Federal Brownfields Tax Incentive:
Alliance Environmental
West Chester, Pennsylvania
Overview
The Federal Brownfields Tax Incentive
encourages brownfields redevelopment by
allowing taxpayers to reduce their taxable
income by the cost of their eligible
cleanup expenses. The Incentive was
originally signed into law in August 1997
as part of the Taxpayer Relief Act. It was
renewed in October 2004 through the
Working Families Tax Relief Act of 2004
and continues until December 2005. To
qualify for the Tax Incentive, three criteria
must be met:
The property must be held by the
taxpayer incurring the cleanup cost
for use in a trade or business;
Hazardous substances must be
present or potentially present on
the property; and
The taxpayer must obtain a
statement from a designated state
agency verifying eligibility for the
Tax Incentive.
Designed to spur investment in blighted
properties and assist in revitalizing
communities, the Federal Brownfields Tax
Incentive can serve as a critical tool in
brownfields cleanup and redevelopment
efforts.
Project Highlights
The Federal Brownfields Tax
Incentive was instrumental in
enabling Alliance Environmental to
clean up and redevelop an 8.5-acre
former landfill and pharmaceutical
property in an economically
distressed neighborhood of West
Chester, Pennsylvania.
Now the location of the Good Will
Business Park, which encompasses
over 100,000 square feet of retail
space, the property supports many
tenants including a local volunteer
fire department, the West Chester
Area Senior Center, and a district
court building.
The Federal Brownfields Tax
Incentive provided Alliance
Environmental with nearly
$800,000 in tax relief.
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Project Background
Alliance Environmental is a demolition and environmental service company located in West
Chester, Pennsylvania. In 1997, faced with the need for larger office and storage facilities, the
company was looking to expand its headquarters. The company identified a nearby, 8.5-acre
property with a building that Alliance hoped to renovate. The site's former uses included a
brick quarry, a landfill, and a pharmaceutical manufacturing facility, Wyeth Incorporated.
Wyeth had produced penicillin in the 1970s and '80s and groundwater on the property
remained contaminated from this and other activities. Before any construction could begin,
Alliance knew that it would have to address the environmental cleanup issues associated
with the property.
Benefits of the Tax Incentive
Once Alliance identified the contaminated property and saw its potential, the cleanup and
redevelopment process began with Alliance purchasing the property in 1998. Through a
newsletter published by a local environmental consulting firm, Alliance learned about the
Tax Incentive. In analyzing its financial options, the company realized the Tax Incentive's
value. For a small business like Alliance, the Tax Incentive was critical to maintaining
adequate cash flow during cleanup and redevelopment. Alliance was able to expense its
cleanup costs at the end of the year and receive an injection of cash as a tax refund.
Once the site was cleaned up, the existing building was renovated, and other buildings were
constructed from the ground up. The site is now home to the Good Will Business Park.
Income from leasing of the Business Park has enabled Alliance to expand its revenue base.
The company has also expanded its scope of work from primarily asbestos abatement and
demolition work to include property cleanup and redevelopment. A combination of the
Federal Brownfields Tax Incentive and a local, municipal tax incentive program provided
Alliance with nearly $800,000 in tax relief.
Process for Utilizing the Tax Incentive
While Alliance's accountant was initially hesitant about using the then-new Federal Tax
Incentive, the company found the Incentive's application and approval process to be
straightforward. Senya Isayeff, a principal of Alliance Environmental, also found the process
to be customer-oriented and streamlined. Isayeff obtained an eligibility statement from the
Pennsylvania Department of Environmental Protection's (DEP) web site and completed the
application in one day. Within a week, DEP had provided Alliance with a letter that approved
the site as qualified for the Tax Incentive. According to Mr. Isayeff, throughout the process,
DEP staff were committed to making the process work, and handled all inquiries with
efficiency and professionalism.
Alliance also made use of local tax incentives for the Good Will Business Park project. In
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particular, Alliance used a municipal tax extension in Chester county called LERTA, which
offers a three-year abatement for increased value in property taxes. As a result, Alliance only
had to pay taxes on the previously determined value of the property. Alliance was also able
to use state programs to assist with brownfields restoration, which dovetailed well with the
Tax Incentive. The first was the Pennsylvania Act 2 Program, which provides indemnity to the
developer from liability issues; the second was the Pennsylvania Act 3 Program, which
provides indemnity from liability issues to lenders.
Community Impact of the Brownfields Tax Incentive
Both the community of West Chester, as well as the neighborhood around the Good Will
Business Park, have benefitted from Alliance's cleanup and redevelopment of the 8.5-acre
former brownfield. As mentioned, four new tenants have located on the Good Will Park,
bringing new commerce and services to the area. One of the new tenants, the local
volunteer fire department, now has a more central location for responding to emergency
calls. In addition, properties adjacent to and nearby the Good Will Business Park have
increased in value, which their owners attribute to the Alliance project. Within a two block
area of the Good Will property, Habitat for Humanity is constructing 17 new homes and a
12,000 SF retail strip mall was completed and occupied.
The local bank had initially expressed concern about loaning money to Alliance due to
possible environmental liability issues. The use of Pennsylvania Acts 2 and 3, along with the
Federal Brownfields Tax Incentive, eased its worries about liability. According to Mr. Isayeff,
the bank's president eventually saw the advantages of using the Federal Brownfields Tax
Incentive to clean up this property. A precedent was set within the local lending community
that financing brownfields can be easier than originally perceived. Alliance has since
obtained financing for other cleanup and redevelopment projects in the area. In October
2003, Alliance purchased a 13.5-acre former concrete plant. Again, the Federal Brownfields
Tax Incentive was utilized to aid in the cleanup process.
The new headquarters of the Good Will Fire Department.
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Continuing Success
Alliance is a proponent of the Tax Incentive and has an interest in its continued availability.
Currently, the company is proposing the cleanup and redevelopment of a 114-acre property that
was once the location of the state mental hospital. Once cleanup is completed, Alliance would
convey the property to the municipal government and have it preserved as protected
greenspace for the community to enjoy. In addition, Chester county has asked Alliance to
contact other municipalities in the area to make them aware of brownfields cleanup and
redevelopment tools, including the Federal Brownfields Tax Incentive. Without the Tax Incentive,
the brownfields cleanup and redevelopment projects in West Chester, PA may not have
proceeded. As Senya Isayeff says, "By developing brownfields, we help preserve open space
somewhere else, while also strengthening neighborhoods like this one."
For more information about the Federal Brownfields Tax Incentive, please visit
http://www.epa.gov/brownfields/bftaxinc.htm.
For more information on requirements for using the Federal Brownfields Tax Incentive in
Pennsylvania, please visit
http://www.dep.state.pa.us/dep/deputate/airwaste/wm/landrecy/Tax/tax.htm.
Federal Brownfields Tax Incentive Solid Waste EPA 560-F-05-228
Case Study and Emergency August 2005
Alliance Environmental Response (5105T) www.epa.gov/brownfields
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