[Fwd: RE: [CPEO-BIF] Brownfield Subsidies]

[Lenny Siegel <lennysiegel@gmail.com>]

Ignacio wrote a few replies to my earlier query. With his permission, I 
am sending one of them out to the list. I think it's useful to our 
current discussion. He warns, however, that this is a simplified, 
incomplete response and reminds us that the New York state tax credit is 
totally different that tax increment financing.

Lenny

Date: 	Sat, 21 Jul 2007
From: 	Ignacio Dayrit <idayrit@ci.emeryville.ca.us>




Fiscal impact analysis is routinely done in large development agreement
projects in CA.  The impacts of the project are estimated based on the
employment, traffic, other environmental impacts, cost of public
services (est. of police, fire, school, recreation, parks, water, power,
etc.).  These can be costed out - cities have their own formulas.

This is calculated against the benefits - taxes (business, property),
fees, cash contributions (yes, many developments give subsidies but yet,
give contribitions as well) and any multiplier effects.  Then, of
course, less the subsidies. The flow of subsidy (all cash vs. over time)
may have an impact.

You can calculate the difference in financial impact of the TIF area by
simply comparing the tax distribution within and outside the TIF.  I.e.,
the TIF may distribute taxes by 50% TIF agency, 25% city, 10% school,
10% transit district, 5% community college, vs the non-TIF area would
have distributed 35% city, 20% school, 15% transit, 10% comm college, 5%
park district, xx% other special tax districts).  Housing funds are
typically included in the city or TIF agency pots.

The kind of consultants that do this in CA include Keyser Marston,
Economics Research Associates, Rosenow Spevacek, Applied Development
Economics, Hausrath Associtaes, etc.

My own 2 cents is that if a city wants to throw $ into any deal, call it
what it is.  Calling all of those subsidies a "brownfields tax credit"
give brownfields subsidies a bad name.  Portions of these are job
creation, infrastructure, housing AND environmental subsidies.  I figure
it would have created too much political opposition if the subsidy was
called too many things.

Take care.

-----Original Message-----
From: brownfields-bounces@list.cpeo.org on behalf of LSchnapf@aol.com
Sent: Fri 7/20/2007 7:44 PM
To: brownfields@list.cpeo.org
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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--


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org

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