The Economics of Brownfields and Watershed Health In Portland, Oregon

January 9, 2014

Prepared for Environmental Economics, Reed College, Fall 2013

Adriana Escobedo-Land 15, Nick Fiore 16, Kevin Gallagher 14, Allison Giffin 14, John Iselin 14,
Maya Jarrad 14, Bryan Kim 14, Anadi Kulkarni 16, Rennie Meyers 15, Ana Montgomery 14,
Mathew Olson 15, Eleanor Parmentier 15, Natalie Pong 16, Mia Reback 14, Jacob Robertson 15,
Alan Tuan 14, Joan Wang 14, Andrew Watson 14, Chris Weber 15, Austin Weisgrau 15, Helene
Wierzbicki 15, John Young 15, Phoebe Young 14

Project Supervised by
Noelwah R. Netusil, Ph.D.
Stanley H. Cohn Professor of Economics
Reed College
(503) 517-7306
netusil@reed.edu

Executive Summary
Brownfield remediation is a complex process that involves many different considerations,
particularly when considering industrial land use in Portland, Oregon. A comprehensive analysis of a
brownfield remediation project should consider the effects on the economic health of the
community, on urban watershed health, on carbon emissions, on housing values and other metrics
of environmental valuation. In the following report we draw heavily on the literature related to
brownfield remediation in the United States and conclude that a paired tax- or subsidy-based
incentive might be best to motivate the availability of viable industrial brownfield sites. In addition,
we find that local initiatives in touch with municipal policies and community needs continue to
produce successful remediation sites by effectively involving local governments.

1. Introduction
1.1 What are Brownfields?
Brownfields, as defined by the EPA (Revitalization 2013), are plots of land for which expansion,
redevelopment, or reusemay be complicated by the presence or potential presence of a hazardous
substance, pollutant, or contaminant. Contamination might be spurred by localized commercial or
industrial use that leaves contamination or perceived contamination on the site, natural disaster,
struggling business site abandonment due to economic conditions, and more sporadic random
contamination. Brownfields lower nearby property values, stifle local investment, and often threaten
public health through direct or indirect pathways (Bromberg, L.M., and T. Spiesman. 2006). The
decline of the manufacturing industry sector in the United States, the enactment of policies to
protect environmental and public health, and continuing tension between the need for
environmental quality and safety and the need for economic development, are primary contributors
to the spread of brownfields in the United States (Bannon 2009). The tension between the need for
environmental quality and for economic development is especially difficult in the industrial cities
hardest hit by the loss of their industrial job base (Brachman).
Brownfield remediation refers to the process of removing hazards and contaminants from
brownfield sites. For urban planners faced with limited area for development, brownfield
remediation is one of the tools at their disposal. Brownfield remediation can reduce trip lengths,
make more efficient use of existing infrastructure, support transit systems, and make walking and
biking viable mode choices (Environmental Protection Agency 2001), especially when brownfields
are located close to existing areas of development. Local and state governments see the potential for
redevelopment to bring in jobs, increase the local tax base, and expand the use of existing
infrastructure. Brownfields are also often located in lower- or middle-income neighborhoods, and

redevelopment provides more accessible employment opportunities to the neighborhood

(Environmental Protection Agency 2001).
However, many barriers hinder the redevelopment of brownfield sites. The most pressing
question is about economic feasibility - will the costs of rehabilitating and redeveloping this land
exceed potential benefits? This question becomes more complicated than for normal real estate
projects because brownfield sites require extensive environmental cleanup. Environmental cleanup is
often considerably more expensive than other costs of development, such as land, rent, and
construction.

1.2 Brownfields in Portland, Oregon

Portland has a unique opportunity to develop its brownfield sites, and particular pressures to do so.
Given the metropolitan areas strict urban growth boundary (UGB), increasing residential
population size, and subsequent concerns about the increasing housing density, space for industrial
development in particular is not available in the amounts required by state law. Section 4 provides a
visualization of brownfields in Portland through maps overlaid with relevant information.
The city is expected to expand by approximately 280,000 people in the next 22 years,
highlighting an urgent and growing need for jobs (Bureau of Planning and Sustainability 2013b). As
the Comprehensive Plan (City of Portland, Oregon Bureau of Planning and Sustainability 2013)
states, jobs in industrial districts, such as the port and airport, are a core part of the citys living
wage job base. The Economic Opportunity Analysis for the City cited a 630-acre shortfall for
buildable industrial employment land (City of Portland, Oregon Bureau of Planning and
Sustainability 2012), and the Portland Brownfield Assessment claims a shortfall of 740-acres (Maul
Foster & Alongi, Inc. 2012). Because of the Urban Growth Boundary and the limited access to key
trade lines (the Willamette and Columbia Rivers), it is not feasible for the City to expand its
industrial land outwards. The City must look instead to lands that it can adapt and reuse for
industrial purposes.
According to the Portland Brownfields Assessment, there are approximately 910 acres of
potential brownfield properties in Portland. This includes 558 industrial acres (Maul Foster &
Alongi, Inc. 2012). A full redevelopment of all brownfield sites could go a long way towards
offsetting the industrial land shortage, and would be expected to create 31,000 new jobs and provide
over $40 million more in property taxes paid to the City (Maul Foster & Alongi, Inc. 2012).
Furthermore, brownfields may help Portland reach its environmental and smart growth goals,

