| From: | "Trilling, Barry" <BTrilling@wiggin.com> |
| Date: | 25 Oct 2006 20:35:46 -0000 |
| Reply: | cpeo-brownfields |
| Subject: | RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate |
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Title: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate
Bruce, I agree with Neal Frink to the extent that requiring a "look back" in every transaction would probably kill the desirability of such subsidies from the outset because it would destroy the foreseeability and finality needed to accomplish financial planning, as well as impose a likely unwieldy bureaucratic hand, where "process" usually dominates "product" or "result." On the other hand, I have no similar reservation about random "non-recourse" audits which would provide the information needed to make necessary program adjustments. Barry -----Original Message-----
I think the issue that Bob Paterson and I were emphasizing is that rarely do the public agencies that grant the subsidies incorporate a "look back" requirement. Thus, it becomes difficult to ascertain whether or not the public benefits were appropriately distributed. Bruce-Sean Reshen
-----Original Message-----
Yikes - I have to chime in: A "look-back" with a positive or negative true-up eats away at the benfits of privatizing the effort, reducing the economic risk and reward, not to mention making the process just that much more complex (and less efficient). This is not to say that there is not a responsibility on the part of Grant authorities assess redevelopment proposals on the front end to make sure the risk/reward balance is appropriate. The broad C/B analysis essential to public policy questions -- how to allocate public funds to brownfields redevelopment, public schools, or defense spending --- occurs at the legislative levels where appropriations (funding) decisions are made. Once at the administrative/program level, the C/B analysis is appropriately focused on achieving the policy objectives of the specific program. Here, it seems, the scoring criteria for awarding grant money needs to be reflective of the program's policy objectives. Perhaps the key thing that is missing is post-project assessments to determine the extent to which awarded grants actually deliver the results they projected (e.g., in terms of pollution reduction, jobs, public space/use, or whatever caused the project to be scored out as a "winner"). The review process then needs to feed back into the selection/award criteria for subsequent rounds of funding (if any) and/or back to the legislature to shape either the amount of funding appropriated or the policy objectives sought to be achieved through this particular use of public funds (again, weighed by the legislature against competing uses for public funds). Doesn't the legislation authorizing most of the brownfields grant programs have just such requirement to report back on the benefits realized from the program for just this reason? One can almost visualize the process flow diagram for fine-tuning (or eliminating or expanding) brownfields redevelopment grants (or tax incentives, or other governmental aid) through such an iterative process. Neal Frink
(513) 977-8359
This message is intended only for the use of the individuals or entity to which it is addressed and may contain information that is privileged, confidential, and exempt from disclosure under applicable law. Any unauthorized dissemination, distribution or copying of this communication is strictly prohibited. -----Original Message-----
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.
p.s., My kind thanks to Peter Meyer for helping me to clarify these issues. Bruce-Sean Reshen
-----Original Message-----
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
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