[CPEO-BIF] Subsidies

[Bruce-Sean Reshen]

Peter,

You acknowledge that "additional appropriations depend on demonstrated
effectiveness in utilization of current funds; increased accountability
can lead directly to future expansion of public funding for the
reclamation of contaminated lands."  But it is also not a viable
strategy to create more risk for the developer by setting up a system of
clawbacks.  Thus, the only methodology that works in a practical, common
sense way is to sufficiently educate public agencies to utilize more
rational criteria in the original granting of the subsidies.  We are not
speaking of maximizing utility, equating marginal rates or finding the
theoretical point where the second derivative is zero.  This theoretical
nonsense is not meaningful in this context (or perhaps any other
context).  This will not work as an optimizing process.  What public
agencies must do is to having sound real estate and land use expertise.
They must have awareness of what is occurring in both the real estate
and financial markets.  They must bring objectivity to their
decision-making criteria.  They must be accountable for their decisions.

Note that our research may be more appropriately focused on the
decision-making process of public agencies as opposed to the decisions
made by developers.

Bruce-Sean Reshen
p. 203-259-1850
c. 917-757-5925

-----Original Message-----
From: brownfields-bounces at list.cpeo.org
[mailto:brownfields-bounces at list.cpeo.org] On Behalf Of Peter B. Meyer
Sent: Friday, October 27, 2006 2:20 AM
To: 'Brownfields Internet Forum'
Subject: Re: [CPEO-BIF] Subsidies

Having worked in local economic development for some 30 years and 
brownfields for over a decade, I have to agree fully with Barry Trilling

on the ideal for determining what subsidies are appropriate. But I still

disagree with him completely on the real possibility of the calculation 
being seriously undertaken at the local level. Thus some sort of ex-post

monitoring, holding recipients responsible for what they promise, is
needed.

Sharon Barr accurately points out that, "... it is very hard to come up 
with a perfect formula that also works in the dirty nitty-gritty world 
of political influence and decisionmaking. One cannot underestimate the 
role of politics in this arena ..."  This is the reality. Her 
observations echo academic research and informal narratives about 
economic development practice that have been around for decades. The 
public sector generally has to rely on the applicants for financial 
support for the data it needs to assess their applications ... and it is

not realistic to assume that there will be no distortion of the 
information provided in order to increase the chance of getitng funding.

The political pressures on local officials are actually more acute in 
the case of brownfields than in 'normal' economic development. Efforts 
to influence decisions come not merely from developers interested in 
potential profits from brownfields, but also from neighborhoods and 
community based organizations concerned for pollution abate and human 
and environmental health risk reduction.

The possibility of deriving a single allocation formula for brownfield 
support is further confounded relative to the grant of support for 
traditional economic development efforts due to multiple objectives  As 
Sharon noted, traditional economic development has focused on jobs, 
incomes, and property value increases, while brownfield redevelopment 
efforts include additional objectives, including housing provision, 
protection of human health, preservation of environmental conditions.
 
In light of these concerns, it is inappropriate for public policy to be 
grounded wholly in a belief in the possibility of objectivity in subsidy

provision, or in calculations of public rates of return. Barry, and 
others who have agrred with him, are correct that any retrospective look

back and imposition of accountability might discourage some developers 
from engaging in some brownfield projects.

However, the increased efficiency and effectiveness of public spending 
on brownfields that such accountability could generate must also be 
considered. Any subsidy funds provided that are not needed to make a 
project economically viable are funds not available for other possible 
subsidies that could actually increase the number of brownfields 
redeveloped. The issue is not one of "subsidize or not" but rather of 
the allocation of public funds to maximize attainment of public 
objectives through that spending.

We can all agree that we want to see the limited brownfield funds 
available have the greatest possible impact on the rate of site 
mitigation and redevelopment. We may all also agree that we would prefer

to see more public funds available. To the extent that additional 
appropriations depend on demonstrated effectiveness in utilization of 
current funds, increased accountability can lead directly to future 
expansion of public funding for the reclamation of contaminated lands,

Peter Meyer

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