including a reduction of CO2 emissions and improvement in watershed health. While Section 7
includes a much more in depth study of the issues relating brownfield redevelopment and carbon
emissions and reductions, the Portland Brownfield Assessment claims that a complete remediation
and redevelopment of all brownfield sites would represent a reduction in 39,000 metric tons of
CO2 annually (Maul Foster & Alongi, Inc. 2012). There are numerous benefits to be seen from
brownfield redevelopment in Portland, but costs and liability concerns are important
considerations.
The Portland Brownfields Assessment includes an in-depth report on issues of financial
feasibility, providing feasibility gaps for six land typologies: downtown high density, mixed use hubs,
main street west, main street east, central city industrial, standard industrial, Superfund shadow, and
harbor waterfront (Maul Foster & Alongi, Inc. 2012). These numbers take into account the cost of
remediation and redevelopment, offset by the sites potential value. According to the assessment,
remediation costs for industrial sites comprise 77 percent of the overall feasibility gap, and this
number increases to 84 percent when accounting for Superfund liabilities.
The redevelopment of some brownfield sites is certainly more feasible than others. For example,
the demand for land in downtown Portland implies that costs of remediation and construction will
be quickly absorbed (Maul Foster & Alongi, Inc. 2012). Other sites will be considerably more
expensive to redevelop, especially those that are a part of the Superfund shadow, where EPA
regulations will increase the costs of remediation as well as restrict future development.

A large proportion of brownfield sites can be redeveloped for only a moderate investment. The
Brownfields Assessments refers to them as low-hanging fruit that could help the city of Portland
meet the industrial land supply shortfall. In their own words, Closing the estimated financial
feasibility gap on 50 percent of the brownfield requires approximately $36 million. That investment
doubles to achieve an additional 20 percent of redevelopment, then doubles again to achieve 90
percent. (Maul Foster & Alongi, Inc. 2012). In section 5, a literature review of the economics of
brownfields further addresses the issues of economic feasibility.
The Comprehensive Plan recognizes and addresses the economic feasibility of brownfield
redevelopment in its policies 3.10 and 3.40. The former calls for an increase in public investment to
overcome the feasibility issues of brownfield redevelopment, hoping for cleanup and redevelopment
of 80 percent or more brownfield sites by 2035 (City of Portland and Sustainability 2013). Policy
3.40 looks to encourage the redevelopment of brownfield sites for industrial use and thus help meet
the industrial land supply shortfall that will become salient in the coming years as population
increases call for more living-wage jobs. Section 2 further explores local, state, and national policies
surrounding brownfield redevelopment.
Despite its shortcomings, Portland is actually considered exemplary in its reuse of brownfields.
In 1998, Portland was selected as a Showcase Community in the EPAs Brownfields National
Partnership program for Portlands strong history of successful redevelopment. The city-run
Portland Brownfield Programs onus to provide resources for neighborhood brownfields on
commercial corridors is driven by the goals of environmental justice and sustainable development
(Fish and Marriott 2013). Section 8 describes Portlands most successful projects, like Esperanza
Court, Arciform, and PortCity Development, which have provided rehabilitated land for commercial
and residential purposes, but few of Portlands projects thus far have been sold as industrial land.
Rehabilitating industrial brownfields is a key step for both economic growth and environmental
concerns within the City of Portland.

1.3 The Effect of Brownfield Remediation on Urban Watershed Health in Portland

For many years, Portland has viewed the urban watershed as a vital infrastructure that must be
restored and maintained. This is because, according to the 2012 Five-Year Implementation Strategy
for the Portland Watershed Management Program, the community and city of Portland believes that
healthy watersheds are the solution to many urban problems including stormwater management,

flooding, air pollution and urban heat effects (Saltzman and Marriott 2013). The adoption of the
Portland Watershed Management Plan in 2006 was a significant step towards the conservation of the
urban watershed.
The Portland Watershed Management Plan defines a healthy urban watershed as a watershed
with hydrologic, habitat, and water quality conditions suitable to protect human health, maintain
viable ecological functions and processes, and support self-sustaining populations of native fish and
wildlife species whose natural ranges include the Portland area. (2005 Portland Watershed
Management Plan 2013) The Portland Watershed Management Plan laid out a roadmap for
improving watershed health by recognizing four watershed health goals for the Portland area, and
outlining six general strategies to achieve these goals.
The two watershed health goals relevant to brownfield remediation:

Habitat: Protecting and restoring aquatic and terrestrial habitat

Water and sediment quality: Protecting public health and native fish by improving surface
water and groundwater quality

The four general strategies to attain these goals that are relevant to brownfield remediation:

Stormwater management: Reducing stormwater runoff into the watersheds

Aquatic and terrestrial enhancement: Restoring or creating healthy habitats for the
benefit of native species

Protection and policy: Managing erosion, sediment, pollutant discharge, as well as

stormwater from land development in order to protect important watersheds

Education: Promoting watershed awareness, and providing pollution prevention education

as well as technical assistance to help maintain watershed health

Brownfield remediation has the potential to encourage healthy watershed function in the
Portland community through addressing the Water and Sediment Quality watershed health goal in
the Portland Watershed Management Project by reducing polluted storm water runoff from the
brownfields, as well as by improving sediment quality in the various Portland watersheds. Section 3
investigates current policies related to urban watershed health in the United States, while Section 6
analyzes the importance of urban watershed health from an economics perspective.

