than wait. Just to put a little additional context in the Northeast Right now on the west coast from the bottom of California to the tip of Alaska and then do you include Canada? Cannabis is legal. All the way through. California, Washington, Oregon, Canada, Alaska. Right now there's six states and many of them in the Northeast Connecticut, Rhode Island, Pennsylvania, New York, Vermont were all very seriously considering moving to attacks in New York. You've been talking about this. Seriously. I mean, you were in that... Those guys were pushing the first medical bills were in terms of, you know, 2008 and there. They came on in 2004. Yeah, in this last election there were governors in Illinois, New Jersey there was an election previously but Rhode Island who were who have either governors who are now just fully supportive of governor's as in the case of Rhode Island who are reluctant and are now fully supportive of cannabis system taxation and regulation of cannabis. But one thing to consider when you're thinking about your tax rate is I know we're not doing this for money. That's not the reason to do this but the extent to which you want to generate funds to do some of the things as you mentioned Senator Lyons working on the prevention bill there may be revenue for that. The bill doesn't contemplate specific items for the revenue but to the extent it goes into the general fund and there's money for that you may want to have that. Well I think what we're struggling with is we don't want to lose money on this. This is a recognition by most states that banning it has not worked that it's there that you can't prohibition doesn't work if people don't think they're doing a bad thing. But we will need to do prevention with kids. We will have okay we're being upstaged by the Fox. Well the sport season. Perfect dealing. Maybe it's the one that was in my backyard. Yeah. Beautiful. We had a den. It's a fortune. Okay. The lady and I just moved to raise the price. Okay. You got a lot of you got a lot of nature. There was an owl out there tearing up a squirrel one day got a lot of attention. Well to the point that you're make that you made to the losing money impact it's you know cannabis exists in Vermont now and the Rand report estimates that 80,000 Vermonters probably excess of that. The question really is who's going to be regulating it is the people who are illicitly selling it that are the ones regulating or is it the regulators that you all but we have to cover the cost of regulation cost of regulation. Yeah. And we know we're going to we know they'll be not paid by kids. Well to that point I know the kids can get it easier than they can get liquor. Well it's not just that in states and say look at the data from the government but but statistics are a thing that can be made one way or another but I saw so many completely at odds I think when we first started looking at this data from Colorado it hasn't had time to chill yet really and figure out what's background and what's you know attributable. One other thing I just want to mention it does get lost I was actually at a conference in November in Las Vegas which was the largest marijuana or cannabis business conference in the world. There was 25,000 people there and there was about a billion dollars of deals that were being done at the time. Now I say that only to say many of those businesses that were being invested in were actually not businesses that ever touched the flour or derivatives of the flour. They were ancillary businesses I met somebody who was a mold maker in Massachusetts and he would make confectionary molds and it's a 60 year old family run business who was there with a booth whose business is exploding now because all over the country he's not selling cannabis he's selling plastic molds which are sold to companies who fill them with cannabis products and stamp on them THC and they'll say in your individualized edibles say 5 milligrams on it whatever you want to put on any type of manufactured product his molds will be able to create that. So there's technology companies that are being created there are soil companies there's insurance products that are being created it was incredible to see the Las Vegas convention center filled with all different types of businesses and many of them had nothing to do with cannabis itself in terms of touching the flour so there's HVAC companies there are scientists there's research there's ancillary businesses and I actually sat through an investors lunch and many of the because you can't list complicated financial transaction but listing on the New York Stock Exchange or a legal product is difficult because they figured out ways to do it but it's difficult but many of the ancillary businesses are now being listed and many of the companies in Canada on the Canadian Stock Exchange are being listed and are being valued in the bill. So I don't think you should lose just it doesn't necessarily impact what you're doing in terms of the tax rate for this bill but ancillary businesses associated with this industry are not insignificant I think it's a really good point because we haven't really talked about that much in here I think it's been in the background but we haven't really talked about it are there I still think we ought to be investing all the money into getting a roadside test because whoever does that is going to make a lot of money yeah there's no shortage of people trying to figure that out but there are Vermont businesses that don't touch the product that are popping up now okay but as you're considering the tax rate I would just say trying to keep it you do whatever you want but trying to keep it I know that Washington has looked at lowering their tax rate just to be able to undercut the illicit market with greater precision I think we can always raise or lower one is easier than the other yes it is it's always easier to lower but this is a sin therefore it's not that difficult to raise the cigarette tax the canvas industry is somewhat unique and there's very few industries that are asking to be taxed you know but they are kind of a unique position I have a feeling that the alcohol companies may have been fine after prohibition would be taxed maybe the case yeah okay questions David? no okay Michelle you're here we got the bill anything we should know that's changed or you want to share your amendment? yeah I heard you might have been changing the local option tax well sure I can come talk about that yeah what are we doing about edibles any tax on edibles or is that our renews on that point? I think Anthea is going to be in to talk to you about that because she's generally covering all the tax stuff back here okay we're ahead of schedule considering we started out with half the committee going on we were just popping in to say hi but so for the record Michelle Childs Office of Legislative Council and I have not prepared something that was a different than I would say so as you know both senate government operations and judiciary were working on the bill simultaneously we might have options to have jurisdiction but there were some provisions in there around the structure of the board that they were taking a look at as well as public records exemptions and things like that and so they did make some recommendations that judiciary had been pulled into their amendment there was one provision that they did change with regard to your committee's jurisdiction you can just grab a chair there's one there behind the coat I'm surprised by it too we're ahead of schedule it's getting towards the end of the session being prepared for everything at all times it feels like yeah we've got to see all those bills they're gonna go out of here if they're going this is what they want out this week so one change that I'm really interested in is that with regard to the local option is that it was in the bill as introduced it was 1% a potential 1% local option if you look at if you have the same version I do but the newest version they don't have a new version we're okay we'll just tell you one concept is senate government operations recommended to judiciary up to two they wanted to give a little more but not require them to go to two and so there was that change did they make any changes and where the tax went? no did they make any changes