Attracting Private Investment To Contaminated Properties

Association for Public Policy Analysis and Management
Attracting Private Investment to Contaminated Properties: The Value of Public

Interventions
Author(s): Kris Wernstedt, Peter B. Meyer and Anna Alberini
Source: Journal of Policy Analysis and Management, Vol. 25, No. 2 (Spring, 2006), pp. 347-
369
Published by: Wiley on behalf of Association for Public Policy Analysis and Management
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Kris Wernstedt
Attracting Private Investment
Peter B. Meyer
to Contaminated Properties: Anna Alberini
The Value of Public
Interventions
Abstract
We employ a mail survey of private developers that uses conjoint choice experi-
ments and Likert-scaled attitudinal questions to examine preferences for policy
instruments and incentives intended to encourage brownfield cleanup and redevel-
opment. Our analysis suggests that developers judge public hearing requirements
at brownfield redevelopments unattractive, but that they place a relatively high
value on liability relief-from both cleanup costs and claims by third parties. Reim-
bursement of environmental assessment costs is not particularly attractive. We
also find considerable heterogeneity among developers in the value they place on
these incentives, depending on their experience with contaminated sites. (c) 2006 by
the Association for Public Policy Analysis and Management
INTRODUCTION
An array of practitioners and analysts have pointed out that traditional regulatory
approaches often discourage private parties from becoming involved in "brown-
fields" sites in the United States (Bartsch & Munson, 1994; Gorman, 2003;
McCarthy, 2002; Robertson, 2001; Schoenbaum, 2002; U.S. General Accounting
Office, 1995). These are defined in federal legislation as "real property, the expan-
sion, redevelopment, or reuse of which may be complicated by the presence or
potential presence of a hazardous substance, pollutant, or contaminant" (42 U.S.C.
89601, amended 2002). Both public and private owners of the properties, as well as
prospective buyers and lenders, fear liability for expensive cleanups, often opting
not to transact or develop them (Segerson, 1993; Whitney, 2003). Yet, left unat-
tended, such sites may pose threats to public health and the environment, and
depress the economy of local neighborhoods (Meyer, 2003). Moreover, existing pub-
lic infrastructure may remain underutilized even as undeveloped areas attract new
growth, contributing to uneven economic progress and continued underinvestment
in older urban and industrial areas. These impacts are pervasive, affecting large and
small urban communities and rural areas throughout the nation.
In response to the abundance of contaminated sites and the problems or missed
opportunities they entail, since the late 1980s, nearly all states have developed a
range of initiatives to stimulate reuse of such sites under the rubric of brownfield
and/or voluntary cleanup programs. These operate in a less burdensome and intru-
sive fashion than longer-standing enforcement-led programs under federal and state
Journal of Policy Analysis and Management, Vol. 25, No. 2, 347-369 (2006)
(c) 2006 by the Association for Public Policy Analysis and Management *WILEY
Published by Wiley Periodicals, Inc. Published online in Wiley InterScience interScience(R)
(www.interscience.wiley.com)
DISCOVER SOMETHING GREAT
DOI: 10.1002/pam.20176
348 / Attracting Private Investment to Contaminated Properties
law. They provide a range of incentives, such as direct financial subsidies, and
replace uniform cleanup requirements with risk-based standards linked to expected
future site use. Some programs may provide some form of liability release upon
state approval of cleanup, providing protection from possible future changes in
cleanup standards or from claims made by neighbors for environmental damages.
Typically, states and localities bundle together multiple incentives, offering a mix-
ture of features to entice private interest in brownfields. The effectiveness of these
incentives is unclear, however. While a number of case studies and surveys have
concluded that the public programs can promote investment in properties that may
otherwise have remained underutilized (e.g., Council for Urban Economic Devel-
opment, 1999), no analysis has examined the import of individual incentives in
investment decisions at contaminated sites in the United States.
This article reports results from a mail survey of over 300 private developers in
the United States and provides suggestive evidence of the relative attractiveness to
such developers of individual incentives to promote brownfields redevelopment. We
focus specifically on financial subsidies, liability relief, and public involvement
requirements. The survey questionnaire does not probe actual redevelopment deci-
sions per se, but rather relies on a series of conjoint choice experiments in which
respondents face hypothetical redevelopment scenarios and must choose between
different combinations of incentives and disincentives on the land development
project. Respondents are randomly assigned different combinations of incentives,
and the responses to the choice questions, which we interpret within a random util-
ity framework, are statistically modeled to assess the attractiveness of each incen-
tive relative to the others. In addition, we pose a series of 5-point Likert-scaled ques-
tions to collect additional evidence on respondents' attitudes. In the following
discussion, we first summarize the brownfields problem and the relevant literature
that motivates our research hypotheses, before presenting the survey results and
discussing their policy implications.
BACKGROUND
The 1980 Comprehensive Environmental Response, Compensation, and Liability

Act (CERCLA), which brought into being the federal Superfund program, is the fed-
eral legislation most closely linked with the brownfields problem. Court rulings
have found that those involved with a site under the jurisdiction of CERCLA can be
held responsible for cleanup costs even if they did not create any contamination, a
responsibility that extends to past and current owners, the generators of hazardous
substances, and those that transported such substances. In addition, any one party
may be charged with all of the cleanup costs if others who might be liable do not
have the financial capacity to pay for cleanup. With these stringent liability provi-
sions, owners, developers, and prospective purchasers of contaminated sites often
have been reluctant to transact or become more involved in them, in fear of getting
ensnared in the liability web.
Criticisms of the inefficiency of the Superfund program are long-standing (Bur-
master & Harris, 1993; Hird, 1990) and pressure for statutory reform to CERCLA
emerged long ago. As a consequence, support has built for new incentives to pro-
mote redevelopment at brownfield properties that do not qualify as Superfund sites
and for more local control over the cleanup and redevelopment of contaminated
sites (Meyer, 1999; Wernstedt & Hersh, 1998; Wernstedt, Hersh, & Probst, 1999). In
response to this, at the federal level Congress amended CERCLA with passage of the
Small Business Liability Relief and Brownfields Revitalization Act (42 U.S.C. ssss
Journal of Policy Analysis and Management DOI: 10.1002/pam

