Who pays for lot remediation?

There’s a commercial development underway nearby, consisting of a four story apartment building and a medical office building. The structures will replace a garden center on a lot which needs $1.4 million in environmental cleanup. The developer petitioned the city to submit the bill for “excavation, soil handling, segregation, treatment and haul-off and replacement of contaminated soils, and remediation of buried onsite debris” for repayment from grant funds.

The city council approved the developer’s petition for the funds on a close 4-3 vote amongst the mayor and six council members. One councilmember ‘stressed that the grant would amount to the privatization of the profit and socialization of the public cost.’ I would rephrase that the funding allows the internalization of public funds to a private benefit.

So who usually pays for remediation? It depends.

Take the case where a neighborhood becomes ill from industrial contaminants seeping into the soil or drinking water. Three years ago 3M settled for $850 million in a suit brought against the corporation for having dumped “millions of pounds of excess toxic chemicals in areas east of St. Paul beginning in the 1950s.” The corporate headquarters is in this area.

Following this norm, the clean-up would fall to the seller. But whether sellers have to prep for market (unless specifically regulated) really depends on market conditions. With housing inventory tight, sellers of single family homes are putting very little effort or investment into obtaining a well qualified buyer. The garden center is in a position to deny any interest in remediation as they are located in an affluent area.

The council members in favor of allowing the developer to tap countywide and statewide funds for remediation express their own philosophy on the matter. Whereas the dissenters imply a gifting of public funds to private enterprise, the yes-voters are relinquished to ‘that’s the way the system works so let them ask for the money.’ Their view of the grant money is that, it has been collected, and set aside, so use it.

I’ve come across this ‘you should ask for benefits’ view before. When my kids were young, the daycare workers were pushing parents to fill out forms to pay for the meal programs (there are income limits but the idea was not to have folks self censure). Instead of putting it on the recipients to ask, the marketing of the state funded program was pushed from the supply side. I didn’t care for the approach then, and although some may be shy to admit they are in need of help, pushing benefits on people still goes counter to the natural momentum of things.

Back to remediation. Once the city gives the green light, the petition goes to the MN Department of Employee and Economic Development, the Metropolitan Council, and Hennepin County for various levels of approval. Since there are multiple demands on the public funds for a variety of projects some comparative pricing will occur. But wouldn’t it be cool if there were some type of ticker tape spitting out the price and or return on this type of investment? And in that representation one could compare the demand for environmental clean-up versus subsidies for housing versus sewer line replacement and so on.

Pricing out the demand sends public money chasing highest value projects. With that type of information we could better make sense how public funds are being internalized into private projects, and what if any, public externalities are generated per dollar or associational work hour in subsequent time-frames. Then we could better analyze the market.