in the ability of towns to regulate where other than to say yes you can be in our town regulate you can be in our town but not next door to the middle school no I think what they did primarily remember what they had in there and that continues to be is that if towns want to prohibit either cannabis establishments in total or a type of cannabis establishment they would have to put it to a vote if they but that they could not essentially use their inherent authority under existing law that you've given to them through statute to essentially zone them out completely or use those types of mechanisms to ban them and they tinkered around with that particular language it's probably a little hard to talk to you about it without it but they did not change anything they didn't do anything with saying you can be within a thousand feet of the school because I know at least in the city of Montpelier if you're getting a liquor license there are regulations about a few away from churches schools well maybe under the charter we have a charter without as it was pointed out to us on Friday Thursday when the league was here that unless we specifically give the bulk of our towns permission they can't do that so what Montpelier and probably Burlington and places that have a charter that gives them authority over places of visual or alcohol or whatever so you have to say yes or no you can't say yes but not across the street from the middle school that's on our court that's going on I just ask unless that's within the authority that the legislature has granted them level 24 currently there's nothing specifically in this bill that changes a town's ability to regulate things with regard to that sort of thing so they can I think under the provisions they can regulate under their inherent authority again no new authority here they can do things like parking or nuisance control things like that but not there's nothing specifically in here that addresses them okay what the housework that went out there okay questions and we've been told all they did was allow up to a 2% local option we're still at 10 we're still at the 10% sales tax yeah the 10% sales tax or xox, xox, campus sales go to education um and we and the commission will determine the regulatory structure and then set fees that would support that structure they will recommend fees to you and to us and we will set fees and what's the can you write us a timeline yep so for the fee structure so the board would essentially convene this fall so appointments kind of gelling over the summer they would start their work this fall on rulemaking and a number of other things that they're required to report back to the general assembly on one of those things being kind of a roll out for year two because remember the first year that the board's work is really going to be doing the rulemaking for the new commercial establishments for the registry program for the dispensary program for the legislature in January of next year with the proposal for all the different types of fees because part of their rulemaking requirements is there to develop tier structures for all the different types of licensing so just like with cultivators they may decide there's going to be 10 different tiers within the cultivators license and say you know for this size we want it to be this and we think this is an appropriate fee for that with their recommendations for that as well as for what they think they need for year two rule out because year two is when they actually start having because the rules will have been adopted by then and to start having people apply the licenses, they'll start having the fee money come in and they'll start issuing licenses in the fall of 2020 for cultivators first, cultivators and testing lines. And they're getting that front money for appropriations because this sounds intensive and the kind of thing that will need some extracurricular assistance, some expertise Yes, the way that it's structured now is that you have in terms of thinking about the money that's required is you have the five board members they are tagged at a salary of a third of his paracord judge which is around $47,000 per position and then they would hire an executive director and an administrative assistant and so there'll be seven people in the board operating for that first year to do a lot of work and there is not an appropriation in here just yet and as you know the fees would not be coming in until the second fiscal year and the fees support the regulatory structure so that's basically the board will run on the cannabis regulation fund that is supported by the fees so any thing in terms of what people are talking about with prevention and education or enforcement or law enforcement or things like that the idea from the judiciary was that because the tempest tax money is a general fund then those types of things would be dealt with through general fund monies to go off and look at the salary for the board explore that one I think they were differing opinions about whether or not they could have changed the level expertise and professionalism required at $47,000 but they decided not to go to late into that basically they didn't discuss it much no it does concern me where did that number come from well there was a group of us working on the draft I think Thursday but it was always uneasy for me just because I think you know we got to do this right and we did that that is the we are trusting that board to really get the details right and I don't know to me it's not an entry level salary well for the area really expertise you might end up with a lot of retired people who could afford to work for that exactly I can tell you the position I don't know what the position is particularly called but Lindsay Wells who runs the medical program for VCIC under DPS I think her salary is around $72,000 so that would be more like half of a judge spirit court judge right I think spirit court judge around $160,000 I know you guys probably deal with it you guys don't have specific numbers I'm more of a rounder but I can get those specific numbers for you if you'd like but just for context about the program that's running now which is a much smaller program so I'm sorry I know you said so there is not right now an appropriation app it's going to appropriate I understand that but it makes me uncomfortable with an actual I feel like when they get into dealing with the policy without strict guidelines from the people who have been making the policy I think sometimes you want to direct the appropriation I would like to direct them a little bit more than making that open well if the the way I think about it is we the bill ultimately lays out we want five people on the board we want a staffer so that's the outline and then they have to do the and figure out the spend I mean there's not either they change the structure and therefore change the number or the is the 47 isn't it the 47th app well it's in there in the sense that in the statutory provision creating the board with the salary shall be so that's so that does say so JFO I think you can look at that and say here we have these five numbers it's 47 salary plus benefits there's not a specific salary for an AP you know I don't know how you think you hire sure that's going to be more than 47 right and then administrative assistant and how they would those numbers and then come up with that there's a directive in here for buildings and grounds to allocate space I kind of put that as a somewhat of a placeholder just a directive because people can be thinking about well you gotta I don't know if it's through you gotta come up with funding mechanisms if there's ground how that all works but I'm anticipating they will again discuss that across the hall about the costs involved in that and whether or not there needs to be appropriation for allocation of space and gearing them up for IT or whatever resources they need to be able to go and do their there's IT there's yeah well it seems to me that there needs to be a linkage between the amount of the tax and the revenue that needs to be raised and I'm seeing a little gap there between those two subjects because you know if you look at the report by the governor's commission tax revenue should be allocated to fund the administrative programmatic needs of the