Published on behalf of the Association for Public Policy Analysis and Management
Attracting Private Investment to Contaminated Properties I 349
9601-9675) to provide conditional liability relief to some of the parties involved in

brownfield properties. This legislation, signed into law in 2002, has authorized up
to $200 million annually for site assessment and remediation and up to $50 million
annually in assistance to state and tribal response programs. In addition, virtually
all states now have their own brownfield or voluntary cleanup programs to stimu-
late the reuse of contaminated properties, including those that may fall outside
CERCLA authority but are covered by state statutes.
These state programs typically offer one or more of several types of incentives:
- regulatory relief, such as cleanup standards that allow residual contamination

to be left on site as long as exposure is limited;
- liability relief that provides protection against potential environmental dam-
age claims by site occupants, workers, or neighbors;
- liability relief that provides protection if cleanup standards change in the
future or further contamination caused by previous owners is discovered on
site;
- financial support through mechanisms such as grants, loans, subsidized
insurance, waivers of development fees, property tax abatements, and reme-
diation tax credits;
- public investments in infrastructure and amenities that can improve expected
revenues of redevelopment participants, such as mass transit connections;
and
- changes in local regulatory procedures to expedite permitting.
The range of properties that, in principle, might benefit from such interventions
is large and diverse. No firm count of brownfields has been established, but an early
U.S. General Accounting Office (1987) study estimated that the nation has between
130,000 and 450,000 potential hazardous waste sites. More recently, Simons (1998)
has placed this figure in the range of 500,000 to 600,000 sites and the U.S. Envi-
ronmental Protection Agency (EPA) suggests it may be as high as 1 million sites.'
However, only a small minority of these has been redeveloped and even fewer-
about 20,000-appear to have formally entered voluntary cleanup programs (U.S.
Environmental Protection Agency, 2005).
EXISTING LITERATURE
The literature from studies over the last 40 years of the efficacy of publicly provided
incentives in shaping private investment and location decisions in the United States
remains inconclusive, even as researchers have adopted increasingly sophisticated
analytical techniques and used better datasets. For example, early statistical and
econometric work that suggested no or very modest impact on location decisions
from tax incentives (Due, 1961; Greenhut, 1956; Oakland, 1974) has been chal-
lenged by later studies that suggested a statistically significant, positive relationship
between tax incentives and regional and local growth and property values (Bartik,
1991; Greenstone & Moretti, 2003; Newman & Sullivan, 1988; Wasylenko, 1997).
However, while such studies demonstrate that individual firms may respond to
incentives, researchers continue to question the practical-as opposed to merely
statistical-significance of the estimated relationship between tax enterprise zones,
1 See www.epa.gov/compliance/resources/faqs/cleanup/brownfields.

tax increment financing and other incentives, and overall economic gains in tar-
geted areas (Fisher & Peters, 1998; Fox & Murray, 2004; McGuire, 1992; Peters &
Fisher, 2002). This work points out that the relationships are inconsistent across
regions, time, industry focus, and incentive type. This is not surprising in light of
the fact that the incentives typically are very small relative to Other factors in a
firm's decision making. Absent more detailed studies-with quasi-experimental
approaches using control and treatment groups or rigorous and independent sur-
veys-the effects of the incentives may be difficult to distinguish (Bartik, 2004).
Moreover, even if new private activity can be encouraged and gross economic gains
realized in a targeted area, the difficulty of restricting the incentives to only new
activities often appears to result in negative net public benefits, due to the cost of
offering the incentives to existing businesses or to ones that would have located in
the targeted area even without the incentives (Peters & Fisher, 2004).
The literature on financial incentives to promote economic activity on contami-
nated land, although relatively limited, echoes some of the findings of the more gen-
eral body of work on economic development incentives. Most studies that have
examined the redevelopment of contaminated properties have identified the barri-
ers to redevelopment and how direct financial subsidies and other interventions can
improve the attractiveness of investing in such properties (Bartsch, Undated;
Bartsch, Collaton, & Pepper, 1996; Coffin & Shepherd, 1998; DeSousa, 2004; How-
land, 2003, 2004; Pepper, 1997; Wernstedt, 2001; XL International and International
Economic Development Council, 2002; Yount & Meyer, 1999). Sherman (2003) pro-
vides the most thorough work on financial subsidies in his simulations of developer
investment calculations, including property tax abatements, site assessment grants,
development grants, low-interest loans for assessment and remediation, and federal
tax incentives that allow remediation costs to be written off for tax purposes as
expenses in the year they are incurred (rather than depreciated over a project life).
No one incentive proves ideal, but the property tax abatement appears the strongest
at enhancing project returns and improving lending terms by improving cash flows
in early years.2
However, echoing the same kind of targeting problem that the more general eco-
nomic literature reports, Sherman notes that for many firms incentives do not
alter behavior by turning a financially undesirable project into an attractive one.
Instead, they boost returns on a project that would be carried out regardless of the
incentives. Grants for environmental assessments typically are too small to make
much difference on project financials, for example, and they do not enhance the
ability of the project to meet debt service payments that otherwise would be out
of reach. Moreover, while remediation and redevelopment grants can be sizable
enough to have an effect, they may entail administrative burdens that make them
unappealing.
In practice, the significance of direct financial incentives for driving brownfield
redevelopment decisions is unclear. Because direct financial incentives are often
combined with other offerings-such as liability relief, community support, infra-
structure provision, and predictable regulatory processes-it is difficult to deter-
mine the effects of any one incentive. In addition, basic property characteristics
clearly may exert far more influence on an investment decision than the limited
2 One reason for this result is that the other incentives have limitations. For example, loans for site
assessment or remediation also can lower debt service requirements and improve lending terms, but
they typically are too small to have much impact. Their chief utility may be in providing early funding
for projects when outside money is unavailable.

scope of incentives that are available. Meyer and Lyons' (2000) analysis of early
brownfield redevelopers, for example, suggests situations where property prices
are especially low because the market-clearing price overestimates the cost of
remediation have played a much bigger role in stimulating entrepreneurial rede-
velopment activity on contaminated sites than the relatively modest public subsi-
dies available. In addition, the subsidies often have entailed transaction costs that
offset their value.
A number of academic studies have explicitly focused on the role of liability on
the market for contaminated sites. In general, this literature bundles together dif-
ferent types of liability. For example, in an empirical paper that examines industrial
property transactions in Chicago, McGrath (2000) concludes that contamination
risk is fully capitalized into industrial land values. In fact, the discount on the sale
price due to contamination may overstate the immediate cleanup cost liability,
which he suggests may reflect legal costs associated with site redevelopment. Boyd,
Harrington, and Macauley (1996) discuss different sources of liability but argue
that it is not the environmental liabilities themselves that predominantly distort real
estate markets, but rather information asymmetries between buyers and seller
regarding the extent of contamination. To the extent that buyers have experience
with the redevelopment of contaminated properties and reasonably symmetric
information as sellers (or can be provided indemnification), distorted markets can
function efficiently.
Unlike the more general literature evaluating economic development mecha-
nisms, with only a few exceptions (Council for Urban Economic Development,
1999; DeSousa, 2002; U.S. Environmental Protection Agency, 2003; Wernstedt,
2004) studies of the redevelopment of contaminated land have not focused on the
economic or fiscal effects of interventions to stimulate this redevelopment. The site-
specific nature of brownfield redevelopment and the lack of readily available data
on such effects at a suitable scale make such an exercise exceedingly difficult.
Rather, existing studies have concentrated on whether the interventions encourage
redevelopment, regardless of whether such redevelopment provides net benefits.
They also have largely been restricted to case study analyses and several reviews of
media coverage of redevelopment projects.
In one of the few rigorous surveys of contaminated sites, Lange and McNeil
(2004b) present an analysis of results from a survey of over 100 EPA brownfield
grant recipients and other stakeholders. They find that community support, consis-
tency with local plans, cost minimization, and minimizing the time it takes to put
the site back into productive use are the most often-cited variables that influence
brownfield development success.3 Alberini, Longo, Tonin, Trombetta, & Turvani
(2005) also use a survey approach in their study of developers and real estate pro-
fessionals attending an international trade fair in France. Respondents selected
among different hypothetical projects and policy incentives that the survey ques-
tionnaire presented them, with the projects differentiated by location, contamina-
tion characteristics, and policies consisting of liability relief, fast-track approval,
flexible cleanup standards, and subsidies. In general, the respondents indicated less
interest in the contaminated sites than other sites, although they were willing to
undertake the former with incentives, particularly if they had prior experience with
contamination. Those less experienced with contamination placed a higher value
on liability relief, fast track permitting, and flexible cleanup standards than they did
3 In a related study of the brownfield grant recipients, Lange and McNeil (2004a) also note the impor-
tance of financial incentives.

