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

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

Bob,

I agree with you that our area of disagreement is narrower than it would
seem.  The fundamental point I was stressing is that subsidies are not
wrong in themselves.  However, unnecessary subsidies are wasteful and
misdirect "social" resources. 

As economists we learn that it is possible to measure market rates of
return at a given time, provided there are other projects in development
at the same time that are unsubsidized.  While precise measurement is
impossible, general ranges of market rates of return are attainable.
The key to the process is that the developer must be willing to "open
his books".  If actual achieved rates of return prove to be well above
the target market rate, then the developer should either return the
subsidy pro rata or provide equivalent social development value.  The
willingness of developers to allow such a "look back", should be an
absolute requirement of the process to protect society.  An interesting
further question is whether society should be willing to further
subsidize a developer who does not achieve the target market rate of
return.  In fairness, if we require a "look back", it should allow
either a positive or negative adjustment.

The key point here is that one should not be outraged by the concept of
subsidies in general.  We both agree that over subsidizing a private
developer is a waste of public resources.  Likewise, I believe that
under subsidizing that same developer makes no sense if we want to
efficiently achieve our social goals (environmental cleanups, jobs,
community revitalization).  Much greater effort needs to be focused on
the design and measurement of appropriate subsidy levels to achieve our
public goals.
 
Bruce

p.s., My kind thanks to Peter Meyer for helping me to clarify these
issues.

Bruce-Sean Reshen
CEO, The MGP Group
733 Summer Street - Suite 405
Stamford, CT 06901
203-327-2888, X18
email: breshen@mgppartners.com
www.mgppartners.com
www.theguardiantrust.org


-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Robert Paterson
Sent: Wednesday, October 25, 2006 10:02 AM
To: 'Bruce-Sean Reshen'; lsiegel@cpeo.org; 'Brownfields Internet Forum'
Subject: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

I don't think we disagree here, IMO based on economic development
incentive
programs across the US, not much "calculation" has gone into "packages"
and
in many cases (e.g., public stadia for example for private use) almost
no
serious B/C analysis with any sophistication is done at all....societal
opportunity costs are real but often not recognized in any meaningful
way as
incentive packages are assembled. Not all brownfield sites need
substantial
public subsidy, and some get too much, which does translate into greater
private profit at public expense (that subsidy might be better used for
other social, economic and environmental programs elsewhere in the
community
with a greater societal return on investment), the question is how do we
do
a better job of assigning incentive packages where they are most needed?
If
others on the list are involved in such packaging, it would be
interesting
to hear what they have to say about "qualifying" sites for incentives
(e.g.,
property tax abatements, TIF financing etc.,) and examples of where the
package was not enough or too much? In their opinion....

Kind regards

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
 
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