RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

["Bruce-Sean Reshen" <reshen@mindspring.com>]

Robert Paterson's recent comments raise several interesting issues.  The
first issue raised is "Why give a subsidy if the benefits are already
positive?"  The supposition behind such a question is that any positive
benefit to an individual is better than zero benefit, so why subsidize
that individual at all.  The answer (most appropriate to entry level
economics courses) is that the individual has an array of choices each
yielding a certain rate of return.  A rational individual will, all
other things being equal, choose the highest rate of return offered.
(Note that the gross returns may all be thought of as involving a risk
component; in turn, yielding a net risk-weighted rate of return.)  If we
wish to influence the individual to choose what we regard as the
socially optimal choice, then the amount of the subsidy should be the
difference between the individual's highest potential rate of return
minus the rate of return on the activity we wish the individual to
engage in.
For example, if the individual could receive 12% and our socially
optimal activity yields 4%, then we must pay the individual a subsidy of
8% if we want that individual to choose our desired activity.  It is
also true that if the individual's other choice is 2%, then it is
unnecessary to subsidize the individual at all.  In fact, in this second
example It is sophomoric to believe that any time a given return is
positive that it is unnecessary to offer a subsidy.  It is only true in
a totalitarian society where the individual has no other choice
available.

The second issue concerns the writer's assumption that "we" have a
"right" to demand a "payoff" to society commensurate with the amount of
the subsidy.  I agree that on a given project, society (as interpreted,
hopefully, through some democratic decision-making procedure) can demand
that a developer do "good" for society.  I interpret this as meaning the
developer should provide some social benefits equal to the amount of the
subsidy.  However, we realize from the above analysis that the subsidy
is an amount that makes the developer "whole" in terms of the achievable
market rates of return on alternative available projects.  Thus, if we
want the developer to do more, we must further increase the subsidy to
adequately compensate the developer.

The real question is not whether or not to subsidize the developer, but
what is the correct amount of the subsidy, given the developer's
available alternative returns on competing projects.  Society has every
right to be certain that it is not wantonly subsidizing projects beyond
what is necessary to attract the developer to what society deems is a
socially important project.
Bruce-Sean Reshen
p. 203-259-1850
c. 917-757-5925



-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Robert Paterson
Sent: Tuesday, October 10, 2006 4:16 PM
To: lsiegel@cpeo.org; 'Brownfields Internet Forum'
Subject: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

The larger question is what we demand of sites that realize substantial
brownfield subsidy benefit...the payoff to society for the subsidy
should be
on par with the benefits given...if we simply boost a developer's rate
of
return from 18 to 29% how is society served? The opportunity costs of
those
subsidies are not inconsequential...perhaps a better use of foregone
revenue
would be to reduce illiteracy, enhance job training or expand social
work
efforts....perhaps a more refined question is whether we are dealing
with
positive or negative value sites? If it is a positive value site, why
allow
a subsidy at all? 

Of course the whole cost/benefit analysis for the use of public
subsidies
has been trashed in prior studies on land development decision making
(basically non-existent for most cities)...so why should brownfields be
any
different...because we sell it as "sustainable development"

My feeling is we need to establish better benchmarks to get public
subsidies, along the lines of a LEEDs certification process, where
subsidies
are tied to auxiliary benefits to society....we need to make sure its
not
feeding at the "pork barrel" trough...my 2 cents....... 

Bob

Robert G. Paterson
Associate Professor
Co-Director, Center for Sustainable Development
1 University Station B7500
School of Architecture
The University of Texas
Austin TX 78712-1160
512-471-0734
Fax 512-471-0716
rgfp@mail.utexas.edu
 
 
Whatever befalls the earth 
Befalls the sons and daughters 
Of the earth. 
We did not weave the web of life; 
We are merely a strand in it. 
Whatever we do to the web. 
We do it to ourselves. 
 -Chief Seattle (1788-1866) 
Native American (Suquamish leader)
 
The information contained in this e-mail message is intended only for
the
use of the individual or entity named above.
 
Distribution or copying of this communication is prohibited. If you
received
this communication in error, please immediately notify me by telephone
at
the number above, and destroy the message.
 
Thank you.
 
-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Lenny Siegel
Sent: Monday, October 09, 2006 10:15 AM
To: Brownfields Internet Forum
Subject: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

[I expect this issue to come up more and more: Are Brownfields subsidies

for development in general, or are they targeted at properties with 
significant environmentally impairments? - LS]


Allen supports review of $4.5 million tax credit request

By CRAIG McCOOL
Traverse City Record Eagle (MI)
October 8, 2006


PETOSKEY - A state lawmaker said he is "very concerned" that developers 
behind a downtown project cited inaccurate information on an application

worth millions in brownfield tax credits.

Sen. Jason Allen, R-Traverse City, supports a complete review of 
Petoskey Pointe developers' application for a $4.5 million tax credit, 
awarded in June by the Michigan Economic Development Corporation.

"Clearly, it's an oversight issue between the (Department of 
Environmental Quality) and the MEDC. I think it's appropriate for them 
to take full review of the problems that are going on," Allen said.

...

For the entire article, see
http://www.record-eagle.com/2006/oct/08pointe.htm

-- 


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org


_______________________________________________
Brownfields mailing list
Brownfields@list.cpeo.org
http://www.cpeo.org/mailman/listinfo/brownfields
_______________________________________________
Brownfields mailing list
Brownfields@list.cpeo.org
http://www.cpeo.org/mailman/listinfo/brownfields

_______________________________________________
Brownfields mailing list
Brownfields@list.cpeo.org
http://www.cpeo.org/mailman/listinfo/brownfields