Brownfields Financing
Funding is essential for* turning a community's brownfields vision into real results.
However, because there is usually no single source of money to complete the many facets of a
brownfields project, the most successful communities will leverage a variety of public and private
sources for brownfields revitalization. Local funding can make the critical difference on brownfields
projects. Localities are uniquely positioned to provide direct funding and gap financing incentives for
brownfields revitalization, and to leverage additional state, federal, and private resources.
The key role of localities in leveraging public and private funding for brownfields is especially important
at "upside down" sites, where contamination costs might exceed real estate value. For instance, in
Bridgeport, Connecticut, Westinghouse has spent over $1 million to clean up the Bryant Electric
facility; the city has spent $700,000 on demolition and site preparation. Expenses on this four-acre
parcel, therefore, have totaled $2 million, or $500,000 per acre. Bridgeport officials note that an
average four-acre clean parcel in the West End would be one quarter that price, or $125,000 per acre.
In Louisville, Kentucky, the City has been working with an expanding business to acquire an adjacent,
contaminated property that has been abandoned for nearly a decade. This project has been
complicated by a wide array of factors, including environmental contamination at the site and uncertain
remediation requirements. Without involvement by the City of Louisville, this deal likely would have
gone nowhere. The city served a critical role as "brownfields broker," overseeing relations between
the Kentucky Department of Environmental Protection, the Landbank Authority, and the prospective
purchaser, Louisville Dryer Company. In addition, the city dedicated funds to this project, for
personnel and site assessment, from grant money provided under EPA's Brownfields Assessment Pilot
Program. Because of the city's involvement, Louisville Dryer Co. remained involved in a real estate
transaction that it might otherwise have abandoned long ago.
This is how the public sector can drive brownfield reuse. But competition for public monies is
increasingly fierce, so it is important for local officials to recognize that - for many projects -
resources devoted to brownfields are public investments that are often recoverable, either through
sale of the site, or from new tax revenues and jobs that the project generates. These public
investments can also leverage additional private investment by helping to demonstrate the economic
viability of an area. For example, the City of Chicago, Illinois used approximately $370,000 to demolish
an eyesore, clean up environmental contamination, and provide a clean, secure lot for Scott Peterson
Meats, a strong neighborhood company, to use for employee parking. The City's commitment to this
project gave Scott Peterson Meats the impetus (and its lenders, the willingness) to invest $5 million
into the project, which, in turn, meant hiring 100 additional employees. Without that critical public
funding, local officials believe that private investment in Scott Peterson's project might never have
materialized. For more information on working with the private sector, see the Toolkit section
entitled Working with Non-Federal Partners.
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The federal Community Reinvestment Act (CRA) requires private lenders to make capital available in
low and moderate-income neighborhoods, to help boost revitalization efforts in these neighborhoods.
EPA has worked to create incentives within the CRA regulations for economic revitalization and
development. Lenders subject to the CRA can now claim community development loan credits for
loans made to help finance environmental cleanup or redevelopment of an industrial site when it is part
of a low or moderate-income area.
In addition to funding, localities can help attract non-profit foundation support for brownfield projects.
For example, the Lyndhurst Foundation provided $10 million for construction of the Tennessee
Aquarium and Ross's Landing in Chattanooga, Tennessee. In St. Paul, Minnesota, job training for new
businesses at the redeveloped Texaco Tank Farm site was financed in part by several area foundations.
For more information about non-profit partners, see the Toolkit section entitled Working with Non-
Federal Partners.
In other cases, localities can help facilitate in-kind services that can offset the need for cash in a project.
In Oregon, local governments helped to convene a handful of private-sector entities, including law
firms, utilities, financing consultants, and others, which they teamed up to facilitate redevelopment of
several defunct timber mill sites. In St. Paul, Minnesota, at the former Texaco Tank Farm (now the
Crosby Lake Business Park), the municipality encouraged Northern States Power Company to install
utility lines at its own expense, and U.S. West phone installed fiber optic lines. These utilities will
benefit from the additional load generated from new economic development, which their up-front
investment helped make possible.
Following are some of the traditional, local financing tools that are being put to use at brownfields in
communities across the nation
Tax Increment Financing (TIF): TIF has traditionally been used for a variety of economic
revitalization efforts, usually in economically distressed or abandoned areas - today's typical brownfield
location. TIF financing is the most commonly used form of local support for brownfield reuse in the
country, and a key part of any strategy to address financing gaps.
The TIF process uses the anticipated growth in property taxes generated by a development project to
finance public sector investment in it. TIFs are built on the concept that new value will be created -
the basic point of most brownfield initiatives - and that the future value can be used to support the
financing of the activities needed now (such as cleanup or infrastructure improvements) to create that
new value. The key to TIF is the local commitment of incremental tax resources for the payment of
redevelopment costs.
TIF bonds are issued for the specific purposes of the redevelopment, such as acquiring and preparing
the site, cleanup of contamination, upgrading utilities, streets, or parking facilities, and carrying out
other necessary site preparation and improvements. This makes them an ideal financing tool for
brownfield projects. In addition, TIF programs are easily used with other types of funding, such as
grants or loans.
Tax Abatements: Abatements are reductions or forgiveness from tax liabilities. Usually, abatements
involve either a basic reduction in rates for a specific period of time, typically 5 or 10 years; or they
freeze values at some point in time, usually at a pre-improvement stage. Tax abatements are
commonly used to stimulate investments in building improvements or new construction in areas where
property taxes or other conditions discourage private investment.
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Some abatement programs feature sliding scales, offering full abatements initially, when business cash
needs are the greatest. Several states allow their localities to do this, including Texas, Maryland, Ohio,
Connecticut, and Idaho. Towns in these states address the issue of remediated brownfield property
re-valuation by waiting several years before fully assessing the property at the value of its new use.
This type of abatement gave the new owner of the 26 acre Vinson Street site in Dallas the incentive
and cash flow to pay for the cleanup himself. The owner later invested $1.2 million into a new wood
pallet recycling operation. Distressed New Jersey communities in designated Environmental
Opportunity Zones can take advantage of a tax abatement program that allows new site owners to
offset up to 75 percent of their property taxes in a single year by spending that amount on site cleanup.
Tax abatement programs must be carefully designed to target intended beneficiaries without offering
unnecessary subsidies, a feat often difficult to accomplish. Because of this, tax abatement programs
have numerous critics. Yet the key advantage of tax abatements is that they give local governments a
workable, flexible incentive that helps influence private investment decisions. This can be important in
efforts to promote brownfield reuse.
Special Service Areas or Taxing Districts: Cities can use a "special service area" designation as a
way to raise cash to finance extra services, improvements, or facilities that will benefit the targeted
area. Property owners in a special service area agree that a special real estate levy or special fee will
be imposed, with the proceeds used to pay for the defined services or activities. The jurisdiction uses
this additional revenue to finance the improvements, either earmarking it directly for the area, or using
it to issue bonds to fund the projects.
Many communities have experience with this approach through main street or central business district
improvement initiatives. Projects commonly include security, maintenance, storefront rehabilitation,
and business attraction or retention efforts. Some communities have used this tool to finance
infrastructure upgrades in commercial districts or at industrial parks. Property owners in a defined
brownfields area can benefit from this approach by working with their local government to raise funds
to cover cleanup costs at blighted sites, especially at small orphan sites that hinder the whole area.
Local Revolving Loan Funds: Several localities have put brownfields revolving loan funds or "RLFs."
Baltimore operates a highly successful RLF, the EBMC (Empower Baltimore Management Corporation)
Brownfield Loan Fund. Initially funded with $2.5 million in federal empowerment zone funds in
November, 1997, the fund has since made 7 loans totaling nearly $2.4 million. 233 jobs have been
created at loan-assisted brownfield projects. Already, $475,000 has been repaid and is available for
new project uses. This includes $340,000 from the Lancaster Square mixed-use office and residential
project in the city's Fells Point neighborhood, which used historic tax credit receipts to retire the debt.
The loan paid for cleanup and removal of several underground tanks at the site. In New York City and
Nassau County, New York, these communities have joined with several area banks to establish a $30
million loan pool for brownfields cleanup and redevelopment. The cities used EPA brownfields
revolving loan fund grants as collateral for the loans made with bank monies.
General Obligation Bonds: Virtually all communities can issue general obligation or "GO" bonds for
any proper public purpose which pertains to its local government and affairs. Economic development
practitioners can make a strong case that a bond pool or bond proceeds to support brownfield cleanup
and reuse projects will create jobs and enhance the local tax base, which are appropriate public
purposes.
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Communities traditionally issue GO bonds for acquiring land, preparing sites, and making infrastructure
improvements - key elements in a brownfield redevelopment strategy. Moreover, the community's
ability to repay this bond debt is enhanced by the growth in property tax revenues as more
brownfields are brought back to productive uses. Chicago, Illinois used bond proceeds to finance the
site assessment and cleanup at several sites. Bridgeport, Connecticut helped finance its new minor
league baseball stadium with GO bonds, and is using its share of gate and concession receipts to help
pay the bonds off.
Debt Leveraging: Debt leveraging is a strategy that increases the return on equity when the
investment is financed partially with borrowed money. In the case of brownfields, a public or quasi-
public entity can serve that purpose by fronting the capital, to make private investments less risky.
This strategy has not been used much, but it has been effective in attracting private capital to
brownfield sites. For example, the St. Paul Port Authority in Minnesota helps to back private loans to
companies by purchasing up to 25 percent of the real estate value in a private loan that can be used to
cover construction, structural improvements, or expansion of operations. The Port Authority also
offers loan guarantees to help ensure companies' access to lines of credit for working capital and
equipment. This financing is often difficult for newly locating companies to secure.
Creative Use of Fees or Fines for Brownfield Activities: Many cities routinely collect various fines
or inspection fees. Instead of having these resources disappear into the local general fund, they could
be devoted to brownfield projects - perhaps used to capitalize brownfield revolving funds or cover site
assessment costs at brownfields.
New Bedford, Massachusetts directs local compliance fees and penalties into a fund that supports the
City's broader brownfield revitalization strategy. Similarly, federal fines might be tapped as well. For
instance, the City of Chicago was given $950,000 by the Sherwin Williams company as part of a
"supplemental environmental project" or "SEP" settlement with the U.S. EPA related to violations of
environmental laws at a Sherwin Williams plant on the city's south side. The city has used that money
to clean up a 103 acre industrial tract in the same area for new industrial and commercial uses.
Please see this section's Resource folder for additional information and reports on financing, including:
Financing Strategies for Brownfields Cleanup: This report by Northeast-Midwest Institute discusses local
strategies for financing cleanup. These case studies included demonstrate a fundamental lesson: to be
economically viable, brownfield projects often require financial assistance from the public sector -
especially local governments.
Public Strategies for Cost Effective Brownfields Community Development: This practice guide from the
Southeast Regional Finance Center will help identify workable approaches to potential land
contamination issues, point to the best practices of successful brownfield redevelopers, and identify
sources of information available for local governments and other organizations interested in launching
or expanding their own brownfield projects.
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Financing Strategies for
Brownfield Cleanup and Redevelopment
by
Charles Bartsch
&
Barbara Wells
Northeast-Midwest Institute
June 2003
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Northeast-Midwest Institute
The Northeast-Midwest Institute is a Washington-based, private, nonprofit, nonpartisan
research organization dedicated to economic vitality, environmental quality, and regional equity
for Northeast and Midwest states. It fulfills its mission by conducting research and analysis,
developing and advancing innovative policy, evaluating key federal programs, disseminating
information, and highlighting sound economic and environmental technologies and practices.
The Institute is unique among policy centers because of its work with the bipartisan
Northeast-Midwest Congressional and Senate Coalitions, co-chaired by Sens. Susan Collins (R-
ME) and Jack Reed (D-RI) and Reps. Marty Meehan (D-MA) and Jack Quinn (R-NY).
Northeast-Midwest Institute
218 D Street, SE
Washington, DC 20003
202/544-5200
202/544-0043 (fax)
www.nemw.org
This publication was made possible by a grant from the U.S. Environmental Protection Agency.
The statements, findings, and recommendations are those of the author and do not necessarily
reflect the views of the U.S. Environmental Protection Agency. Reproduction of this report,
with the customary credit to source, is permitted.
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Table of Contents
Executive Summary 1
Introduction 7
Leveraging Federal Programs 11
U.S. Environmental Protection Agency Programs 12
U.S. Department of Housing and Urban Development Programs 14
Economic Development Administration Programs 18
U.S. Army Corps of Engineers Programs 20
U.S. Department of Transportation Programs 21
Federal Tax Programs 23
Using State Programs 25
Using Local Programs 29
Conclusions 37
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Executive Summary:
Financing Tools and Strategies in Brief
The Northeast-Midwest Institute began examining the challenges of reusing
contaminated sites in 1991, when financing barriers first emerged as a critical deterrent to
redeveloping brownfields. Since that time, the Institute has documented nearly 100 successful
brownfield reuse projects in cities of every size, which have used nearly as many financing
strategies to bring new life to old sites.
The Institute's case studies demonstrate a fundamental lesson: to be economically viable,
brownfield projects often require financial assistance from the public sector - especially local
governments. Site remediation and related preparation costs make it impossible for many sites to
compete with comparable "greenfield" sites - undeveloped land with no history or suspicion of
contamination. Without help, private parties often are not able or willing to invest the resources
needed to take a brownfield through its full redevelopment cycle.
Special Costs Facing Brownfields
Brownfield projects face key financing gaps that can foil efforts to assemble a complete
package. These gaps typically involve capital shortages for three activities specific to
brownfield sites: early-stage site assessment to determine exactly what contamination needs to
be addressed; defining a site remediation plan, which owners need to take the site through a
voluntary cleanup program (VCP) that allows the use of institutional controls or provides some
finality on liability; and implementing cleanup.
In addition to these special costs, typical financing costs for conventional sites may be
elevated for brownfield sites. Brownfield developers almost invariably have to pledge a higher
rate of return to their investors or lenders to persuade them to assume the higher perceived risk
associated with the project. Extra underwriting costs also can add significantly to the costs of
loan processing and review procedures. And lenders usually require developers to have at least
25 percent equity in the project to make sure that the borrower has sufficient capital at risk.
Relieving Brownfield Financing Concerns
The most successful brownfield redevelopment efforts recognize private lender and
developer concerns and perceived risks. They aim to help private parties better manage
brownfield risks by meeting at least one of the following objectives:
Ensuring a minimum return: Localities can provide incentives such as loan
guarantees or companion loans that ensure a minimum return. They also can offer
support, such as environmental insurance, that limits the borrower's exposure to
unforseen problems that affect the value of collateral or the borrower's ability to pay.
Reducing the borrower's cost of financing: Localities can subsidize the interest costs
on project loans (for example, with tax-exempt financing or low-interest loans). They
also can reduce loan underwriting and documentation costs by offering loan
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packaging assistance or technical support that might be available through Community
Development Corporations (CDCs) and other local institutions. In some cases, local
governments can help cut borrowing costs by partnering with site users to prepare
records and help maintain institutional controls.
Offering terms or incentives to ease the borrower's financial situation: Tools like tax
abatements, tax credits, or grace periods can improve the project's cash flow and
make the project numbers work. These tools can be helpful in mixed-use project
scenarios that include open space. Similarly, training and technical assistance
services can offset project costs and reduce a site reuser's need for cash.
Offering assistance or information that provides investor and lender comfort:
Performance data for new technologies and institutional controls, or insurance that
can help transfer risk, can increase the investor's and lender's comfort level with a
brownfield project.
Providing direct financing help: When contamination is suspected, money for site
assessment and cleanup is the hardest piece of the financing puzzle to solve.
Therefore, more and more cities are fronting money for this purpose, as grants or
forgivable loans.
