2006 CPEO Brownfields List Archive

From: "Bruce-Sean Reshen" <reshen@mindspring.com>
Date: 21 Apr 2006 17:31:29 -0000
Reply: cpeo-brownfields
Subject: RE: [CPEO-BIF] GASB Accounting for Pollution Remediation
 
Title: [CPEO-BIF] Rolling Hills Estates (CA) golf course project abandoned

Peter,

Your questions are good ones, but the answers are not simple.

 

  1. The GASB pronouncement would apply to all levels of government.  However, obtaining full disclosure and transparency is a different matter.  For example, several years ago the FASB issued FAS #143 which deals with disclosure of asset retirement obligations, the most important of which are environmental liabilities.  Most accounting firms choose to interpret the standard as not requiring meaningful disclosure.  Thus, the FASB was forced to issue FIN 47 effective December 2005 in order to emphasize that they meant what they said in FAS #143.

 

      So the real question is how would government accountants choose to interpret the requirements of the

      new GASB?  Most likely we will not know until the GASB issues interpretive guidance on the new

      standard.  My belief is that the intent of the GASB is to require full disclosure and recording of all

      current and future environmental liabilities at all levels of government, federal, state and local.  The

      reality is that such across the board implementation at all levels of government will require enormous

      financial resources and a commensurate upgrade in technical ability not currently available in most

      cities.

 

      You also asked about the impact on the federal deficit.  Remember, the key impact of the new GASB

      Pronouncement is on the balance sheet of government and not the income statement.  Therefore,

      there would be a minimal impact on the current budget (and deficit).  It is only when resources are

      devoted to the remedial activities that we will see a major budgetary impact.  Unfortunately, only states

      and cities will be required under current law to address the information disclosed about environmental

      conditions at sites.  Under current law it is not as certain that the booking and disclosure of

      environmental liabilities would necessarily lead to rapid remediation of such liabilities.  Witness the

      backlog of superfund cleanups which are addressed only as funds become available.

 

  1. I am much more optimistic that the new standards would have a favorable impact on the state and

           local governmental levels.  The recording and disclosure of environmental liabilities at the state and

           local government level would be required independent of the particular state and local brownfields

           programs.  As I have previously stated, the recordation of such liabilities will have an adverse

           impact on state and local governments’ balance sheets, especially vis-à-vis the ratings of credit

           agencies.  The rational response of localities would be to mitigate the balance sheet impacts by

           addressing the environmental liabilities through state and local brownfields programs.  Thus, the new

           GASB requirements will probably result in an acceleration of remedial efforts under these programs in

           order for governments to relieve themselves of these liabilities.

 

           Since state and local governments would be under extreme pressure to transfer these liabilities to

           private sector redevelopers, it is urgent that we prepare ourselves as citizens to be certain that as such

           accelerated redevelopment takes place it does not result in a lessening of standards that would be

           protective of human health and the environment.  I would hope that state and local governments would

           choose to give developers tax and entitlement incentives.  I fear that it would be cheaper for them to

           simply relax environmental standards.

 

           I am not sure that the accounting regulatory community (GASB and FASB) is even aware of the

           environmental social changes that would result from this proposed pronouncement.  We live in

           interesting times.

 

Bruce

 

Bruce-Sean Reshen

CEO

The MGP Group

733 Summer Street – Suite 405

Stamford, CT 06901

p.  203-327-2888, X 18

f.   203-327-2999

c.  917-757-5925

breshen@mgppartners.com

www.theguardiantrust.org

www.mgppartners.com

 

 

-----Original Message-----
From: peter [mailto:petestrauss1@comcast.net]
Sent:
Friday, April 21, 2006 12:26 PM
To: 'Bruce-Sean Reshen'; 'Jim McRitchie'; lsiegel@cpeo.org; 'Brownfields Internet Forum'; 'Beth Grigsby'
Subject: RE: [CPEO-BIF] GASB Accounting for Pollution Remediation

I have two questions for this group:

1. Does the GASB standard apply to federal property, such as DOE sites?  If yes, what would be the effect on overall deficit?  If no, should it?

2. With regards to the Brownfields program, would the GASB standard discourage state and local governments from participating in the program (i.e., would those entities not want to know about potential liabilities)?

Thanks,

 

Peter Strauss

 


From: brownfields-bounces@list.cpeo.org [mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Bruce-Sean Reshen
Sent: Thursday, April 20, 2006 3:43 PM
To: 'Jim McRitchie'; lsiegel@cpeo.org; 'Brownfields Internet Forum'; 'Beth Grigsby'
Subject: RE: [CPEO-BIF] GASB Accounting for Pollution Remediation
Importance: High

 

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 decline.

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.

 


From: brownfields-bounces@list.cpeo.org [mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Jim McRitchie
Sent: Thursday, April 20, 2006 2:41 PM
To: lsiegel@cpeo.org; 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" <bgrigsby@purdue.edu> 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.

http://www.gasb.org/plain-language_documents/pollution_plain-language.pdf

http://www.gasb.org/exp/ed_pollution_remediation_obligations.pdf

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

Norwalk, CT, 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
occur:

   1. Pollution poses an imminent danger to the public or environment and a
government has little or no discretion to avoid fixing the problem

   2. A government has violated a pollution prevention-related permit or
license

   3. A regulator has identified (or evidence indicates a regulator will do
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 it will
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
so).

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
www.gasb.org.

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 director@gasb.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
765.494.9928
cell: 317.430.6514

 


From: brownfields-bounces@list.cpeo.org 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 Hills Estates
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
http://www.dailybreeze.com/news/articles/2664211.html

--


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


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