2006 CPEO Brownfields List Archive

From: "Peter B. Meyer" <pbmeyer@louisville.edu>
Date: 2 Nov 2006 20:19:43 -0000
Reply: cpeo-brownfields
Subject: [CPEO-BIF] On Brownfield Subsidies ...
 
Well, friends, we're getting there ... we might even gain some consensus in Boston, and Barry is right about small differences ... and I am looking forward to our conversation!

Bruce is right ... I am back, and the return is from England, where I've been working on their 'brownfields' - which are a bit different: any previously developed land, not necessaily tinged with contamination concerns. They're pursuing a "triple bottom line" in a lot of their work, trying to articulate and then meet environmental, social AND economic objectives on each project. But their logic and approach involves "regeneration" of AREAS, not just sites, so off-site impacts are central to their thinking -- and have been to mine for a while, now.

Bruce is also right that most brownfields are in places with populations of 50,000 or more-- but that does not mean there is not waste (and wasteful precedents) in smaller settings. More importantly, my comment on the capacity of local governments to conduct the analyses recommended in this discussion was underscored by Ignacio -- who has done wonders in Emeryville, buoyed up by the exceptional property values in the Bay area..

One economic datum that even small municipalities can, and do, track -- because they have to, and often because the records are maintained by the counties in which they are located -- is the value of the real estate within their borders. They rely on property taxation for much of their revenues, so property values are known. But they rarely use that information to make subsidy decisions, except for those few places that have applied a Tax Increment Financing or TIF logic to their brownfield subsidy decisions, whether or not their states have granted formal TIF powers to localities.

When the economic benefits of the off-site impacts of mitigating highly visible brownfields are taken into consideration, it is possible that subsidies are TOO LOW, given the returns from some projects. This statement presumes that the social equity and environmental impacts of the project are not so negative as to undermine the purely economic returns to the public -- other property owners in the neighborhood -- and to the local public coffers.

(I offer this observation about subsidy levels to make clear that I am not opposed to supporting brownfield redevelopment at all. My concern is for efficiency in assuring public returns for the expenditure of public resources on projects driven primarily by the pursuit of private profit on the part of the developers. So, certainly, Barry's comment that he and I are not as far apart as my straw men miht have implied is accurate.)

There are very few studies out there that provide any solid data on the off-site property value impacts of brownfield redevelopments..(The little evidence I know of, in fact, deals with other contaminated land reclamations -- RCRA, BRAC, Superfund -- more than with brownfields.) If we had such data -- and developed ways of measuring related social and environmental impacts off site -- then we might be able to offer the smaller municipalities-- those with less than 250,000 populations, let's say, a set of yardsticks for measuring the returns on projects and thus for setting maximum subsidy levels.

The actual amount of subsidy should, however, depend not on the returns to the public but the need to make the developer "whole" with respect to the risk-adjusted return on investment from the project. Tis would mean, for example, that the subsidies Ignacio might offer in a hot property market such as Emeryville in California should be expected to be lower for a project with the same physical characteristics than would be necessary somewhere closer to Bruce or Barry -- in depressed old mill towns in Connecticut or elsewhere in New England. That leaves us with the problem of determining the appropriate subsidy in a context in which -- unlike in the United Kingdom -- it is considered inappropriate to ask a developer to open its books to show the need. We have to change that information provision climate if we are to use our public resources efficiently.

A few odd points, responding to comments made by others since my last rant ...

1. Barry argues that "we should not impose a bureucratic police procedure that will discourage development..." -- I agree fully, and never proposed one. Claw-backs can involve little or no uncertainty over terms, and minimal bureasucracy. The economic development ones I have seen included conditions such as "show you've met X% of your target job creation (as target you defined when applying for your subsidized loan) or the interest rate subsidy on you loan falls by Y for every target range you failed to attain." Yes, there is market risk here, but no additional uncertainty.

2. I'm no LEED expert and will not enter into that discussion ... but the logic of something like te Austin Smart Growth Index is appealing, assuming it can be mad eusable by lots of other communities, adapted to their situations and easily operationalized on a spreadsheet with local data.
The first step down this path, it seems to me, is getitng some handle on off-site property value impacts from different types of redevelopments on brownfields of different sizes.


3. Bruce's discussion of a developer competing with other developers to do a brownfield is an accurate picture of one small subset of brownfield redevelopments, those for which some local public or public/private development body has obtained property and is soliciting a master developer to remediate and redevelop. In a rarer case, developers may be competing for sites from major firms that have mothballed properties or placed conditions on redevelopments. But in interviews with many brownfield redevelopment specialists dating back to 1999, I have repeatedly heard "we will not do projects on publicly owned land; the local governments set too many conditions." For may redevelopers, then, there is no competition to get public approval of them as te developers, so his description of process is a bit skewed.

4. And, of course, Lenny is right -- there are many different kinds of subsidies, with different objectives, and means of providing support. That is why any spreadsheet for calculating appropriate support needs to include provisions for weighting of different economic, social and environmental objectives. Certainly, those weights will be determined in a local political -- that is, not objective -- manner, but the spreadseet might then help the locality to get the biggest "bang" in its terms from the brownfield redevelopment resources it commits to supporting private projects.

... and that is what I believe we all want to see happen ...

Peter
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