2006 CPEO Brownfields List Archive

From: "Trilling, Barry" <BTrilling@wiggin.com>
Date: 26 Oct 2006 19:04:53 -0000
Reply: cpeo-brownfields
Subject: RE: [CPEO-BIF] Subsidies
Title: Message
I sense some need here to punish developers willing to take risks on the remediation and development of clearly challenged properties.  Peter's examples of "claw-backs" present false hope.  How many more projects would have been developed without such "claw-backs?"  Defining a general public benefit standard that applies in every case amounts to a one-size-fits-all cookie cutter:  it may have appeal to bean counters and for purely academic purposes
Barry J. Trilling
Wiggin and Dana LLP
400 Atlantic Street
P.O. Box 110325
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, but its a sure way to discourage development.  Go ahead and audit the project afterwards to see what benefits accrued, if any; but don't try to take the money back if some pre-conceived beneficial goal was not attained.  Rather, use some statistically significant number of examples to shape future public policy.  Doing otherwise will apply an inverse pressure on the market, discouraging developers from engaging in brownfield projects.
-----Original Message-----
From: brownfields-bounces@list.cpeo.org [mailto:brownfields-bounces@list.cpeo.org] On Behalf Of Peter B. Meyer
Sent: Thursday, October 26, 2006 2:36 PM
To: Bill Cocose
Cc: 'Brownfields Internet Forum'
Subject: Re: [CPEO-BIF] Subsidies

Bill Cocose's point about assessed values is exceptionally well taken -- but incomplete. There are, indeed, states in which it is very difficult to discharge old tax debts in the case of redevelopment of abandoned, and thus tax delinquent, sites. In such cases, the burden accumulated from those tax obligations can, as he points out, add to the financial burdens carried by a brownfield site.

However, there is another side to the issue. In other instances, especially with warehoused small sites, some of which are held on spec against expected property value increases, the carrying cost for holding a site off the market would be depressed by reassessments to close to zero for un- or under-utilized sites. In Kentucky, for example, some cities were pressing for the right to assess a higher tax rate burden on vacant unused brownfield sites as a means of getting access and forcing sites onto the market. 

The problem really is that there are few, if any formulaic solutions or responses that make sense. The real need is for tailored responses - and for subsidies where needed, but not as automatic grants. The problem, then, is that such responses require data, and we have not been willing to demand information from business applicants requesting public support, while we have always required it from individuals and families. "Need-based assistance" is acceptable as a basis for providing welfare or supplemental security income to the elderly -- why isn't it equally appropriate for developers?

There is also no reason  not to require some sort of assurance of public benefit as a condition of that assistance. To continue the welfare analogy, we evolved "workfare," in which people had to show that they were making an effort to get themselves beyond dependency. We could, logically, require a similar demonstration of environmental or other socially beneficial outcoems from brownfield developers, and we might even penalize them after the fact for nonperformance.

We do not need to look to welfare for an analogous program, but to the economic developemnt experience with "clawbacks." These are conditions imposed on various forms of state support for economic development projects, in which the developers or new firms promise some number or jobs or total payroll in return for some subsidies. States, dating back to the 1970s, monitored development project performances and implemented clawbacks of different sorts, and this did not seem to acutely discourage investment. (A typical clawback might be a higher interest rate on a low interest loan proviced in response to a commitment to generate a specific number of jobs, if the target jobs were not created.)

In the brownfield case, the performance measure could be the site remedial response, and the pollution abatement condition attained. This is an outcome that is more under a developer's control than the number of jobs generated by a company, and one that can be attained regardless of  the unknowns of economic condition or real estate market changes.  Such a clawback provision need thus need not add to the uncertainty prospective developers would face, and could actually save investors time and money by providing community representatives, who might otherwise be a real thorn in brownfield redevelopers' sides, with some assurance about the environmental performance the project will deliver. Reduced community resistance can speed project approvals and safe money.

-- All in call, this is an excellent and important debate to have, and I am very pleased to see that CPEO has hosted the discussion thus far.

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Peter B. Meyer
Professor Emeritus of Urban Policy and Economics
Director, Center for Environmental Policy and Management
School of Urban and Public Affairs
University of Louisville
 - - - - - - - -
Director of Applied Research
Institute of Public leadership and Public Affairs
Northern Kentucky University
- - - - - - - -
Senior Advison, E2 Inc.
- - - - - - - -
President, The E.P. Systems Group, Inc.
- - - - - - - -
Managing Member, Ecofun, LLC
- - - - - - - -
cell         502-435-3240
phone     859-491-9298
fax          859-491-9252
skype      pbmeye02 or 859-648-0373
- - - - - - - -
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Taylor Mill, KY 41015

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