Re: [CPEO-BIF] New York subsidies

A few thoughts regarding this article from someone who is not involved in the New York Brownfield Program but keenly interested in how its incentive structure - in its past, current, and future iterations - (i) influences the investment of private capital in public cleanups; (ii) mobilizes and empowers various constituencies and stakeholder groups to act; and (iii) ultimately provides a return on investment to the public in the form of environmental restoration, additional tax revenue, new job creation, public health enhancement, environmental justice, social equity, and other forms of public benefit . . . .

1. The article states - disapprovingly, I think - that over a two year period 80 percent of the $362 million in tax breaks went to just 10 of the 52 projects that successfully applied under the state brownfield program. The flip side is that the 42 other projects received the balance over that same two year period, a total of $72.4 million or $1.72 million per project. This is still an extraordinary - and for many states, obviously enviable - level of economic investment.

2. With respect to the 10 projects that received approximately 80% of the tax breaks ($289 million), I wish the reporter spent some time discussing and analyzing the nature and extent of contamination, the complexity of the cleanup, and the public health risk posed by the contaminants. From the way the article was written, one could conclude there weren't any contamination issues associated with these projects. But I'm advised that this was not the case, that, in fact, there were significant and substantive impacts to be addressed with each of these projects; however, the tax credits were taken only on the buildings and not the cleanup (not completely sure why; believe it was a sequencing/timing issue).

I also wish there was an evaluation of the financial return on the $289 million investment. How many jobs were created? What type of jobs? What are these projects going to generate in property and payroll taxes? For those who are not intimately familiar with the New York program in general or these projects in particular, it's hard to judge (either favorably or critically) the fairness and appropriateness of investing $289 million in just 10 sites without having more facts to evaluate ROI to the public.

3. The article also appears to take issue with the notion that "the vast majority of the money" was allocated to "subsidize developers' buildings rather than cleanups." I think the nuance that the reporter misses here is that the making of the project financially viable is precisely what creates the cleanup funding mechanism. There is also the economic dynamic here that redeveloping contaminated sites is an inherently risky proposition and that this risk proposition forces the developer to incur major cost premiums that need to be subsidized - and that, from a policy perspective, the public should want to help underwrite - so that these sites are made as attractive to develop as clean sites and so that they don’t linger in an intractable environmental, economic, and public health limbo. (Such cost premiums typically include the higher cost of capital; additional expenses to manage impacted media during dewatering, demolition, utility installation, and construction; installation and operation of vapor barriers, procurement of environmental insurance; and proffering of other further assurances as end-users and tenants may desire and/or regulators may require.)

In this sense, I think the focus on the money going directly to buildings as opposed to cleanups is a bit of a red herring. The Brownfield compact is essentially this: The public sector will agree to invest in a project to make it feasible. In return, the project proponents will agree to clean it up, reuse it, create jobs, expand the tax base, and/or provide other public benefits (e.g., among many other possibilities, conservation and recreation amenities, green energy, green infrastructure, access to healthy food, access to better transportation options, social, financial, and public health equity for neighborhood stakeholders, job training, and on and on and on). If the developer fulfills her terms of the compact, where the public's investment was initially allocated to yield all of those public benefits as a return on investment appears to be a rather unhelpful litmus test, no? Brownfield projects, by definition, start with a funding deficit. However that gap gets filled so that the project moves forward and cleanup ultimately achieved is arguably besides the point.

All of this said, if millions of dollars in tax breaks (or, really, any tax breaks at all) are going to sites that have no legitimate, contamination-driven market dysfunction, well that's obviously a problem and the criticism is well placed. We have a similar problem in Florida where a powerful tax refund tied to job creation in designated "Brownfield Areas" has a loophole so big you could drive a fleet of trucks through it. Our problem is that the statutory criteria for designating a Brownfield Area is overly-broad and imprecise, allowing local governments to designate vast areas of land within their jurisdiction that clearly include numerous parcels which lack either documented contamination or a plausible inference of perceived contamination. Still, once the designation is in place, the job creation bonus immediately becomes available as of right and enables employers who otherwise meet the balance of the criteria to tap into tax refund dollars. This loophole has unsurprisingly been subject to some criticism in a handful of media articles; however, no one has moved legislatively to fix it notwithstanding the fact that accessing a tax incentive designed to reward job creation on Brownfield sites that oh-by-the-way happen to have neither actual nor perceived contamination is a classic case of gaming the system. (Again, based on what I've been advised, I don't think that's what happened with the ten NY projects allocated $289 million in tax breaks. )

