SUBSIDIZED LOAN PROGRAM ECONOMIC ASSESSMENT: A Potential Policy Solution for North Carolina's Dry Cleaning Industry

Abstract

In 1997, the North Carolina (NC) government established the Dry Cleaning Solvent Cleanup Act (DSCA) to minimize the negative health impacts that result from the use of the toxic solvent perchloroethylene (or perc) in the dry cleaning industry (DCI). Since then, the understanding of the long-term risk of DCI perc use to human, environmental and economic health has evolved. The phase out of DCI perc use in NC dry cleaning now has demonstrated value. This study uses discounted cash flow (DCF) analysis to evaluate a subsidized loan program that would encourage the phase out of the use of perc by NC dry cleaners. It incorporates two higher economic value gains of a perc phase out into the analysis, the decrease of real estate and public health costs. In addition, this study takes an interdisciplinary approach – combining research findings and methods from the fields of toxicology, law, finance and economics – to provide further recommendations on how to drive productive DCI regulatory change in North Carolina. The analysis results support two key findings. First, the net benefit of phasing out perc equipment is in North Carolina’s economic interest. Second, the net gain of a phase out is sufficient to finance a program to subsidize dry cleaners to convert to non-perc alternatives. However, the value of a non-perc dry cleaning machine subsidy can only be captured if the implementation process and participation rate are designed and carried out effectively.