Leveraging Federal Programs
Cities and towns have used nearly two dozen federal programs to help finance some
aspect of brownfield reuse basic site preparation, planning, site assessment, cleanup, and
construction. Only three of these programs explicitly focus on brownfields: the U.S.
Environmental Protection Agency (EPA) assessment and cleanup programs, and the U.S.
Department of Housing and Urban Development (HUD) brownfield economic development
initiative (known as BEDI), which mainly applies to block-grant entitlement cities. The other
programs require some creativity to make site assessment and cleanup needs conform to their
eligibility criteria, which may target issues such as slums, blight, and job creation and retention.
U.S. Environmental Protection Agency Programs. Three EPA financing programs
have been used extensively to spur brownfield redevelopment, and a fourth shows promise in
several states. EPA awards site assessment grants of up to $200,000 per jurisdiction or site for
pre-cleanup environmental activities such as site assessment, inventory, characterization,
prioritization, community outreach, and cleanup planning and design. Site cleanup grants, new
for fiscal 2003, provide up to $200,000 per site to fund cleanup conducted by cities, development
agencies, nonprofit groups, and similar entities at sites that they own. The Brownfield Cleanup
Revolving Loan Fund provides grants of up to $1 million to establish locally administered loan
funds that make low- or no-interest loans for cleanup. Clean Water State Revolving Loan Funds
can be used by states for loans of up to 20 years to finance activities that include brownfield
mitigation to correct or prevent water quality problems.
U.S. Department of Housing and Urban Development Programs. HUD programs
offer communities the most resources for brownfield projects and the greatest flexibility in
carrying them out. Community Development Block Grants (CDBG) can be used for site
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preparation or infrastructure improvements or, under certain circumstances, lent to private
companies for economic development projects such as creating jobs for low- and moderate-
income people. CDBG "floats" - something like an advance on a city's block grant allowance -
enable CDBG recipients that are not able to spend their entire annual allocation in the year they
receive it from HUD to tap the account on an interim basis to finance short-term projects that
create jobs.
Linked to the CDBG program, Section 108 is authorized to help cities finance site
clearance, property acquisition, infrastructure, rehabilitation, or related activities - including the
removal of toxic contaminants - that are too large for single-year block grant funding. The
Brownfield Economic Development Initiative, established five years ago to complement HUD's
Section 108 program, will competitively award $25 million in fiscal 2003 to support any activity
that also is eligible for Section 108 or CDBG funding.
Finally, under the HOME Investment Partnerships Program, HUD allocates more than $1
billion as formula grants that often are used in partnership with local nonprofit groups and fund a
wide range of activities that build, buy, and/or rehabilitate affordable housing or provide direct
rental assistance to low-income people.
Economic Development Administration Programs. The Economic Development
Administration (EDA) has emerged as one of EPA's strongest interagency partners. During the
past several years, EDA has made brownfield redevelopment one of its program funding
priorities, spending nearly 20 percent of its project resources - about $35 million a year - on
brownfield-related activities. EDA funding can cover the costs of addressing any kind of
contamination, including leaking underground tanks, asbestos, PCBs, and lead paint, which
makes it more flexible than many other programs. However, many communities are not eligible
for EDA funds because eligibility criteria are pegged to unemployment rates.
The Public Works and Economic Development Program serves as EDA's primary
initiative for directly affecting brownfield redevelopment through grants that average about
$900,000 for infrastructure enhancements that serve industry and commerce - and may be key
components needed for a brownfield project. The Economic Adjustment Program helps state
and local governments that experience sudden and severe economic dislocation or long-term
economic deterioration to design and implement adjustment and redevelopment strategies to
strengthen their economic base. EDA has identified brownfield redevelopment as a necessary
component in fulfilling this program's objectives. Finally, the Planning Program can help those
with an interest in brownfield reuse to fill key informational needs through planning grants of
$10,000 to $200,000.
U.S. Army Corps of Engineers Programs. If a brownfield project can be tied to water
or water quality, it may be eligible for support from the U.S. Army Corps of Engineers. The
Corps offers technical assistance, contracting support, and help with site planning and
remediation, and has a wealth of experience with projects like the harbor restoration on the Long
Island Sound in Glen Cove, New York. The Corps provides support for brownfield projects
under related authorities involving civil works and water resources.
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Through the Continuing Authorities Program, the Corps can assist communities and non-
federal entities with water-related planning and construction, which may include brownfield
assessment work. Under the Support for Others Program, the Corps provides technical,
engineering, and project management expertise on a reimbursable basis to other federal agencies,
tribes, states, municipalities, and international governments. The Corps assists with site
assessment, environmental studies, redevelopment planning, real estate activities, cleanup
oversight, and other aspects of brownfield projects. The Planning Assistance to States Program
enables the Corps to help local governments, agencies, and tribes prepare comprehensive plans
for the development, use, and conservation of water and related land resources. Finally, General
Investigations Studies and Projects, which generally cover large geographic areas and involve
multiple water resource issues, may encompass or affect brownfield sites, but they require
specific authorization by Congress.
U.S. Department of Transportation Programs. Some communities have made creative
use of federal Department of Transportation (DOT) funds for brownfield purposes, linking
transportation projects with brownfield projects in three ways. The brownfield site itself may be
a transportation facility - a road, port, or rail yard - in need of upgrading. In other cases,
transportation system improvements are needed to make the brownfield site more marketable -
typically, by expanding access that better connects vehicles or rail with people and sites.
Finally, part of the transportation solution also may be part of the pollution solution, using roads,
parking lots, and other transportation structures as caps to safely limit exposure and make site
development costs more manageable.
Federal Tax Programs. The federal tax code provides a unique tool, the brownfield tax
expensing incentive - the only federal tool directly targeted to private owners of contaminated
sites. It enables taxpayers to deduct environmental cleanup costs in the year they incur them,
rather than having to capitalize them over time. In addition, for revitalization strategies that
include affordable housing, brownfield projects can be linked with low-income housing tax
credits.
Using State Programs
In many ways, states have built the financing foundation that communities rely on to
advance their brownfield efforts. State financing initiatives will take on a whole new level of
importance as they become linked to the liability relief and other responsibilities and incentives
accorded the states by the federal Brownfield Revitalization Act enacted in 2002.
State tax incentives help with a project's cash flow by allowing revenue to be used for
brownfield purposes rather than for tax payments. Direct financial assistance programs fill
capital gaps, by financing specific parts of the project, offering guarantees that limit the risk of
potential losses, or offsetting the extra up-front costs of site cleanup. Programs in at least ten
states offer indirect support for brownfield financing, such as tax increment financing and
bonding authority. In Wisconsin, delinquent taxes for new purchasers may be cancelled as part
of an agreement to clean up contaminated property, and a new Brownfield Environmental
Assessment Program conducts state-funded Phase I and II assessments at city or county
nominated sites.
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Using Local Programs
State brownfield initiatives provide a foundation for local efforts that complement and
build on them. In general, local governments could better position themselves to support
brownfield reuse projects by giving a new twist to their existing economic development finance
programs. For example, localities traditionally have used tax increment financing (TIF) for a
variety of economic revitalization efforts, usually in economically distressed or abandoned areas.
Now TIF is the most common form of local support for brownfield reuse. Under TIF, the local
government determines the property tax income from the TIF district and typically issues bonds
to be repaid from the new revenue generated by the reuse. Then as investment in the district
increases and the tax base improves, tax revenues beyond the original base level the
increment are used to pay for improvements and subsidies.
Local governments also use tax abatements, which reduce or forgive tax liability, to
enhance the cash flow that is a key concern when contamination is involved. Tax abatement
programs must be carefully designed to target intended beneficiaries without offering
unnecessary subsidies, a difficult feat to accomplish. Several cities have established locally
capitalized and operated revolving loan funds, targeted to urban redevelopment and
brownfield-related projects. They use a wide variety of sources for capitalization, including
general revenue appropriations, bank contributions, fees or fines, and repayments from CDBG or
other program activities.
Virtually all communities can issue general obligation (GO) bonds for any public purpose
pertaining to their local government and affairs. Economic development practitioners can make
a strong case that a bond pool to support brownfield cleanup and reuse projects serves the public
purposes of creating jobs and enhancing the local tax base. Cities traditionally issue GO bonds
for acquiring land, preparing sites, and making infrastructure improvements all key elements
in a brownfield redevelopment strategy.
Cities also use four other low- and no-cost initiatives for brownfield reuse. In the last
two or three years, a new wave of insurance mechanisms has emerged to bring certainty to
brownfield risks and reduce project costs in the long run. Institutional controls are used at sites
where risk-based cleanup standards are tied to future land uses most often industrial or
commercial uses that limit human exposure to residual contamination. New technologies - some
of them less than two years old - are bringing down brownfield site preparation costs. Finally,
communities can launch technical or procedural initiatives that help site users cut their
preparation costs - such as helping with site assembly and title clearance; linking site owners to
state and federal programs and incentives; and helping with loan packaging.
Federal Challenges
Although states are at the forefront of brownfield financing, federal programs provide
key support - often jump-starting some of the largest or most complex brownfield projects.
Several of these federal programs face challenges in delivering brownfield-relatedassistance to
communities.
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Stagnant Community Development Block Grant Funds: Nationally, block grant resources
have not kept pace with demand. The overall level of funding has been pretty constant for the
past five years, even as the number of entitlement cities eligible to share in that pot increased by
about 5 percent a year.
Barriers to Small-Community Use of Section 108 and Brownfield Economic Development
Initiative: Despite the great potential for the Section 108 and BEDI programs to support
brownfield projects, it is extremely difficult for small, non-entitlement cities to access them.
Since small cities are not eligible on their own to apply for Section 108, they must apply through
their state or an urban county, which have been very reluctant to use the Section 108 program
because it requires the use of future CDBG allocations as collateral. Furthermore, since BEDI
grants must be used in conjunction with new Section 108 loan guarantees, most small cities are
shut out altogether.
Linkage of Economic Development Administration Eligibility to Unemployment: Two
factors limit the use of EDA funding. First, its eligibility criteria are pegged to unemployment,
knocking many communities out of the box. Second, because there is so much competition for
its funding, the agency tries to spread it around. This means a community that has been
successful with EDA before, even for a completely different type of project, may not be able to
go back to the well again with a brownfield initiative.
Matching Funds and Authority for U.S. Army Corps of Engineers Brownfield Projects: A
chief drawback to working with the Corps, at least for some communities, is its requirement that
funds be matched. In addition, because the Corps has no specific authority for brownfield
assessment, cleanup, or redevelopment, the Corps must justify its support for brownfield projects
under related authorities involving civil works and water resources.
MPO Barriers to Using Transportation Funds: In many places, metropolitan planning
organizations (MPOs) have proven to be a barrier to linking transportation and brownfield
redevelopment. MPOs have a key role in deciding which transportation projects will be funded
and how program dollars will be distributed, but most have not considered brownfields as part of
"their" mission. In addition, the MPO process involves lengthy time frames and reviews that
may not be compatible with the compressed time frames of many brownfield reuse opportunities
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Introduction
The Northeast-Midwest Institute began examining the challenges of reusing
contaminated sites in 1991, when financing barriers first emerged as a critical deterrent to
redeveloping brownfields. Since that time, the Institute has documented nearly 100 successful
brownfield reuse projects in cities of every size, which have used nearly as many financing
strategies to bring new life to old sites.
These case studies demonstrate a fundamental lesson: to be economically viable,
brownfield projects often require financial assistance from the public sector - especially local
governments. Site remediation and related preparation costs make it impossible for many sites to
compete with comparable "greenfield" sites - undeveloped land with no history or suspicion of
contamination. Without help, private parties often are not able or willing to invest the resources
needed to take a brownfield through its full redevelopment cycle.
Special Costs Facing Brownfields
Brownfield projects face key financing gaps that can foil efforts to assemble a complete
package. These gaps typically involve capital shortages for three activities specific to brownfield
sites:
early-stage site assessment to determine exactly what contamination needs to be
addressed;
defining a site remediation plan, which owners need to take the site through a
voluntary cleanup program (VCP) that allows the use of institutional controls or
provides some finality on liability; and
implementing cleanup.
In addition to these special costs, typical financing costs for brownfield sites may be
higher than those of conventional sites. For example, brownfield developers almost invariably
have to pledge a higher rate of return to their investors or lenders to persuade them to assume the
higher perceived risk associated with the project. This brownfield premium can translate into an
extra 10 to 20 percent return on investment, or an additional 2 or 3 interest points on a loan rate.
Extra underwriting costs - for environmental data collection and analysis, testing,
independent corroboration of collateral value, and other activities to help the lender evaluate
project risk - can add significantly to the costs of loan processing and review procedures. Some
banking analysts estimate that these transaction costs have tripled since the emergence of the
brownfield issue 10 years ago.
Lenders also tend to impose a number of conditions on financing for contaminated
properties. They usually require developers to have at least 25 percent equity in the project to
make sure that the borrower has sufficient capital at risk. Most banks also use an informal rule
of thumb that cleanup costs cannot exceed 25 percent of the property's fair market value once it
is clean.
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Relieving Brownfield Financing Concerns
Public investments are most often needed for costs related to brownfield redevelopment.
The primary factor preventing private investors and lenders from filling this gap is risk: the
chance that problems will arise with a project and their costs will affect the potential payoff
Risk - quantifying, avoiding, and managing it - is the number one concern of investors and
lenders. To them, a brownfield is first and foremost real estate deal complicated by
environmental issues.
Brownfield developers and stakeholders must deal with these issues by addressing the
risks that make brownfield sites economically uncompetitive - at least initially. They need
technical and financial resources to help them reverse financial course and have a chance to
realize the full competitive advantage of their location and situation. If the more than 10,000
redeveloped brownfield sites around the country prove anything, it is that this can be done.
The most successful brownfield redevelopment efforts recognize private lender and
developer concerns and perceived risks. They aim to help private parties better manage
brownfield risks by meeting at least one of the following objectives:
Ensuring a minimum return: Localities can provide incentives such as loan
guarantees or companion loans that ensure a minimum return. They also can offer
support, such as environmental insurance, that limits the borrower's exposure to
unforseen problems that affect the value of collateral or the borrower's ability to pay.
Reducing the borrower's cost of financing: Localities can subsidize the interest
costs on project loans (for example, with tax-exempt financing or low-interest loans).
They also can reduce loan underwriting and documentation costs by offering loan
packaging assistance or technical support that might be available through Community
Development Corporations (CDCs) and other local institutions. In some cases, local
governments can help cut borrowing costs by partnering with site users to prepare
records and help maintain institutional controls.
Offering terms or incentives to ease the borrower's financial situation: Tools like
tax abatements, tax credits, or grace periods can improve the project's cash flow and
make the project numbers work. These tools can be helpful in mixed-use project
scenarios that include open space. Similarly, training and technical assistance
services can offset project costs and reduce a site reuser's need for cash.
Offering assistance or information that provides investor and lender comfort:
Performance data for new technologies and institutional controls, or insurance that
can help transfer risk, can increase the investor's and lender's comfort level with a
brownfield project.
Providing direct financing help: When contamination is suspected, money for site
assessment and cleanup is the hardest piece of the financing puzzle to solve.
Therefore, more and more cities are fronting money for this purpose, as grants or
forgivable loans.
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Brownfield success stories show that creative and proactive cities, towns, or development
authorities can partner with states, federal agencies, and private experts to jump-start
redevelopment and move the process through its make-or-break early phases. Of course
localities can help pay for site assessment and cleanup, but they also can take low-cost and
no-cost initiatives, such as helping with site assembly and loan packaging and linking site
owners to state programs and incentives, new technologies, and insurance providers.