agencies that would regulate it plus it should generate enough revenue adequately to cover all the costs projected to be needed for education prevention, roadway safety, regulation and enforcement I'm just a little concerned that I'm not knowing whether this is a profit center or not I've heard you say this many times that I wanted to see if others agree with me I think it's very important for us to think of this as two things there is the regulation which involves all the testing all the licensing all of the oversight of having a regulated marketplace and as I understand this bill very clearly says the board you figure out the fees you figure out who we're going to have in terms of 18 producers or 800 producers and figure out the fees necessary to fund the regulation of that and then there is the cost whether it's law enforcement or educational materials and I really think they are separate things and as I've always understood the framework one is funded by the fees that's the regulation and one presumably would be funded by the revenue and I don't know if I've heard you conflate them before maybe you mean to do that or maybe it hasn't been bifurcated that way and I just wonder if you mind if you're bifurcated I do mean to combine them and this is starting to train down the set of tracks and I would like to have a better idea of where it's going and of what the costs because it's not that we can't calculate what these costs would be and I think we should have a good understanding of them as we start talking this is a revenue committee as we start talking about revenues in this committee absolutely but the societal costs are born by society today and so I think it's tricky to me that side is much trickier and much there are many more variables the regulation side doesn't exist today and we are setting it up and again that is conflated here to be a closed system within the licensing structure and so that's the immediate need is to figure out that structure the projecting of the tax revenue based on consumption and then what we want to spend on prevention, education and so forth is down the road you're right the train is leaving but harder to predict and in the out years again we know we've been talking here about a 10% tax as a protection and I don't have a good feeling for that even within the realm of the ballpark of what this is going to cover in terms of costs and I agree with you there may be other reasons why the state would have let to do this based on what's going on now et cetera but it doesn't mean that we shouldn't go into this with our eyes wide open to what we're getting into and that's all it's not that these things are incalculable it's not that they're incalculable at least to a range sure but do you think it's fair to think of those two sort of columns that's fine two columns that don't add it together after being covered by the total income we have the ability to raise or lower the either column we don't know enough yet to set the fees because we don't know what the cost is going to be just a lot of decision points and so we're commissioning the authority to go out and do that work for us and then they will come back and tell us this is what we want to do I think it's going to cost and we will get to say yes, no, or maybe the other thing is the initial tax structure and this is probably the simplest one I've seen looking at all of this but some of those might be looked at as fees 9.25 per ounce of flowers that might be a fee that gets set for the regulation of that the other ones are pretty much sales and gross receipts right, dear my missing excise sales, yeah grams chart that looked at other yeah, that's what I'm looking at we got local, yeah excise sales massachusetts is at about 18% with a local option on top of that Oregon is at 17 nevadas are 25 washington's at 37 plus no, and then 6 on top of that we're at 10 so just to go to balance question earlier about timing is you will have one legislative session mm-hmm to where you could adjust the tax rate prior to there ever being actually any licenses even issued yet for getting sales, you wouldn't see your first retail sales until April of 2021 but if you decided to do maybe a wholesale or tax or something along the lines it wasn't justice rate, excise you could, you have the next year because of the the long roll out time because of setting up the system and going through rulemaking and and also I just wanted to point out just back on the fees on page 9 in section 5 that's where you have the language around the board coming back to you with recommendations on all the different types of fees and so you have that in subsection A and then in subsection B which is at the bottom of page 10 at the same time the board is coming to you and with regards to information on the resources necessary for implementation for the next fiscal year and shall consider utilization of current expertise and resources within state government in cooperation with other state departments and agencies where there's overlap so they're going to be coming to you with the specific build out of positions. So if you think about this is positions and appropriations it's looking at this first this year right but then they'll be coming back to you in junior and saying well we think so we're going to be accepting applications and we ask to meet we're going to be getting this number of applications we need a position to process these applications and then once cultivators are licensed we're going to need a plant health inspector and we're going to recommend you know we're going to recommend that you shift one from we're going to recommend that you create one for us we want to utilize the services of the agriculture laboratory and that's going to be this much cost to them and so they're coming to you with a proposal in January with those costs and hopefully the proposal may be they're going to support those costs so is the idea is that the fees are going to be tagged to supporting all those regulatory costs of what you would be approving in terms of positions now how are we going to this does allow animals right yes okay are we taxing those is the same ten percent excise excise it's cannabis and cannabis products that the tax structure applies to so it would be both are exempt from the six percent sales and use and then both would be subject to the ten percent excise and the up to two percent local option or you can do six percent four percent two percent local option and then we'll go into the sales tax well then we go into the end fund yes well that would be that would really help property tax we're not depending on how much revenue we bring in okay I'm just thinking edibles might be a well this isn't the regulatory section though this is just an excise tax but remember we were hearing about the value added you know think about it so you're ten percent excise tax is added to the cost there so in turn it sort of scales in a sense right it's because it's cost more if you're thinking of it as I don't know what we would measure milligrams or something of THC your tax on the edible is going to be more than per gram whatever right do you understand that I didn't say that very well but I got that the labor et cetera will also be taxed so I think the choice we face is we're going to we could get into the weeds on this he put my foot in it um no pun was actually attacked on that one um I guess we can get into the grass either we could get bogged down forever trying to figure out all the mining details and probably not end up knowing a whole lot more than we know now we can look at other states and say well you know we may be undercutting the black market but so aren't these other states is it Washington that's at 37 that's what he said is thinking about lowering there's okay so 37 is too high other states are looking at 10, 17 something below 20 just keep reading this we can establish as much money as we want to raise from this a percentage and then we can having decided what we would raise would recommend be raised we can decide whether 6% of that number should go into the sales tax kitty that would be our priority to do that and we can recommend whether or not there should be local options which would be a fraction of what we've decided to raise that we would recommend but that would probably