According to the 2012 Five-Year Implementation Strategy for the Portland Watershed
Management Plan, toxic pollution in the sediment (which would include pollution from brownfield
areas) is currently limiting healthy watershed function for the Columbia Slough, Johnson Creek, and
the Willamette River watersheds in Portland. And according to the Portland Brownfields
Assessment, there are approximately 910 acres of potential brownfields in Portland. Given this,
brownfield remediation has the potential to make a significant positive impact on the urban
watershed health.

1.4 Opinions on Brownfield Remediation

The success of brownfield redevelopment projects relies heavily on public opinion, particularly in
cases where public investment is necessary to cover remediation costs. Public investment is
contingent upon public interest and support. If individuals do not see brownfield redevelopment as
a viable job-creator, or a good use of their tax dollars, then it is unlikely that remediation and
redevelopment will occur. Furthermore, other concerns regarding watershed health and
environmental quality may affect support for brownfield remediation. There have been a number of
opinion

polls

in

the

US

related

to

the

issues

of

brownfield

remediation

and

watershed/environmental health. These help us to think about the kinds of support and opposition
brownfield redevelopment policies may face in Portland.
A Gallup Politics poll conducted in March 2012 found that 50% of Americans worry a great deal
about contamination of soil and water by toxic waste, and that a further 28% worry a fair amount
about the same issue (Jones 2012). On top of this, the same Gallup poll found that 48% of
Americans worry a great deal about the pollution of drinking water, and that a further 30% worry a
fair amount about the same issue. Given that brownfield sites contribute to both contamination of
soil and water by toxic waste and the pollution of drinking water, the Gallup poll suggests an interest
in the US for brownfield remediation.
The Nation League of Cities (1998) mailed a survey to 1,300 municipal elected officials and
asked, How useful could brownfields conversion be in making your city more economically
competitive? 41 percent of respondents felt that brownfield conversion could be somewhat useful,
34 percent thought they were of little use, and 25 percent found them to be very useful (National
League of Cities 1998). This gives us an idea of how aware elected officials may be of this untapped
resource.

A survey conducted by Sustainable Long Island, a non-profit based in Long Island, New York,
polled brownfield officials and stakeholders, including municipal and government employees,
elected officials, developers, legal professionals, engineers, and others across Long Island, and asked
them to rank the top impediments to brownfield redevelopment on Long Island. Overall,
respondents felt that market conditions, the need for environmental assessment, environmental
regulations, inadequate infrastructure, cleanup funds, and liability issues were, in order, the greatest
barriers to redevelopment, from strongest on down (Sustainable Long Island 2011). To these
individuals, the brownfield redevelopment process is challenging because of regulations and funding.
Simplified processes, concise and predictable standards and requirements, and more funding would
act to make brownfield redevelopment a more appealing option.
These surveys give us a sense of how key stakeholders think about potential brownfield
remediation and redevelopment, as well as how the public views environmental degradation and its
subsequent health effects. The result of the public opinion survey indicates that the general public is
quite concerned about the health of their environment and their watershed. The other surveys show
how city officials across the US are concerned with the economic issues that brownfield remediation
raises. The in-depth economic feasibility analysis (discussed earlier in the Brownfields in Portland,
Oregon section above) is perhaps the best step Portland is taking to encourage brownfield
remediation and redevelopment. If the concerns about market conditions and funding are addressed,
then the discussion can focus on potential gains, such as the benefits that remediation will have on
watershed health, environmental quality, carbon benefits, and economic growth in the City of
Portland.

1.5 Key Terms

Greenfields: This term was originally used in construction and development to refer to land that has
never been used, where there was no need to demolish or rebuild any existing structures. Today, the
term greenfield project is used across industries, where it means to start a project without the need
to consider any prior work.
Use Value: The value derived from the actual use of a good or service, such as hunting, fishing, birdwatching, or hiking, provided by an ecosystem. This can include indirect values, where there is no
direct interaction with a specific part of an ecosystem but value is derived from that specific
components contribution to the ultimate engagement with the environment.

Non-use Value: Values assigned to environmental goods by an individual even if that individual will
never necessarily access that good. Non-use value can be equated to the satisfaction of just knowing
that an environmental good exists.
Total Economic Value (TEV): The composite value of an environmental good, also known as the sum
of the use and non-use values for that good.

1.6 Outline for the Rest of the Report

Section 2 studies the Local, State, and National Policies about Brownfields, and finds that there are
several paths that Portland can pursue to encourage remediation and redevelopment. A land bank
could be established with the specific goal of redeveloping Portland's brownfields, but given the
particular characteristics of the Portland brownfields (notably reluctance of owners to sell their
brownfield properties without market pressure) a land bank may not be a strong option. Instead, a
tax- or subsidy-based incentive paired may be the best option.
Section 3 investigates Local, State, and National Policies about Urban Watershed Health, and
finds that there are few watershed health policies at the local level, indicating the merit of creating
local policies to address the nuances of specific watersheds; given the total economic values of even
small urban watersheds, it might be useful to design policies that ensure these values are taken into
account during land use planning.
Section 4 creates maps of brownfields in Portland overlaid with information about taxes and
ecology to find that the majority of brownfield sites are concentrated along the river on industrial or
previously industrial land, and that the majority of tax lots with a brownfield located on it are zoned
as "Commercial" use.
Section 5 explores the Economics of Brownfields Literature, and finds that while brownfields
are a largely untapped resource for both environmentalists and economists, there are a number of
difficulties associated with brownfield remediation. Brownfield landowners are often uninterested in
remediation, but they are also hesitant to sell their land at a low enough price to attract customers
willing to remediate and redevelop. The best solutions for this issue require the local government to
assume responsibility for the redevelopment of polluted properties. They could purchase
brownfields outright, subsidize some of the remediation, or tax landowners on their un-remediated
land.
Section 6 considers the Economics of Urban Watersheds and finds, in short, that the literature
unanimously finds that healthy urban watershed features (wetlands, vegetated areas, streams, rivers,

