14 . 6. 3 INSURANCE AND TAXES In the area of insurance and taxes, this analysis departs from the methodology used in other SPS economic evaluations. That methodology consists of applying factors against capital cost to arrive at an annual cost to account for insurance and taxes. The various SPS concepts are very different in their capital intensiveness, and a single factor applied against the capital cost would not take this into account. With a computerized model it is just as convenient to calculate the insurance and taxes more precisely. The results reflect ground system property insurance and property taxes based on average rates being paid by the utility industry. Federal income taxes were estimated by applying corporate tax rates against the taxable revenue after taking the allowable deductions (depreciation, operating expense, interest, and taxes). In addition, it was assumed that a certain percentage of launches would not successfully place the payload in orbit, and/or the launch vehicle would not be recovered. These losses could conceivably be insured in the same manner as commercial communications satellite launches are insured today. Of course, the underwriter for such insurance would charge a premium based on the long term probability of successful launches such that he would recover the expected payments plus make a profit. Alternately, it can be assumed that the financial burden and risk of a program as large as SPS can only be borne by a joint enterprise arrangement between an aggregate of private companies (possibly including the federal government) and that the resulting joint enterprise would be large enough to absorb launch losses. Theoretically, for a program of the magnitude of SPS with many launches over time where the statistics of infinite processes approximately hold, the only difference between insuring and absorbing launch losses is the profit of the insurance underwriter (there is no tax difference because either losses or insurance premiums are deductible for income tax purposes). The study results reflect the assumption that the company absorbs launch losses. Finally, in the area of insurance, no provision for third party liability insurance has been included for two reasons. First, the definition of a premium is complicated by the fact that the insured event has a low probability with potentially large claims. Second, current rates for commercial satellites seem quite reasonable, and linear extrapolations to SPS yield premium costs that are essentially negligible (less than 1 million dollars).
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