be the order which would be most likely logical to do and then appropriations can decide maybe they wanted to go someplace different place we can set the tax rate 10 is low on a national scale 37 is too high but we have some flexibility in there to adjust that rate remembering that when it leaves here it'll go to the other body and then we'd like to get this through the entire process but that's something to think about is look at the charts and think about is 10 the right spot to start because it is even with the syntax no or any tax then to raise it but cigarettes is about the only thing I know probably alcohol you can raise without there being a whole lot of public outcry so we could raise it so think about that and think about where you start well it's a complicated thing but there is further complication and my mind is that the original draft there's cash flow problem the fees don't come in for another year till after the board's been up and running and then that sort of exacerbates until some of the revenue is really matured the draft initially had a way to mitigate that to some degree which was the preferential treatment of the current dispensaries that's been stripped as I understand judiciary so that folks across the hall are going to face a question about this cash flow thing we I think got today that's 58 which is a bill that deals with hemp and CBD products that has fees in it that came out of the senate act that's why so there is potential for us to I think there's some logic to looking at that part of cannabis in terms of some revenue in terms of this cash flow thing I don't have a good sense of the scale there but maybe we will schedule that so we can get an idea well I think that would be fun I have asked folks to help me understand the CBD products subject to sales tax but in fact we consume a very small amount of the CBD products that are made here and so I'd love to figure out a way and I've asked folks to help me at the end and Graham that's why I've chased him out earlier to help me understand is there a way for us to get some kind of tax on folks who are selling CBD on the internet or selling wholesalers that are shipping it out I think that would be a way to look at that side of it maybe we'll mirror that in cannabis in the marijuana side recognizing that all marijuana can only be in Vermont we're a closed system there which is not the case on the CBD but anyway just so you know I can start to poke around a little bit of that as soon as I find my agenda maybe we can sort of person brings up how you phase them in but that's what you decide after you decide you want them three minutes after the run then you go back and do the how you phase it in you don't get that one handed to the other I agree but I think there hasn't happened with both bills so there is some chance to bring it into concert or a morning concert or to have a life that's the hemp bill okay that works I think we've got cannabis and we'll take out the cannabis on Thursday and put in hemp and see if we can get a walk through with that bill and get an idea of what's going on until we can get some folks over here to talk about that okay okay we're on break well just oh well we could stay since Graham's here Graham can do the fiscal note and he's here on 87 so maybe rather than half our break we'll get 15 and get Graham in can I just ask does anybody else care about this salary piece can we let that slide for you I think a prox is going to deal I think we can yeah they'll deal with it I think we could send a note to them saying that we would like to ensure that the salary is high enough to attract the necessary expertise okay what is the now where it was 47 is this for glass right positions no exempt positions there are points there are points okay Graham how long will it take I do need to hear I don't know I don't think it's great no one there's an opinion and benefits the rest of Vermont and it has been suggested that you might help us thank you venture chair members of the committee I know some of you I know some of you then in this chair many times use a role and glad to be back what I would propose to do today is I'll stop anytime you want and we can do all questions if you want or if you don't I'll be glad to walk and go through my spiel here that I prepared I work in the legislative council for about 10 years in the 70s and went over to the public service commission and worked there for 17 years I think it was after that I did some more telecom stuff I was the telecom principal of the national regulatory research institute for a couple of years it's a sort of a think tank for public utilities and then I went into private practice as a consultant and I worked as not so much as a lawyer but mostly as an expert witness in a variety of cases in the District of Columbia public utilities commission some FCC cases for some rural wireless companies and I did a lot of work for a small telco in Nebraska I had a variety of clients the last couple of years I sort of let the consulting coast down to almost nothing but I'm doing other things in my life as a retired guy thank you all my taxpayers very much for my monthly retirement checks and I felt that I heard that there was a lot of telecom sort of turn here I want to just offer to volunteer to be helpful in any way that I can so that's why I'm here I talked to several people about this I've read a lot of recent documents but I warn you that I am basically seven to ten years out of date in terms of any in-depth knowledge of what's happening in Vermont I think I can say there hasn't been a whole lot happening in the last seven or ten years well there's a lot of plans to be looked at in order but EC5 is probably the biggest piece of progress so I would offer that I have sort of two major topics and then a list of suggestions minor suggestions, some of the suggestions at the end if it's agreeable to you I'll go through it that way the two major topics are the universal service fund and and they're obviously closely related but the universal service fund I don't know how interested you are in the history of the fund it was enacted in 1994 I was involved here in that event it was created primarily to fund the U911 program the U911 program still today is the greatest beneficiary of the online universal service fund everybody knows I'm talking about here the finance community I'm not really interested the a lot of things have changed since 1994 there are more payors there are more competitors the technology is different the time we were very concerned about almost exclusive concern was that we were worried that the ability to get landline telephone service at everybody's home was in jeopardy from some recent events in the industry and at the federal level so we needed the insurance to have a mechanism to replace what we're called implicit subsidies built into the rates that everybody paid at the time to replace those with explicit subsidies we didn't actually enact that part of the plan at the time you all waited many more years before you created the first program of that kind but the fund has been in operation since 1994 mainly funding E911 and Lifeline and a couple of other minor programs right now I would say the two biggest changes since 2004 are broadband and wireless both of those are fundamental changes and they need to be I think they require a reconceptualization of the whole concept of the universal service fund you have been granting money to facilitate broadband employment and it seems to be on everybody's mind that I talked with today but it was something that wasn't even imagined in 1994 I mean there was no World Wide Web in 1994 arguably but it's true so one of the things that we undertook at that time was to figure out what the base would be for the universal service fund and Vermont made a somewhat risky decision to apply it to the whole telephone bill not just to the intrastate part for those of you who are sort of regulatory junkies you know that in the beginning of the early part of the 20th century the FCC and the courts mandated that telephone companies be divided into essentially two virtual companies one of which sold local exchange interstate toll and had its own set of costs and its own set of revenues and the other one sold interstate toll and it had its own set of costs