Because of the great diversity in brownfield situations, no single "best" local approach
will suit every site. A variety of incentives can make the most effective use of public-sector
assistance and create a climate that invites private investment in brownfields. Often, a
mix-and-match approach works best, blending federal, state, and local incentives and private
programs.
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Leveraging Federal Programs
Cities and towns have used nearly two dozen federal programs to help finance some
aspect of brownfield reuse basic site preparation, planning, site assessment, cleanup, and
construction. Only three of these programs explicitly focus on brownfields: the U.S.
Environmental Protection Agency (EPA) assessment and cleanup programs, and the U.S.
Department of Housing and Urban Development (HUD) brownfield economic development
initiative (known as BEDI), which mainly applies to block-grant entitlement cities. The other
programs require some creativity to make site assessment and cleanup needs conform to their
eligibility criteria, which may target issues such as slums, blight, and job creation and retention.
Federal Financial Assistance for
Brownfield Redevelopment Activities
Loans
HUD funds for locally determined CDBG loans and "floats"
~ HUD Section 108 loan guarantees
~ EPA capitalized brownfield revolving loan funds
~ EPA capitalized clean water revolving loan funds (states set priorities, run programs)
~ SBA microloans
~ SBA Section 504 development company debentures
~ SBA Section 7(a) and Low-Doc programs
~ EDA Title IX (capital for local revolving loan funds)
Grants
~ HUD Brownfield Economic Development Initiative (BEDI)
~ HUD Community Development Block Grants (for projects locally determined)
~ EPA assessment pilot grants
~ EDA Title I (public works) and Title IX (economic adjustment)
~ DOT transportation and community system preservation (TCSP) pilot grants
~ DOT (various system construction and rehabilitation programs)
~ Army Corps of Engineers (cost-shared services)
Equity capital
~ SBA Small Business Investment Companies
Tax incentives and tax-exempt financing
~ Targeted expensing of cleanup costs (through 12/31/03)
~ Historic rehabilitation tax credits
~ Low-income housing tax credits
~ Industrial development bonds
Tax-advantaged zones
~ HUD/USDA Empowerment Zones (various incentives)
~ HUD/USDA Enterprise Communities (various incentives)
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U.S. Environmental Protection Agency Programs
Three EPA financing programs have been used extensively to spur brownfield
redevelopment, and a fourth shows promise in several states.
Site Assessment and Cleanup Grants. Site assessment grants have been used to fund a
variety of pre-cleanup environmental activities such as site assessment, inventory,
characterization, prioritization, community outreach, and cleanup planning and design. EPA
awards up to $200,000 per jurisdiction or site for these purposes, and new statutory authority
allows EPA to extend eligibility to sites with petroleum contamination. Site cleanup grants, new
for fiscal 2003, provide up to $200,000 per site to fund cleanup conducted by cities, development
agencies, non-profit groups, and similar entities at sites that they own.
Brownfield Cleanup Revolving Loan Fund (RLF). RLF grants provide up to $1
million to establish locally administered loan funds. These RLFs can make low- or no-interest
loans for cleanup. Beginning in fiscal 2003, recipients may use up to 40 percent of a
capitalization award for cleanup sub-grants.
RLF Funds Cleanup in Stamford, Connecticut
In 1999, EPA provided the first of two awards totaling $750,000 to the city of Stamford,
Connecticut, to capitalize its Brownfields Cleanup Revolving Loan Fund (BCRLF) to
make loans that facilitate the cleanup and redevelopment of brownfield properties. The
BCRLF enabled Blue's Brothers to borrow $160,000 to defray the total cost of abatement
and removal of contaminated material at a brownfield site in a mixed-use area of
commercial, industrial, and residential development. By December 2000, the $1.5-million
redevelopment project had renovated two turn-of-the-century buildings and opened a
Harley-Davidson/Buell Dealership with a showroom, offices, and maintenance facility.
The Stamford Community Development Office serves as the BCRLF's lead agency,
responsible for ensuring compliance with all applicable laws and regulations and seeing
that funding was used for authorized purposes. Because the original BCRLF required
that a municipal or government employee serve as the project manager, the city
attempted to enlist the U.S. Army Corps of Engineers to provide site management
through an Interagency Agreement with EPA. When the parties could not reach an
agreement, the city contracted with a private project manager, which led to a program
change that allows the use of private contractors for site management. The Phase I and
II assessments were completed by May 1999, and by the following October,
approximately 3,000 tons of soil contaminated with chromium, lead, cadmium, petroleum
hydrocarbons, PCBs, and arsenic were removed. The site was cleaned to residential
standards to maximize options for future use.
Clean Water State Revolving Loan Funds. Clean water state revolving loan funds
(CWSRFs) have barely made it to the radar screen as a brownfields tool, but they have
considerable potential for use at sites where water quality is an issue.1 Capitalized by EPA, these
funds can be used by states for loans of up to 20 years to finance activities that include
brownfield mitigation to correct or prevent water quality problems. Only a few states - notably
'For detailed information on using the CWSRF, see the Institute's report, Using the Clean Water State Revolving Fund
for Brownfields and USTfields, available on line at http://www.nemw.org/CleanWaterBF.pdf.
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New Mexico, New York, and Ohio - have started using this approach, but EPA allows all states
to do it. Last year, CWSRFs financed nearly S3 billion in water quality projects. Ohio, for
example, issues loans for brownfield assessment and cleanup through its state Water Pollution
Control Fund. Help is available to both municipalities and private entities participating in the
state's voluntary cleanup program.
CWSRF Funds Groundwater Cleanup in Cleveland, Ohio
The Grant Realty Company of Ohio used a CWSRF loan to clean contaminated
groundwater and soils at the 20-acre, former Sunar Hauserman industrial site in
Cleveland, preparing it for commercial use. The company used the site to build a
centrally located corporate headquarters for its subsidiary.
The former Sunar Hauserman property once housed a furniture manufacturing plant that
caused contamination from solvents used during production to clean metal furniture.
With cleanup costs estimated at $800,000, the property initially received no attention
from potential buyers. Under Cuyahoga County's $200,000-Brownfields Assessment
Pilot Grant, EPA, the state, and the site owner conducted detailed environmental
assessments and listed it with an industrial realtor. Grant Realty purchased the property,
despite its contamination, and obtained a $1.6-million CWSRF loan at an interest rate of
approximately 4 percent to cover the cost of treating contaminated subsurface soil and
groundwater. The repayment source came from a tank-cleaning operation, with personal
loan guarantees and a second position mortgage as additional collateral.
Ohio issues such loans for brownfield assessments and cleanups through its CWSRF
program, known as the Water Pollution Control Loan Fund (WPCLF), administered by
the Ohio Environmental Protection Agency. The loans are available to both
municipalities and private entities, particularly those participating in the state's Voluntary
Action Program (VAP). The prospective WPCLF loan recipient does not necessarily
have to participate in the VAP as long as the work performed directly benefits surface or
ground water.
WPCLF loans for brownfields cannot exceed $3 million per project, and the loan period
cannot exceed ten years. Eligible projects include Phase I and II assessment activities
(e.g. literature searches, site evaluation studies, sampling, monitoring, and laboratory
tests) and remediation. Like CWSRF programs in other states, Ohio's WPCLF offers
loans at varying interest rates and durations, with lower interest rates for small and
disadvantaged communities, short-term loans, and special projects dealing with
municipal compliance maintenance, water conservation, and construction of
nonconventional technologies. Wastewater and nonpoint source pollution projects,
including brownfields and USTfields, are both eligible for funding as long as they benefit
water quality and are listed in the state's Nonpoint Source Management Plan.
Ohio's Revolving Loan Fund provided an additional $1 million to clean up the Grant
Realty site, and the state VAP provided a "No Further Action" letter and Covenant Not to
Sue. During and after cleanup, the new owner made more than $3 million in property
improvements and upgrades. Construction began in early 1996 and was completed that
year. Taxes on the improved property, combined with personal and corporate income
taxes resulting from the new operations, have created annual revenue of $1 million for
Cleveland.
States set CWSRF project priorities within broad EPA guidelines. Eligible activities may
include brownfield cleanup to correct or prevent water quality problems such as groundwater
contamination. State revolving funds can cover the costs of a variety of activities, including the
excavation and disposal of underground storage tanks; capping wells; excavation, removal, and
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disposal of contaminated soil or sediments; well abandonment; and Phase I, II, or III
assessments. Each state determines who may use its revolving funds; EPA allows communities,
municipalities, individuals, citizen groups, and nonprofit organizations to be loan recipients.
Usually, loans are repaid through fees paid by developers; recreational fees; dedicated portions
of state, county, or local government taxes; stormwater management fees; or wastewater user
charges.
U.S. Department of Housing and Urban Development Programs
HUD programs offer communities the most resources for brownfield projects and the
greatest flexibility in carrying them out.
Community Development Block Grants (CDBG). Cities of all sizes are eligible for
CDBG funds. Large cities with populations of 50,000 or more, and urban communities with at
least 200,000 residents, receive grants based on a statutory formula. Smaller, "non-entitlement"
cities of fewer than 50,000 people receive block grant funds through their states. Localities
decide how to spend CDBG funds within broad HUD guidelines that aim to help low- and
moderate-income people or address conditions of slums and blight. Grants can be used for site
preparation or infrastructure improvements or, under certain circumstances, lent to private
companies for economic development projects such as creating jobs for low- and moderate-
income people. HUD has specifically defined addressing contamination as an eligible activity; it
was included in the language of the 1997 appropriations bill as well.
More than 50 cities have used CDBG resources directly for brownfield purposes.
Rochester, New York, used CBDG to capitalize local RLFs for brownfield purposes.
Youngstown, Ohio, is using CDBG to pay for first-year loan costs incurred by a new
manufacturing plant at a brownfield site.
Dallas, Texas, used CDBG to pay for cleanup at sites being used for housing.
Newberg, Oregon, used $280,000 for cleanup and site clearance at an abandoned auto
dealership downtown, which it plans to convert to a new retail center.
Wisconsin has been reserving $2.5 million of its state CDBG allocation to provide
small cities with resources for site assessments.
CDBG "floats" offer another option for communities, enabling them to leverage block
grant resources for purposes such as brownfield projects. CDBG floats are rarely used, but they
have great potential to assist with smaller infill projects. A float is something like an advance on
a city's block grant allowance. Generally, CDBG recipients are not able to spend their entire
annual allocation in the year they receive it from HUD, and unspent funds remain in the federal
treasury until drawn down. When a city can show that previously awarded block grant funds
will not be needed in the near term, it may tap its block grant account on an interim basis, using
the CDBG float, to finance short-term projects that create jobs.
Any developer, nonprofit agency, or private company may use float proceeds if it can
secure an irrevocable letter of credit from a lender. (The letter of credit gives HUD the
assurance that the money will actually be there when needed for its original block grant
purpose.) The letter of credit against the CDBG can help to put some distance between the
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specific brownfield project and the bank, affording the bank greater comfort. Float loans can
finance site and structural rehabilitation, including cleanup. Community groups and nonprofits
have used CDBG floats to generate the $25,000 to $50,000 needed to assess and clean up small
sites in key neighborhood areas. The floats are generally repaid from the proceeds of the reuse
project, as rents, or through site purchase.
CDBG Spurs Cleanup in Somerville, Massachusetts
The U.S. Department of Housing and Urban Development (HUD) provided primary
funding for the ambitious redevelopment of a ten-acre railyard in Somerville,
Massachusetts. Once a thriving commercial area, in recent decades Boynton Yards had
become blighted, dominated by scrap metal dealers, automobile salvage operations, and
automobile tow yards. In the mid-1980s, the Somerville Redevelopment Authority
acquired nine different properties at the site - including a fat rendering factory, a frozen
food facility, and a sandblasting company - for reuse as a modern industrial park.
Somerville targeted CDBG funds to a former mattress factory that had been vacant for
more than two years. To spur redevelopment of the two-acre site following an EPA
assessment, the city used CDBG to provide the non-profit Visiting Nurses Association
(VNA) with a $100,000-cost overrun coverage agreement, in the event that the cleanup
costs exceeded the cost estimate that was produced as part of the EPA assessment.
The VNA performed the site cleanup and demolition of the deteriorating factory building,
without any overruns requiring use of the CDBG coverage.
The VNA paid $250,000 for the removal of hazardous materials and then obtained
funding from numerous sources for construction of the $13-million development. The
Massachusetts Housing Partnership Fund provided a $5.4 million construction loan; the
National Equity Fund of Chicago brought in $6 million in low-income housing tax credits;
the Federal Home Loan Bank of Boston committed $1.2 million; the Massachusetts
Department of Housing and Community Development contributed $500,000; and the city
of Somerville contributed $400,000. VNA constructed a 97-unit assisted living facility and
health center for low- and moderate-income senior citizens.
The larger Boynton Yards project also used a $1.5-million Section 108 loan guarantee in
tandem with a $1-million Economic Development Initiative grant, as well as an $851,000-
Economic Development Administration (EDA) grant and a $1 million-Community
Development Action Grant (CDAG) from the Commonwealth of Massachusetts.
It is important to note that CDBG project funding allocations for cities of any size are
local or state decisions, as long as they meet HUD's basic eligibility criteria. It may be difficult
for new activities, such as brownfield initiatives, to work their way into the local priority-setting
process. Moreover, nationally the block grant resources have not kept pace with demand. The
overall level of funding has been pretty constant for the past five years, even as the number of
entitlement cities eligible to share in that pot increased by about 5 percent a year.
Section 108 Loan Guarantees. Linked to the CDBG program, Section 108 is authorized
to help cities finance site clearance, property acquisition, infrastructure, rehabilitation, or related
activities - including the removal of toxic contaminants - that are too large for single-year block
grant funding. The city, state, or county recipient can re-loan the funds to a business or another
entity to carry out the needed activities. Entitlement cities may leverage up to five times their
annual CDBG grant for large, capital intensive projects typically, economic development
projects like brownfields that need considerable up-front cash for site preparation. Cities have
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up to 20 years to repay these HUD-backed loans, usually with the income generated from the
sale or development of the site.
More and more cities are targeting Section 108 to brownfield projects. For example,
Denver is using the program for short-term construction loans on downtown projects, with the
developers repaying the notes upon sale of the properties. Mid-sized cities such as Yonkers,
New York, have used Section 108 proceeds to create a brownfield revolving loan fund, which is
being targeted to properties in and adjoining the downtown redevelopment district.
There are concerns about Section 108 requiring cities to use their future CDBG funding
as collateral, but no well-conceived and underwritten Section 108 project has ever defaulted.
Moreover, Section 108 is the one federal program related to brownfields that has never run out
of funding. The Congressionally authorized annual level of guarantee authority has never been
exhausted; $679 million has been authorized for fiscal 2003.
Section 108 at Work in Baltimore, Maryland
and Syracuse, New York
The city of Baltimore, Maryland, converted an empty Montgomery Ward distribution
center into a housing and commercial complex. A key part of the project financing was
an $8-million Section 108 loan for site preparation, renovation, and construction. The
loan will be repaid by rents that the complex will generate.
The 1.3-million-square-foot facility had been vacant since 1985 when a developer
rescued it from demolition. The HUD funding was combined with other federal and state
grants and loans and $25 million in historic tax credits and investor equity. The
government funding convinced Citigroup's Center for Community Development
Enterprise to provide a $22.6-million loan toward the $100-million project. The center
lends and invests to spur community development and the revitalization of neglected
areas, and the public financing reduced Citigroup's risk. In fiscal 2000, the project
received an additional $1 million from the HUD Brownfields Economic Development
Initiative. The project also received a $2-million loan from the Maryland Brownfields
Revitalization Incentive Program, a $4.5-million loan from the federal empowerment zone
program, a $2-million loan from the Maryland Department of Business and Economic
Development for lead paint removal. Reopened in 2002, the building now houses its first
two tenants: the Maryland Department of the Environment and the state lottery.