on financial subsidies, which were relatively more appealing to developers with

prior experience with contaminated properties.
STUDY HYPOTHESES AND SURVEY DESIGN
Based on the existing literature that identifies factors that promote the redevelop-
ment of contaminated property, four research hypotheses guide our analysis. Pro-
ceeding from our most general hypothesis:
H 1: Private developers place a different value on (a) protection from additional

cleanup costs that might result from changes in regulatory standards or the
discovery of additional contamination in the future than on (b) protection
from liability for future environmental damage claims by site occupants,
workers, or adjacent landowners.
This is an exploratory hypothesis, and is motivated primarily by the dearth of

empirical evidence about the relative value of different forms of liability protection,
and by the fact that most of the analytical work examining liability has focused on
cleanup rather than third-party liability (Segerson, 1993).4
Wernstedt, Meyer, and Yount (2003) conclude that the developers they surveyed
who have purchased environmental insurance view both protection from cleanup lia-
bility for future discovery of additional contamination and third-party protection as
helpful, with the cleanup protection appearing "very" or "extremely" important in
most of the projects for which it has been purchased. On the other hand, it is also pos-
sible that as experience accumulates, developers and site owners may perceive pro-
tection against additional cleanup requirements for the discovery of new contamina-
tion or changes in cleanup standards to be less important than heretofore assumed.
In this regard, Simons, Pendergrass, and Winson-Geideman (2003) report that less
than 0.5 percent of contaminated sites receiving "closure" letters from state regula-
tors-an indication of completion of cleanup requirements-have later been
reopened. If private parties recognize this low rate of "reopeners" and believe it will
continue, the value of protection against changes in cleanup standards may be low.'
H2: Government requirements for public involvement on remediation plans

may be acceptable or even be judged beneficial to developers.
The literature is mixed on whether public involvement promotes the success of

brownfield projects, due in part to different mechanisms and motivations of such
involvement. On one hand, many brownfield stakeholders argue that active engage-
ment of the public can increase public benefits by helping to identify safeguards
that protect community residents from residual contamination, as well as private
benefits. Interaction between developers and the surrounding community may help
defuse possible tensions and reduce the likelihood of lawsuits or protests later in
the project period. In addition, community members often can contribute substan-
tive improvements to a project by virtue of the knowledge and familiarity with the
4 We combine protection for the discovery of existing contamination and changes in standards because
of survey considerations described below.
5 Developers who have significant experience with contaminated properties may be more aware of this
trend than others. If so, it is possible that the value they place on protection from liability over future
cleanup costs is different than that for less experienced developers. This is one conjecture related to
hypothesis H4 below.

neighborhood (Pendergrass, 1996). Drawing on survey evidence, Lange and McNeil

(2004b) highlight the role community support plays in redevelopment successes.
In contrast, Meyer and Lyons (2000) report that the brownfield entrepreneurs
they interviewed try to avoid public scrutiny since it can both slow their cash flows
and draw competitors. Moreover, U.S. General Accounting Office (1997) notes that
state voluntary cleanup program managers have argued that requiring extensive
public participation adds time and costs to a cleanup process and can therefore be
counterproductive. Such a requirement could also scare off site owners who wish
to avoid the publicity of their efforts to decrease their environmental liabilities. In
addition, active citizen lobbying against certain types of projects may promote a
land use with less market appeal and thus a lower profit potential (Howland, 2003).
H3: Private developers place a higher value on environmental assessment subsi-

dies than on equivalent subsidies for remediation or construction activities.
In principle, the expected value to private developers of a dollar of assessment

subsidies should exceed the expected value of a dollar of construction or remedia-
tion subsidies because the former are provided even if a project is abandoned. In
contrast, financial support for remediation or construction is not provided unless a
project goes forward. We might expect, however, assessment reimbursements to be
too small a percentage of total project costs to notably enhance project financials.
They also do not improve the estimated income generation to debt service ratio
used by lending institutions, thus dampening their attractiveness (Sherman, 2003).
H4: Private developers with a higher proportion of their projects on contami-

nated properties place a different value on liability protection than do
developers with a lower proportion of their projects on such properties.
We conjecture that the value developers more experienced with contamination

place on incentives reflects their experience and confidence, especially with envi-
ronmental assessments, cleanup cost, and potential third-party liability. Developers
who remain interested in contaminated projects after undertaking them presum-
ably have learned how to manage liability uncertainties on their projects and may
not require significant interventions by public entities.
SURVEY METHODS AND ADMINISTRATION
To test the above hypotheses, we developed a survey questionnaire based on con-

joint choice experiments, a method widely used in transportation, decision analy-
sis, environmental valuation, and marketing research (Louviere, Hensher, & Swait,
2000). The general approach relies on creating a stylized policy (or a good)
described by a vector or combination of individual attributes. Different variants of
this policy or good are obtained by altering the levels of the individual attributes. In
a typical conjoint choice experiment, respondents are asked to examine two or
more variants that differ from one another in the level of two or more attributes,
and to indicate which is the most preferred.
Our survey questionnaire presents respondents with a hypothetical townhouse
development project on a contaminated site with specified expected costs and rev-
enues. It then lists two alternative, hypothetical policy packages that go along with the
development project (A & B), with instructions for the respondents to choose which of
these two packages they consider most attractive (they also could choose neither pack-

age). The policy attributes themselves entail different redevelopment incentives and
disincentives, each of which has two or more levels, as shown in Table 1. These include
financial support, separately provided for (i) site assessment and/or (ii) cleanup/con-
struction; (iii) protection from cleanup liability; (iv) protection from third- party lia-
bility claims for environmental damages by site occupants, workers, and adjacent
landowners; and (v) additional public hearing requirements. The cleanup liability
attribute refers to protection from additional cleanup costs if standards change or
additional existing contamination is discovered in the future after the state has
approved the cleanup (which provides protection against reopeners). The exact phras-
ing of the scenario and of the conjoint choice questions is reported in the Appendix.'
To represent a cross-section of different attribute combinations, we created 32
different sets consisting of five incentive pairs-each incentive pair contained two
policy packages applicable to the proposed project-and presented each respondent
with one of these 32 sets.' Each respondent, therefore, faced five choice questions.
As noted above, for each of the choice questions, a respondent would choose one of
the two policy packages or an option to choose neither package. This means that in
each choice question the choice set contains 3 alternatives.
The approach is motivated by a random utility model, and the corresponding sta-
tistical model is a conditional logit that predicts the probability of choosing one
alternative out of the J alternatives shown to the respondent in the choice question
(Greene, 1997):
Pr(yi=k)=epx
where Pr(Yi = k) is the probability of bundle k being chosen by individual i, xik is a
vector of attributes for choice k presented to each individual i, and xii is a vector of
attributes for each choice j presented to each individual i. As explained above, in
our survey J equals 3.
Table 1. Incentives available in choice experiments.
Incentives Levels Presented
Site assessment cost reimbursement: $0, $100,000

