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

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

The problem with direct expenditures by public agencies for development
projects is that there is no arms length transaction.  The situation is
very different from the example of a public agency bargaining with a
private developer over the amount of a public subsidy for a project.
When the development is done by the public agency, we do not have the
same checks and balances we do when the agency bargains with the private
developer.  It becomes an incestuous transaction and there is no reason
to presume that the public interest will be protected.  In fact, we
should presume that the public interest will not be protected.

Bruce-Sean Reshen
p. 203-259-1850
c. 917-757-5925

-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Robert Paterson
Sent: Wednesday, October 25, 2006 2:54 PM
To: 'Frink, Neal'; 'Bruce-Sean Reshen'; lsiegel@cpeo.org; 'Brownfields
Internet Forum'
Subject: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

I agree with your call for the classic "feedback loop," that ever
necessary
element of learning from experience that unfortunately is not well done
in
the public sector.  Public agency resistance to performance measurement
has
proven difficult ever since the reinventing government took off in the
1990s.  No one wants a report card, and the public sector doesn't reward
learning from experience very well in practice--so that makes this idea
difficult at best.  Keep in mind, for example, the great "studies" done
by
cities and Rouse Inc on the benefits of "festival marketplace"
projects...Rouse development would present these glowing job creation
numbers to justify massive subsidy packages, of course subsequent
academic
studies showed that most of the attributed long term "job creation" was
a
smoke screen, in point of fact, many Rouse projects simply moved retail
activity from one part of the metro region to another. Only the few
Rouse
projects that had monopoly location advantage really were "true" job
generators...so from a brownfields standpoint--feedback to learn from
experience would be great, but it needs to be more than just "fluff"
numbers
or other such baloney...it would require work by our Environmental
Finance
centers and other academic institutions to put together program
evaluation
efforts that could pass academic standards for quality research.  It
needs
to be more than just checklists and bean counting of fictitious net job
creation, it needs to really measure and evaluate what matters and that
means conducting research with our economists friends that is of high
quality.

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
 

-----Original Message-----
From: Frink, Neal [mailto:NFRINK@DINSLAW.com] 
Sent: Wednesday, October 25, 2006 11:23 AM
To: Bruce-Sean Reshen; Robert Paterson; lsiegel@cpeo.org; Brownfields
Internet Forum
Cc: Frink, Neal
Subject: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

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
Dinsmore & Shohl, LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202

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-----Original Message-----
From: brownfields-bounces@list.cpeo.org
[mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Bruce-Sean
Reshen
Sent: Wednesday, October 25, 2006 11:34 AM
To: 'Robert Paterson'; lsiegel@cpeo.org; 'Brownfields Internet Forum'
Subject: RE: [CPEO-BIF] Petoskey Pointe (MI) tax credit debate

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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