10

lakes) or percentage of land comprised of urban watershed features in a property have a positive
impact on house prices. These urban watershed valuations rely mainly on statistical models.
Section 7 looks at the Carbon Benefits of brownfield remediation, and notes how the value of
brownfield remediation ought to consider the effect of redevelopment on carbon emissions. The
future costs of placing carbon in the atmosphere, the social cost of carbon particularly, might be
included in the evaluation of remediation feasibility; proactively addressing carbon emissions in this
venue might preclude any unwanted future federal policy action.
Section 8 studies previous cases of brownfield remediation in Georgia, Maryland, and
Pennsylvania that give important insights on how to successfully remediate brownfield sites. These
case studies make the importance of choosing redevelopment projects with strong demand
abundantly clear. For example, we found that an attempt at brownfield remediation in Pittsburgh,
Pennsylvania failed because it did not cater to the employment needs of the surrounding
communities.

2. Brownfields in Local, State, and National Policy

2.1 Introduction
Oregons Growth Management Act, by requiring cities to create development plans, puts limits on
urban sprawl at the cost of removing some development flexibility. Portland is currently
experiencing a shortage in its stock of industrial-use land (Bureau of Planning and Sustainability
2013a), but it also has numerous vacant lots and brownfields (see maps in chapter 4). These
properties have been found to reduce the value of surrounding properties (Apgar, Duda, and Gorey
2005) while also costing the city money because of vandalism, arson, and other crimes.
Opening up brownfields for redevelopment would help solve these problems, but there exist a
number of barriers. The first difficulty Portland faces is the long-acknowledged issue of motivating
the owners of brownfields to sell their property (David Adams et al. 2000). The distribution of
brownfields around Portland (see maps in chapter 4) raises the question of whether or not siting
industrial land could occur without significant pushback in certain regions or neighborhoods. Finally,
theres the ever-present concern with brownfields that abatement and redevelopment is costly
compared to the alternative of locating on uncontaminated (greenfield) property. This section

11

investigates land bankstheir institutional arrangement, purpose, strengths and weaknessesas a

possible tool for solving Portlands brownfield problems.
Upon investigation of the Cuyahoga Land Bank (Cuyahoganty Land Reutilization Corp. 2013),
Chicagos Cook County Land Bank (Cook County Land Bank Authority 2013), and others it appears
to us that a land bank is not a viable solution to Portlands brownfield problem. It seems that most
land banks are deployed as a remedy to widespread property abandonment, which is not a problem
in Portland. While the environmental benefits of redeveloping brownfield sites is certainly touted by
other land banks as a success, it seems as though this is a secondary priority for these organizations.
For example, the Genesee County Land Bank has demolished 3,000 abandoned homes at a cost of
about $12,000 (Dominic Adams 2013) per home since 2003, eclipsing spending and grants on
brownfield redevelopment1 (EPA 2013). In other cities holding onto contaminated land makes less
economic sense for a reluctant seller, but in Portland there is good reason to speculate that the land
will increase in value. We found little to suggest that land banks would help ease this reluctance. The
idea of combining a tax or subsidy (or tax increment financing) into a possible land bank solution
would seem an unpopular or unfeasible solution, especially compared to an alternate purely taxbased approach that could encourage brownfield owners to redevelop or sell.

2.2 Portland Compared to Other Land Bank Sites

Population growth in Portland has been greater than the national average for over ten years,
and is projected to continue (Metro 2009). On the other hand, Portlands urban growth boundary
limits the potential for sprawl; the result is that population density within Portland must increase.
More people looking to live and work in Portland means increasing land prices. With regards to
brownfields, the primary issue would seem to be the cost of redevelopment. Assuming a system
whereby a developer has no financial concerns with regard to site contamination and liability, theres
the issue of high costs to clean up the site for development in the first place. In the face of growing
demand for land in Portland, it would seem a land bank might make good sensetransaction costs
could be lower, individuals with expertise in site remediation would be easier to contact, etc. The
problem is that brownfields do not seem to be the number one driver for land banks. Rather, land
banks seem particularly good at encouraging and aiding redevelopment of abandoned properties.

1
. It should be noted that Michigan lawmakers passed legislation such that any land held by a land
bank is called brownfield, (Maul Foster & Alongi, Inc. et al. 2012) but that this does not mean
each abandoned property qualifies as one in terms of high cost of pre-development remediation.