Public hearing: Required, not required
Protection from additional cleanup cost: Available, not available
Protection from third-party liability claims: Available, not available
Subsidy for redevelopment: $0, $125,000, $250,000, $500,000
6 Ideally, we would have liked to separate the various aspects of liability into many attribut
increasing the number of attributes requires larger sample sizes (e.g., 5 attributes, each with 2
generate 25 or 32 combinations, and each additional attribute or additional level for an existing
ute doubles this).
We use 32 sets to ensure that each would be received by a sufficient number of respondents (L
et al., 2000). The 32 sets come from the following. We first created all of the possible combinat
the levels of attributes, which gives a total of 64 policy packages. We then created all of the possib
of these 64 policy packages (roughly 2,000 possibilities), but discarded the pairs with dominated
natives (pairs where one of the alternatives is obviously more attractive than the other). Fr
remaining possibilities, we created 32 sets of five pairs each by randomly selecting pairs.

Attracting Private Investment to Contaminated Properties / 355
In addition, we presented half of the respondents with a redevelopment in all

experiments that has high potential for property appreciation (the "strong" market
scenario) and the other half a redevelopment with little or no such potential (the
"weak" market scenario). The scenario details remain the same across all five exper-
iments that each individual faces, and the same across all individuals with the
exception of slight differences in project costs between those receiving a scenario
with high market potential and those receiving one with low market potential (as
shown in the Appendix, the expected revenue, land acquisition cost, and develop-
ment costs are higher in the strong market scenario). Absent the policy induce-
ments, the expected profits from the project would be $5 million under the strong
market scenario and $4 million in the weak market scenario. In both cases, we
aimed to create reasonable scenarios from the perspective of realistic financial
details and from the standpoint of the respondents being experienced enough with
its conditions as to behave as rational profit maximizers.
In addition to the choice experiments, we also presented a number of statements
related to contaminated properties and asked respondents to indicate the degree to
which each statement reflects the respondents' experiences on a 5-point Likert scale
(from 1 = never to 5 = always). The statements touched on financial aspects of
redevelopment, incentives, liability uncertainties, and the influence of community
residents in the cleanup and redevelopment process.
RESULTS
The survey was administered in late fall 2003, with questionnaires mailed to a sam-
ple of private industry members of the Urban Land Institute (ULI), a nonprofit
organization that focuses on land use and real estate development.8 Of the 2,759
original mailings of the questionnaire, 11 were returned due to unreachable
addresses, and 313 usable responses were obtained.9
We do not expect this sample to be representative of the population of developers
at large in terms of experience with contamination, but we cannot examine and/or
formally model any self-selection into the sample because we do not have identify-
ing information on the targeted developers and on the respondents that returned
the questionnaire.10 Because of the anonymity of the responses and the lack of iden-
8 Prior to the actual mailing of the questionnaire, ULI announced the survey in a newsletter circulated
to members. The actual mailing of the survey packet was preceded by a letter signed by the president of
the organization urging participation. The packet included a letter from the lead investigator of the proj-
ect, the questionnaire itself, and a self-addressed, postage-paid envelope. In addition, reminder postcards
or e-mails were sent to all recipients of the original mailing both two and four weeks after the initial
mailing. To maintain strict anonymity, the questionnaires did not ask for identifying information and did
not include codes that allowed survey administrators to identify respondents in any way.
9 The response rate of 11.4 percent likely reflects the mail survey format (Cameron, Shaw, & Ragland,
1999) and the financially sensitive nature of some of the questions. ULI's own surveys of its members on
a variety of issues range from 10 to 30 percent, depending on the topic, while Wernstedt, Meyer, and
Yount's (2003) examination of developer's experiences with environmental insurance at contaminated
sites reports a 27 percent response rate to a telephone instrument. In analogous studies appearing in the
corporate finance literature that seek information on how corporate financial officers evaluate projects,
response rates to mail surveys have been in the 5-15 percent range (Brounen, Jong, & Koedijk, 2004;
Graham & Harvey, 2001; Trahan & Gitman, 1995).
10 A formal self-selection model might comprise two equations. The first would explain participation as
a function of individual characteristics, while the second would amend the indirect utility function
underlying the random utility model to account for the fact that unobservable characteristics of the
developers influence both participation in the survey and the value placed on the incentives. See
Cameron, Shaw, and Ragland (1999) for a self-selection model for mail survey data.

Table 2. Summary statistics.*
Variable Name, Definition % Sample
Developer, firm engages in real estate development 89

Resid, firm engages in residential development 79
Decision, respondent helps make decision on project investment 90
Owner, respondent has an ownership interest in firm 64
Compare, firm's typical project same size as hypothetical project 56
Self$, firm self-finances projects 17
Fate, firm rents all or almost all completed residential projects 24
In fill, firm experienced with infill projects 92
Assess, firm experienced with environmental assessment 90
Contam, firm experienced with projects w/ contamination 78
Environ$, firm has received public $ for environmental costs 23
Construct$, firm has received public $ for non-environmental costs 34
Specialist, more than 60% of firm's projects have had contamination 19
Neither, neither set of policy packages is chosen 32
ChoiceA, the first policy package is chosen 37
ChoiceB, the second policy package is chosen 31
Never, neither set of policy packages is chosen in all 5 experiments 10
*Based on 313 respondents and 1,475 choice responses.
tifying information, we also cannot determine the geographic and financial repre-
sentativeness of the 313 respondents. We would reasonably expect our sample to
comprise developers that have had actual experience with contaminated sites, or
might be willing to consider such sites for future projects.
The summary statistics displayed in Table 2 suggest the decision context of the
hypothetical project is familiar. Nearly all of the respondents are, in fact, develop-
ers-with only 10 percent listing other development roles such as construction or
consulting-and over three-quarters have experience in residential development.
Most are also substantively involved in investment decisions in their firms-as the
decision maker or the provider of information to the decision maker, a role that the
survey questionnaire requires them to take on in the conjoint experiments. Almost
two-thirds of the respondents have a direct ownership interest in the firm. In addi-
tion, less than 20 percent report that their firm self-finances projects, meaning that
most of the firms represented in the sample use borrowed capital and thus share
project financial risks with others.
The characteristics of the project in the conjoint choice scenarios are also broadly
consistent with the experiences of the respondent. Over one-half of the respondents
indicate that the questionnaire's hypothetical project is about the same size as the
typical project of their firm, with the majority of the remainder indicating that the
hypothetical project is smaller than their firm's typical project. In addition, almost
two-thirds of the respondents' firms have experience in developing townhouses.
However, while the hypothetical scenarios depict a residential project that is leased
or rented, only about one-quarter of the respondents indicate that their firms typi-
cally rent their residential projects on completion.
In terms of the environmental component of the project, Table 2 shows that
almost all respondents have experience with infill projects and environmental
assessments, and more than three-quarters have experience with sites that have

