[CPEO-BIF] at the risk of overstimulating the list on incentive evaluation and subsidies

["Kris Wernstedt" <krisw@vt.edu>]

Bruce,

We have not done studies examining how to determine an optimal subsidy.
Theory suggests this be where the marginal costs of subsidies equal their
marginal benefits, but that's unhelpful at many actual bfield sites, and
perhaps socially or politically indefensible if one can't get a good handle
on the amount and distribution of the social costs and benefits.  Targeting
investment risk reductions through such things as universal liability relief
rather than direct financial support may diminish the need for this
calculation at the project level, although such liability relief obviously
would involve its own set of tradeoffs.

The private developers responding to our survey appeared to put a high value
on liability relief.   For our hypothetical scenarios (these were NOT actual
projects), the value of ironclad relief was 15% (for protection for cleanup
costs) to 20% (for 3rd party protection) of expected project profits, which
works out to be higher than the realistic $ available in many subsidy
packages.  The values of such relief were slightly lower for more
experienced bfields developers.  Also, when we asked developers specifically
about subsidies and the form they could appear in, about 1/4 indicated a
cash preferences, about 1/8 a preference for equivalently valued waivers of
public project fees (such as for water hookups), and the rest indicated cash
subsidies and fee waivers were equally attractive.  

Kris
 
-----Original Message-----
From: Bruce-Sean Reshen [mailto:reshen@mindspring.com] 
Sent: Thursday, October 26, 2006 11:14 AM
To: 'Kris Wernstedt'; brownfields@list.cpeo.org
Subject: RE: [CPEO-BIF] incentive evaluation and subsidies

Kris,

Did any of your studies indicate a preferred methodology for examining the
issue of determining an optimum subsidy amount?  What were developer
preferences in terms of in-kind payments such as liability protection versus
direct subsidy payments?  My experience and analysis lead me to conclude
that developers always prefer direct payments.

I believe what is required to improve our knowledge is a study focused on
the agencies granting the subsidies.  The key questions would be: (A) How do
they determine what the appropriate and fair subsidy should be on a given
project, and (B) What form of subsidy leads to optimal public benefits?
Anyone interested?

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 Kris Wernstedt
Sent: Thursday, October 26, 2006 8:04 AM
To: brownfields@list.cpeo.org
Subject: [CPEO-BIF] incentive evaluation and subsidies

Bob and Gang,

A few years ago, Kate Probst and I helped to put together an EPA-funded
workshop that looked at community impacts from reusing contaminated
properties (www.rff.org/sitereuse).  As part of the workshop, we wrote a
paper that summarized about a dozen "studies" or databases that presented
info on jobs, tax revenues, leveraging, and other impacts from reuse
(http://yosemite.epa.gov/EE/epa/eed.nsf/ffb05b5f4a2cf40985256d2d00740681
/ba2
2be2fe6866d5d85256eaf0053aee9/$FILE/2004-06.pdf).  None of them grappled
fully with the issues you've noted and some certainly were more nice
smelling smoke than rigorous analyses.  

On another EPA-supported project, headed by Peter Meyer, several of us
looked at the subsidy issue that you and Bruce stimulated this nice
discussion with.  Without going into the gory details, we surveyed over 300
hundred private developers about the value of public interventions for
reducing risk--by providing liability protections, for example--as an
alternative to subsidizing returns.
www.nvc.vt.edu/uap/docs/KrisWPubs/1-Wernstedt&Meyer&Alberini_JPAM2006.pd
f
provides a more or less readable academic paper on that study.

Kris

*************************************
Kris Wernstedt
Urban Affairs and Planning
Virginia Polytechnic Institute and State University Alexandria Center
1021 Prince Street, Suite 200
Alexandria, Virginia 22314
703-706-8132 (voice), 703-518-8009 (fax) krisw@vt.edu
*************************************

-----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
 



_______________________________________________
Brownfields mailing list
Brownfields@list.cpeo.org
http://www.cpeo.org/mailman/listinfo/brownfields


_______________________________________________
Brownfields mailing list
Brownfields@list.cpeo.org
http://www.cpeo.org/mailman/listinfo/brownfields