12

One strength of land bank programs weve observed that could be improved upon further in
Portland is the establishment of internet information systems. All of the land banks we studied had
some form of online listing for their properties (see Cuyahoga Countys website for a good example
of a system). The City of Portland already provides PortlandMaps.com as a public data resource and
if a land bank were established in Portland the listing of properties provided for interested buyers
could include or be incorporated into the robust information already available online.
Portland, with its high demand for land, doesnt really have an abandoned property problem. A
motivated buyer would be more likely to pursue abandoned, uncontaminated property if available
because it would be cheaper to develop, and a seller does not need to be concerned with remaining
part of a chain of liability which could complicate matters and cost them money even after the site
has changed hands. A land bank can be particularly effective with abandoned properties in cities
where that is a problem for a few reasons. One, the stock of properties the land bank targets
includes brownfield sites and abandoned properties. In theory this means that there is simply more
land that the bank can go after for encouraging redevelopment than in a city like Portland that has
primarily brownfield sites. This can be especially useful if a developer or group of developers is
looking to aggregate a number of properties for a larger projectnegotiations and arrangements can
go through the land bank for both types of property. Two, property abandonment may not be a
static problem. In Portland, given demand for land and regulation/stewardship practices, we hope
the current acreage of brownfields sitting undeveloped (910) will not increase (City of Portland and
Sustainability 2013). In other cities where land banks have been implemented, if redevelopment of
abandoned properties begins in one particular district (it becomes the primary focus of an urban
revitalization effort) the property abandonment issue may continue and grow in other parts of the
city. A land bank focused on abandoned properties may then have a greater operating lifespan,
better justifying the cost of starting it in the first place and increasing the chance that private actors
will step in and a market will form around the sale and development of these previously unattractive
properties. Lastly, development of an uncontaminated property is simply cheaper. Table 2.1
summarizes the advantages and disadvantages of establishing a land bank in Portland. The table
initially appeared in the Portland Brownfield Assessment, a report prepared for the Portland Bureau
of Planning and Sustainability in 2012. The conclusions of our research have been added to the table
denoted by an asterisk (*).

13

Table 2.1 Amended Policy Tool Summary for Land Bank (Maul Foster & Alongi, Inc. 2012)(Maul Foster
and Alongi Inc, E.D. Hovee and Company LLC, and ECONorthwest 2012)
Advantages

Disadvantages

Potential to become self-sustaining over time.

Requires substantial initial public investment in

challenging budget climate.

Provides patient capital and long-term vision.

Relatively low projected Return-of-Investment
Establishes alternative to government taking title of (ROI) rate.
contaminated properties via tax foreclosure.
Land banks seem best deployed in areas with
Potential to leverage state and federal grants moderate-to-extreme urban blight and
(HERA)
abandonment.*
High
potential
redevelopment.

to

promote

brownfield May do little to address owner reluctance to

sell/land shortfalls simultaneously.*

Potential to work well with established information

systems.*

Land banks could be formed with brownfield redevelopment as the first or only priority,
especially where arrangements could be made to release the final buyer/future developer from
liability, but Portland isnt solely or even strongly in need of buyer incentives. Reluctant potential
sellers comprise another dimension of the brownfield problem; where incentive exists to simply hold
onto land, owners are reticent when approached about sale and redevelopment. In Portland it is
especially easy to see why owners might hold onto their land rather than sell now. With land in high
demand, owners can speculate on the value of their land increasing. If they can write off these
properties and do not need to pay property taxes on them, there is little a land bank option on its
own would be able to do.

2.3 Government Intervention

In Portland, there are a large number of interested buyers of brownfield properties but only a limited
number of sellers. Thus, it would make sense for government intervention to target sellers, which
may occur in two ways. Sellers can be taxed for holding undeveloped land, increasing the price of
holding the land and incentivizing them to sell, or they can be subsidized to lower the selling price.
Economic theory suggests that the seller should be indifferent and incentivized equally by a tax or a
subsidy. However, this is not the reality as subsidies are politically more popular and hence
potentially reap better results.

14

We can see from this list of problems that ownership constraints are varied in their nature and
hence require different solutions. Ownership constraints can be split into two different branches:
frictional constraints and structural constraints (Couch and Fowler 1992). Frictional constraints
relate to transaction costs in the market. Making the market more accessible and informative for
potential buyers and sellers can decrease transaction costs. Structural constraints are much harder to
deal with as they refer to the problems where a transaction is uneconomical because of the
differences in the price of selling and buying. While frictional constraints can be dealt with by
implementing more market procedures, structural constraints almost always have to be dealt with
using taxes or subsidies to the owner and/or subsidies to the buyer. Subsidies to the buyer are called
developmental measures and are not encouraged where demand for the land is high, as it is in
Portland. Government interaction with the seller only is recommended for our particular situation.
Taxing the owner of a brownfield site is usually done through a vacant land tax. First of all, it is
important to note that taxes are politically unpopular, and so this approach has rarely been practiced.
The structure of this tax is critical to ensure that it targets those who are currently stagnant in the
market, and not those who are actively trying to sell or remediate the brownfield. With this goal in
mind, a flat tax paid by owners of brownfields is least efficient. Such a tax may discourage
development since developers may have to pay the tax as they prepare for development, and the
added cost makes their scheme uneconomic. Instead, the tax could come with a grace period,
applying only to those who continue to own and not develop brownfields a certain period of time
after its announcement. In the interest of efficiency, Portlands zoning regulations and increasing
population density give legitimate reason to tax those who own land that isnt being used.
Subsidies and grants are generally more popular with the public and so the policy would be
easier to implement. Subsidies would either lower the cost of buying or increase a sellers profits,
and in places of high demand such as Portland, a subsidy directed towards brownfield landowners,
as opposed to potential buyers, would be more efficient. Unfortunately, grants have significant
limitations that must be heeded. Subsidies require a much greater initial investment, and like the land
bank scenario, one must be sure the return on investment is large enough for the option to be
economically viable.
The second type of subsidy is a tax concession. It is important to note that in terms of costs to
the government this is no different than a grant, it merely has different effects in some cases. Tax
concessions usually take the form of capital allowances or enterprise zones. Capital allowances allow
a firm to deduct capital against the revenue of firms for tax purposes, if this capital is directly