contamination. Roughly one-quarter have received public support for environ-

mental and about one-third financial support for non-environmental costs (such
as land acquisition and construction). In addition, responses to Likert-scaled atti-
tudinal questions show that most respondents understand liability features of the
contaminated property market. Nearly 80 percent of respondents indicated that
developers of contaminated properties are always or almost always concerned
that additional cleanup might be required by the state due to changes in stan-
dards. Nearly 90 percent are always or almost always concerned that finding pre-
viously undiscovered pollution could lead to additional cleanup requirements."
Finally, in terms of the presentation of the conjoint experiments, it appears that
the respondents view the scenarios and policy packages as reasonable. In two-
thirds of the choice questions, respondents chose one of the two project options,
and only in one-third of the choices did they select the "neither" package option.
This implies a plausible scenario in the sense that the returns on investment are
neither too high (as to make the project always desirable) nor too low (as to make
it always undesirable).12
Only 10 percent of the sample reject both policy packages in all five experiments
and choose the "neither" option, implying that most respondents are willing to con-
sider the choices and undertake projects with contamination under the right cir-
cumstances. Surprisingly, most of the 10 percent who consistently reject both pol-
icy packages have experience with redeveloping contaminated properties,
suggesting that the 20 percent return on investment in the hypothetical scenario
may be insufficient to attract their interest." Either they have other investment
options that usually bring higher returns or, alternatively, contamination still car-
ries such stigma that they demand exceptionally high expected returns to compen-
sate them for their perceived risks.
Basic Model
The results of the basic statistical model appear in Table 3. This model includes the
five policy attributes, with the two dollar attributes-assess$ and subsidy$-
expressed in thousands of dollars-and the other three attributes specified as 0/1
dummy variables. The model uses the full sample of 313 respondents for a total of
1,475 usable observations." As already noted, in each choice experiment, the
respondent chooses between two alternative bundles of policy choices or a "do nei-
ther" option (thus, the specification has two intercepts, leftpack and rtpack, that rep-
11 As noted earlier, we asked respondents to consider a number of opinions that are sometimes expressed
about the development of properties that are known or suspected to have contamination and to indicate
whether such opinions reflect their own experience, on a scale from 1 to 5, where 1 means "never" and
5 means "always." One of these opinions stated that "Developers of contaminated properties are con-
cerned that additional cleanup might be required by the State if there are changes in environmental stan-
dards in the future" and another that "Developers of contaminated properties are concerned that find-
ing previously undiscovered pollution could lead to State requirements for additional cleanup efforts."
12 In addition, when a choice of one of the two policy packages is made, it does not appear that the order
of the policy packages makes a difference; that is, 37 percent choose the first policy package listed and
31 percent the second package.
13 Meyer and Lyons (2000) report minimum annual returns to brownfield entrepreneurs in the mid-
1990s of 20 to 25 percent, but these have dropped as the brownfields market has matured.
14 We justifiably can pool the responses of developers who received the strong and weak market scenar-
ios because a likelihood ratio test indicated that the coefficients on the attributes were the same across
these two subsamples. This implies that the marginal dollar value of the incentives does not differ across
the two scenarios.

resent each of the two policy packages, namely, that shown on the left and on the
right of the questionnaire's page)."
The results highlight the significance of most of the policy incentives at the 0.05
level or better, as is shown by the t statistics reported in column 4. Three of the four
significant policy attributes-protection from cleanup liability, protection from
third-party liability, and cleanup/construction subsidies-have positive coefficients,
suggesting that these incentives offer some value to the respondents. The fourth sig-
nificant attribute-the public hearing requirement-enters the model with a nega-
tive coefficient. The negative alternative-specific intercepts imply that, absent the
incentives, developers would tend to choose the "neither project" alternative.
In addition to the coefficient and standard errors, we can estimate the financial
value of each of the policy incentives. Columns 5 and 6 in Table 3 show the marginal
value (in dollars) of the policy attributes and their value as a percentage of the project's
profit, respectively. The dollar values in Column 5 are calculated as the ratio of each
attribute's coefficient to the coefficient of subsidy$, and are thus expressed in thou-
sands of dollars (the unit of measurement of subsidy$). We obtain the percentages dis-
played in column 6 of Table 3 as the marginal values of the policy incentives divided
by the average expected profit in the sample.16 Respondents indicate a high dollar
value from the liability protections-nearly $1 million in the case of protection from
third-party liability for environmental damage claims from site occupants, workers,
and neighbors and over $700,000 in the case of cleanup liability protection-and an
over $200,000 cost associated with the public hearing requirement. Cleanup and third-
party liability are worth 16 percent and 22 percent of the expected profit each.
These results have implications for each of our four hypotheses.
H 1: Cleanup and Third Party Liability Protection
The magnitude of the 3rdparty coefficient in Table 3 is significantly greater than

that of the cleanup coefficient at the 0.05 level. This lends support to the hypothe-
Table 3. Basic model.
(1) (2) (3) (4) (5) (6)

Incentive Coeff. s Error t Statistic $1000s %profit
assess$ 0.0015 0.0009 1.52 75 1.7

hearing -0.4250 0.0950 -4.48 -218 -4.8
cleanup 1.3920 0.0948 14.68 712 15.8
3rdparty 1.9277 0.0989 19.49 986 21.9
subsidy$ 0.0020 0.0003 7.13 100 2.2
leftpack -1.7780 0.1312 -13.56 - -
rtpack -1.8867 0.1318 -13.85 - -
15 Including these alternative-specific interce

purpose of including them in the model is to te
a tendency to choose one alternative as a resul
levels. The coefficients of leftpack and rtpack
respondents do not favor one over the other.
16 Absent any incentives, the expected profit o
$5 in the strong market scenario. The average e
million X (1- pL), where pL is the share of resp
nario (i.e., that with little potential for appreci
Journal of Policy Analysis and Management

