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Title: Re: [CPEO-BIF] On Brownfield Subsidies ...
The British approach sounds like it makes sense. The absence of holistic thinking with regard to "smart growth" has held us back, with entrenched bureaucracies whose jurisdictions encompass only one aspect of the problem, vying among themselves in the allocation equation and asserting the myopic view that their particular constituencies should dominate the process.
The subsidy process may serve as an incentive to overcome this insidious parochial particularism. Barry
-----Original Message-----
From: brownfields-bounces@list.cpeo.org <brownfields-bounces@list.cpeo.org>
To: brownfields@list.cpeo.org <brownfields@list.cpeo.org>
Sent: Thu Nov 02 14:54:15 2006
Subject: [CPEO-BIF] On Brownfield Subsidies ...
Well, friends, we're getting there ... we might even gain some consensus
in Boston, and Barry is right about small differences ... and I am
looking forward to our conversation!
Bruce is right ... I am back, and the return is from England, where I've
been working on their 'brownfields' - which are a bit different: any
previously developed land, not necessaily tinged with contamination
concerns. They're pursuing a "triple bottom line" in a lot of their
work, trying to articulate and then meet environmental, social AND
economic objectives on each project. But their logic and approach
involves "regeneration" of AREAS, not just sites, so off-site impacts
are central to their thinking -- and have been to mine for a while, now.
Bruce is also right that most brownfields are in places with populations
of 50,000 or more-- but that does not mean there is not waste (and
wasteful precedents) in smaller settings. More importantly, my comment
on the capacity of local governments to conduct the analyses recommended
in this discussion was underscored by Ignacio -- who has done wonders in
Emeryville, buoyed up by the exceptional property values in the Bay area..
One economic datum that even small municipalities can, and do, track --
because they have to, and often because the records are maintained by
the counties in which they are located -- is the value of the real
estate within their borders. They rely on property taxation for much of
their revenues, so property values are known. But they rarely use that
information to make subsidy decisions, except for those few places that
have applied a Tax Increment Financing or TIF logic to their brownfield
subsidy decisions, whether or not their states have granted formal TIF
powers to localities.
When the economic benefits of the off-site impacts of mitigating highly
visible brownfields are taken into consideration, it is possible that
subsidies are TOO LOW, given the returns from some projects. This
statement presumes that the social equity and environmental impacts of
the project are not so negative as to undermine the purely economic
returns to the public -- other property owners in the neighborhood --
and to the local public coffers.
(I offer this observation about subsidy levels to make clear that I am
not opposed to supporting brownfield redevelopment at all. My concern is
for efficiency in assuring public returns for the expenditure of public
resources on projects driven primarily by the pursuit of private profit
on the part of the developers. So, certainly, Barry's comment that he
and I are not as far apart as my straw men miht have implied is accurate.)
There are very few studies out there that provide any solid data on the
off-site property value impacts of brownfield redevelopments..(The
little evidence I know of, in fact, deals with other contaminated land
reclamations -- RCRA, BRAC, Superfund -- more than with brownfields.) If
we had such data -- and developed ways of measuring related social and
environmental impacts off site -- then we might be able to offer the
smaller municipalities-- those with less than 250,000 populations, let's
say, a set of yardsticks for measuring the returns on projects and thus
for setting maximum subsidy levels.
The actual amount of subsidy should, however, depend not on the returns
to the public but the need to make the developer "whole" with respect to
the risk-adjusted return on investment from the project. Tis would mean,
for example, that the subsidies Ignacio might offer in a hot property
market such as Emeryville in California should be expected to be lower
for a project with the same physical characteristics than would be
necessary somewhere closer to Bruce or Barry -- in depressed old mill
towns in Connecticut or elsewhere in New England. That leaves us with
the problem of determining the appropriate subsidy in a context in which
-- unlike in the United Kingdom -- it is considered inappropriate to ask
a developer to open its books to show the need. We have to change that
information provision climate if we are to use our public resources
efficiently.
A few odd points, responding to comments made by others since my last
rant ...
1. Barry argues that "we should not impose a bureucratic police
procedure that will discourage development..." -- I agree fully, and
never proposed one. Claw-backs can involve little or no uncertainty over
terms, and minimal bureasucracy. The economic development ones I have
seen included conditions such as "show you've met X% of your target job
creation (as target you defined when applying for your subsidized loan)
or the interest rate subsidy on you loan falls by Y for every target
range you failed to attain." Yes, there is market risk here, but no
additional uncertainty.
2. I'm no LEED expert and will not enter into that discussion ... but
the logic of something like te Austin Smart Growth Index is appealing,
assuming it can be mad eusable by lots of other communities, adapted to
their situations and easily operationalized on a spreadsheet with local
data.
The first step down this path, it seems to me, is getitng some handle on
off-site property value impacts from different types of redevelopments
on brownfields of different sizes.
3. Bruce's discussion of a developer competing with other developers to
do a brownfield is an accurate picture of one small subset of
brownfield redevelopments, those for which some local public or
public/private development body has obtained property and is soliciting
a master developer to remediate and redevelop. In a rarer case,
developers may be competing for sites from major firms that have
mothballed properties or placed conditions on redevelopments. But in
interviews with many brownfield redevelopment specialists dating back to
1999, I have repeatedly heard "we will not do projects on publicly owned
land; the local governments set too many conditions." For may
redevelopers, then, there is no competition to get public approval of
them as te developers, so his description of process is a bit skewed.
4. And, of course, Lenny is right -- there are many different kinds of
subsidies, with different objectives, and means of providing support.
That is why any spreadsheet for calculating appropriate support needs to
include provisions for weighting of different economic, social and
environmental objectives. Certainly, those weights will be determined in
a local political -- that is, not objective -- manner, but the
spreadseet might then help the locality to get the biggest "bang" in its
terms from the brownfield redevelopment resources it commits to
supporting private projects.
... and that is what I believe we all want to see happen ...
Peter
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