15

involved with industrializing a brownfield site. This means that the firms will not be taxed for this
capital. The capital is seen as an asset for development and the concession directly endows
developers with more market power to develop further, as well as incentivizing them to do so. Tax
concessions influence producer behavior. The subsidy is more likely to have been efficiently
allocated if it reimburses businesses for spending rather than gives them money for more spending.
Enterprise zones create areas in which development is tax-free or taxed less for a predetermined
period of time. This is a fiscal stimulus that creates or enhances market opportunities where
previously they were weak or did not exist. By and large, they are the most tried and the most
successful of all fiscal stimulus measures in brownfield redevelopment (Boarnet and Bogart
1996)(Boarnet and Bogart 1996)(Boarnet and Bogart 1996)(Boarnet and Bogart 1996). Reduced tax
liabilities and enhanced net revenues enabled developers to pay owners of sites enhanced prices and
still make an acceptable profit in areas where rental levels were previously depressed (Erickson and
Syms 1986)(Erickson and Syms 1986). Hence, owners previously demanding values that were
unacceptable to developers were frequently able to achieve prices sufficient to encourage them to
sell. Adams (2000) estimated that approximately 20% of brownfield sites in Britain that underwent
development would not have done so if not for fiscal stimulus. He expects this percentage to
increase over time as governments become more aware of the rewards associated with stimulus.

3. Urban Watershed Health in Local, State, and National Policy

3.1 Introduction
Given the total economic values of even small urban watersheds, it might be useful to design
policies that ensure these values are taken into account during land use planning (Lahiri, Latif, and
OBrien 2013). Urban watershed health, or watershed health more broadly, is addressed at the
Federal level primarily through legislation such as the Water Pollution Control Acts which aim to
protect the health of the nations watercourses (Darby, McMichael, and Dunlap 1976). Beyond such
acts, the policies surrounding urban watershed health are left largely to state and local regulatory
bodies.
There is probably no clean cut policy regime that would be applicable across the board to
address concerns surrounding urban watershed health. Watersheds, are extraordinarily variegated
and a policy that would be effective in one watershed might be wholly inappropriate for another.
For this, the most efficacious policies would be those designed for the specific character of specific

16

watersheds (Hascic and Wu 2006)it has suggested that a water quality-trading program (i.e. a
environmental credit market) might be useful in most cases for correcting some of the market
failures surrounding watershed services (Langpap, Hascic, and Wu 2008).

3.2 Watershed Valuation

The economic valuation of the watershed and the services a watershed provides is a critical
consideration in the formation of any watershed policy. In general, the cost incurred for letting a
certain amount of pollution above some baseline level (a topic which is critical in its own right) into
the watershed must be higher than the savings from doing so. Valuing a watershed is difficult
because it provides multiple types of services that do not easily collapse into a single dollar value.
Further complicating the issue is the multitude of valuation techniques availableall of which will
often point to wildly different values.
An innovative study conducted by Randhir and Shriver (2009) suggests an alternative method of
valuation that involves ranking without prices within the framework of group deliberation. They
argue that, Preferences for ecosystem attributes can be prioritized without explicit imputation of
monetary values, and that non-monetary valuation more accurately reflects the human values
placed on improving and protecting ecosystems (Taylor and Gerath 1996). An immediate concern
that arises from any non-monetary valuation is affordabilitywithout any monetary weight to anchor
preferences, it is quite possible that environmental characteristics will be valued beyond a given
budget constraint. However, Randhir and Shriver are able to mitigate this risk by: (a) having
stakeholders performing this evaluation only give preferential weights and not levels of service and
(b) by incorporating a group deliberation element involving similarly interested and powerful
stakeholders to gain a sense of public consensus on what is most important in a watershed. End
values were derived from an algorithm incorporating individual stakeholder valuation, mean
valuation, and an index of consensus, which acts as a proxy for the public interest. The results show
that there existed a statistically significant difference between the raw mean (achieved by averaging
stakeholders individual preferences) and the harmonized mean (achieved through group
deliberation and consensus)thus providing a motivation for this valuation technique.

3.3 Watershed Policy in Oregon

The Department of Environmental Quality (DEQ) is the main state-level agency responsible for
assessing, monitoring and setting water quality standards for Oregon. To best achieve its goal of

17

protecting the states water supply, the DEQ utilizes a watershed approach framework. Although
the concept of managing water quality from the geophysical level has been utilized since the 1800s,
the watershed approach has reached full maturity only within the last two decades (Taylor and
Gerath 1996). There are several key advantages of taking a watershed approach versus traditional
point-source pollution focused methodologies. Perhaps most prominently, a watershed approach
eschews arbitrary political boundaries for geophysical ones, allowing policy makers to holistically
assess and address water quality issues in a manner that considers the interactions that occur
between the biotic and abiotic elements of a watershed ecosystem. Furthermore, a watershed
approach unites various public and private organizations together and synergizes their efforts
towards the best possible use. Indeed, the Oregon DEQ cites their watershed approach as
synergizing 17 different programs run by various local, state, federal, and private agencies together to
best handle issues of water quality. Participatory place based approaches to watershed planning may
also have certain disadvantages. Using Portland as a case study, Larson and Lach suggest that certain
demographic groups are overrepresented in the planning process while other demographic groups
are marginalized (Larson and Lach 2010).
One of the DEQs key programs intended to address watershed health is the TMDL (total
maximum daily load) program. The EPA requires that states have a TMDL program via section
303(d) of the Clean Water Act (EPA 2013). A TMDL refers to the maximum level of
pollutant/impairment that can be present in water to still meet the minimum water quality standards
set by the state. Water bodies that fail to meet the minimum standards set by the state are required
to have TMDLs developed for them under section 303(d). Currently, there are 1,206 TMDL
identified segments throughout Oregon, the most common impairment of which is the water
temperature, and the most impaired water basins being the Willamette and Umpqua

