Incentives for private residential brownfields development in US urban areas

Abstract

Public agencies in the US have committed resources to encourage private investment in reusing contaminated sites. With public funds in short supply, the effectiveness of their efforts matters both to the agencies and the development community. This paper draws on a mail survey of private developers that uses conjoint choice experiments to investigate the relative attractiveness of incentives to promote residential infill on contaminated property. Results suggest protection from third party liability offers the most value, with protection from cleanup liability and relief from public hearing requirements also important. The findings indicate several opportunities for planners to promote infill on contaminated sites in a socially and environmentally appropriate manner.

Notes

1 A planning-related example of such an approach appears in the Alberini et al. (2003) examination of urban squares. In their study, building height, mix of retail and residential use and open space constitute the targeted attributes of an urban square design. The researchers use a questionnaire to ask individuals to evaluate the overall aesthetics of different combinations of these attributes, rather than the individual importance of each attribute.

2 A number of state regulatory agencies already supply ‘no further action’ letters to site developers and lenders to indicate that the site has met standards and the agency has no further interest in the site at that time. However, changes in standards or the discovery of previously existing but unknown contamination could ‘reopen’ the site to scrutiny. Many parties involved in contaminated sites fear such reopeners, although their actual occurrence appears to be very rare (Simons et al., 2003). The cleanup protection offered in Table 1 protects against these reopeners as well.

3 This can be represented formally as the probability of choosing one of three alternatives (either of two bundles of incentives or neither bundle), , where Pr(Y _i  = k) is theprobability of bundle k being chosen by individual i, x_ik is a vector of attributes for choice k presented to each individual i, and x _ij is a vector of attributes for each choice j presented to each individual i.

4 This pseudo R² is calculated as McFadden's R². See Long (1997, p. 104) for an accessible discussion of this measure of model fit. The 0.2 value is in line with the authors' experiences with similar analyses that use stated preference and binary logit data.

5 In principle, public participation in privately-led projects can be of advantage to both the public and private developers. The former may benefit because such participation can lead to more desirable project features from the perspective of the local community, while the latter may benefit because participation can bring new ideas to the project that are economically attractive and promote community buy-in to the project. However, focused interviews with developers suggest that many do not agree that public participation provides net benefits in their projects, at least in the short-run. A key element in most developers' investment calculations is time (adding months or years to a project timeline increases the cost of borrowing and pushes back the point at which positive cash flows begin), so to the extent that public hearings extend a project timeline, they may decrease net project returns.

6 As an intermediary step, modeling the assessment reimbursement as a continuous variable (either $0 or $100 000) rather than as a dummy allows a comparison between it and the construction subsidy. The p-value of the coefficient reimbursement remains the same (as it should) and a likelihood ratio test of the two coefficients does not reject a null hypothesis that the two are equal. This allows combination of the two into one total financial support variable.

7 The cost of direct subsidies also may not be as clear as they appear. As the fifth section notes, three-quarters of respondents might be at least as content with fee waivers as with direct cash payments. Such waivers may offer creative avenues to extend the strained budgets of subsidy program, although their costs may be harder to discern.