A few thoughts on New York State government’s role in property development

Brownfield and Greenfield industrial properties

Brownfield definition: A former industrial or commercial site where future use is affected by real or perceived environmental contamination.

Greenfield definition: Relating to or denoting previously undeveloped sites for commercial development.

The choice of Brownfield vs. Greenfield is heavily influenced by government assistance (subsidies) and the red tape involved. This is where conflict arises. If government more heavily subsidizes a Greenfield site, that site may be selected, even if a Brownfield site would be more suitable otherwise. The opposite is also true. Factor in zoning boards, the Regional Economic Development Councils, city planning boards, IDAs, etc. and the regulatory and compliance issues balloon.

From a sustainability and community appearance perspective, Brownfield sites should be first priority for development whenever possible. From a practical sense, the Brownfield sites are likely to have good infrastructure in place: water, sewer, road access, and high power requirements. But the demolition and environmental cleanup costs can be significant, and perhaps unpredictable.

For a Brownfield site, which is to be re-purposed for the same permitted use as in the past, government’s role should be minimal. Allow the private owner of the property to make the sale with minimal government interference – none at all from the state. Even though a Brownfield site may have many economic subsidy incentives available through the web of REDCs, IDAs, etc., the added political bureaucracy can very well chase away an interested party due to the added time and effort involved.

What New York State can and should do is make the environmental cleanup costs as known and predictable as possible. They should survey sites and document the problems that exist. Make such information public knowledge. The public should be kept fully informed. Transparency is key so that reality and perception are in sync. Frequently, pollution problems are exaggerated, therefore full disclosure and transparency would bring perception down to reality.

The term “shovel-ready” is an overused cliché. So long as government exists, no private property is ever truly shovel-ready. The goal should be to bring government obstruction to an absolute minimum. Aside from the corrupting effects of subsidies (subsidies are scaled in proportion to political leverage), “free” money always comes with one key cost – added bureaucracy. Get rid of special subsidies for property development, and the process to develop will be much faster and easier.

Land Banking

Land Banking definition: As pertains to this discussion, the practice of government taking full ownership of abandoned properties, and often aggregating them together for future development.

The state adopted a Land Banking statute in 2011 and this practice is expanding. We should have a great deal of concern about centralization of power, corruption, and conflicts of interest arising from the expanded practice of land banking.

If only a few corporate entities are selected to manage vast networks of private property in the state, this has pay-to-play written all over it. Sounds a lot like the state licensed casino strategy, which is another shining example of corporatism.

There’s a conflict of interest. The corporate entities chosen to merge and manage the properties, may benefit more by expanding upon the network. Thus, economic sabotage becomes in the interest of these entities. We should not create more economic incentives for bottom feeders.

Currently there are walls of separation between government entities that foreclose upon properties and the land bank corporations that redevelop those properties. Over time, these public/private “cooperation” ventures will blur such dividing lines. We are likely to see revolving door movement of people from serving on land bank boards and elected government legislative bodies. Opportunities for corruption and graft are bound to seep in. The whole concept of public/private partnership is a major avenue to corruption.

The gravest concern would be if political subdivisions begin to seize property under the guise of “public benefit” – eminent domain, and then shift the property to a Land Bank for development. Section 1608 of New York Assembly Bill A373A seems to offer a lot of latitude to municipalities for the terms of acquisition. New York State has done nothing at all to box in the 2005 SCOTUS Kelo decision which opened the floodgates for “public benefit” seizure of property under eminent domain versus the more traditional and restrictive “public use” concept. Many other states have taken action to limit property seizure via eminent domain since the Kelo decision (the Institute for Justice cited Florida as having the best responsive policy). New York still has nothing in response to Kelo.

If the Land Bank concept cannot be repealed in its’ entirety, the act should at least be amended and shackled so that ONLY properties which are truly abandoned can be considered for acquisition by a land bank.