3.4 The State of Oregons Waters: The Willamette Basin

The Willamette Basin serves as a poignant case study on the importance and necessity of TMDL
standards in managing watersheds and water quality. Consisting of 12 sub-basins, the Willamette
Basin has been consistently plagued by mercury, temperature, and bacteria issues. The Willamette
TMDL program was ODEQs first attempt at creating a basin wide TMDL policy rather than
addressing issues at the sub-basin level (Willamette Basin TMDL: Overview 2006). Unsurprisingly,
this particular TMDL program required extensive coordination between multiple stakeholders from
all sectors. For example, the TMDL for mercury was set through a joint effort between the Oregon

18

DEQ, US EPA, and a group of interested stakeholders from the public, private, and advocacy
spheres in Oregon (Willamette Basin TMDL: Overview 2006). This group of interested
stakeholders was able to develop a comprehensive plan involving a bio-magnification food web
model and an independently revised estimate of a mercury balance for the Willamette River Basin
with the ultimate end goal of having fish clean enough for human consumption (Willamette Basin
TMDL: Mercury 2006). This result demonstrates the degree of complexity that a TMDL can take
and the importance of having multiple interested parties participate in the policy making process.

3.5 The State of Oregons Waters: The Columbia

The Columbia River is a major waterway that separates Oregon and Washington near Portland. Its
course has attracted extensive industrial development, especially along the OR/WA border, thus
plaguing that portion of the river with extensive pollution. As such, the EPA in partnership with the
ODEQ formed the Columbia River Toxics Reduction Working Group with the aim of reducing the
level of toxins present in the water system. According to a 2009 report published by this working
group, the river is heavily polluted with, mercury, dichlorodiphenyltrichloroethane (DDT) and its
breakdown products, polychlorinated biphenyls (PCBs), and polybrominated diphenyl ether (PBDE)
to the extent where it may have adverse effects on human, animal, and plant life (Columbia River
Basin: State of the River Report for Toxics 2009). The river is also contaminated with arsenic,
dioxins, radionuclides, lead, pesticides, industrial chemicals, and emerging contaminants such as
pharmaceuticals found in wastewater, which are not focused upon in the report but merit some
advance concern (Columbia River Basin: State of the River Report for Toxics 2009).

3.6 Brownfield Redevelopment and Watershed Health

Brownfield redevelopment efforts are inextricably linked to the improvement of watershed health in
which the brownfields are located. Indeed, it can be argued that every brownfield redevelopment
project is also a watershed redevelopment project. Empirical support for this proposition is found
by an April 2011 study conducted by the US EPA of five metropolitan areas with extensive
brownfield redevelopment projects (Swartwood and Thomas 2011). To summarize, the EPA
averages the environmental performance of brownfields across the five communities and compares
them to traditional developments. The results are telling (Swartwood and Thomas 2011):

19

Table 3.1 EPA Estimation on Environmental Performance of Brownfields as compared to Greenfields.

Pollutant

Measurement

% Difference for Brownfields

as compared to Conventional

Stormwater Runoff

Acre-feet/yr

43~60%

Nitrogen

Lbs/yr

9~71%

Phosphorous

Lbs/yr

-31~78%

Turbidity

Lbs/yr

21~80%

Biological Oxygen
Demand

Lbs/yr

62~79%

Chemical Oxygen
Demand

Lbs/yr

65~79%

Oil and Grease

Lbs/yr

66~80%

Metals

Lbs/yr

59~72%

In almost every case, brownfield redevelopments perform better by a significant margin as

compared to their conventional (or greenfield) counterparts (Swartwood and Thomas 2011). This
result is due to the particular characteristics of brownfields. First, because brownfields are already
polluted, any development that occurs on them will result in a reduction of pollutants entering the
watershed. Second, the EPA hypothesizes that brownfield redevelopments are often used more
intelligently with an eye towards ecological friendliness.

3.7 Brownfield Redevelopment and Watershed Protection: An Overview of Process

Given that policies concerning (urban) watersheds need to be undertaken on the state and local
levels, and that those policies need to be directed to the specific character (where character is
composed of the abiotic (physical geography), biotic (ecosystem), and built (otherwise invisible
human institutions of property and visible material objects such as infrastructure) of local
watersheds, it should perhaps come as no surprise that Oregon policies concerning watershed health
seem to have been designed to facilitate public-private and state-local partnerships.

20

One such public-private partnership is that undertaken by the Oregon Watershed Enhancement
Board. Under the aegis of the OWEB, local watershed councils are provided funding to take care of
the Oregons waters (Seim 2012). A quick back-of-the-envelope calculation of the OWEB data
reveals that funding is overwhelmingly utilized for actual restoration efforts (Seim 2012). That is not
to say, however, that funding can only be used for restorationfunding has been allocated for
everything from education efforts to monitoring equipment (Seim 2012).