and interstate revenues and each had its separate regulator and in the world view of a regulator those things were so fundamentally different that they could never be mixed in any way and therefore many states adopted universal service funds literally universal service funds looked only at its own jurisdiction as the base we went the other way we found a Supreme Court case that sustained the Illinois sales tax statute which had been applied to both interstate and intrastate telecommunications so the Illinois legislature crossed the jurisdiction barrier and said there's a sales tax on telephone bills regulatory jurisdiction doesn't matter for taxes it's on all the bill and the Supreme Court held it in 1989 1994 came along we were here and this legislature said let's rely on the Supreme Court case we'll bit make it on all telephone bills I just want to tell you my opinion that was a wise decision then and it's been vindicated many many times over since because nobody except the most dynamical regulator cares a bit now what's intrastate and what's intrastate the regulations that once were the sort of separate worlds the regulation has mostly fallen into this repair it's gone away and the methods by which anybody who's still measuring this the methods that they use to measure it are suspect and basically using rules of thumb so I think you made the right decision in 1994 I want to ask you to consider there's a new imbalance today that the universal service fund which is charged on telephone bills is being used primarily to pay for broadband and there's no charge on broadband and so I think I would ask you to consider whether a charge on broadband maybe at a lower rate we might want the same revenue or a different amount of revenue but it seems to me unfair arguably that a person who's a telephone customer has to pay for broadband employment especially if you can't get to broadband so anyway that's a suggestion if you did take this course that I'm recommending I think that there would be a likely legal challenge for many people committed to this all regulatory jurisdiction theory and I'd be glad to provide more details but my analysis is that the relevant federal preemption is in the internet tax freedom act which is something that congress has passed and that it allows for this because it's an exception generally the internet tax freedom act prevents the states from taxing internet access but there is one exception for E-911 it's a qualified exemption and it's a qualified exemption for the state universal service fund the uses of the USF for broadband the next topic I'd like to discuss the department has recommended and used a new connectivity mechanism and they've been given a small amount of money for this and they've worked on through two or three rounds of grants and generally it's been costing about $1,500 I guess $2,000 of grant per person served and the only thing I want to say about this is that I think you might want to consider restricting that so that the grants are for better broadband you have a goal of 100 megabits up and down in five years and if you're really serious about that goal you probably don't want to be granting money to companies to be building out DSL which is not capable except under the very shortest and most ideal circumstances providing that standard so unless you have questions about that I'll move on to broadband which is my second topic I'm sort of already in I guess I want to suggest to you that I do have a question about that if I could because I think a lot of us we're thinking very similarly to what you just said about are any investments poultry that they may be in standing broadband it's ridiculous to have public dollars go to stretch DSL the department was saying that they're a little worried about being very strict about the speeds that they would grant money to support just because in a certain cases maybe that would be better than nothing to bring someone DSL if you got nothing right now you might be grateful to get a DSL is it and so we're I'll say for me I'm stuck really understanding that the technology but from your experience do you have a sense of I mean is there anything to that argument or should we just sort of be more disciplined and say look if we're getting public dollars if you're getting public dollars you got to be not investing the whole technology I'm sorry that I can't answer it completely because I think I don't know how serious you are about the hundred hundred goal for five years if what I'm going to say in a minute that is a very that's a stretch goal that you're not on the I don't see you on the path to achieving that and so if you want to re-examine that goal and sort of say well you know the money is for the best the greatest human welfare possible or something like that then the four megabit extension might be just a ticket because the person who doesn't have anything needs something I mean I'll tell you a personal story when I retired from the state about 11 years ago I took a job that allowed me to telecommute and I lived up on East Hill in middle sex and fortunately I was a hundred yards this side of the end of the cable run and so I was able to get great broadband service from Comcast quite adequate to telecommute I could do video conferencing I could do you know send my I was writing papers basically and send them in get edits back no problem a few seconds if I had been 200 yards further up the road I would have had to rent an office or I don't know what I mean it was really important to me to have that quality of broadband that was what I had then was better than DSL and I'm now doing you know video streaming at home and getting 40 megabit service and quite happy with it I always underestimate historically I've been wrong about the future need for broadband I've always thought well you know whatever is now will be fine in five years and I've been wrong again and again and again because it's really the demand has really gone up I don't need to give you more examples but the demand has really gone up and down is still stressful and if you really feel that strongly that you know we're going to be going there and you want to be the first you know state to get that then I think you should you should limit DSL brands but it's really a question of what you think best serve your constituents needs and like I said I've been wrong a lot okay so what I want to suggest to you about broadband is that there's a thing called a network effect and that is if you remember pictures you've probably seen pictures of Times Square in 1890 1,000 telephone lines building up ahead and digs for a population and then 1900,1910,1920 here a legislature started passing and that interconnected things if your company and your company are both selling telephone servers you've got interconnect and handle each other's calls I shouldn't have to buy one if you're on a company A and you're on a company B you shouldn't have to buy an A phone or a B phone you should just have to buy one phone so there was a lot of benefit to the whole country from that interconnection laws that passed and it produced network efficiencies requiring a sharing of information in facilities and interconnection and the internet is a different kind of thing there's nobody selling A phones and B phones you've got to either connect to sell internet you've got to connect to the internet but there's a lot of secrecy and a lot of sort of I'm going to keep my information in my pocket about where my facilities are and what my prices are and that is I think restricting the ability of less where buyers to get good deals and to find the places to transport their credit if you know if you're one of the major carriers of the major national carriers you probably have very good information about what the prevailing card fiber radius or about what the prevailing ethernet radius or the special axis in all these terms in the industry but if you are the director of information services for the state maybe you don't have to like that same level of information so one of the things I'm encouraging is that the state would be more active in collecting information trying to override secrecy claims and publish that information to create something more like an open market the open market idea was really the heart of the 1996 