Published on behalf of the Association for Pu
sis that the relative attractiveness of the two distinct forms of liability protection
differs. As noted earlier, most of the academic literature has focused almost exclu-
sively on cleanup protection, but our results suggest that third-party liability pro-
tection may offer more value to private developers.
Responses to our Likert-scaled questions on insurance mechanisms that provide
liability protection provide additional evidence of the importance of such protection.
Specifically, 47 percent of respondents indicated that an affordable insurance policy
that protects a developer from damage and liability claims would "always" encourage
private redevelopment of contaminated properties.17 An additional 43 percent indi-
cated that such insurance would "almost always" encourage such development. It is
interesting that protection against cleanup cost overruns-which were provided in
the hypothetical scenarios as a baseline condition rather than an incentive-attracts
a similar level of support. Specifically, 40 percent of respondents indicated that an
affordable insurance policy that assures a firm cap on the costs of environmental
response would "always" encourage private redevelopment of contaminated proper-
ties, while 46 percent indicated that it "almost always" would do so.18
H2: Public Hearing
The negative sign and significance of the coefficient on the public involvement
proxy variable, hearing, lead us to reject our hypothesis that public involvement
requirements provide benefits or are neutral to developers. The unattractiveness
likely reflects the additional time that such involvement often entails, as well as the
uncertainty about additional requirements and costs that such involvement may
generate. These can be particularly problematic if a developer's investment strategy
is built on a short project horizon with rapid sale of the property to other investors.
In contrast to this finding, in our Likert-scaled question on this theme, nearly
one-half of the respondents expressed the belief that developers always or almost
always "gain if they involve community members in their environmental response
planning process." That this did not translate to a perceived benefit from the pub-
lic hearing requirement may reflect respondents' experience that a mandatory hear-
ing-as distinct from a proactive engagement and partnership with community
members-is potentially contentious. The negative value of the hearing require-
ment also may reflect the fact that most of our respondents sell or mostly sell their
projects, and thus likely have less long-term presence in the community than those
who typically lease the residential units they develop. In addition, nearly one-quar-
ter of respondents indicated that local residents "always" or "almost always" oppose
infill redevelopment projects. Another one-half indicated that local residents "some-
times" oppose such projects. Such opposition clearly has the potential to slow down
project timelines or change redevelopment options, particularly if manifested in a
contentious public hearing process in which residents may pressure local and state
permitting entities to deny more lucrative land uses (Howland, 2003).
17 In the Likert scale section of the questionnaire, the respondents were shown the statement "An affordable
insurance policy that protects a developer from damage and liability claims would encourage private rede-
velopment of contaminated properties" and were asked to indicate, based on their experience, how true this
was on a scale from 1 to 5, where 1 means "never" and 5 means "always." While the conjoint choice ques-
tions treat the two types of liability protection as separate attributes of a policy package, in the Likert scale
question, we combined them within the same statement to keep this section of the survey manageable.
18 The exact phrasing of this statement is as follows: An affordable insurance policy that assures a firm
cap on the costs of environmental response would encourage private redevelopment of contaminated
properties."

H3: Environmental Assessment
The sign of the assessment attribute, assess$, in the basic model represented
Table 3 is positive, as expected, but it is not significant at conventional levels. Mor
over, we cannot reject the null hypothesis that the coefficient on the assessm
attribute is different from that on the subsidy.
The evidence from the Likert questions generally supports this lack of a stro
relationship. Attitudes about the desirability of assessment grants relative t
cleanup grants are mixed. While nearly 40 percent of respondents indicated th
grant for environmental assessments is "always" or "almost always" more beneficia
to a developer than a grant for the same amount for environmental response, near
25 percent of respondents indicated that this is "never" or "almost never" the case
We do find one subsample of developers for whom the assessment reimbursemen
appears relatively more desirable, however. When we asked respondents after
final choice experiment whether they would prefer the assessment and constr
tion/cleanup subsidies in cash or in the form of equivalently valued waivers of pub
lic fees associated with the project (such as for water hookups), 23 percent indicate
a cash preference (roughly 12 percent indicated a preference for waivers, and
remaining 65 percent indicated cash subsidies and fee waivers were equally attr
tive). If we examine only the 23 percent of respondents who indicate a cash prefer
ence for subsidies, the assess$ coefficient becomes significant at the 0.05 level and
about twice the size of the subsidy$ coefficient. Some caution is necessary in inter
preting this finding, however, because this difference still is not statistically sign
cant, a result we attribute to the small number of respondents in this subsample.
H4: Experienced Developers
Nearly 20 percent of the respondents to the survey are specialists (i.e., developer
who do more than 60 percent of their projects on contaminated sites). Under
H4 hypothesis, we would expect these more experienced respondents to place a dif-
ferent value on both types of liability protection than the non-specialists. Tab
shows the results of running our conditional logit model on a split sample. The lef
panel of the table displays coefficients and p-values for the 250 non-specialist deve
opers, while the right panel shows these figures for the 60 developers in the samp
who specialize in redeveloping contaminated properties. This split corresponds
1,194 and 295 observations. Both panels also show the estimated value of pol
attributes (expressed as a percentage of profits rather than as dollar values) f
coefficients that are significant at the 0.1 level or better. Several features stand ou
First, specialists in redeveloping contaminated properties appear to place a low
value on the cleanup and 3rdparty liability protections as a percentage of profit th
Table 4. Specialist / non-specialist model.
Non-Specialist Developers Specialist Developers

Incentive Coeff p-Value %profit Coeff p-Value %profit
assess$ 0.0021 .05 2.5 0.0003 .89 -

hearing -0.4793 .00 -5.6 -0.2588 .19 -
cleanup 1.3575 .00 15.9 1.5155 .00 14.4
3rdparty 2.0503 .00 24.0 1.5200 .00 14.5
subsidy$ 0.0019 .00 2.2 0.0024 .00 2.3
Journal of Policy Analysis and Management DOI: 10.1002

Published on behalf of the Association for Public Policy
do the non-specialists, lending support to our H4 hypothesis. The difference is par-

ticularly stark for 3rdparty liability protection, where the value of such protection
for specialists falls more than one-third below the value for non-specialists.19 More-
over, the specialists place nearly identical values on third-party protection as they
do on cleanup protection.
A second noteworthy aspect in Table 4 relates to the assessment attribute in the
non-specialists portion of the table. The assess$ variable in the non-specialist sub-
sample is significant at the 0.05 level, with an estimated value expressed in profit
terms that slightly exceeds that of the subsidy$ variable. The coefficient of the
assessment reimbursement for specialists, in contrast, does not differ from zero at
any reasonable test level. We speculate that this divergence may reflect a different
tolerance for transaction costs and the risk of losing sunk costs: those more famil-
iar with redeveloping contaminated properties do not find the relatively small cost
of assessments to be a barrier or their reimbursement to be an advantage (Sher-
man, 2003), but developers less specialized in contaminated properties consider the
assessment costs enough of a burden that their reimbursement is welcome.
Third, the coefficient on hearing for the specialists is lower than the analogous
coefficient for the non-specialists, and is statistically insignificant. This suggests
less concern with the costs that the hearing requirement imposes. This specialist
subsample as a whole does not seem to gain or lose anything from the imposition
of the public hearing requirement, and it is possible that some of the developers
among those with greater experience with contaminated properties may even ben-
efit from it.
SUMMARY AND POLICY IMPLICATIONS
The record of successful redevelopments of contaminated sites shows that private