In Syracuse, New York, the city is using Section 108 guarantees and BEDI grants to
transform two former industrial sites in the new Crossroads Commercial Park. In 1988,
the city obtained $3 million in Section 108 loan guarantees and a $1-million BEDI grant to
acquire, clean up, and perform clearance and demolition at the first site. The loan
guarantees financed $300,000 for infrastructure development and $1.5 million for
construction of a new building. The new manufacturing facility will open this year,
creating up to 40 jobs in an empowerment zone.
The second site obtained an $875,000-BEDI grant in 1999, with $2.19 million in loan
guarantees, to fund Phase II assessment. The city is working with the New York
Department of Environmental Conservation to plan a voluntary cleanup for the site and
apply for 75 percent of the cleanup costs under the state Environmental Quality Bond
Act. Loans for the brownfield redevelopment will be repaid from the revenues generated
by the new businesses that locate in the park.
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Brownfield Economic Development Initiative. The Brownfield Economic
Development Initiative (BEDI) was established five years ago to complement HUD's Section
108 program, providing funds that can be used to support any activity that also is eligible for
Section 108 or CDBG funding. Congress appropriated $25 million for BEDI in fiscal 2003, to
be awarded competitively.
BEDI and Section 108 Fund Site Preparation in Provo, Utah
The city of Provo, Utah, will use a $1 -million BEDI grant and $3.5 million in Section 108
funding to complete environmental site work and redevelopment at the former Ironton
steel plant. The plant will be converted into a multi-purpose facility housing office and
retail space, and a warehousing and distribution operation. Once fully leased, the Ironton
site will generate more than $400,000 in annual tax revenues.
In 1995, U.S. Steel completed an environmental investigation of the 326-acre site to
determine the extent of the pollution and entered into a voluntary cleanup agreement with
Provo and the Utah Department of Environmental Quality. In 2001, U.S. Steel completed
a $4.2-million cleanup to industrial and commercial standards. However, before the site
can receive a certificate of completion, the city must negotiate wetland protection issues
with the U.S. Army Corps of Engineers, which was not a party to the original voluntary
cleanup agreement among the state, city, and U.S. Steel.
Today Provo owns about two-thirds of the site, and some remaining parcels have been
purchased by various companies and businesses that agreed to reserve at least 51
percent of the 300 jobs for people with low and moderate incomes. In August 2000, HUD
awarded Provo the $1-million BEDI grant for project engineering and design at the site,
followed in January 2001 with $3.5 million in guaranteed Section 108 loans to support the
site's redevelopment. The city will begin using the HUD funds following the development
underway of working drawings for the site's infrastructure and utilities.
Despite the great potential for the Section 108 and BEDI programs to support brownfield
projects, it is extremely difficult for small, non-entitlement cities to access them. Congress has
created a Catch-22: since small cities are not eligible to apply for Section 108, they must apply
through their state or an urban county, which have been very reluctant to use the Section 108
program because it requires the use of future CDBG allocations as collateral. To date, the
Institute has found just one small city - Glen Cove, New York - that has obtained a Section 108
guarantee for brownfield purposes. Furthermore, BEDI grants must be used in conjunction with
new Section 108 loan guarantees. This largely shuts out small cities altogether, but even larger,
entitlement cities are constrained by practical or political limits due to the required pledge of
block grant resources as collateral.
HOME Investment Partnerships Program. The largest federal block grant to state and
local governments designed exclusively to create affordable housing for low-income households,
HOME allocates more than $1 billion each year to the states and hundreds of localities
nationwide. The funds are awarded as formula grants, providing each grantee a line of credit to
draw upon as needed for grants, direct loans, loan guarantees or other forms of credit
enhancement, or rental assistance. The grants often are used in partnership with local nonprofit
groups and fund a wide range of activities that build, buy, and/or rehabilitate affordable housing
or provide direct rental assistance to low-income people.
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CDBG and HOME Funds Finance
Construction in Waukesha, Wisconsin
Phoenix Heights, Wisconsin's largest residential brownfield development, was built in
Waukesha, Wisconsin, and targeted to moderate-income families. The project has
completed 69 energy-efficient homes boasting good architectural character, at an
average price of $132,000.
The $13.5-million project on the former General Castings Corporation foundry site used
$3.13 million in public funds - nearly $1.9 million in state funds for cleanup (out of a $2.5
million total), and $415,000 in CDBG funds to cover some of the construction costs. In
addition, the project used $575,000 in state and HUD HOME program assistance funds
to help families complete their home purchase. This investment has produced $405,000
in annual property taxes.
Cleanup of the site took six years. When it was completed in 1999, C-CAP Inc., a local
nonprofit housing organization, bought the property. The housing subdivision was built
through a partnership involving the city and county of Waukesha, the state, Fannie Mae
and a consortium of local lenders.
Economic Development Administration Programs
The Economic Development Administration (EDA) has emerged as one of EPA's
strongest interagency partners. Long before the term "brownfield" was coined, EDA carried out
programs widely used for traditional economic development, funding infrastructure
development, business development, and economic revitalization. EDA provides grants to
communities to support public works activities.
During the past four years, EDA has made brownfield redevelopment one of its program
funding priorities, spending nearly 20 percent of its project resources - about $35 million a year
- on brownfield-related activities. Projects have included infrastructure and roadway
improvements, mill site reuse activities, industrial building rehabilitation, and new business
incubators in old factory buildings. EDA funding can cover the costs of addressing any kind of
contamination, including leaking underground tanks, asbestos, PCBs, and lead paint, which
makes it more flexible than many other programs. About two-thirds of all EDA funding goes to
small towns and rural areas.
Public Works and Economic Development Program. The public works and economic
development program serves as EDA's primary initiative for directly affecting brownfield
redevelopment through grants that average about $900,000. This funding helps distressed
communities attract resources from the public and private sectors to promote economic
development. It helps pay for roads, water and sewer facilities, port improvements, and other
infrastructure enhancements that serve industry and commerce - and may be needed for a
brownfield project.
Recently, EDA has provided public works funding to renovate an old factory into a
multi-tenant facility in Uniontown, Pennsylvania, and for an incubator building expansion in
Cleveland, Ohio. Grants are available to state and local governments, Indian tribes, and public
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and private nonprofit organizations. Since these entities are eligible for EPA grants as well,
there is an opportunity for cross-program leveraging.
Economic Adjustment Program. The economic adjustment program helps state and
local governments that experience sudden and severe economic dislocation or long-term
economic deterioration to design and implement adjustment and redevelopment strategies to
strengthen their economic base. The program's funding encourages state and local governments
to implement strategies that will attract private-sector investment and participation. EDA has
identified brownfield redevelopment as a necessary component in fulfilling this program's
objectives. EDA recently awarded $600,000 to Racine, Wisconsin, for use by the county
economic development corporation to capitalize a revolving loan fund that provides gap
financing for businesses that redevelop idle brownfield properties.
Planning Program. EDA's planning program for economic development districts,
Indian tribes, and redevelopment areas, can help those with an interest in brownfield reuse to fill
key informational needs. For example, the program can support marketing or feasibility studies
that are needed for brownfield reuse. Planning grants typically range from $10,000 to $200,000.
EDA Funds Public Works in
Baltimore, Maryland, and York, Pennsylvania
By the mid-1990s, Baltimore, Maryland's largest abandoned industrial facilities, the
former American Can Company complex, had stood vacant for more than a decade and
was viewed by many as symbolic of the problems plaguing the economy of Baltimore's
poorest areas. In 1997, EDA participated in the revitalization of this brownfield site by
contributing $746,112 to the Maryland Economic Development Corporation's renovation
of one of its buildings. To support the city's goal of growth in technology-oriented small
businesses, EDA's investment aimed to create a high-tech business incubator. The
American Can Company project was the first to be successfully completed under
Maryland's voluntary cleanup program and is widely credited with starting the successful
rejuvenation of southeast Baltimore. Today, the Emerging Technology Center has
become a successful small business incubator.
In Pennsylvania, EDA invested $1.1 million with the York County Industrial Development
Corporation to redevelop the former York Manufacturing Company brownfield site. The
deteriorated industrial complex in the heart of York had been vacant for more than 30
years and served as a nagging reminder to the community of its economic decline.
EDA's investment supported the rehabilitation of building space considered salvageable.
This early commitment to the project, soon after the completion of the site's feasibility
study and master plan, helped to secure additional resources to rehabilitate the blighted
area. Currently known as the Industrial Plaza of York, the revitalization effort was an
unqualified success, winning the first Phoenix Award for excellence in brownfield
redevelopment in 1997. Buchart-Horn/Basco Associates, an international architectural
and engineering firm, selected the site as its world headquarters and became its anchor
tenant. The facility employs approximately 500 people and is 98 percent occupied. The
complex also includes space for small and minority start-up businesses with supported
business services.
Two factors limit the use of EDA funding. First, its eligibility criteria are pegged to
unemployment, knocking many communities out of the box. Second, because there is so much
competition for its funding, the agency tries to spread it around. This means a community that
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has been successful with EDA before, even for a completely different type of project, may not be
able to go back to the well again with a brownfield initiative.
U.S. Army Corps of Engineers Programs
If a brownfield project can be tied to water or water quality, it may be eligible for support
from the U.S. Army Corps of Engineers. The Corps offers technical assistance, contracting
support, and help with site planning and remediation, and has a wealth of experience with
projects like the harbor restoration on the Long Island Sound in Glen Cove, New York. A chief
drawback to working with the Corps, at least for some communities, is its requirement that funds
be matched. In addition, unlike other federal agencies such as EPA or HUD, the Corps has no
specific authority for brownfield assessment, cleanup, or redevelopment. Instead, the Corps
provides support for brownfield projects under related authorities involving civil works and
water resources.
Continuing Authorities Program (CAP). Through CAP, the Corps can assist
communities and non-federal entities with planning and construction under nine authorities for
the following activities:
emergency streambank and shoreline protection;
flood control;
snagging and clearing for flood control;
navigation;
beach erosion;
mitigation of shore damage due to navigation works;
project modifications for improvements to the environment;
ecosystem restoration projects in connection with dredging; and
aquatic ecosystem restoration.
In many cases brownfield assessment work that is related to these Corps projects can be
cost-shared under CAP. Projects must have non-federal sponsors, generally with a cost-share of
65 percent federal and 35 percent non-federal. The federal share may not exceed $5 million per
project.
Support for Others (SFO). SFO enables the Corps to provide technical, engineering,
and project management expertise on a reimbursable basis to other federal agencies, tribes,
states, municipalities, and international governments. The Corps assists with site assessment,
environmental studies, redevelopment planning, real estate activities, cleanup oversight, and
other aspects of brownfield projects.
An amendment to Section 211 of the Water Resources Development Act of 2000
(WRDA) modified the procedure for the Corps to accept requests for SFO services, requiring
that any new work for state and local governments receive Corps headquarters approval. For
approval, the customer must certify that the requested services are not reasonably and quickly
available through ordinary business channels, and the Corps must certify that it is uniquely
equipped to perform these services. These certifications must be supported by clear and
convincing facts.
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Corps Lends Expertise and Funding in
St. Louis, Missouri, and East St. Louis, Illinois
St. Louis, Missouri, and East St. Louis, Illinois, have undertaken the Mississippi River
Corridor Brownfields Initiative, which targets a corridor along both sides of the river. The
area encompasses riverfront recreational areas, business districts, industrial areas, and
residential neighborhoods. For years, the Corps and EPA have worked closely with St.
Louis on brownfield redevelopment in the corridor, even before the city became part of a
brownfield showcase community. Today, EPA funds an employee of the Corps to serve
as the showcase community federal coordinator under the Intergovernmental Personnel
Act (IPA) - the person charged with providing a consistent point of contact for the federal
agencies involved in the community brownfield projects.
The Corps' most active project has been at the East St. Louis, Illinois, riverfront. In
November 2001, the Corps began an analysis of 1,100 acres of riverfront as part of a
major master planning initiative. The first phase of the project included determining the
ownership of each property, the types of structures on each piece of land, environmental
concerns, and any infrastructure running through the redevelopment area. Subsequent
phases will involve community participation to develop alternative plans for the riverfront;
selection of a final plan via project stakeholders; developing cost estimates for any major
public infrastructure improvements required; and completing the implementation plans for
the project. The project is funded under the Planning Assistance for States Program,
with $250,000 from the Corps matched by the same amount from the city.
In addition, the Corps works in the East St. Louis central business district, which has
severe infrastructure problems. The Corps is authorized to assist in a $1 -million
infrastructure improvement project to control combined sewer overflows, under a 75
percent-25 percent cost-share arrangement with the city. The Corps' assistance is
essential to making the infrastructure improvements, which in turn will be extremely
important to the redevelopment of key brownfield properties downtown.
Planning Assistance to States (PAS). Under PAS, the Corps helps local governments,
agencies, and tribes prepare comprehensive plans for the development, use, and conservation of
water and related land resources. The program also funds site-specific projects such as wetland
assessments, environmental impact statements, and hydraulic or other preliminary engineering
evaluations. The required 50-percent non-federal cost share may be composed of both funds and
in-kind contributions.
General Investigations Studies and Projects (GI). GI projects generally cover large
geographic areas and involve multiple water resource issues. These basinwide projects include
feasibility studies, which require a 50 percent-50 percent cost share with a non-federal sponsor,
and construction projects, which require a 65 percent-35 percent cost share. Although GI
projects may encompass or affect brownfield sites, they are more difficult for communities to use
because they require authorization by Congress.
U.S. Department of Transportation Programs
Some communities have made creative use of federal Department of Transportation
(DOT) funds for brownfield purposes. As a growing number of case studies shows,
transportation projects can be connected with brownfield projects in three ways. The brownfield
site itself may be a transportation facility - a road, port, or rail yard - in need of upgrading. In
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other cases, transportation system improvements are needed to make the brownfield site more
marketable - typically, by expanding access that better connects vehicles or rail with people and
sites. Finally, part of the transportation solution also may be part of the pollution solution, using
roads, parking lots, and other transportation structures as caps to safely limit exposure and make
site development costs more manageable.
Linking Transportation Projects with Redevelopment in
Lawrence, Massachusetts, and Emeryville, California
In Lawrence, Massachusetts, the Lawrence Gateway Project is integrating public and
private investments to revitalize the city's downtown residential, commercial, and
industrial centers. The Massachusetts Executive Office of Transportation and
Construction (EOTC) was instrumental in launching the project to provide 1.2 million
square feet of office space in the mills along the Merrimack River while improving access
to major highway routes.
In the project's "Quadrant Area," EOTC is connecting transportation enhancements to the
redevelopment of two major brownfield sites: Oxford Paper and GenCorp, Inc. EOTC is
investing $30 million in the reconfiguration of the Route 495/Marston Street interchange,
constructing new off-ramps, realigning an intersection for easier access, installing new
traffic signals, and rehabilitating nine bridges and two walls. In addition, EOTC is
undertaking the Canal Street Realignment/Spicket River Bridge Replacement Project,
which will raise the entire roadway profile to span a new pedestrian walkway.
Because the Spicket River Bridge's substructure will occupy the footprint of one of the
old mill buildings on the Oxford Paper site, all five buildings on the site needed to be
demolished for the project to go forward. EOTC committed the resources needed for
demolition and cleanup, with the City of Lawrence expected to complete the remediation
work in 2003 or early 2004. EOTC plans to begin bridge construction in 2003.
The estimated cost of cleaning up the Oxford site will total more than $13 million, with $9
million in transportation funds contributed through 2002 by the Massachusetts Highway
Department and the Federal Highway Administration. In addition, GenCorp provided
$636,973 for Oxford cleanup and is matching $100,000 for site assessment from Mass
Development with an additional $40,000. Cleanup of the Oxford site makes cleanup of
the GenCorp site more sustainable as well, because water flowing through an
underground raceway connecting the sites transfers contamination between them. The
EOTC project will ensure that both sides are stabilized at once.