3.8 The Willamette Partnership and Freshwater Trust

Historically, in the United States the instrumental value of rivers and streams has been measured by
their capacity to serve the purposes of navigation, waterpower, irrigation, and flood drainage (Hays
1959, 527 and 91122). This manner of accounting the value of rivers was not isolated. Far from it,
in fact, this way of accounting has a long and wide-ranging historical lineage. The same exact criteria,
for example, were used to evaluate the efficacy of early 19th century drainage projects designed to
materially improve the rivers of Ireland (Great Britain, 1809). These methods of accounting did
not take into account such things as in-stream flows or the ecological/habitat benefits from streams
and rivers. The Freshwater Trust aims to further the new solutions [that] are needed to fix every
river. That is to say, the Freshwater Trust aims to fix the more than a century of improvements
effected upon the rivers and streams of Oregon. This fixing, as it were, will in part be accomplished
through restoring and accounting for the benefits of habitat and in-stream flows (The Freshwater
Trust 2013). Notably, however, fixing the improvements to rivers and streams will be accomplished
through water quality trading and quantifying/marketing ecosystem services. In this respect, the
Freshwater Trust of Oregon has partnered with the Willamette Partnership whose stated goals focus
on the establishment of successful ecosystems services market. Toward this end, the Willamette
Partnership has developed the experimental Ecosystem Credit Accounting System which is a
package of protocols, tools, and resources, that allow participants in the ecosystem services market
to buy and sell ecosystem services in each of the four ecosystem currencies (Willamette Partnership
2013a). The Partnership is currently engaged in six pilot projects throughout the Willamette Basin.
The project in Johnson Creek, for example, aims to achieve Oregon DEQ TMDL goals by lowering
average water temperature, improve salmon habitat, and demonstrate the efficacy of the use of
temperature credits in an ecosystem services credit trading system (Willamette Partnership 2013b).

3.9 Brownfield Redevelopment and Watershed Protection: An Overview of Tools

21

Brownfield redevelopment is fraught with significant financial risk and uncertainty of final outcomes.
According to a report published by the US Government Accountability Office, brownfields are
difficult to redevelop due to owner unwillingness to identify properties that may be or are
contaminated and investor unwillingness to take on the risk of a possible lawsuit or cleanup costs
that comes with brownfield properties in the context of Superfund Laws (Guerrero 1997). These
inefficiencies due to information asymmetry and risk preferences are most likely further
compounded by state and local legislationleaving the potential for many brownfields to sit
undeveloped. Beyond the loss in potential economic activity that results from a lack of
redevelopment, it is quite possible that many brownfields, even though no longer actively producing
new pollutants, are harming the watershed due to toxic chemicals and waste that have seeped into
the soil and permeated the surface. Hence, any plan to remediate brownfields incorporatesto a
certain degreeconcerns about watershed health.
Many state and local authorities have set up loan/grant programs that assist developers with the
costs associated with brownfield redevelopment. One such program is the State of Washingtons
Brownfields Redevelopment Loan Fund. The BRLF program loans up to $425,000 to contaminated
landowners to put their land back into productive economic use. Augmenting this program is the
Voluntary Cleanup Program in which property owners can retain environmental consultants from
the States Ecology department at a low fee ($50-100/hr). Washingtons Department of Commerce
has estimated that every dollar spent on brownfield redevelopment has resulted in $12 in
State/Local Tax revenue, $14 in Payroll Value, and $64 in Business Revenue (Mandeville 2013).

3.10 Brownfield Redevelopment and Watershed Health: Credit Markets

An alternative tool that can be used to encourage the redevelopment of brownfields in a manner
that is consistent with watershed protection is the creation of an environmental credit market. In an
environmental credit market, property owners can trade pollution permits, thus creating a market
that appropriately addresses the individual needs of a diverse variety of firms.
One of the primary issues facing the creation of an environmental credit market is the
appropriate baseline level that should be set as a market entry condition. First and most obviously,
an improperly set baseline will most likely cause more pollution or less productive activity than is
desired by the policy maker. A more nuanced concern results from the tradeoff made between
having an efficient market or an equitable market depending on the baseline.

22

3.11 Brownfield Redevelopment and Watershed Health: Credit Market Baselines

Ghosh et al. (Ghosh, Ribaudo, and Shortle 2011) extensively address such concerns in a study of the
Conestoga watershed. They employ a simple model consisting of dairy farms (a source of non-point
pollution) located within the Conestoga watershed under different baseline requirements and policy
characteristics (Ghosh, Ribaudo, and Shortle 2011). In particular, they divide up dairy farmers into
two distinct classes: (a) good stewards that adopt best management practices before a credit market
and baseline are set, and (b) poor stewards who do not adopt best management practices until after a
baseline is set. Furthermore, they introduce two different baseline methodologies: the D baseline,
which sets baseline requirements based on the BMPs is use by all farms at a specific date and the M
baseline, which sets baseline requirements given a minimum standard that the policy maker sets. The
D baseline carries the danger of the baseline requirement being too lax, whereas the M baseline
carries the danger of the baseline requirement being too high. Running a simulation using this model
leads to the important conclusion that the problem of inequity towards the good stewards that
occurs with a D baseline is far less harmful from the markets perspective than the inefficiency of
the M baseline. They are able to conclude this by showing that although good stewards are less
rewarded or even priced out of the market using a D baseline, the M baseline raises the overall cost
of offsets and results in less pollution abatement than is desired (Ghosh, Ribaudo, and Shortle 2011).

23