investment can be attracted to properties burdened with contamination. In fact,
most of our respondents have done such redevelopment in the past. When pre-
sented with the hypothetical contaminated property in the conjoint experiments,
most indicate that they would choose to invest in a redevelopment project under the
right configuration of policy incentives. These include direct project subsidization
through reimbursement of assessment costs and subsidies for cleanup and/or con-
struction activities, as well as protection from liability for future cleanup and from
third party liability claims. The evidence from the survey responses lends support
to most, but not all, of the four hypotheses that guided the analysis.
In terms of the hypothesis that developers place a different weight on the two dif-
ferent types of liability protection, our survey data imply that third-party liability
protection is particularly attractive. The value of protection from third-party claims
represents nearly 22 percent of the project's return on investment, compared to 16
percent for cleanup liability protection. This differential, while appreciated by prac-
titioners and environmental insurance experts, has received little scrutiny in the
academic literature that has examined liability at contaminated sites. It appears to
be driven primarily by non-specialists in our sample, suggesting that protection
from third party claims may be a potentially useful policy tool to stimulate rede-
velopment of brownfields even at locales without brownfield specialists.
19 A Wald test rejects the null hypothesis that the coefficient on third-party liability is the same across
specialists and non-specialists at the 5 percent significance level (Wald statistic = 4.84, p-value = 0.02).
A Wald test, however, fails to reject the null hypothesis that the coefficient on cleanup liability is the
same across the two groups (Wald statistic = 0.68, p-value = 0.41).

The survey results also suggest that developers continue to perceive that public
involvement procedures, as manifested through public hearing requirements, place
a cost on projects. Across the sample as a whole, this cost represents about 4 per-
cent of the project's profits. This runs counter to the hypothesis, which much of the
practitioner literature suggests, that developers place a neutral or positive value on
such involvement. However, two qualifications are in order. First, while the
required public hearing in the survey questionnaire appears to impose a cost, an
alternative involvement approach that entails collaboration with local residents
may, in fact, be viewed more favorably. Second, for developers with significant proj-
ect activity involving contamination, the cost of the hearing requirement is statisti-
cally indistinguishable from zero. Since these specialists also appear to place a
lower value on the liability protections than non-specialists, this difference may
simply reflect their greater appetite for risk and/or ability to manage certain aspects
of brownfields activity more efficiently.
Regarding the hypothesis that developers place a higher value on assessment sub-
sidies than equivalent subsidies for cleanup or construction activities, the results
generally support only a weakly significant effect of the assessment at all. And,
when significant, the value appears very close to the value of the cleanup/construc-
tion subsidy. Brownfield specialist developers, in particular, appear to find the
assessment incentive of little interest.
In interpreting our results and their implications for public policy, the reader
should keep in mind that our study is not designed to address the overarching ques-
tion of whether incentives stimulate redevelopment of contaminated land in a way
that yields net fiscal or social benefits. It also does not attempt to address the com-
plete array of factors that shape brownfields development. Rather, it uses a set of
hypothetical situations to examine which of a subset of important incentives offer
the most value to potential redevelopers of contaminated sites. Moreover, we can-
not claim that the survey sample is representative of the development community
at large, nor that all types of developers are likely to respond to the incentives in the
same ways as our analysis suggests. However, it seems reasonable to believe that
our respondents come primarily from the segment of the development community
that is most likely to undertake development projects on contaminated land.20 Sub-
ject to these caveats, our work offers a handful of important policy takeaways.
First, our analysis suggests that for the subpopulation of private developers who
are reasonably likely to seriously consider a project with contamination, the prob-
ability of undertaking such a project is notably higher when subsidies and liability
protections are provided. In an environment of tight state and local budgets, off-
budget mechanisms, such as liability protections, may become much more critical
than the relatively limited pool of support available through traditional economic
development subsidies.
Second, full or partial reimbursements of environmental assessment costs appear
to have only a modest value and effect on undertaking a redevelopment. This con-
firms the point that such reimbursements do little to improve private project
financing up front, and many developers are accustomed to abandoning much
higher, more general pursuit costs associated with real estate development as a cost
of doing business (Meyer & Lyons, 2000; Sherman, 2003). However, a recent study
by the U.S. Government Accountability Office (2005) notes that programs that pro-
20 This conjecture is supported by the fact that 90 percent of our respondents have had an environmen-
tal assessment done, implying that they are acquainted with potential contamination problems and their
consequences.

vide public funds to support government-led environmental assessments are very

popular. Demand by local governments for assessment money from state and fed-
eral programs typically exceeds the supply of such money and, in fact, local gov-
ernments often use such support at privately owned abandoned or underutilized
sites to make them more attractive for development. Our work does not directly
address this avenue of assessment support, but our finding that direct reimburse-
ment of privately led site assessments does not seem to be attractive to developers
suggests that environmental assessment subsidies warrant more scrutiny.
Third, our finding that developers highly value cleanup and third-party liability
protection highlights some of the hidden costs of brownfield redevelopment prac-
tice that may leave contamination on site as part of a risk-based cleanup strategy.
Future liability for such residual contamination clearly remains a concern of many
developers. This problem has become particularly acute recently with vapor intru-
sion, the migration of volatile chemicals from the soil or groundwater into air
spaces of buildings (Eklund, 2005; Inside Washington Publishers, 2004; U.S. Envi-
ronmental Protection Agency, 2002). As post-remediation experience at sites accu-
mulates and technology improves to detect lower concentrations of volatile chemi-
cals, remedies thought to be satisfactory are being called into question. Assigning
liability for addressing these problems is contentious.
Finally, although this study focused on the attractiveness of different incentives,
the actual mechanisms that provide the incentives are important considerations. For
example, a range of stakeholders have suggested that federal remediation tax cred-
its could attract interest from a wider cross-section of developers nationally, since
they would be available directly rather than accessible only through a more discre-
tionary program gatekeeper (U.S. Government Accountability Office, 2005). In addi-
tion, while public entities should not provide incentives that subvert private sector
capabilities that already exist, the public sector still may have an important role in
interfacing with the private sector. The environmental insurance industry, for exam-
ple, can provide a range of products that address cleanup and third-party liability.
However, the 100 percent liability protection in the survey questionnaire that devel-
opers valued so highly is not available in the market-it unrealistically would require
assurance that the insurer would accept every claim and would never impose an
upper limit on the payoff-and other insurance remains unaffordable or unavailable
for small sites. State legislation barring third-party suits over post-remediation dam-
ages from sites that have government approved cleanups (or state indemnification),
and state-facilitated insurance in situations where purchase of private products is
not realistic, both warrant further consideration by policymakers.21
In sum, our survey has found that certain incentives-namely those related to lia-
bility relief-work well and are a potentially useful tool for stimulating brownfield
development, while others-such as the reimbursement of environmental assess-
ment costs-are not as attractive to developers. Furthermore, it appears that devel-
opers generally find public hearing requirements unattractive. Our study also has
uncovered significant heterogeneity in the attractiveness of incentives, depending
on the developers' experience with brownfields and the extent of their activity with
contaminated sites.
We wish to thank Ann Oliveri and Michael Pawlukiewicz. of the Urban Land Institute for
their help with our study. This work was supported by STAR Grant R829607 from the U.S.
21 See Yount and Meyer (2004) for a recent discussion of existing state brownfields insurance programs.