In California, Emeryville has connected various pots of transportation funding to their
brownfield reuse strategies. In 1992, the city successfully marketed an old Chevron tank
facility to Amtrak for its new Bay Area main station. Within 18 months, Emeryville,
Wareham Development, and Amtrak planned, financed, and constructed the station,
which opened in August 1993. The city is promoting redevelopment of adjoining
brownfields into office and residential uses, using roadways as contamination caps as
part of institutional control strategies to ease their reuse.
In 1996, Emeryville completed a $2.5- million pedestrian bridge over the railroad tracks,
partially funded with $800,000 through the federal Intermodal Surface Transportation
Efficiency Act. The pedestrian network and free shuttle service link the Amtrak station to
the city's busiest business, retail and entertainment centers. These centers include a
mixed-use office and retail development adjacent to the Amtrak station called Emery
Station - three buildings on 10.64 acres, with 370,000 square feet of office space and
20,424 square feet of street-level retail and restaurant space. Another is the Terraces at
Emery Station, built on the Chevron site, with 101 residential units over a 732-space
parking structure shared by commercial users.
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Unfortunately, transportation programs must work through metropolitan planning
organizations (MPOs), which in many places have proven to be a barrier to linking
transportation and brownfield redevelopment. MPOs have a key role in deciding which
transportation projects will be funded and how program dollars will be distributed, but their
culture and mindset prevent many MPOs from considering brownfield-related activities. In
addition, the MPO process involves lengthy time frames and reviews that may not be compatible
with the compressed time frames of many brownfield reuse opportunities.
Federal Tax Programs
Brownfield Tax Expensing. The federal tax code provides a unique tool, the brownfield
tax expensing incentive - the only federal tool directly targeted to private owners of
contaminated sites. It enables taxpayers to deduct environmental cleanup costs in the year they
incur them, rather than having to capitalize them over time. Congress first passed the incentive
in 1997 as part of the Taxpayer Relief Act, but it was little-used because geographic and poverty
targeting criteria made it difficult to understand and use. In December 2000, Congress
eliminated those targeting criteria so that essentially any brownfield site owner can take
advantage of the incentive. Congress also extended its effective date to December 31, 2003, and
bills are pending in Congress to make the expensing incentive permanent.
The relatively simple two-page IRS form requires site owners to obtain state verification
that they do in fact own a brownfield, but participation in the state voluntary cleanup program is
enough to satisfy that requirement, which also may be met in other ways. Costs that are eligible
for expensing include site assessment and cleanup costs, monitoring costs, operations and
maintenance costs, and state program oversight fees.
The signature example of brownfield tax expensing is PacBell Stadium in San Francisco,
new home of the Giants. At PacBell, quick recovery of considerable cleanup costs at the 23-acre
former industrial warehousing site near downtown had a bottom line impact of several million
dollars on this project. The Giants' three-year old park was built with private money after voters
repeatedly rejected the kind of public financing that typically goes into stadiums. Critics said the
$170-million construction debt the team had to carry would prevent the Giants from spending the
money to field a competitive team. Yet the new stadium increased annual revenue from $60
million in the last year at the old park to about $160 million in three sold-out years at PacBell.
Low-Income Housing Tax Credits. For revitalization strategies that include affordable
housing, brownfield projects can be linked with low-income housing tax credits. Interest in
reusing brownfield properties for residential purposes is growing, and low-income housing tax
credits can play an important role in attracting capital for housing on brownfield sites.
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Housing Tax Credits Support Affordable
Housing in Trenton, New Jersey
Trenton, New Jersey, forged an early success for housing tax credits in redeveloping the
contaminated Circle F manufacturing site. Completed in 1997, the project assembled
$9.1 million in funding to clean up the site for affordable senior citizens' housing.
Trenton officials selected Lutheran Social Ministries of New Jersey (LSM), a long-time
local nonprofit developer, to undertake the project. The city subdivided the site,
targetting the older front half of the parcel for 70 units of senior citizen housing. LSM
fronted $553,000 for site cleanup and preparation, which became part of its project
equity. LSM also applied for and received an allocation of approximately $5.4 million in
federal low-income housing tax credits from New Jersey. These credits are distributed
by states according to their own criteria.
The tax credits attracted Nat West bank, a private lender, which helped finance the
project with a $4.1-million construction loan. The bank assumed the role of a limited
partner in the project in order to obtain the tax credit benefit.
In addition, the project obtained $1.4 million from the New Jersey Department of
Community Affairs Balanced Housing program, $326,000 in State Regional Contribution
Agreement funds, $150,000 in City HOME funds, and $420,000 in Federal Home Loan
Bank funds. LSM also obtained a $517,000-development loan and a $330,000-loan from
Thrift Institutions Community Investment Corporation of New Jersey.
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Using State Programs
In many ways, states have built the financing foundation that communities rely on to
advance their brownfield efforts. State financing initiatives will take on a whole new level of
importance as they become linked to the liability relief and other responsibilities and incentives
accorded the states by the federal Brownfield Revitalization Act enacted in 2002.
A wide variety of state financing programs use many different but equally effective
approaches to meet the diverse challenges of brownfield reuse. These challenges include
financing site assessment and cleanup, and paying for the complicated planning and transaction
costs that brownfields typically require. The Northeast-Midwest Institute compiles detailed
information on state programs in our annual State of the States report, but generally they fall in
the following categories.
Tax Incentives
State tax incentives help with a project's cash flow by allowing revenue to be used for
brownfield purposes rather than for tax payments. This can help site reusers to assemble the
cash needed for the site preparation costs associated with contamination. The cushion of a tax
break also can improve a lender's assessment of the project's financial picture.
State Tax Incentives
Colorado's Brownfields Tax Credit Provides an income tax credit of up to $100,000 to
offset brownfield cleanup costs for properties located in municipalities of at least 10,000
residents and eligible under the state Voluntary Cleanup and Redevelopment Act. The
total credit is broken down to 50 percent of the first $100,000 spent on cleanup, 30
percent of the next $100,000, and 20 percent of the third $100,000.
Illinois' Environmental Remediation Tax Credit. Provides an income tax credit of up to
25 percent of eligible cleanup costs in excess of $100,000 per site (with no deductible in
low-income areas), with a maximum annual credit of $40,000 and total credit of $150,000
per site. The credits are transferable to new owners.
Michigan's Brownfield Authority Single Business Tax: Provides a financial credit
against the single business tax for up to 10 percent of investments made by any taxpayer
or lessee on eligible property in a Brownfield Authority community. Eligible investments
include demolition, construction, or improvement of buildings.
Ohio's Brownfield Site Clean-Up Tax Credit Program: Provides taxpayers with a state
franchise or income tax credit for the voluntary assessment and cleanup of a
contaminated site. The credit is up to 10 percent or $150,000 per year in distressed
areas, and 10 percent or $100,000 per year in non-distressed areas.
State and federal tax incentives historically have been used to channel investment capital
and promote economic development in areas that have needed it, and brownfield targeting is a
natural evolution of this tool. Most tax incentives aim to offset cleanup costs or provide a buffer
against increases in property value that raise tax assessments before the site preparation costs are
paid off. About 23 states offer some sort of tax abatement or credit.
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Financial Assistance
State financial assistance programs fill capital gaps, still the greatest barrier to brownfield
reuse. These programs can help finance specific parts of the project, such as site preparation, or
serve to increase a lender's comfort level by offering guarantees that limit the risk of potential
losses. Financial assistance also can ease the borrower's cash flow by plugging certain capital
holes or offsetting the extra up-front costs of site cleanup.
Some 22 states offer some sort of targeted brownfield financial assistance. About 14
states also offer direct financing, matching resources to needs, usually in places where the
private sector may fear to tread. Ohio is the current trend setter, with a major environmental
bond issue passed in November 2000 that includes $200 million for brownfield reuse initiatives.
Other states, such as New Jersey and Pennsylvania, have established significant loan programs
funded by general appropriations.
Targeted Financial Assistance
Florida's Brownfield Areas Loan Guarantee. Provides guarantees or loss reserves for
licensed lenders for redevelopment projects in brownfield areas. The state will pay 10
percent of any loss sustained on the guaranteed portion for up to five years.
Illinois' Brownfields Redevelopment Loan Program. Finances limited site
investigation, demolition, and remediation at sites contaminated with hazardous
substances, pesticides, and petroleum. Public and private entities may apply for up to
$500,000 at a simple annual rate of one-half the market interest rate, but not less than
2.5 percent.
Indiana's Brownfield Cleanup Revolving Loan Fund. Through a U.S. EPA BCRLF
pilot, issues loans to public and private entities for removal actions at brownfield sites.
Interest rates are 2.5 percent for terms of one to nine years and 3 percent for terms of
ten to 20 years.
Massachusetts' Brownfields Redevelopment Access to Capital Program. $15-
million environmental insurance fund administered by the Massachusetts Business
Development Corporation (MBDC) encourages private-sector lending in support of
brownfield redevelopment. BRAC began operating in October 1999.
Indirect Support
Programs in at least ten states offer indirect support for brownfield financing. For
example, Michigan has authorized cities and counties to establish Brownfield Redevelopment
Authorities with tax increment financing and bonding authority. Structurally, they are based on
widely recognized and popular development authority entities, which increases their acceptance
by those communities and private players who might not be comfortable with something that had
an environmental focus front and center. To date some 75 authorities have been set up around
the state, and they are proving useful as "one-stop" shops for information, technical assistance,
and resources. They are especially helpful in small towns, spearheading redevelopment projects
in communities with as few as 1,500 people.
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In 1999, Wisconsin's legislature adopted several bills aimed at the financing process.
First, it addressed the payment of back taxes on abandoned sites - an issue that creates a barrier
to brownfield redevelopment in cities all over the country. Wisconsin now allows the
cancellation of delinquent taxes for new purchasers as part of an agreement to clean up
contaminated property. The state also established a Brownfield Environmental Assessment
Program (BEAP), through which the state department of natural resources conducts state-funded
Phase I and II assessments at city or county nominated sites. For many properties, the
information from BEAP audits has been a strong enough incentive for redevelopment to proceed
with no further public subsidy.
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Using Local Programs
State brownfield initiatives provide a foundation for local efforts that complement and
build on them. In many instances, local governments have begun exploring financial incentives
to offset some risks of brownfield redevelopment. Many of these approaches involve placing a
new brownfields "spin" on tried-and-true financial assistance tools.
In general, local governments could better position themselves to support brownfield
reuse projects by giving a new twist to their existing economic development finance programs.
This may be as simple as recognizing site assessment and remediation needs as legitimate project
activities within the scope of their programs, by working with community groups willing to take
on such projects, or by offering more flexible terms and conditions to applicants seeking help for
brownfield-related activities.
Tax Increment Financing
Available in 47 states, tax increment financing (TIF) traditionally has been used for a
variety of economic revitalization efforts, usually in economically distressed or abandoned areas.
TIF is the most common form of local support for brownfield reuse, especially in California,
Colorado, Florida, Illinois, Indiana, and Wisconsin.
The TIF process finances public investment in a development project based on the
anticipated growth in property taxes the completed project will generate. TIFs are built on the
concept that a brownfield initiative will create new value and that this future value can be
leveraged to finance some activities needed today to foster it. Under TIF, the local government
determines the property tax income from the TIF district. Then as investment in the district
increases and the tax base improves, tax revenues beyond the original base level the
increment are used to pay for improvements and subsidies. (Some states also allow local sales
tax and earnings tax revenues to fund the increment.) Municipalities may rely on the tax base to
increase on its own or on a developer to invest in improvements to be reimbursed as increment
revenue comes in. They also can issue municipal bonds to pay for improvements in the district
and use the increment to pay off the debt.2
TIF is regulated by the state, but controlled by the city. States provide the authority for
local governments to use TIF, laying out the ground rules that communities must follow.
Enabling legislation varies from state to state, but there are several common elements. First, a
local government or redevelopment agency establishes a TIF authority to define an appropriate
redevelopment district. Local assessors then freeze property value in the designated district to
establish the revenue base. This base is in effect for a specific length of time, typically 10 to 25
years. Generally, TIF authorities must prepare a redevelopment plan including proposed
projects, their feasibility, their costs, and a timetable for activities.
2
Tax Increment Financing Boosts Local Tax Base, Economic Development Digest, National Association of
Development Organizations, Vol. 11, no. 10, September 2000. http://www.nado.org/pubs/sept6.html
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TIF bonds are issued for the specific purposes of the redevelopment: acquiring and
preparing the site; upgrading utilities, streets, or parking facilities; and carrying out other
necessary site improvements. These bonds are an ideal financing tool for brownfield projects
and are easily used with other types of funding, such as grants or loans.
TIF Financing Revitalizes Sites in
Wyandotte, Michigan, and Minneapolis, Minnesota
In Wyandotte, Michigan, the city's TIF district and tax increment bonds provided most of
the $5.2 million in public funds to transform vacant industrial land into a nine-hole, par 36
golf course. The golf course occupies about two-thirds of the former 84-acre BASF
chemical production site, a contaminated property that was redeveloped into prime
recreational, waterfront property that includes a world-class rowing facility, 25-acre park,
and boardwalk.
In 1980, BASF began phasing out operations at the obsolete plant, and the Michigan
Department of Environmental Quality ordered the company to encapsulate the site with a
clay cap and prohibited future site development. However, Wyandotte officials prevailed
in efforts to redevelop the riverfront site, which was integral to a city-wide revitalization
effort. After six years of negotiations, Michigan issued a consent agreement requiring
BASF to prevent contaminated groundwater from discharging into the Detroit River.
Construction of the site's park area cost $3.9 million, in addition to the $5.2 million for the
golf course. Major financial support came from the city's $4.5 million, $2 million from
BASF Corporation, and $1.5 million from the Michigan Recreational Bond Fund provided.
User fees for the golf course and other amenities pay for maintenance of the park, and
the revitalized waterfront has led to a significant increase in property values and
investment in housing rehabilitation in the adjoining and formerly declining neighborhood.
In Minneapolis, the declining Johnson Street Quarry was subject of an intense
community effort to bring retail to the northeast area of the city. TIF was the key to
getting the finance in place, with the $60 million in project costs divided between public
and private sources. Despite high expenditures, the city is recouping its costs through
property taxes and revenues generated from the tax increment finance district. The new
Quarry Retail Center has created more than 2,000 jobs and increased property and sales
tax bases in excess of $3 million a year. Sales tax figures are not available at this time,
but sources estimate that they are significantly over the 1996 predictions.
Many jurisdictions hesitate to use TIF for brownfield projects because it can be difficult
to retire the bonds if projected development fails to materialize or unanticipated complications
arise. Also, the complexity of many TIF programs is a practical disadvantage. TIFs can require
a lot of time to put into place and demand high levels of technical expertise and negotiating
savvy to move a project - especially one involving environmental concerns - from concept to
implementation.
Despite its challenges, TIF is the key element in Michigan's Brownfield Redevelopment
Authority approach. Minnesota also has adopted a TIF option, called the hazardous waste
subdistrict, designed to meet the financing needs of brownfield areas. Properties in the
subdistricts can be valued down to zero for TIF valuation purposes, maximizing the tax
increment to allow more revenue to be raised for redevelopment.
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Tax Abatements
Tax abatements reduce or forgive tax liability, enhancing the cash flow that is a key
concern when contamination is involved. Abatements most often relieve property taxes, but also
are granted for sales, inventory, and other taxes. They take several forms:
freezing the assessed value of land or buildings at a specific time, usually prior to
improvements;
reducing the tax rate for a certain period of time, typically five, ten, or twenty years;
or
exempting some types of property from taxation altogether.
