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
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212-756-2205 (w)
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www.environmental-law.net