Telecommunications Act of Congress passed in 1996 you may know Major Act passed authorizing mandating local exchange competition prohibiting states from restricting entry in new competitors but in order to make that work when they did away with the regulation and the monopoly they had to have some other method of keeping prices down the way they did it was to create mechanisms for open market there had to be interconnection agreements and they had to be filed with the state commission and some of the bigger carriers had to file standard offers so that the world could read what their prices were information about where the switches were was publicly disclosed where the cables were in so now I understand that's largely sort of fallen away and I think you could get better network effects if you could find ways to restore more elements of the public market to internet protocol especially fiber communications so the competition model I think also had a strategic flaw which was in the cities it worked fine they did away with regulation the costs are low the prices are high new competitors want to come in and skim some of that cream and so if you're in Brooklyn it's great you've got five or six or ten competitors you can buy from they're all renting probably facilities from Verizon at least originally but they're all competing with each other in price and the customer gets a lot of choice that's great when you can support multiple networks because the costs are low and the price is high rural areas, the northeast kingdom the opposite is true customers are far apart the wires and the cables are long it's very difficult to find as you know it's very difficult to find the money to even build the first network much less expect a competitor to come in and only build just on the chance that you might be able to steal some customers so I think that the congress has really underestimated the difficulties in rural areas and I think that also argues why the state needs to be involved and the state is involved of course as a major purchaser and there is the telecommunications authority for a while built fiber now I guess renting that fiber but I think what I want to encourage is an even more aggressive planning function where rather than just talking about what is it that the state is buying and how can we get the transportation agency to better talk to the state police they would go also into the area of where is VTEL's fiber and how can we best use that to support Vermonters I shouldn't pick up VTEL because they're the hero of the day for renting fiber but where is X company's fiber what prices are available at and if they could if the state could somehow interface with the private market more in a way that I describe I think there are also lower costs in the state just like getting the two agencies to talk together we've also had a problem I guess with E911 being not fully reliable when there are storms or backhoe incidents and this is I think partly due to the fact that the state is still denying how I would suggest that you might consider asking E911 to they have right now they have two side-by-side systems they have the old system the telephone system running on traditional telephone switches and beside that the next generation is the protocol and it seems to me that if E911 board would be a little bit more aggressive in moving to IP they could find ways to eliminate some of the unilineability that they had with these so-called remote switches so the problem is that if there's two switches that are connected two telephone switches that are connected and one of them is a so-called remote switch the cable gets cut people on that switch can only call locally they can't make toll calls and E911 calls don't go through apparently from what I've read some of the fire chiefs and police and whatnot have sort of done work around protocols to sort of compensate for this when they're in stand-alone mode but why couldn't they have a failover device that switches a wireless and that happens or into an IP network if there's a fiber an IP fiber nearby so I encourage you to ask this question to the E911 people they come in and do a very interesting drawing of their system and switches and Rube Goldberg could have done as well and they have a new contract and they're going to get more control but after that it got vague I don't want to criticize them, I think they've done some remarkable things that's one of the first states to have an IP overlay and they've also done a text to E911 system that is commendable so they've done a lot of good things I just think that in 25 years into it maybe we should be looking at whether the old part of the network of the system could be improved and apparently from the reading newspaper clippings about isolation of remote switches it can be improved so how would you how would you go about achieving this 100-100 goal of 2024 would be very difficult to achieve on that kind of path I think there are a lot of problems, different types of problems political, legal, administrative one of the political problems is that if you actually somehow came up with money to build fiber let's say through union districts, communication union districts you're going to have political opposition from the providers that already provide broadband whether it be the cable company or the telephone company they're not going to want to see their facilities made obsolete you may have experienced this already administratively I think this is a huge task it's much bigger than I think the DII's current job of consolidating telecommunications purchases within state government because what I'm suggesting is that they would look outside of state government in the interest of citizens not just government buyers but in the interest of expanding broadband to the public and that they would acquire and use information about facilities not owned or rented by state officers I've been talking with Senator Brock a little bit about this before but finding a group or a person to lead such an effort I think would be a real challenge if you were looking for someone you need dedication to a long-term commitment and I think the joint committee looks like you know I think you're the chair from right you certainly step in the right direction I don't think you could accomplish it by yourselves but certainly pressure from that group would be useful you'll need legal resources to do what I'm suggesting the secrecy problem has been getting worse and worse I think and I just I haven't seen anybody willing to stand up and say oh you know you can't tell me that it's secret that that's a fiber out of that pole that I'm looking at I can see that it's fiber it isn't secret so why is it confidential when you're bringing back when the companies make those we've had the GIS people in here to tell us exactly how much they could see on their mapping for that very question I mean do we have to do a drive around and map every place you can see label on a pole it is pretty public it would be nice and I don't know if it's possible legally but it would be nice if the department of public service preparing their plan the telecommunications plan if they could require some disclosure of the location of some of these facilities probably there would be a prevention plan that we'd have to deal with so it would be there's some pain involved in trying to do that but it would be probably worthwhile and I think doing this kind of thing requires a sort of mixture of legal roles that may be uncomfortable partly it's a government agency that's going to be wanting to do this planning and maybe buying the facilities that aren't adequate like the telecommunications department did partly it's going to be a private entity that's going to have to figure out how to move in and buy at the right place at the right time from the best seller and that is a hard project as a former transmit I'm not sure what I would recommend I'm not sure what along with the telecommunications authority when it was shipwrecked or whatever it was put into lawfuls but I think that's an example of the kind of thing that is sort of a hybrid public private entity that's operating utility or like a carrier some state obligations public records disclosure and transparency and that sort of thing there's also a project regarding microcells that