Do Public Benefits of Voluntary Cleanup Programs Justify Their Public Costs? Evidence from New York

Abstract:

This paper contributes to the debate over public benefits and costs of state-funded voluntary cleanup programs, using evidence from property values in New York City. We value site redevelopment separately from cleanup and examine time to capitalization. Using property fixed effects and controlling for time-varying shocks, New York’s Brownfield Cleanup Program added 4% to property values. Off-site gains averaged 5.6% for properties with three units or less and 1.2% for multifamily residences, producing a $579.3 million tax gain that does not exceed the $667.9 million in program spending. Benefits stem from program participation and cleanup, but not from site redevelopment. 

https://www1.nyc.gov/assets/oer/images/content/hero/IMG_3236_clean-soil-stockpile.JPG

http://le.uwpress.org/content/95/3/369.short

by Olesya M. Savchenko 1 and John B. Braden 2

1. Assistant professor, Food and Resource Economics Department, University of Florida, Gainesville; savchenko.olesya@gmail.com

2. Professor Emeritus; Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign; jbb@illinois.edu

Land Economics http://le.uwpress.org/ via University of Wisconsin Press http://www.uwpress.org/

Volume 95, Number 3, August 1, 2019; pages 369-390

Estimating the Effects of Brownfields and Brownfield Remediation on Property Values in a New South City

Abstract:

Using data from Charlotte, NC, a New South city without a legacy of heavily contaminated properties, we find the distance from unremediated brownfields—typically former industrial properties believed to have modest contamination—to have no effect on residential sales values, but proposed cleanup and actual remediation have positive, substantial, and significant effects especially within 0.5 miles of the brownfield. Our results are consistent whether we examine all property values within a given distance, such as 0.5 miles, or examine discrete distances, such as 0.3–0.5 miles. An estimate of the benefits is on the order of $4 million.

...

In an abstract available free of charge at http://tinyurl.com/jbqyqau the authors report that the median brownfield size ... is nearly 262,000 square feet.,,, Based on tables 2 and 3, a 10,000 square foot increase in the size of a brownfield results in a decrease in property value of about 3%.  For an otherwise comparable house valued at the median of $95,000 (adjusted using a 1995 price index), the house near the brownfield loses almost $3,000 in value for each 10,000 square foot increase in the size of the brownfield.

...

If stage 2 is reached where a developer applies for constructive notice, as is the case for about 40% of the transactions in this sample, a house within 0.5 miles from the brownfield experiences an increase in value, with the size of the increase decreasing with the size of the brownfield. For the median size brownfield of 262,000 sq. ft., the net effect is on the order of 0.3 – 26.2*(0.005) = 0.17 or 17%. The $95,000 median house would now be worth $111,000 given the developer intentions, a gain of almost $16,000. For our data sample of approximately 500 houses within 0.5 miles of a given brownfield and based on median values, 200 homes (40% of 500) will gain the premium for an overall gain of around $3,230,000. We attribute these benefits to the market expectation that a developer applying to the brownfields program expects to remediate and eventually redevelop.

http://www.brownfieldsconference.org/en/Article/136/ReVenture_Park__Charlottes_667_Acre_Success_Story

The benefits of the brownfields program increase further where there is actual remediation (and would increase again with redevelopment). Again choosing the 0.5 mile distance, the lift to property value is a little over 10% (bearing in mind that homeowners out to 2 miles will benefit, and homeowners within 0.3 miles are actually worse off). The house that had already appreciated by almost $16,000 would now add approximately $11,000 to $122,300. Approximately 15% of sales took place after remediation. For the sample of 500 houses within a 0.5 mile of the nearest brownfield, there is an additional $10,000 in benefits for the 75 homes that sell after remediation, or an additional $830,000, bringing the overall gain to $4.1 million.

State investments in brownfields yield 14-fold return, UW-Whitewater study finds

Efforts to investigate, clean up and redevelop Wisconsin brownfields, fueled by $121.4 million in state grants and leveraged by local and federal incentives, have cumulatively recouped $1.77 billion, a more than 14-fold return on investment.

Those are among the findings of a University of Wisconsin-Whitewater study that analyzed the economic impact of the incentives. Over half the state revenue outlay is recouped in state tax revenues from construction activities generated by the investments alone, and redevelopment of the properties directly or indirectly resulted in the retention of 54,483 permanent jobs.

Economists from UW-Whitewater’s Fiscal and Economic Research Center calculated that local governments gain $88.5 million annually in tax revenues from redeveloped brownfields, not including property taxes derived from the new or renovated buildings. On average, post-redevelopment assessed values exceed pre-development values at a ratio of 3.5 to 1.

“There are a lot of brownfields still sitting idle,” said Russ Kashian, UW-Whitewater professor of economics and co-author of the study. “This study demonstrates that when the state has the capacity to expand the program, it would be a smart investment.”

Brownfields are defined as “abandoned, idle or underused industrial or commercial facilities or sites, the expansion or redevelopment of which is adversely affected by actual or perceived environmental contamination.” One example is the former Allis Chalmers plant in West Allis, now known as Summit Place. Redevelopment of the site led to 2,700 permanent jobs in 630,000 square feet of converted office space.

“As a direct result of this brownfields cleanup initiative,” said West Allis Mayor Dan Devine. “The once-contaminated and dilapidated property is now the city’s largest taxpayer and the city’s largest employment center.”

Since 1998, the State of Wisconsin brownfields funding programs have assisted 703 sites, resulting in 4,713 acres of contaminated land that was assessed, cleaned up or both. Also in 1998, the state established the Wisconsin Brownfields Study Group to evaluate Wisconsin’s current brownfields initiatives and recommend changes, as well as propose additional incentives for the cleanup and reuse of abandoned or underused properties.

“The study shows that for a relatively small investment, the state recoups benefits that far outweigh the costs,” said Nancy Frank, associate professor of urban planning at University of Wisconsin-Milwaukee and appointee to the study group, which commissioned the study. “And the state’s investment was critical to these sites getting cleaned up and put into productive use.”

                             http://dnr.wi.gov/topic/brownfields/
Frank pointed to the fact that brownfields redevelopment had tangible benefits to the public, unlike some economic development initiatives.

“When you clean up a brownfields site you can see it in the landscape,” said Frank. “You can also see the new businesses moving in, so you know it’s having an economic impact. And with this study, we can measure it.”

The full report is available free of charge at http://www.uww.edu/documents/uww/FERC_BROWNFLDS.pdf.

http://tinyurl.com/hmy3r5q

University of Wisconsin https://www.wisconsin.edu

Posted on November 18, 2015