Some abatement programs feature sliding scales, offering full abatements initially, when
business cash needs for recovering brownfield preparation costs are the greatest. Several states
including Connecticut, Idaho, Maryland, Ohio, and Texas address the issue of increasing
the tax liability on remediated brownfield property by allowing several years to pass before the
property is fully assessed at the value of its new use.
Tax abatements can stimulate investment in building improvements or new construction
in areas where property taxes or other conditions discourage private investment. Local
governments usually need to have state authority to offer tax abatement programs, and most
authorities allow participation by only certain areas, such as the economically distressed
communities or deteriorating neighborhoods that typify brownfield sites.
Tax abatement programs must be carefully designed to target intended beneficiaries
without offering unnecessary subsidies, a difficult feat to accomplish. Therefore, tax abatement
programs have numerous critics. Yet tax abatements offer the key advantage of giving local
governments a workable, flexible incentive that helps influence private investment decisions.
In Chelsea, Massachusetts, the Everett Avenue urban renewal district was home to
mostly junk yards and outdoor storage before the Houston-based Wedge group purchased two
acres to construct a $17-million, 180-room hotel, the city's first. A property tax abatement on
the site, which generated very little in taxes anyway, provided the financial offset needed for the
developer to take on a brownfield site and clean it up. Even with the property tax abatement, the
hotel is expected to generate $400,000 in other taxes annually.
Local Revolving Loan Funds
Several cities have established locally capitalized and operated revolving loan funds,
targeted to urban redevelopment and brownfield-related projects. They use a wide variety of
sources for capitalization, including general revenue appropriations, bank contributions, fees or
fines, and repayments from CDBG or other program activities. Conceptually, they are similar to
state or federal RLFs.
Baltimore operates the highly successful EBMC Brownfield Loan Fund. Initially funded
in 1997 with $2.5 million in HUD empowerment zone funds, the fund has made seven loans
totaling nearly $2.4 million, which have leveraged more than $74 million in private investment.
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These seven loan-assisted brownfield projects are projected to create 783 jobs. One of the
largest projects cleaned up underground storage tanks at a series of warehouse properties in the
city's Fells Point neighborhood, creating 36,000 square feet of office and residential space and at
least 108 jobs.
New Bedford, Massachusetts, has established its own brownfield assessment program,
supported by an Environmental Assessment Fund capitalized and maintained by the city.
Nonprofit institutions and others have also contributed to the loan fund. The RLF's goal is to
provide initial assessments of potentially contaminated sites to reduce stigma and eliminate the
fear of the unknown. New Bedford uses an environmental assessment tax lien as entree to a site
to perform a Phase I assessment, paid by the local RLF. These costs are recovered upon sale of
the parcel.
General Obligation Bonds
Virtually all communities can issue general obligation (GO) bonds for any public purpose
pertaining to their local government and affairs. Economic development practitioners can make
a strong case that a bond pool to support brownfield cleanup and reuse projects serves the public
purposes of creating jobs and enhancing the local tax base. Cities traditionally issue GO bonds
for acquiring land, preparing sites, and making infrastructure improvements all key elements
in a brownfield redevelopment strategy.
Bridgeport, Connecticut, used GO bonds to finance part of its $21-million, 5,500-seat,
minor league baseball stadium. Before redevelopment, the city owned almost half of the stadium
site, which formerly housed the abandoned Jenkins Valve facility and Sprague Meter Company
buildings. Through a combination of bond funds and private investment, the city acquired the
remainder of the property, relocated businesses, and built the city-owned stadium that is now
home to the Bridgeport Bluefish. The city's share of gate and concession receipts from Harbor
Yard will help pay them off. These bonds help transform the abandoned and heavily
contaminated Jenkins Valve site into a catalyst for urban revitalization. Last year, some 300,000
people attended a game at the stadium, which has created 361 jobs.
In Chicago, the city expended $495,000 from GO bonds and EPA Brownfields Showcase
Community funds to clean up property on the city's distressed west side, and then turned it over
to the adjacent Scott-Petersen Meat Company. The company had approached the city in 1993
about acquiring the abandoned 1.5-acre property, promising to expand its operations and hire
new employees, thus providing a stable business presence in an increasingly blighted
neighborhood. Just 13 months after the project began, the city had remediated the site, removing
the debris from inside the building, demolishing the building, and removing several underground
storage tanks from the site. Scott-Peterson invested $5.2 million in the site for parking
expansion and a smokehouse addition, allowing for a third shift that added 100 local residents to
its payroll.
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Other Low- and No-Cost Initiatives
Money is not the only financing tool that cities can provide. Four other low- and no-cost
initiatives can be just as important as a grant to prospective brownfield site reusers and their
bottom lines.
Insurance. In the last two or three years, a new wave of insurance mechanisms has
emerged to bring certainty to brownfield risks and reduce project costs in the long run. They
allow deals to close more easily for two reasons: first, because unexpected cleanup costs
encountered during the development process will not add to the developer's anticipated costs,
and second, because the insurance protects against the costs of additional contamination
affecting the site reuser's ability to pay off mortgages or other notes.
Three types of insurance are most commonly used in brownfield situations.
Environmental remediation insurance, for releases that occurred before the policy
was written but were discovered after the policy was in place. More and more
lenders are requiring environmental remediation insurance to give them some comfort
and cover.
Stop-loss coverage, which protects against cost overruns once a cleanup plan is
defined, or against additional costs resulting from changes in regulatory standards.
This coverage can quantify risks and costs for a developer or site purchaser.
Pollution legal liability insurance, which offers protection against problems
stemming from the migration of contamination to other sites.
A few cities are exploring ways to increase the availability of brownfield insurance by
linking small developers or site owners with insurers, or helping to assemble a portfolio of sites
to spread risk and costs. Such an approach could attract small users to these sites. Despite the
potential benefits of insurance, local officials need to remember that brownfield sites may be
caught in an insurance "Catch 22": insurers may want a cleanup plan in place before issuing a
policy, while site reusers often need the insurance earlier in the process, to secure resources for
planning and cleanup.
A final emerging trend known in the industry as "insurance archaeology" involves using
old corporate Comprehensive General Liability policies to pry funding loose for cleanup or other
brownfield activities. Basically, this approach pursues claims on pre-1980 policies, which
lacked today's pollution exclusions. Settlements are being negotiated on old policies dating
back to the 1950s or even earlier, sometimes for as much as 40 percent to 60 percent of the
policy's face value. Some attorneys will take these cases on a contingency-fee basis, and their
approach has passed legal challenges in most states.
Institutional Controls. Institutional controls are used at sites where risk-based cleanup
standards are tied to future land uses most often industrial or commercial uses that limit
human exposure to residual contamination. Proprietary controls often are recorded in covenants,
easements, or other restrictions on the property's use that are consistent with the agreed-upon
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level of cleanup. Government controls impose restrictions that fall within the traditional police
powers of state and local governments. The most common types are permit, planning, and
zoning limitations on land use. In practice, they may involve using a parking lot for a site cap, or
installing monitoring wells.
No matter what form they take, institutional controls must prevent an unanticipated
change in land use that could result in unacceptable exposures to contamination. They demand
ongoing enforcement, since local leaders or administrators who established them move on, and
controls involving equipment like monitoring wells may fail.
Institutional controls are gaining more credibility and more use. They are credited with
significantly reducing development costs on sites intended for new industrial or commercial
uses. For example, Home Depot - which has completed a couple of dozen brownfield projects
around the country - used institutional controls at a brownfield site in Honolulu, Hawaii. Home
Depot worked with the state for almost two years to obtain a "letter of completion." The first
site to go through the state's voluntary cleanup program, the Honolulu Home Depot employed a
multi-million dollar environmental control system including venting, capping, and monitoring
wells to reduce cleanup costs to the point that the project could go forward.
Innovative Remedial Technologies. New technologies - some of them less than two
years old - are bringing down brownfield site preparation costs. For instance, the cost of
cleanup at that Ernst Steel site in Cheektowaga, New York, was reduced by $300,000 with the
use of a new treatment that immobilizes lead in soils. The savings at the small site made the
project numbers work. Biotechnologies that have successfully and cost-effectively treated
contamination include the use of weeping willow trees to suck metal contamination out of the
groundwater at an old foundry in Staten Island, New York, and the application of microbes to
treat petroleum contamination in soil at a vacant gas station in Berwyn, Illinois.
In Trenton, New Jersey, the old Magic Marker site was seriously contaminated with lead
from a former lead-acid battery manufacturing plant, just feet away from homes in a densely
populated area of the central city. A conventional dig and haul cleanup raised concerns about
releasing large volumes of contaminated dust in the neighborhood, as well as exorbitant costs.
The solution was one of the first phytoremediation cleanups in the country, using mustard plants
to extract lead from the soil.
In 1995, a research corporation called Phytotech approached the city about conducting a
demonstration cleanup project using phytoremediation at the Magic Marker site. Working with
community members and city and state officials, Phytotech initiated the first of three harvests in
1996, resulting in a 20 percent reduction of lead in the surface soil. Because the harvested plants
can be safely processed through drying, ashing, or composting, they reduced the amount of waste
to be landfilled by 95 percent and saved $300,000 in cleanup costs.
These examples illustrate why it is important for developers to keep in touch with state
and federal environmental agency experts who can link them with information on new
technologies that can make site preparation costs more manageable. EPA funds a network of
hazardous substance research centers at half-dozen universities across the country, and they can
be a valuable informational resource.
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Technical and Procedural Initiatives. Communities can launch technical or procedural
initiatives that help site users cut their preparation costs. For example, local governments can:
Help with site assembly and title clearance.
Link site owners to state voluntary cleanup programs and the liability relief and other
incentives they offer.
Link site owners to federal and state financing programs and other incentives
Offer access to tax incentives or tax-exempt finance.
Help site owners establish institutional or engineering controls.
Help with loan packaging.
Help separate the environmental risk from the economic value of the property.
Northeast-Midwest Report
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Conclusions
Brownfield success stories show that creative and proactive cities, towns, or development
authorities can partner with states, federal agencies, and private experts to jump-start
redevelopment and move the process through its make-or-break early phases. Of course
localities can help pay for site assessment and cleanup, but they also can take low-cost and
no-cost initiatives, such as helping with site assembly and loan packaging and linking site
owners to state programs and incentives, new technologies, and insurance providers.
The strategies for redevelopment constantly evolve with the introduction of additional
tools and resources. Some, like EPA's cleanup grants, are newly created expressly for
brownfields. Others, like Clean Water State Revolving Loan Funds, already exist for related
purposes but are redirected to brownfield use. Every new brownfield project provides another
opportunity to apply the array of federal, state, and local brownfield resources and private sector
tools, providing one more model to reinforce proven strategies or demonstrate new ones.
Federal Challenges
Although states have built the financing foundation that communities rely on to advance
their brownfield efforts, federal programs provide key support - often jump-starting some of the
largest or most complex brownfield projects. Several of these federal programs face challenges
in delivering brownfield-related assistance to communities.
Stagnant Community Development Block Grant Funds: Nationally, block grant resources
have not kept pace with demand. The overall level of funding has been pretty constant for the
past five years, even as the number of entitlement cities eligible to share in that pot increased by
about 5 percent a year.
Barriers to Small-Community Use of Section 108 and Brownfield Economic Development
Initiative: Despite the great potential for the Section 108 and BEDI programs to support
brownfield projects, it is extremely difficult for small, non-entitlement cities to access them.
Since small cities are not eligible on their own to apply for Section 108, they must apply through
their state or an urban county, which have been very reluctant to use the Section 108 program
because it requires the use of future CDBG allocations as collateral. Furthermore, since BEDI
grants must be used in conjunction with new Section 108 loan guarantees, most small cities are
shut out altogether.
Linkage of Economic Development Administration Eligibility to Unemployment: Two
factors limit the use of EDA funding. First, its eligibility criteria are pegged to unemployment,
knocking many communities out of the box. Second, because there is so much competition for
its funding, the agency tries to spread it around. This means a community that has been
successful with EDA before, even for a completely different type of project, may not be able to
go back to the well again with a brownfield initiative.
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Matching Funds and Authority for U.S. Army Corps of Engineers Brownfield Projects: A
chief drawback to working with the Corps, at least for some communities, is its requirement that
funds be matched. In addition, because the Corps has no specific authority for brownfield
assessment, cleanup, or redevelopment, the Corps must justify its support for brownfield projects
under related authorities involving civil works and water resources.
MPO Barriers to Using Transportation Funds: In many places, metropolitan planning
organizations (MPOs) have proven to be a barrier to linking transportation and brownfield
redevelopment. MPOs have a key role in deciding which transportation projects will be funded
and how program dollars will be distributed, but most have not considered brownfield-related
activities to be part of "their" mission. In addition, the MPO process involves lengthy time
frames and reviews that may not be compatible with the compressed time frames of many
brownfield reuse opportunities.
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Public Strategies for Cost-Effective
Community Brow nil eld Redevelopment
Practice Guide #1
Summer 2002
Southeast Regional Environmental Finance Center
EPA Region 4
University of Louisville
H. Wade VanLandingham, The Stormstown Group
and
Peter B. Meyer
Center for Environmental Policy and Management
University of Louisville
426 West Bloom Street
Louisville, KY 40208
502-852-8152
efe@louisville.edu
http://cepm.louisville.edu
2/24/2005
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Preface and Acknowledgements
This Practice Guide is the first of a series to be produced by the University of Louisville
Environmental Finance Center for use by local officials and staffs. The series is intended to provide tools
for trainers that can be used to better inform local elected officials and government/nonprofit agency
staffs about environmental planning issues and the economic and financial implications of the different
policy choices facing state and local governments.
The University of Louisville Environmental Finance Center (UofL EFC) is one of nine centers
nationwide supported by the Environmental Finance Program of the U.S. Environmental Protection
Agency. Located in the southeastern United States, the UofL EFC coordinates its project planning and
work with the Planning and Analysis Branch of the Office of Policy and Management in the EPA Region
4 office in Atlanta and we focus on issues of particular concern to our home region.
This Practice Guide has benefited from support for a prior review of the literature and practice in
brownfield reclamation by the authors. The authors acknowledge the support of the U.S. Economic
Development Administration, Research and National Technical Assistance Division for the preparation
of Reclamation and Economic Regeneration of Brownfields, released in August, 2000.
The signing in January, 2002, of the Small Business Liability Relief and Brownfields Revitalization
Act has changed the landscape for brownfield redevelopment in a number of ways. Until the guidances
for implementation of the Act, due out in late 2002, are issued by EPA, the details of the new prospects
for reclamation and re-use cannot be determined. This Guide, then, is prepared with respect to the
conditions existing before the passage of the Act. We will introduce and update an additional Appendix
as the new legislation and regulations are implemented and enforced. The first version of the Appendix,
to be available both in print and as a separate download from our web page, should be out in early 2003.
