I believe Beth Grimsby’s comment is
in error. Not only would the proposed new GASB standard not retard the
redevelopment of brownfields, its impact may be to accelerate redevelopment of
sites in the hands of governmental units.
First, it is important to state that this
proposed standard would not impact private redevelopment efforts all. The
impact would be confined to sites either actually or figuratively owned by
governments. “Actual” ownership clearly refers to sites
legally owned by the local, state or federal government. Under these
circumstances the government would responsible for all remedial costs and any 3rd
party costs. When I speak of “figurative” ownership, I am
referring to those sites where the governmental unit has, in the absence of a viable
private sector PRP, the responsibility to remediate the site in order to
protect human health and the environmental. The government might also
have responsibility under health and safety codes to provide medical
assistance, housing costs and emergency financial assistance to 3rd parties
threatened or damaged by the contamination.
In either case, under the proposed GASB
the government would be required to record liabilities for current and future
remedial costs. In addition, government may be required to record obligations
to 3rd parties injured by the contamination. The particular government
would also be required to provide extensive disclosure of the nature and impact
of these obligations in the financial statements.
To the extent that these recorded
liabilities affect the credit position of the governmental unit, it may result
in a downgrading of the government’s bond ratings and future interest
costs. In extreme circumstances it may adversely affect the liquidity and
solvency of the governmental unit.
As governments become aware of the
potential impacts of their “ownership” of direct remediation and 3rd
party environmental liabilities, logic dictates that they will be more, not
less, amenable to working with the private sector to encourage responsible
redevelopment of brownfield sites. Zoning, building and development agencies
of the governmental unit will find it imperative to work cooperatively with potential
private sector redevelopers who will promise to assume those remedial
obligations in exchange for favorable zoning and development decisions.
Thus, the likely impact of the new GASB
pronouncement (when finalized) will be a stepwise change in paradigm.
First, we will observe a downwards adjustment in the financial position of
governmental units with severe brownfields obligations. This will serve
to focus their attention on resolving remediation liabilities in the most
efficient and expeditious manner. Second, we are likely to see these
governments offer incentives and streamline the redevelopment process in order
to entice developers to assume these environmental liabilities. The
ultimate result will be to vastly accelerate the remediation and redevelopment
of these sites.
The writer is acutely aware that there are
two other corollaries of this analysis. First, in the short run there will
be an unfair and socially unproductive impact on poorer communities that were
once home to many derelict industrial sites with severe contamination. It
raises important environmental justice issues to burden these poorer
communities with the impact of this proposed accounting pronouncement.
These communities are most likely to see their balance sheets deteriorate,
their credit ratings plunge and their ability to service their constituencies
The second corollary is that there will be
severe social impacts in the affected communities, exacerbating social tensions
and a sharpening the divergent interests between our core cities and our
expanding suburban locales. It is clear that until the many benefits of
brownfields redevelopment can be realized, there will be a need to support
these communities with state and federal resources.
The writer has been a Certified Public
Accountant for over 20 years, has taught economics as a full time tenured
professor and has spent the greater portion of his career in real estate
development and brownfields activities. The writer’s company
currently managed the Guardian Trust, whose mission is to provide for assured
long term stewardship of sites remediated used risk-based technologies.
email@example.com [mailto:firstname.lastname@example.org] On Behalf Of Jim McRitchie
Sent: Thursday, April 20, 2006
Brownfields Internet Forum; Beth Grigsby
Subject: Re: [CPEO-BIF] GASB
Accounting for Pollution Remediation
How would it be detrimental? Isn't it largely just requiring
disclosure of existing and projected liabilities?
>>> "Grigsby, Beth A" <email@example.com> 4/20/2006
10:57 AM >>>
I would like to solicit imput from stakeholders in Brownfield
Redevelopment about the impact of the proposed accounting standards drafted
by the Government Accounting Standards Board (GASB Accounting for
Pollution Remediation). These proposed accounting standards appear to be
detrimental to the Brownfield initiative and I would welcome opinions from
others on this issue.
NEWS RELEASE 01/31/06
GASB Issues Exposure Draft That Would Put the Cost of Cleaning Up Pollution
on Governments' Financial Statements
New Proposal Identifies Five Key Circumstances Under Which Accounting for
Pollution Remediation is Required
January 31, 2006-The Governmental Accounting Standards Board
(GASB) today issued an Exposure Draft intended to provide guidance and
consistency with respect to the accounting and reporting of obligations and
costs related to pollution remediation. The proposal reflects the Board's
intention to ensure that certain costs and long-term obligations not
specifically addressed by current governmental accounting standards will be
included in financial reports.
The proposed standards build on a Preliminary Views draft that was released
for public comment in March 2005.
Specifically, the proposal sets forth the key circumstances under which a
government would be required to report a liability related to pollution
remediation. According to the proposal, a government would have to estimate
its expected outlays for pollution remediation if any of the following
1. Pollution poses an imminent danger to the public or environment
government has little or no discretion to avoid fixing the problem
2. A government has violated a pollution prevention-related permit
3. A regulator has identified (or evidence indicates a regulator
so) a government as responsible (or potentially responsible) for cleaning up
pollution, or for paying all or some of the cost of the clean up
4. A government is named in a lawsuit (or evidence indicates that
be) to compel it to address the pollution
5. A government begins to clean up pollution or conducts related
remediation activities (or the government legally obligates itself to do
In addition to the liabilities, expenses, and expenditures which would be
estimated using an "expected cash flows" measurement technique and be
reported in the financial statements, the proposed standard would require
governments to disclose information about their pollution clean up efforts
in the notes to the financial statements.
"Today's proposal intends to improve financial reporting by fostering more
transparent and more consistent accounting that encourages comparability,"
said Robert Attmore, Chairman of the GASB. "The proposed standard also
enhances the ability of users to assess a government's obligations by
requiring both earlier reporting of obligations and recognition of
obligations that may not have previously been reported."
The requirements of this proposed Statement would be effective for financial
statements for periods beginning after June 15, 2007.
A copy of the proposal may be downloaded from the GASB's website at
The GASB encourages interested individual and organizations to comment on
this Exposure Drafts. The comment deadline is May 1, 2006. Comment letters
should be submitted electronically to firstname.lastname@example.org or via regular mail
Beth A. Grigsby, LPG
Brownfields Outreach Program Manager
Purdue Center for Regional Development
Burton D. Morgan Center for Entrepreneurship, Room 220
1201 West State Street
West Lafayette, IN 47907-2057
From: email@example.com on behalf of Lenny Siegel
Sent: Thu 4/20/2006 12:02 PM
To: Brownfields Internet Forum
Subject: [CPEO-BIF] Rolling Hills
Estates (CA) golf course project abandoned
Golf course doesn't make the cut in Rolling
With $2.5 million already spent, the developer decides to abandon the
project on the former Palos Verdes Landfill site.
By Nick Green
Daily Breeze (CA)
April 20, 2006
Los Angeles County officials will formally announce
today they have
abandoned plans to build a golf course on the former Palos Verdes
Landfill site in Rolling Hills Estates, the Daily Breeze has learned.
The contentious proposal had incited widespread opposition from local
government officials and community groups.
The announcement comes less than a month after the Daily Breeze reported
a long overdue environmental analysis of the site was in limbo. County
Supervisor Don Knabe made the disclosure Wednesday afternoon to a group
of local mayors attending a meeting of the consortium of county
Sanitation Districts, which operates the landfill site.
For the entire article, see
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St.,
Mountain View, CA
Voice: 650/961-8918 or 650/969-1545
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