probably is what's paying attention to and the department is apparently that you all know that microcell project was limited there were more cells than were installed and then the company failed there were a lot of issues around whether the pricing was right for the things that it had to buy was it paying too much for power was it paying too much for locational information those problems perhaps could have been solved but they went under before they could be solved so I'm encouraged the committee talking with the department keep paying attention to the joint committee with the department about how they're doing a microcell restoration project having those microcells out in the countryside filling in the holes that the private industry has not provided wireless to is an important first step and it can be later built into much more powerful if you're on the pole, you've got electricity you've got broadband connection picking up revenues from carriers that are roaming onto your site you've got a potentially workable business model and you could later upgrade the service to 4G or something like that and it's a foot in the door for providing good quality service to the areas that are without wireless so I'm happy to take questions I have I'm nearly done if you'll be done I have 10 summary suggestions for you if you want to hear them or I'll take questions that would be great so no and I didn't plan on giving it to you but I'll be happy to send it if you email it to Faith she will make sure that we get it sure I'll do that so one, I encourage I said this already I encourage E-911 to migrate away from a service purchase and the time division multiplexing model of TDM is the old telephone protocol and towards a facilities purchase on an IT model two, I would consider lowering the USF rate and broadening the base to apply to broadband three, I would look for ways to help communication union districts and raising capital and interconnecting their existing with existing networks and you might consider encouraging electric utilities to consider having a sort of department of broadband management this is something that's happening where I live now I live in Lee, Massachusetts and some of the hill towns up in the Berkshires are very remote and have had broadband for a long time and desperation they've formed co-ops and they're taking it into their own hands and they're building fiber rings up in the hills with everybody they've found a nearby electric utility Westfield Electric it's willing to come and run it for them because nobody in the town knows how to run a fiber ring but you know the electric utility already has bucket trucks and people who know how electrons flow and that sort of thing so it makes a lot of sense for them it might make sense here too eventually I've asked Fletch Council to take a look at what some other states are doing yeah, Massachusetts Council that might want to contact yeah and somebody that used to be there has talked to me packages they do I talked about strengthening the telecom planning process there are a lot of things I think you can do there but collecting more information making it more public and trying to push for integration between the public provided networks and a skit number five you'll have to read that later number six ensuring the future of state support for telecom facilities is conditioned on the grantee being subject to disclosures of plant location and capacity so if you're going to another round of what we call BTOP funds that the state is going to administer encourage you when you give money to the provider that's going to build that make sure that you can get into it later if the agency transportation wants to use that fiber that isn't being used they should be able to get into it anybody should be able to get into it there's a project called FirstNet I understand I don't really know that much about but it's apparently underway and decisions have been made to pick one particular vendor that's a lot of people I'm happy with and I would suggest you look into better ways to integrate this new money with the communication needs of the state possibly by joint utilization of towers or by requiring some conditions on carrying other people's traffic that may be possible I don't know I encourage you to investigate whether Microsoft is currently owned by the state can be installed and serviced for a future higher quality wireless service number nine encourage you to investigate power backup requirements modern network is very electricity dependent in the old days it was not even worked even during the snowstorm because the voltage came from the central office and the power was out power companies say hey my power is out can't do that anymore it's all electric current from the grid or it's batteries and batteries are really important if especially if you haven't thought about it till the power was out so there should be a lot of discussion about what the expectation is for battery life should people have two hour batteries should they have 24 hour batteries should they have a choice if my DSL and my service depends upon our remote platform down in the corner those little cabinets that don't have anybody in them but they're the size of a refrigerator and they have electronics in them they may have two hour batteries or they may have 24 hour batteries whenever those batteries go out my service dies and I encourage you to investigate dark fiber legal status if there's a lot of overbuilt fiber it makes a lot of sense economically if you're going to put a fiber run in to over build it to put in multiple strands for future use and moreover even for a lot of the fiber that was installed years ago there's an electronic equipment now at your end that greatly multiplies the amount of data that can be pushed through it so there's a lot of overbuilt fiber in the state and Alco has in some of it I don't know personally what Alco's utilization rate is on their capacity and I understand that they're beginning to open it up to some distribution utilities but there's a lot of fiber out there and finding out whether you can require access to it is an important question and that's the end of my presentation I'll be glad to take questions okay thank you and thank you for the chance to come up and talk to you again this kind of took the last three, four weeks and I hope it seemed like a coherent whole because we've just been shooting at it committee granted there's been a lot of talk about using existing power companies telephone poles to transmit fiber to the premises do you have an opinion one way or the other as to whether that's a strategy that makes sense well let me try to split the question if fiber to the premises makes sense and I think that is the best way to achieve your 100-100 goal I think everything else is kind of a little chancey maybe the cable companies can do it in some places maybe the wireless people can do it someday maybe the satellite people can do it someday right now I think fiber is a safe bet but it's expensive it's no more expensive than running copper but nobody's running copper anymore either and nobody I know nobody I know that's exactly what has been run recently fiber is expensive especially if people live a quarter mile from each other and but if you decide you want that then New England is unusual in that we uncharacteristically carry a lot of stuff on poles the rest of the country a lot of it's buried in the mid-west they plowed down at the rocks and it's much more durable here it's on poles and the trees fall and the wind blows it down but we have we have a protocol that is not optimal and the department's plan recognizes this there's a protocol for sharing poles and there's a pricing system and there's a way to go about asking for pole space you ask the pole owner to prepare and you move stuff up and down basically one pole and there's a formula for how much you have to pay and there's some adjustments needed to it but I given the number of rocks that used to be in my land I don't see us plowing it in and if you're going to have fiber it's mostly going to be on the poles is that it's all what's your question is it practical from a cost solution standpoint well I wish I could give you an average cost of installation per mile talk to somebody else anything I once knew about