4. Notwithstanding the points I raise in the paragraphs above - and I raise them only to suggest that more critical reporting and analysis by the author of the article would have offered deeper insight into what I think was his main premise (that the state program in its previous iteration was flawed in a number of fundamental ways) - the retooling of the program to ensure that public dollars are better and more efficiently targeted to neighborhoods, communities, and populations with the greatest needs is an obvious and important improvement. Jody Kass, who is quoted in the article, succinctly identifies this key shortcoming: "Low-income communities have not been benefiting from a program that we thought was meant to benefit them."

5. The emphasis that the new Brownfields law is placing on more participation from municipal organizations and community organizations - especially community organizations - is exciting and hopefully will be successful in channeling more money, more resources, and more capacity to grassroots organizers and advocates. Having just returned from the New Partners for Smart Growth conference in Seattle (easily among the top 3 best conferences I have ever attended), I can attest to the sophisticated and effective models for Brownfields restoration and redevelopment that exist at the community level in New York and that are doing powerful, ground breaking work. United Puerto Rican Organization of Sunset Park (or "UPROSE" - www.uprose.org) and West Harlem Environmental Action, Inc. for Environmental Justice (or "WE ACT" - www.weact.org) were two such organizations that were present and whose representatives fairly blew the conference away with their passion, vision, expertise, extraordinary level of commitment, and humbling level of accomplishment.

6. It's unfortunate that the advisory board charged with reporting on the progress and impact of the changes to the NY Brownfields program has not been fully appointed. I suspect that the analysis that the board ultimately provides will be eagerly received across the country - and will provide the hard data that we and that our peer Brownfield advocates will need to help convince our respective state and local policy and law makers to more heavily invest in environmental redevelopment.

Michael R. Goldstein, Esq.
Akerman Senterfitt
One Southeast Third Avenue, 28th Floor
Miami, FL 33131
Direct Line: 305.982.5570
Direct Facsimile: 305.349.4787
Mobile Phone: 305.962.7669
michael.goldstein@akerman.com

"Recycle, Reuse, and Restore Environmentally Impacted Properties: Rebuild Your Community One Brownfield at a Time"

From: brownfields-bounces@lists.cpeo.org [mailto:brownfields-bounces@lists.cpeo.org] On Behalf Of Lenny Siegel
Sent: Monday, February 08, 2010 4:28 PM
To: Brownfields Internet Forum
Subject: [CPEO-BIF] New York subsidies

Builders clean up in brownfield program
Luxury project heads list of state tax breaks from $362M effort

By BRIAN NEARING
Albany Times-Union (NY)
February 5, 2010

ALBANY -- A state program intended to clean and rebuild on polluted land has cost taxpayers more than $362 million during the past two years, with the vast majority of the money going to subsidize developers'
buildings rather than cleanups.

For every dollar handed out in state tax credits for the brownfield cleanup program, about 90 cents supported building costs, according to a Times Union analysis of annual 2008 and 2009 reports issued by the state Department of Taxation and Finance. The remaining dime went to cover cleanups.

The reports include only projects that claimed tax breaks prior to June 2008, when the state Legislature reformed rules to limit payouts out of concerns that the five-year-old program was a windfall for developers that fostered too few cleanups -- particularly in poor neighborhoods.

While 52 projects statewide got tax breaks, the lion's share of savings went to just a handful of big-ticket developments, with 10 projects accounting for 80 percent of the total.

...

For the entire article, see
http://www.timesunion.com/AspStories/story.asp?storyID=897292

--

Lenny Siegel
Executive Director, Center for Public Environmental Oversight a project of the Pacific Studies Center 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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