[CPEO-BIF] Subsidies

Thu Oct 26 11:57:49 PDT 2006

I sense some need here to punish developers willing to take risks on the
remediation and development of clearly challenged properties.  Peter's
examples of "claw-backs" present false hope.  How many more projects
would have been developed without such "claw-backs?"  Defining a general
public benefit standard that applies in every case amounts to a
one-size-fits-all cookie cutter:  it may have appeal to bean counters
and for purely academic purposes 

Barry
Barry J. Trilling
Wiggin and Dana LLP

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, but its a sure way to discourage development.  Go ahead and audit the
project afterwards to see what benefits accrued, if any; but don't try
to take the money back if some pre-conceived beneficial goal was not
attained.  Rather, use some statistically significant number of examples
to shape future public policy.  Doing otherwise will apply an inverse
pressure on the market, discouraging developers from engaging in
brownfield projects.

	-----Original Message-----
	From: brownfields-bounces at list.cpeo.org
[mailto:brownfields-bounces at list.cpeo.org] On Behalf Of Peter B. Meyer
	Sent: Thursday, October 26, 2006 2:36 PM
	To: Bill Cocose
	Cc: 'Brownfields Internet Forum'
	Subject: Re: [CPEO-BIF] Subsidies

	Bill Cocose's point about assessed values is exceptionally well
taken -- but incomplete. There are, indeed, states in which it is very
difficult to discharge old tax debts in the case of redevelopment of
abandoned, and thus tax delinquent, sites. In such cases, the burden
accumulated from those tax obligations can, as he points out, add to the
financial burdens carried by a brownfield site.

	However, there is another side to the issue. In other instances,
especially with warehoused small sites, some of which are held on spec
against expected property value increases, the carrying cost for holding
a site off the market would be depressed by reassessments to close to
zero for un- or under-utilized sites. In Kentucky, for example, some
cities were pressing for the right to assess a higher tax rate burden on
vacant unused brownfield sites as a means of getting access and forcing
sites onto the market.  

	The problem really is that there are few, if any formulaic
solutions or responses that make sense. The real need is for tailored
responses - and for subsidies where needed, but not as automatic grants.
The problem, then, is that such responses require data, and we have not
been willing to demand information from business applicants requesting
public support, while we have always required it from individuals and
families. "Need-based assistance" is acceptable as a basis for providing
welfare or supplemental security income to the elderly -- why isn't it
equally appropriate for developers? 

	There is also no reason  not to require some sort of assurance
of public benefit as a condition of that assistance. To continue the
welfare analogy, we evolved "workfare," in which people had to show that
they were making an effort to get themselves beyond dependency. We
could, logically, require a similar demonstration of environmental or
other socially beneficial outcoems from brownfield developers, and we
might even penalize them after the fact for nonperformance. 

	We do not need to look to welfare for an analogous program, but
to the economic developemnt experience with "clawbacks." These are
conditions imposed on various forms of state support for economic
development projects, in which the developers or new firms promise some
number or jobs or total payroll in return for some subsidies. States,
dating back to the 1970s, monitored development project performances and
implemented clawbacks of different sorts, and this did not seem to
acutely discourage investment. (A typical clawback might be a higher
interest rate on a low interest loan proviced in response to a
commitment to generate a specific number of jobs, if the target jobs
were not created.)

	In the brownfield case, the performance measure could be the
site remedial response, and the pollution abatement condition attained.
This is an outcome that is more under a developer's control than the
number of jobs generated by a company, and one that can be attained
regardless of  the unknowns of economic condition or real estate market
changes.  Such a clawback provision need thus need not add to the
uncertainty prospective developers would face, and could actually save
investors time and money by providing community representatives, who
might otherwise be a real thorn in brownfield redevelopers' sides, with
some assurance about the environmental performance the project will
deliver. Reduced community resistance can speed project approvals and
safe money.

	-- All in call, this is an excellent and important debate to
have, and I am very pleased to see that CPEO has hosted the discussion
thus far.

	Peter
	- - - - - - - -
	Peter B. Meyer
	Professor Emeritus of Urban Policy and Economics
	Director, Center for Environmental Policy and Management
	School of Urban and Public Affairs
	University of Louisville
	 - - - - - - - -
	Director of Applied Research
	Institute of Public leadership and Public Affairs
	Northern Kentucky University
	- - - - - - - - 
	Senior Advison, E2 Inc.
	- - - - - - - -
	President, The E.P. Systems Group, Inc.
	- - - - - - - -
	Managing Member, Ecofun, LLC
	- - - - - - - -
	cell         502-435-3240
	phone     859-491-9298 
	fax          859-491-9252
	skype      pbmeye02 or 859-648-0373
	- - - - - - - -
	3205 Huntersridge Lane
	Taylor Mill, KY 41015 

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