this is old but it's the department has paid I think $1,500 per customer under the new grant program to extend service some of which I assume is fiber some of which is DSL so think about it in the order of $1,000 or $2,000 a customer capital expense and I can't tell you if that's practical you have to decide it's tricky for us trying to learn all this stuff we work for once a year we're very dependent on our department which America currently has 3 or 4 people that sort of work on this topic of that and so the telecom plan that the legislature mandated for that few decades be updated every 10 years has been vexing to this group of people here for not being as robust as we might think it's necessary but it is tough that we I'm assuming we haven't funded an independent contract to do it we kind of lean on the department and just say you're supposed to do this setting us on a timeline which is badly overdue do you have do you share my assessment that's really tough for us to do this kind of planning robust telecom plan document and do you have some suggestions for us how we might get on if you agree that what we've been presented with I think that department's telecom plan has some things in it good innovations that they've never seen before they have better quality broadband maps than the FCC has the FCC averages everything to a census block level and says oh if you have do you have broadband I must have broadband that's the way things look in Washington DC so the department did a lot better than that and they also first time I saw produced a wireless availability in that I understand Corey Chase went around with cell phones I commend that I think that's detail good GIS quality information that helps you make decisions about where for example the Microsoft might logically go I also think that they took a comprehensive and competent review of all the different industries and what the challenges are my personal impression was a little bit more cautious than I would have liked but I do think it was a confident plan I mean I could answer more detail questions about where you're looking for more detail it might be worth your time to review the statute and see whether they did everything you told them to do last time and then add things that you think they should do next time perhaps put it in a slightly different way that if you had to produce the state's telecommunications plan who would you hire if you were looking at an outside party to produce the best plan that we could that perhaps there's a level higher than what we got from the public service department I don't know if I'm really prepared to answer that right now there are certainly consultants that could be acquired to help I don't think you want to ask a contractor to write the plan do you? we're going to assess the plan yeah sure sure to be perfectly honest I have to surprise it I mean it feels though it's a competent plan with some good parts to it yeah maybe I'm not the guy you want to listen to no I think they did what the law asked them to do I think maybe as you said we wanted or want more and we need to look at the law can you just give me an idea of what parts you felt like you were sort of wondering for I think personally I didn't and I would admit I didn't get through the whole thing because I kept writing notes I didn't find anything concrete to me a plan I thought it was a good review I thought it said what we've done but going forward I just had a hard time finding a concrete recommendation I think my impression was that when they found a problem they said you could look at this yes that's exactly what they did if I were you I would interpret that you better look at that I think they were being that's why I said cautious obviously interagency issues that they were trying to finesse and they didn't they didn't want to be too directive to the legislature I think they saw it as a safer course to just say here's an opportunity I think the other thing is we all know that it will take some money to do anything and when you come up with a no tax no fee at least until this year it's pretty hard if you don't have any money you can't have a plan and call us for a lot of money to do something that says to really do this right in a reasonable time frame this is the kind of investment we're going to need I think we saw it as a summary not so much a roadmap I saw you nodding the chair sort of preempted my question were you convinced that to get the kind of coverage we want it's going to need some tax payer dollars or rate payer dollars yes and do you have any idea of what a logical funding source for that money? funding? I like the reminded universal service fund model has a surcharge on the services that are provided through the network the as I said earlier asking broadband to pay and share for building broadband is a fair thing I don't have to run for election unless it's easy for me to say we tried to satellite tax that didn't go very well just because they put runners on the bottom of you TV all day and all night on the question of how do you spend the money what you want to do is you want to make sure that the spending on broadband gets you something that you want you wouldn't otherwise get there and it's hard to do that the FCC has an act of mechanism of auctions where they'll take areas that are underserved and they'll ask companies to tell us in order to serve this area and then they rank them all nationally and they say well we have this much money and so we're going to start at the cheapest per line and we're going to go down to run out of money and then that's the end of the program that's one way to do it you don't want to over pay and when you do pay you want to make sure that the stuff that gets bill is properly available for other network users not just the retail customers of the company that got the grant I don't know if I can say any more detail right now have you seen the administration's plan on veto loans I have not is it a plan to help communication union districts? to help them get started I really like the model of I draw the analogy to roads you wouldn't want UPS owning your town's roads and so the idea that there's some public ownership of the cable makes sense to me I don't think the towns should be union districts unless they're very expert should be necessarily running the services but they should be offering the roadways and cables to somebody that they can trust to run it properly and if they don't like them they can change that but at least the facilities are there so the idea that there would be some financial help to the communication union districts I like that if you were to look at another state based on your experience that does telecommunications planning well is there any place that you would point us to to look at as a model to consult my former business partner before I answer that I will write to the committee what should we have asked you that we failed to we had a great conversation let me run on and on I think I covered everything that I wanted to say so thank you for your patience and it's great to be back and see some of my old friends and some doing how does the cell service on these messages two bars but I'm only two blocks from the central office if I wanted to get DSL I could probably get a stupid DSL I know it feels bad here but I do want to tell you a horror story I did some work out of my own those guys they had ranches out there and they were hundreds and hundreds of acres and those people had US West and US West was sort of infamous as being the company that invested the least in their network and they were they were telling tales about how the equipment in the central office switches, the so-called line cart where the rioters came in were sold that they aren't manufactured anymore and they were buying off eBay when yours broke they would buy one off eBay and put it in and hope it worked and even maybe you restocked the one that didn't work so the next guy that when you call you get my old line cart and I heard stories about these ranchers who their service was down more than it was up and they would have to drive their pickups up to the ridge to make their phone calls daily it would be like half an hour on the ridge to make all my phone calls so we got it bad but nothing like Wyoming okay thanks very much