Environmental Protection Agency (EPA). The opinions reported in this paper are ours and
do not represent those of our institutions or the EPA.
KRIS WERNSTEDT is a Fellow at Resources for the Future, Washington, DC.
PETER B. MEYER is Professor of Urban Policy and Economics at the University of

Louisville, and Director of Applied Research at Northern Kentucky University.
ANNA ALBERINI is Associate Professor at the University of Maryland-College Park.
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APPENDIX. SCENARIO AND EXAMPLE OF A CONJOINT CHOICE QUESTION
In this part of the questionnaire, we would like to ask you to consider a hypo-
thetical land development project under the conditions listed below and five sets
of hypothetical incentives offered by the state or local government for this proj-
ect. Please assume your company does projects of this type in responding to the
questions.
You are deciding whether to make a contract offer on the property.
Imagine a townhouse project that your company would then lease to individual
households. This project would take place under the following circumstances:
Market Condition: The project is undertaken in an area with high potential for
property value appreciation that might raise return above expected values.
Environmental Assessment Cost: The expected cost for environmental studies,
including assessment, sampling, and response planning, is $100,000.
Site Remediation Cost: Based on known prior uses, the environmental engi-
neers report that the expected cost for meeting state regulatory requirements is
$900,000, including protection from any cost overruns.
Land Cost: The expected purchase price for the site is $6 million. [Note to reader:
In the low market scenario this is $3 million.] *
Development Cost: The expected development cost at the site, including con-
struction, marketing, interest, legal and administrative fees, etc., is $18 million (in
addition to acquisition, assessment, and cleanup costs). [Note to reader: In the low
market scenario this is $16 million.]*
Revenues: The expected present value of the townhouse development after con-
struction is $30 million. [Note to reader: In the low market scenario this is $24 million.]*
*Note to reader: Half of the respondents receive a questionnaire with high potential
for market appreciation and half receive a questionnaire with little potential for mar-
ket appreciation. Relevant costs for the project with little potential appreciation are
scaled downward but the expected rate of return on investment remains 20 percent in
both scenarios.
All of the five pairs of project alternatives below will occur under the above con-
ditions.

Choice 1. Consider the following alternative scenarios A and B.
Policy Conditions A B
1. Public Sector reimbursement for the full cost Not provided Not provided
of preparation of your environmental
investigations, including needed environmental
assessment, sampling, and planning for remediation
or containment.
2. Separate public hearing on your company's Not required Required

environmental response plan prior to any
regulatory decision on it.
3. State approval of your completed environmental No Tes

response protects your company and successor
owners from additional cleanup costs even if:
(a) Future changes in cleanup standards require
further remediation, or (b) pollution caused by
prior owners is discovered on-site at some later date.
4. State approval of your environmental response No No

protects your company and any successive owner from
liability for any environmental damage claims, whether
from site occupants, workers, or neighbors.
5. When response plan activities or construction begins, $125,000 0

a public subsidy will be provided in the amount of
Bl. Which of these project alternatives do you find more attractive, A or B, or would you
choose to do neither? (Please check only one.)
CI A
DB
- Not do the project at all.
Journal of Policy Analysis and Management DOI: 10.1002

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Attracting Private Investment To Contaminated Properties

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Association for Public Policy Analysis and Management

Attracting Private Investment to Contaminated Properties: The Value of Public

The 1980 Comprehensive Environmental Response, Compensation, and Liability

Journal of Policy Analysis and Management DOI: 10.1002/pam

9601-9675) to provide conditional liability relief to some of the parties involved in

- regulatory relief, such as cleanup standards that allow residual contamination

Journal of Policy Analysis and Management DOI: 10.1002/pam

Journal of Policy Analysis and Management DOI: 10.1002/pam

Journal of Policy Analysis and Management DOI: 10.1002/pam

on financial subsidies, which were relatively more appealing to developers with

STUDY HYPOTHESES AND SURVEY DESIGN

H 1: Private developers place a different value on (a) protection from additional

This is an exploratory hypothesis, and is motivated primarily by the dearth of

H2: Government requirements for public involvement on remediation plans

The literature is mixed on whether public involvement promotes the success of

Journal of Policy Analysis and Management DOI: 10.1002/pam

neighborhood (Pendergrass, 1996). Drawing on survey evidence, Lange and McNeil

H3: Private developers place a higher value on environmental assessment subsi-

In principle, the expected value to private developers of a dollar of assessment

H4: Private developers with a higher proportion of their projects on contami-

We conjecture that the value developers more experienced with contamination

SURVEY METHODS AND ADMINISTRATION

To test the above hypotheses, we developed a survey questionnaire based on con-

Journal of Policy Analysis and Management DOI: 10.1002/pam

Table 1. Incentives available in choice experiments.

Incentives Levels Presented

Site assessment cost reimbursement: $0, $100,000

Journal of Policy Analysis and Management DOI: 10.1002/pam

In addition, we presented half of the respondents with a redevelopment in all

Journal of Policy Analysis and Management DOI: 10.1002/pam

Table 2. Summary statistics.*

Variable Name, Definition % Sample

Developer, firm engages in real estate development 89

*Based on 313 respondents and 1,475 choice responses.

Journal of Policy Analysis and Management DOI: 10.1002/pam

contamination. Roughly one-quarter have received public support for environ-

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H 1: Cleanup and Third Party Liability Protection

The magnitude of the 3rdparty coefficient in Table 3 is significantly greater than

Table 3. Basic model.

(1) (2) (3) (4) (5) (6)

assess$ 0.0015 0.0009 1.52 75 1.7

15 Including these alternative-specific interce

Journal of Policy Analysis and Management

H2: Public Hearing

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H3: Environmental Assessment

H4: Experienced Developers

Table 4. Specialist / non-specialist model.

Non-Specialist Developers Specialist Developers

assess$ 0.0021 .05 2.5 0.0003 .89 -

Journal of Policy Analysis and Management DOI: 10.1002

do the non-specialists, lending support to our H4 hypothesis. The difference is par-

SUMMARY AND POLICY IMPLICATIONS

The record of successful redevelopments of contaminated sites shows that private

Journal of Policy Analysis and Management DOI: 10.1002/pam

Journal of Policy Analysis and Management DOI: 10.1002/pam

vide public funds to support government-led environmental assessments are very

Journal of Policy Analysis and Management DOI: 10.1002/pam

KRIS WERNSTEDT is a Fellow at Resources for the Future, Washington, DC.

PETER B. MEYER is Professor of Urban Policy and Economics at the University of

ANNA ALBERINI is Associate Professor at the University of Maryland-College Park.

Journal of Policy Analysis and Management DOI: 10.1002/pam