2007 CPEO Brownfields List Archive

From: LSchnapf@aol.com
Date: 21 Jul 2007 09:08:15 -0000
Reply: cpeo-brownfields
Subject: [CPEO-BIF] Brownfield Subsidies
 
thanks all for your comments. Not being an economist, I was just wondering if there was some formula that can be applied to figure out the taxes that are likely to be thrown off by a project without going into a detailed study if the project results in a "net" benefit to the state as a whole.
 
For example, if we know a developer will be building a $200 million project, arent there multipliers are other metrics that can be used to figure out the jobs created, income taxes generated, sales taxes from raw materials used and sale of condos, property taxes from the development, etc. This might simplistic but at least it presents an estimate of some of the benefits thrown off by a project that can offset the tax credit liability generated by the project.
 
I do not think that the creation of an environmental fund for use by the state to acquire, remediate and then sell property to developers makes any sense. First, the state cannot cleanup as many sites as developers can and certainly not in the time frame required by the market. The Wollman Rink in Central Park was a perfect example. The City tried for years to get it reconstructed. Trump stepped in, hired contractors that were incentivized to complete the work within certain time periods (and without having to do the bidding procedures) and had the rink built in a year. When the state gets involved, the low bids frequently up with sloppy and sometimes tragic results like what happened with the Boston Harbor tunnel.
 
Having done a numerous brownfield sites across the country either representing developers or lenders, my experience is that tax credits are the most efficient and fastest way to redevelop contaminated properties. Loans and grants may be ok for local governments to perform assessments but tax credits work great for developers since they dont have to deal with bureaucratic delays and inadequate staffing, and the developers along with their contractors are incentivized to get the project done quickly so they can then file for their financial benefits.
 
Also, there was a comment about subsidies and trivial level contamination. Regulators and environmental professionals may view some amounts of contamination as trivial but contamination still sends shudders through the development and lending community because of the cost and timing uncertainty. 
 
Despite liability reforms, many developers are still nervous about touching even slightly contaminated properties. I've been involved in situations where I have spent more than a year explaining the benefits of a state brownfield program before a client was willing to pull the trigger on a project. These projects are viewed as risky and high risk money demands high rewards. With construction costs increasing 5-10% a month, any delays can have devastating effects on the rate of return and make projects uneconomical.  
 
And of course, it seems each year we become concerned about more types of chemicals at ever lower levels of exposure. Thus, I would never underestimate the impact of "trivial" amounts of contamination at a site or the incentives needed to convince developers to take a risk on a contaminated property instead of a nice undeveloped parcel or land with a fairly benign use.   
 
Larry       
 
Lawrence Schnapf
55 E.87th Street #8B/8C
New York, NY 10128
212-876-3189 (h)
212-756-2205 (w)
212-593-5955 (f)
203-263-5212 (weekend)
www.environmental-law.net




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