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Public Strategies for Cost-Effective Community Brownfield Redevelopment
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Public Strategies for Cost-Effective
Community Brownfield Redevelopment
Table of Contents
INTRODUCTION 1
The Nature of the Brownfields Problem 1
The Need for Information at the Local Level 1
The Legal Liability Environment 2
Other Concerns 3
The Situation Entering 2002 3
LOCAL DECISION-MAKING FOR BROWNFIELDS REDEVELOPMENT 3
The Costs and Benefits of Brownfields Redevelopment 4
FEDERAL AND STATE PROGRAMS 5
Federal Brownfields Redevelopment Initiatives 5
Environmental Protection Agency 5
Department of Housing and Urban Development 6
Department of Commerce, Economic Development Administration (EDA) 7
Other Federal Programs and Resources 7
Other Tools Created by Federal Action That May Be Useful 7
State Brownfields Regeneration Programs 8
Eligibility 9
Participation Requirements 9
Site Assessment Support 9
Mitigation or Remediation Support 9
Liability Relief from Public Actions 10
Liability Relief from 'Third-Party' Actions 10
Oversight/Approval Procedures 10
State Regulatory Action Time Limits 10
Variable Cleanup Standards 10
Engineering Controls 11
Institutional Controls 11
Right-to-Know/Public Participation Requirements 11
Reopener/Reconsideration Clauses 11
COST-EFFECTIVE LOCAL BROWNFIELDS REDEVELOPMENT: 12
A REVIEW 12
Site Assessment 12
Remediation and Development 12
Private Financing 13
Insurance 13
Exit Strategies 14
Appendix A:_GUIDES TO BROWNFIELD REDEVELOPMENT PROCESSES 16
Appendix B:_FEDERAL PROGRAMS/POLICIES SUPPORTING BROWNFIELDS
REDEVELOPMENT 19
ENDNOTES 22
iii
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INTRODUCTION
In the last decade, a great deal of attention has turned to the redevelopment of brownfield sites,
defined in the mid-1990s by the Environmental Protection Agency (EPA) as abandoned, idled or
underutilized industrial and commercial facilities where expansion or redevelopment is
complicated by real or perceived contamination (1). Our goal here is to inform the local Economic
Development Organization or municipal agency charged with economic and/or community
development in an area (EDO) about the brownfields development process and to demystify the
mass of legalistic, technical, and often contradictory or out-of-date writings. This Practice Guide
should help to identify workable approaches to potential land contamination issues, point to the best
practices of successful brownfield redevelopers, and identify sources of information available for
local governments and other organizations interested in launching or expanding their own
brownfields efforts.
The Nature of the Brownfields Problem
The reuse of previously developed land is not a new practice. Federally led Urban Renewal
efforts in the 1960s attempted redevelopment of the larger urban cores (2). Urban areas and their
economic development organizations have had lengthy experience with the intentional reuse of their
lands.
Although cities, and to a lesser extent other areas, have been reusing land for many years, the
context for this reuse has changed over time. Plant closings associated with the restructuring of the
US economy from the 1970s on, retail market and housing location shifts have all helped to generate
an array of underutilized and potentially contaminated sites, commonly known as brownfields. The
sheer number of these sites is impressive. It is generally agreed that there are a least 500,000 sites
with uncertain or risky environmental conditions, in terms of known past uses and current status (3,
4, 5, 6).
Complications in redeveloping brownfields may arise from the conditions of the sites
themselves, from their locations, or from actual contamination (or even from the stigma associated
with the possibility of contamination). Most of the difficulties of brownfield redevelopment come
from the legal and financial issues affecting the projects. Despite these potential problems, there is
great interest in reusing these sites because their location may offer exceptional private profits from
successful redevelopment, while also contributing to public economic and community development
goals.
Conventional wisdom argues that the costs and risks associated with the reuse of these sites often
makes them uncompetitive with "greenfield" development. Recent experience, even before the new
2002 law, however, demonstrates that brownfield redevelopment can be financially rewarding for
all.
The Need for Information at the Local Level
The process of developing a vacant or agricultural greenfield site is well understood. This is not
Public Strategies for Cost-Effective Community Brownfield Redevelopment
1
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true of brownfield redevelopment. The complications come not only from federal and state
environmental regulations but also from the details of specialized incentive programs designed to
promote brownfields, as well as from the wide range of financing and insurance options available.
Good local decisions depend on the quality of data available on both local conditions and the
investment options facing redevelopers.
The Legal Liability Environment
When Congress enacted the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA or Superfund) in 1980, it wanted to make reclamation of heavily
contaminated but neglected sites easier and more certain. Unfortunately, CERCLA had several
unintended negative effects on economic development - in large part because of court interpretations
of the Act. The Superfund itself is focused on fewer than 1,410 sites, but the publicity it has
generated has undermined the perceived value of 500,000 or more brownfields across the nation that
may have minimal, if any, contamination (4, 6, 7).
The problem created by CERCLA comes much more from the legal liability issues it raises for
any site with even a small amount of contamination, than from the cleanup or procedural regulations
involved (8). The key legal issues involve "strict" and "joint and several" liability.
> "Strict" liability does not require the demonstration of any wrong-doing. Even actions that
were legal at the time they were taken and created some contamination result in the actors
being held accountable for the costs of clean-up and environmental damages. This liability is
also retroactive, meaning that it applies even to acts causing pollution years or decades
before CERCLA passed in 1980.
> "Joint and several" liability has to do with how this liability is shared among the many
parties who could be held responsible for the pollution. CERCLA creates three general
classes of "potentially responsible parties" (PRPs): (1) generators of hazardous substances,
(2) owners and operators of the site where the contamination is found, and (3) transporters
with the authority to decide on the site for disposal of hazardous substances. The joint and
several language means that any one or all of the PRPs may be held responsible for the
entire cost of cleanup, no matter how little pollution they caused. The bottom line has been
that local governments or authorities who attempt to redevelop such contaminated properties
may end up among the responsible parties.
This potential liability has created a situation in which just about all previously used industrial
and commercial sites need to get an environmental assessment before they can be sold and before
redevelopment financing can be obtained (9, 10). The regulation has made redevelopment:
> more expensive (because of assessment and cleanup costs);
> riskier (because of the possibility of greater contamination than originally conceived); and,
> slower (due to the time necessary to assess the levels of contamination, clean the property, and
obtain appropriate clearances).
Finally, before some 1996 legislative changes, court findings on CERCLA made redevelopment
of brownfields more difficult by exposing lenders to liability for the sites they accepted as collateral
(3, 9, 11, 12). The net result was to reduce demand for any previously developed sites.
2
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Other Concerns
In addition to environmental concerns, brownfields regeneration has been slowed by weak
demand for any type of developed sites (6, 13). A range of factors often combine to undermine
redevelopment of abandoned industrial sites in particular, but also other sites in urban centers (14,
15):
> the physical and economic deterioration of older industrial areas in recent decades;
> population out-migration from cities;
> common public sector neglect of infrastructure and service delivery in impoverished areas;
> changes in preferences for production and distribution facility types (such as increased
demand for single-story buildings); and,
> greater demand for access to the interstate highway system as trucks have replaced river and
rail transportation, leading firms to locate in suburban locations near highway interchanges.
"Greenfield" sites (previously undeveloped properties) are usually in such higher demand areas,
cost less per acre to develop, and do not involve as much risk and uncertainty for investors (16).
The Situation Entering 2002
In the 1970s and 1980s, local governments and economic development organizations found
themselves with many potentially reusable sites, but little private sector interest in redeveloping
those properties and significant obstacles to public sector-led redevelopment (17,18). The situation
changed in the 1990s as states passed laws and regulations including Voluntary Cleanup Programs
and more flexible cleanup standards for brownfields based on intended new uses of sites. Other state
policy developments included liability relief for project financiers and for innocent new purchasers
(and inheritors or acquirers) of previously contaminated sites (19, 20). Federal and state financing
became more available, and existing economic development programs have been modified to
promote brownfields. Finally, private sector insurers developed new risk-management products
tailored for brownfield regeneration (21, 22, 23).
The most fundamental problem for the majority of EDOs that have yet to launch systematic
brownfields programs is how to initiate and direct such efforts. Clearly, the first step in a local
entity's brownfields redevelopment project is to gather and assimilate information about the maze of
regulations and programs and about the site itself. Here we offer a guide for local EDOs but do not
attempt any step-by-step recipe. Appendix A describes some Guides to Brownfield
Redevelopment that may be useful to interested EDOs, though the new federal law will
substantially alter the decision frameworks that applied under those older guides. (You might want
to look out for updates from those sources as the new law goes into effect.)
LOCAL DECISION-MAKING FOR BROWNFIELDS REDEVELOPMENT
Brownfield redevelopment needs to be part of the economic development strategy for any EDO
working in a previously developed area. In many cases, the local area simply has no other land
available for new economic activity or housing. In other cases, the brownfield sites may be located
Public Strategies for Cost-Effective Community Brownfield Redevelopment
3
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in the middle of a redevelopment area. Reuse of the sites provides a means of creating jobs,
increasing the local tax base, and maintaining an inventory of useable land as an alternative to
passively permitting all new economic activity to take place outside currently built-up areas.
Redevelopment even can help reduce local government budgets and taxes, since the public sector
costs of building and maintaining sewer, water, and transportation infrastructure are lower within
areas that were previously developed (24).
Redevelopment also helps to reduce negative neighborhood effects. Abandoned sites can become
locations for drug-related or other undesirable activities. Moreover, businesses and residents close to
brownfields often suffer lost revenues and declining property values due to the stigma associated
with pollution. Any calculation of the costs and benefits of redeveloping brownfields thus needs to
include the potential costs avoided by reducing social problems as well as the financial balance
sheet. Moreover, even the financial analysis should be based on neighborhood, not single site,
economic impacts.
The Costs and Benefits of Brownfields Redevelopment
A growing number of private developers and venture capital firms are investing in brownfields,
recognizing that they can be highly profitable (25). More generally, the financial benefits of
brownfield investments are becoming more obvious to a broader audience of public and EDO
officials. The most comprehensive study undertaken so far of brownfield project economic features
examined 107 very diverse types of completed projects completed through 1999 (5). The study
found that cleanup costs averaged only 8 percent of total project costs, median public costs per job
created were $14,003, and every public sector dollar invested leveraged an additional $2.48 in
private dollars (with half the public money coming from non-local sources). In short, brownfields
provided good EDO investment opportunities.
The economic rationale for public support for the cleanup costs facing owners depends on
several factors, including: (1) site conditions, (2) current real estate market valuations of the location
and other site factors, and (3) the non-market public interests served by redevelopment. However, a
public subsidy only makes sense if the owner's expected cost to clean is more than the value of the
site after reclamation.
Three major risks (and, therefore, potential costs) confront private investors in contaminated
sites that are not present in other development projects:
> possible cost (and time) overruns in cleanup or containment operations;
> possible liability claims from accidents or contaminant exposures in the past or during the
cleanup; and,
> uncertainty about future community acceptance (leading to changes in marketability of the
site, restrictions on acceptable land uses, and possible additional cleanup requirements).
In assessing the public economic benefits of a potential proj ect it is important to look beyond the
site itself to the wider community (4, 26, 27, 28). Redevelopment of brownfield sites in poor
neighborhoods offers many opportunities, including:
> the possibility of new employment for local residents;
> reduced public health risks from past contamination and a lower likelihood of additional
4 Public Strategies for Cost-Effective Community Brownfield Redevelopment
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pollution;
> increases in the tax base associated with new economic activities and employment; and,
> increased attractiveness of the community or neighborhood at large to other new businesses.
Wider recognition of these sorts of "spillovers" is one reason that brownfield redevelopment is
increasingly pursued through area-wide strategies. Financing approaches such as tax increment
financing (TIF) that borrow against the additional taxes generated by a proj ect are being used where
states permit. This tool has the potential to raise more capital if impacts beyond the site are
considered due to the larger tax base covered if off-site effects are included (29). But the real reason
for taking more of an area-wide approach to considering brownfields redevelopment is that the
impacts of abandoning - or reclaiming - such sites can be felt across a metropolitan area or regional
real estate market (27, 30, 31, 32, 33).
The very presence of brownfields can undermine the economic competitiveness of a region by
damaging its image and making it less attractive. As urban or town centers hollow out, commuting
distances grow, expanding new construction takes farmland and open space, major investments in
infrastructure are required to serve new areas while existing infrastructure in developed areas is
underutilized and may deteriorate over time due to underfinanced and inadequate maintenance (24,
34, 35, 36, 37).
In summary, a region's inability to address its brownfield problems - conditions increasingly
understood by the real estate industry to be solvable - can undermine the credibility of its EDOs. A
brownfields strategy thus needs to be part of any economic development organization's action
program. This fact is understood by the federal and state governments that have launched a wide
array of programs to support such local EDO efforts.
FEDERAL AND STATE PROGRAMS
Any EDO working on brownfields needs to know what non-local resources are available to
support its efforts. In this section, we review the programs in place through 2001. We begin with
capsule descriptions of the major federal programs that could support local redevelopment efforts.
Then we turn to the key features of the very diverse state programs, to help EDOs examine how
their state's approach can fits into their local strategic decision-making and project selection
priorities.
Federal Brownfields Redevelopment Initiatives
Federal recognition that brownfields redevelopment is more than just an environmental issue is
reflected in the 1995 launch of the Brownfields Economic Redevelopment Initiative, under which,
by 2002, EPA had awarded pilot grants to well over 400 state, local and tribal organizations for
projects to stimulate cleanup and redevelopment of brownfields (38). The Federal Interagency
Working Group on Brownfields, created in 1997, involves fifteen different federal government
agencies.
Environmental Protection Agency
Brownfields Assessment Demonstration Pilots (generally known as Brownfields Pilot Proj ects).
The diverse experience of more than 300 Pilots has produced useful guidance on how to launch a
Public Strategies for Cost-Effective Community Brownfield Redevelopment 5
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brownfields redevelopment effort or add such a thrust to on-going local economic development
efforts. Funds have been used for individual site assessments, area-wide brownfield database
development, and special programs to involve community members in brownfield site
redevelopment planning.
The Asset Conservation. Lender Liability, and Deposit Insurance Protection Act, passed in 1996,
provides protection for lenders and certain other parties from the risks associated with participation
in brownfield proj ects. As lenders have become more confident about the protection available under
the Act, more debt capital has become available for brownfields redevelopment. It still appears
necessary for EDOs in many local real estate markets to educate bank lending officers and loan
committees about the Act.
Brownfields Cleanup Revolving Loan Funds, each capitalized with up to $500,000, allow state,
local and tribal agencies to make loans to developers that facilitate cleanups (39). These funds help
fill a financing gap created by the hesitation many commercial lenders feel about providing funds
when un-remediated brownfields provide the only collateral. Non-traditional sources of debt capital
to pay for cleanup such as these revolving funds thus may remain essential, even for projects with
very high risk-adjusted returns.
Job Training and Development Demonstration Pilots provide up to $200,000 over two years to
address the environmental justice and economic inequality issues presented by brownfields (40).
These grants may be used for environmental employment and training for residents near
environmentally impaired sites to augment the community benefits of brownfield redevelopments.
The Small Business Liability Relief and Brownfields Revitalization Act, signed in January,
2002, greatly expands the funds available for the pilot, revolving loan and other local programs,
expands the grant limits we noted above, and provides special funding for new state initiatives to
expand brownfield investment and redevelopment opportunities. Its liability relief provisions should
also serve to expand the availability of private capital and reduce the costs at which such funds are
provided to brownfield redevelopers. The details of the new legal provisions are not yet clear, since
the regulatory guidances and procedures have not been formulated - or tested in the courts.
Department of Housing and Urban Development
Community Development Block Grant (CDBG) Program for revitalization of decaying
neighborhoods dates to 1974. Both CDBG and Section 108 Loan Guarantee Program funds were
used for brownfield proj ects long before the formation of the Interagency Taskforce on Brownfields.
Cleanup of brownfields was specifically defined as an eligible use of CDBG funds in 1998 federal
legislation.
Brownfields Economic Development Initiative (BEDI) provides a total of $25 million annually
(for FY 2000) to stimulate local efforts to regenerate brownfields. All BEDI applications must be
accompanied by a request for new Section 108 loan guarantee authority and must advance one or
more of the CDBG program objectives of benefitting low and moderate income persons, preventing
slums or blight, or addressing imminent threats and urgent needs. (This initiative is being expanded
and provisions modified as we write in 2002; final implementation procedures and funds availability
remain to be determined.)
