United States
Environmental Protection
Agency
Office of Solid Waste &
Emergency Response
(5101)
EPA 500-F-99-166
September 1999
BROWNFIELDS TAX INCENTIVE CASE STUDY:
ALLIANCE ENVIRONMENTAL SYSTEMS. INC.
West Chester, Pennsylvania
A demolition and environmental service company decided to relocate its headquarters to a
brownfields in a low-income area, spurring new hope and future development.
In 1998, Alliance Environmental Systems,
Inc. decided to replace its old headquarters with a
new, spacious building that could accommodate its
projected growth. As the demolition and
environmental service company began scouting
the West Chester, Pennsylvania area, it found an
unexpectedly promising location: an 8.5- acre
brownfields site at 510 E. Union Street.
A site that could meet the company's needs
Records show that the 8.5-acre parcel,
comprised of two 3.3 and 5.2 acre lots, had been
used for a variety of purposes since the late 19th
century. The site was initially a brick clay quarry,
but then served as a municipal landfill until the
early 1940s, when National Foam Systems used it
to landfill sulfate wastes. Wyeth Incorporated, a
pharmaceutical company, purchased the site in
1948 along with 30 other acres as a home for its
pharmaceutical manufacturing operations. In
1984, Wyeth sold the 8.5-acre site to Fermenta
Products, which changed its name to Fermtec
Products, Inc. in 1987 and manufactured
pharmaceutical products on the site until 1991. At
that time, all pharmaceutical manufacturing
processes ceased and the property became a
storage and distribution center for third-party
materials until 1994, when Fermtec Products, Inc.,
vacated and abandoned the site.
BROWNFIELDS AND THE TAX
INCENTIVE
Commercial developers and economic development officials
are becoming more aware of the potential redevelopment
value of brownfields, or parcels of land with real or
perceived contamination.
These sites offer advantages, such as access to existing
infrastructure and transportation systems. Moreover, they
are often close to major population centers, placing
companies near customers and potential workers. Looking
at the big picture, many developers have found brownfields
can be as attractive as undeveloped land.
Federal, state and local governments have also realized that
they can play a role in returning these brownfields sites to
new uses. A wide variety of government assistance is now
available, ranging from low-cost financing to tax incentives.
The end result has been many successful projects and
improved quality of life for nearby residents.
The Federal Brownfields Tax Incentive encourages
brownfields redevelopment by allowing taxpayers to
immediately reduce their taxable income by the cost of their
eligible cleanup expenses in targeted areas. This incentive
creates an immediate tax advantage from these expenses,
helping to offset short-term cleanup costs.
The tax incentive is designed to create economic growth in
disadvantaged areas by encouraging brownfields
redevelopment.
On the whole, Alliance liked the site because there was a large building on the 3.3-acre lot that,
once rehabilitated, could easily house the new headquarters as well as the additional equipment the
company intends to purchase. The remaining acreage could be used by Alliance or developed and rented
to other businesses, perhaps as a self-storage facility or business incubator.
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Alliance Environmental Systems Case Study for the Brownfields Tax Incentive page 2
Still, Alliance had to address the issue of possible contamination. The ground-water was
contaminated with methylene chloride, which Wyeth used in its penicillin manufacturing process in the
1970s and 1980s. Wyeth has worked with the Pennsylvania Department of Environmental Protection
(PA DEP) to monitor and clean the groundwater and storm water from the site. In addition, the site was
likely to be contaminated by other chemicals that were disposed of in the landfill during the early part of
this century, before the government regulated disposal of wastes.
As Alliance considered the property, it realized that there was probably no contamination above
ground. Moreover, Alliance felt that it could remediate the site for between $100,000 and $300,000 under
the state's new Land Recycling Program (Act 2), which allows site-specific remediation standards.
These remediation costs looked reasonable, especially if the cost of the land was low enough.
Low-cost state financing helps to seal the deal
In July of 1998, Alliance notified the PA DEP that it intended to remediate the site under the Act
2 program, which is designed to encourage the reuse of contaminated commercial and industrial sites.
Under the Act 2 program, Alliance worked with the Southeast Regional Office of the PA DEP to develop
appropriate risk-based cleanup standards as well as potential remediation strategies for the site.
With the assistance of the Chester County Development Council, Alliance applied for low-cost
financing from the Pennsylvania Department of Community Economic Development (DCED). As part of
the state's Land Recycling Program, DCED runs the Industrial Sites Cleanup Fund, which allows
companies to receive 2% interest loans for up to 75% of the cost of completing an environmental study or
cleanup plan.
In light of all this information, Alliance decided to purchase the site for its headquarters. It then
formulated a plan for a Phase II environmental survey with input from the PA DEP's Southeast Regional
Office. The approved plan calls for taking a set of soil samples and then taking two series of
groundwater samples over a three-month period. While the tests will cost about $150,000, they are
important in helping the company establish a solid baseline understanding of the existing contamination.
Without such an understanding, it will be difficult to develop an effective final remediation plan.
Alliance will begin the Phase II survey as soon as the Department of Economic and Community
Development approves and releases the first round of its Act II funding.
The Brownfields Tax Incentive adds an extra benefit to the project
While Alliance was working on securing Act 2 status, it read about the federal Brownfields Tax
Incentive in a newsletter published by a local environmental consulting firm. After the company got more
information about the program from the state, it began to look into whether the property was qualified.
Alliance discovered that 510 E. Union Street did - it was located in a census tract with a 29.6% poverty
rate, well above the 20% poverty rate threshold set in the guidelines.
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Alliance Environmental Systems Case Study for the Brownfields Tax Incentive page 3
The company quickly put together a comprehensive application and submitted it in early
December 1998. Within two weeks, the DEP approved their request, and Alliance was certified to use
the federal Brownfields Tax Incentive.
The project creates positive spillover effects in the community
Because Alliance has not yet started the actual cleanup, it is difficult to say exactly how much
money will be saved by using the Brownfields Tax Incentive. However, it is clear that Alliance's
redevelopment project is already an inspiration to the neighborhood.
Some local companies have approached Alliance to see whether they might be able to secure
space on the site, because they have found it difficult to find large tracts of land to expand their
operations. Alliance estimates that as many as 100 to 200 new jobs could be created if it opts to turn the
rest of the site into a business incubator. These jobs would be in addition to the 12 to 15 new jobs that
Alliance expects to create after its own move.
Other companies have asked Alliance for more information on Act 2 and the federal Brownfields
Tax Incentive, with an eye to replicating Alliance's experience. And Alliance, buoyed by its own
success, wants to help others with similar projects.
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