[CPEO-BIF] Re: Brownfields Digest, Vol 26, Issue 23

[steve.luzkow@abnamro.com]

Peter Meyer points out one opinion that can be agreed upon by most,, that
is "The real need is for tailored responses - and for subsidies where
needed, but not as automatic grants." However, to draw a parallel between
the need based criteria for a welfare recipient versus a developer who has
the financial means to "pick and choose" is not realistic.

Regardless of intent or outcome, the objective will always be the return on
investment, whether economic or reputational.  As life holds no guarantees
on return, the basis of assurances, whether they be the number of jobs or
an environmental benefits, should in turn be the justification of approval
that includes not just hard data but assumptions to address items outside
the control of the developer.  Specifically, developers must be safeguarded
from "clawbacks" resulting from the unforeseen downswing in the market, the
failure to identify the 1,000 drums containing PCBs in the back forty,
inability to obtain revenue for the proposed remediation due to market
conditions, etc.  Such safeguards will, in turn, provide a incentive to
pursue subsidies or grants.   Keep in mind, in order to obtain the subsidy
or grants the developer must conduct studies at an expense and risk not
encountered with greenfields, and can include Phase II expenses, increased
development time for approvals for the various grants or subsidies,
increased environmental consultant and legal fees, obligations to
remediate, etc.   The equation is simple; the rewards (economic or
reputational) must outweigh the expenditures and risks.

This is not a welfare condition.  It is a choice between Brownfields or
Greenfields.  It is a analysis of benefit versus reward (moral or
financial).  It is from this paradigm that the basis of those issuing the
rewards, the clawbacks, and public opinion must place judgement on the
course of the Brownfield process.


Steve Luzkow
Environmental Risk Manager
Mail Code M0900-560
LaSalle Bank Midwest/ ABN AMRO
Phone: 248.822.5739
Fax:      248.637.2686
Mobile: 248.207.1444


                                                                                                                                             
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                      10/26/2006 02:56 PM                                                                                                    
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Today's Topics:

   1. Re: Subsidies (Peter B. Meyer)


----------------------------------------------------------------------

Message: 1
Date: Thu, 26 Oct 2006 14:36:08 -0400
From: "Peter B. Meyer" <pbmeyer@louisville.edu>
Subject: Re: [CPEO-BIF] Subsidies
To: Bill Cocose <wcocose@brownfields.com>
Cc: 'Brownfields Internet Forum' <brownfields@list.cpeo.org>
Message-ID: <45410018.7000400@louisville.edu>
Content-Type: text/plain; charset="us-ascii"

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.

Peter
- - - - - - - -
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
- - - - - - - -
3205 Huntersridge Lane
Taylor Mill, KY 41015
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End of Brownfields Digest, Vol 26, Issue 23
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