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Department of Commerce, Economic Development Administration (EDA)
The Economic Development Administration provides a variety of assistance to help communities
develop and implement local economic development strategies. The agency has supported
redevelopment of old industrial sites for at least 25 years. In fiscal year 2002, brownfields
redevelopment was an eligible activity under EDA's Public Works and Economic Development
Facilities Assistance program that was funded in the amount of $250 million (41). Substantially
greater funding for elements of the programs described below and other, new, brownfield-specific
programs, is proposed in the FY 2003 budget.
Planning Program involves the ongoing EDA funding for economic development planning.
These funds may be used to integrate brownfields redevelopment into broader economic strategies
known as Comprehensive Economic Development Strategies (CEDS). Localities must have a CEDS
in place to receive Public Works or Economic Adjustment funding.
Economic Adjustment Program funds are targeted at areas suffering from long-term distress such
as economic restructuring or shorter term challenges such as plant closings and natural disasters.
These monies may be used for redevelopment, planning, and for locally administered revolving loan
funds.
Other Federal Programs and Resources
National Oceanic and Atmospheric Administration (NOAA) Coastal Zone Management Program
supports land acquisition and environmental improvement activities for sites adj acent to waterways
or coastal areas, and NOAA funds have been used for brownfields in such locations.
Department of Health and Human Services (DHHS) Social Services Block Grants may be used
to provide funds for job training related to brownfield cleanup efforts in Empowerment Zones and
Enterprise communities. These funds will not pay for cleanups, but they can be important in
soliciting support and participation of local communities by delivering services that benefit residents
near brownfields.
Department of Transportation provides funds specifically for brownfields redevelopment under
both the Federal Highway Administration and the Federal Transit Administration.
U.S. Army Corps of Engineers provides engineering assistance to communities in four broad
areas associated with brownfields: site assessment, remediation, property redevelopment, and
sustainable reuse.
Other Tools Created by Federal Action That May Be Useful
Community Reinvestment Act credits that can be claimed by banks for lending on brownfield
projects in low- and moderate-income neighborhoods. Many banks remain unaware of the 1995
regulatory change by the Office of the Comptroller of the Currency to support brownfields
redevelopment (42). EDOs may be able to increase the flow of bank lending to brownfields simply
by making sure local banks take the availability of these credits - and the 1996 legislated lender
liability relief - into consideration.
Public Strategies for Cost-Effective Community Brownfield Redevelopment 7
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Brownfields Tax Incentive - really an accelerated depreciation program - allows investors to
"expense" or claim their total brownfield site mitigation (pollution cleanup or containment) costs on
their income taxes in the year in which they are incurred, rather than have to depreciate them over
time (43).
Civil Rights Act of 1994 and environmental justice issues have worried some redevelopers - but
they need not. Community groups could, in principle, use Title VI of the Act to deal with the higher
than normal environmental risks of some local populations. However, actual experience with
community participation in project decision-making before the treatment of pollution is decided
upon suggests that more neighborhood engagement actually can lower development time costs over
a project's lifetime (44, 45). Furthermore, broad-based community input may improve both
regulatory and planning processes (46).
State Brownfields Regeneration Programs
As of 1994, EPA could identify only 14 states that claimed to have developed their own
programs to facilitate brownfields cleanup and reuse (47, 48). According to the generally accepted
tabulations of the Northeast-Midwest Institute (49), by late 2001, all but two states (North and South
Dakota) had some form of so-called Voluntary Cleanup Program (VCP) to promote brownfields
reclamation and redevelopment.
The programs in place, while discussed as if similar, vary tremendously. Through 2001,
Kentucky, for example, only provided liability relief to public sector redevelopers. Other states, such
as Illinois, Massachusetts, Michigan, Minnesota, and Pennsylvania, offer special financial assistance
as well as cleanup certifications to private developers. Some programs focus very narrowly on
stimulating manufacturing - or housing - or only assist sites in special sub-state target areas.
However, all these state programs are efforts to reshape the local effects of the heavy burden of
federal brownfield liability for cleanups and damage (50, 51, 52).
This expansion of state brownfield programs is a logical outgrowth of broader state innovation
and competition in efforts to encourage new investment and associated economic development (53).
In fact, the states with the most active VCPs also tend to have special economic stimulus packages
targeting brownfields, or to regions or locations that are likely to contain them (54, 50). Michigan,
for example, provides special incentives to its "Renaissance Zones;" Pennsylvania has a "Special
Industrial Areas" cleanup standard and other states have targeted their federally designated
Empowerment Zones or Enterprise Communities or their own state enterprise zones for brownfields
incentives.
By and large, the state VCPs do not provide protection against lawsuits filed against developers
by private parties, but only against state (and/or local) enforcement actions (19, 49). Patterns and
types of financial support also vary, from small loans for site assessments to major grants and 100%
tax credits for cleanup costs (54, 55). Overall, the VCPs have greatly improved the brownfield
project investment climate.
Each of the different elements of state VCPs plays a slightly different role in facilitating
8 Public Strategies for Cost-Effective Community Brownfield Redevelopment
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brownfields reuse (19, 54,20, 56). Since the VCP programs continue to evolve, local EDOs need to
revisit their state contacts regularly to be sure they are aware of the resources currently available to
them (49, 50). Features that can affect the value of your state's VCP to your economic regeneration
efforts include:
Eligibility.
Some states (CT, KY, MA) limit the protection under their VCPs to "innocent parties,"
excluding any federally defined "Potentially Responsible Parties" (PRPs) who may have been
polluters. Other states (AR, FL, MO, PA) include anyone willing to clean up a site, and some (CO,
for example) appear to target their programs to current owners who are PRPs (49). The non-PRP
programs may help new owners or developers, but would not assist current owners in cleaning or
preparing a site for redevelopment. As a result, they do not encourage owners with liability concerns
to bring large tracts of idle land to the market. (Owners may "warehouse" sites in order to avoid
possible mandatory cleanup orders or damage claims.) New insurance coverage eventually may give
a private solution to the liability problems that lead owners to warehouse land. Meanwhile, VCPs
can help bring the underutilized sites to market if they offer PRPs liability relief (20, 50).
Participation Requirements.
In some states (MA, for example), any known contamination must be publically disclosed, and
the pollution forces a site into the program. In others (such as PA), privately conducted site
assessments do not have to be made public even if they uncover significant pollution, so there is no
pressure to enroll in the VCP. If the results of a site assessment can be kept private, then an owner
might do one just to see what his problems might be - and he may find little or no contamination.
Therefore, states that offer privacy may stimulate site assessments and redevelopment at the expense
of some public right to know. On the other hand, such secrecy may permit severe risks to remain
hidden on some sites and may increase community distrust of redevelopment efforts.
Site Assessment Support.
The state VCPs provide varying levels of technical assistance from state agencies, information
from agency records regarding prior site uses or spills, or financial assistance in the conduct of
brownfield site assessments. Where such support is available, it may make it much easier for smaller
EDOs to launch local brownfield programs.
Mitigation or Remediation Support.
Some VCPs permit applicants to file both a mitigation plan and a request for state financial aid
for the cleanup at the same time. State funding decisions, however, may be based on expected
economic impacts such as new jobs, rather than the costs of dealing with contamination. In such
cases, even major pollution problems may have difficulty getting state cleanup funding.
Public Strategies for Cost-Effective Community Brownfield Redevelopment
9
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Liability Relief from Public Actions.
Three types of state certifications are generally available under VCPs. "Certificates of
Completion" (such as KY offers) simply indicate that the planned and state-approved site cleanup or
containment has been executed to the state's satisfaction. State "Covenants Not To Sue" (on which
the MA and MI programs are based) promise no future state enforcement actions, but may offer no
protection against private, sub-state public, or federal liability claims. "No Further Action Letters"
(evident in the PA program) represent a formal finding that a cleanup has met the state standards,
with no need for additional action, and may provide more liability relief in general. All these
certifications include some "reopeners," permitting some re-examination and possible additional
cleanup as new information becomes available or on-site land uses change over time.
Liability Relief from 'Third-Party' Actions.
Some states (PA, for example) go beyond certifying public acceptance of the remedial actions on
a site: they provide state court immunity from damage claims made by private parties once the state
has approved a remediation. These provisions can protect developers. They also may encourage
communities to conduct more active public oversight.
Oversight/Approval Procedures.
Most state VCPs involve at least three definable steps: (1) notice of intent to act, (2) provision of
evidence on completed action, and (3) state review of the work done. Most states use environmental
agency personnel to review cleanup plans and their execution. Others (notably MA and OH) rely on
state-certified private environmental professionals to do the reviews. Allowing developers to consult
with regulators on plans in process may help them prepare better plans and avoid costly rejections
and resubmissions. Such cooperation can also make the regulatory process more predictable for
developers and encourage them to take on brownfields.
State Regulatory Action Time Limits.
Recognizing that time is money, many states have limited how much time agencies have to
review and act on proposals or reports of completed cleanups. Speedier regulatory action lowers
elapsed time costs and regulatory cost uncertainty for developers.
Variable Cleanup Standards.
One major innovation present in most state VCPs is flexibility in cleanup standards, with
requirements most often based on intended future sites uses. This flexibility permits redevelopment
without a complete cleanup. The ability to leave some contaminants on site really can lower project
costs, allowing multi-family residential, commercial or industrial redevelopment on sites that are too
expensive to clean for single family residential uses. The flexibility, however, can make
redevelopment decisions more complicated since it creates varying remediation costs for different
planned land uses. EDOs can help developers deal with these increased decision-making costs.
10
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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Engineering Controls.
To qualify for less burdensome cleanup standards, developers are often required to install ground
"caps," fences, or other barriers to limit exposure to contaminants left in place. States vary in the
extent to which such controls are recorded or registered and in the procedures they have developed
for oversight and to assure that the controls are maintained over time. Communities may fear that the
engineered controls could fail and worry about such redevelopments. EDOs can help by serving as
local registries for - or even doing periodic inspections of - such barriers.
Institutional Controls.
Three different types of institutional controls - limiting what can be done on any one site - may
be used to make sure that the future uses are consistent with the flexible cleanup standards permitted
and to assure that engineering controls are maintained over time (57, 58, 59). While any of these
three controls would provide a record of site conditions and engineered barriers, the extent to which
the information accompanies all deeds in future real estate transactions varies:
> Deed Notices, the most common control, rarely need to be reported as a matter of law,
although a record is inserted in county property files in the expectation that real estate
lawyers will find them;
> Deed Restrictions provide a more formal record and are more likely to be required to be
reported to prospective purchasers in property transactions;
> Environmental Easements would provide the most complete and permanent record of the
need to limit land uses.
Many states permit engineering controls and/or varying cleanup standards for the immediate new
land use proposed for a site, but do not have formal institutional controls in place. Some appraisers
and development specialists claim that these land use controls reduce sale prices or future property
values. However, there is little or no evidence to support their claims (60, 61, 62). Indeed, some
sellers impose their own use limits on buyers so as to protect themselves from future liability claims
for any contamination that they leave on site before they sell (63).
Right-to-Know/Public Participation Requirements.
The public's right-to-know and to participate in decisions about brownfields redevelopment are
treated very differently across the states. Cleanup cost savings associated with partial cleanups may
be offset by the expenses associated with increased public participation many states then require. On
the other hand, more community involvement can reduce the risks developers may face due to the
actions of unhappy neighbors.
Reopener/Reconsideration Clauses.
CERCLA reserves the federal right to "reopen" any approved cleanups if new dangers arise,
risks are discovered, or under other conditions. EPA has argued that most brownfields have levels of
contamination below those with which the agency is concerned. Most states require a failure of
engineering or institutional controls before a case is reopened. Narrow conditions for reopening
appear to offer greater certainty to redevelopers, but there is no evidence that even broad provisions
Public Strategies for Cost-Effective Community Brownfield Redevelopment 11
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impose a risk that deters regeneration efforts.
COST-EFFECTIVE LOCAL BROWNFIELDS REDEVELOPMENT:
A REVIEW
The traditional role of the EDO involves acquiring sites, overseeing their development,
financing, and marketing them. The process doesn't change for brownfields - but it gets more
complicated.
Site Assessment
The first activity in a brownfields redevelopment project is an on-site environmental assessment.
The purpose of this assessment is to determine:
> what contamination is present,
> whether this pollution poses a risk,
> what procedures will be needed to make the site acceptable for redevelopment, and,
> the costs and time necessary to do the needed site environmental preparation.
On most brownfields, this process will find either no contamination at all, or just a minimal, and
fairly easily dealt with, level of pollution. Nonetheless, in some instances, the environmental
assessment may be expensive. That is why many of the state programs are prepared to cover some
assessment costs.
It is important that the site assessment be as thorough as possible since this knowledge will
minimize the risks and uncertainties inherent in a brownfields project. The American Society for
Testing and Materials (ASTM) developed such guidelines starting in the mid-1990s. Its standards
are now readily accepted (64, 65, 66). Unfortunately, many brownfield program decision-makers are
not aware of this development. They thus tend to exaggerate the project uncertainty that remains
after completion of a site assessment that meets the ASTM standards. Fear of that uncertainty, and
lack of current information about lower cost cleanup or containment techniques, has blinded may
potential developers to brownfield investment opportunities.
Remediation and Development
The assessment will specify the type and level of cleanup, containment or other remedial action
needed (or offer a range of possibilities depending on final use). Some remediation work may
require investment by the EDO if no PRP's are involved in the project. When such costs are high
they may have to be borne by the local agency in order to keep land costs within market norms.
At the remediation stage, brownfield projects have an above-average risk of cost-overruns. The
obvious problem is that the assessment may not have uncovered all the problems that a bulldozer
will. This is the primary factor that separates a brownfields project from a traditional greenfield
development.
The risks associated with brownfield redevelopments are generally understood. The major
problem encountered involves uncertainty over the likelihood that additional costs will arise and the
12
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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amount of money they may involve (67, 55, 68, 69, 70). If it is not possible to put firm dollar values
on risks, it becomes very difficult to determine the needed risk-adjusted rate of return for a project.
Not having firm numbers, investors may simply abandon projects - or only pursue those with truly
exceptional returns. Thus, it is the uncertainty associated with brownfields that poses the biggest
barrier to redevelopment.
Private Financing
Most brownfields proj ects initiated by EDO's are funded by a combination of public and private
monies. Often state grants pay for some portion of the assessment and remediation costs associated
with the environmental cleanup. However, most projects still require developer equity, bank loans,
or some other source of private capital. EDOs that can draw on non-local brownfield project support
resources will be better able to attract the needed private investment.
Financiers can make loans on risky property, or even take equity positions in development
efforts, provided they are able to make allowances for their risk exposure through higher interest
rates, reserve accounts, inclusion of more secure collateral or similar approaches (33). Due in part to
the combined effects of the 1996 Act providing partial relief for lenders from joint and several
liability under CERCLA, the 1995 Community Reinvestment Act provision of credits for brownfield
investments, and the accumulation of experience with successful projects, banks are now more
willing than ever to lend on brownfields. Exceptional costs remain: Banks require brownfield
borrowers to demonstrate higher levels of "due diligence" and loans are typically made at higher
interest rates, reflecting concern about exceptional risks, including the prospect of borrower default
prior to a cleanup (71, 72). As a result access to capital remains a problem for brownfield projects
(73).
The continued tight brownfields capital market appears to be due to a number of different
factors:
> Brownfields are often in neighborhoods with many problems other than contamination,
including poor infrastructure or transportation access, crime, and related ills (74, 31, 75, 76);
> For a variety of reasons, urban land is often less in demand than suburban or exurban sites,
even in the absence of the complicating factor of possible past contamination (77, 74, 78);
> Federally financed highways and other infrastructure development, along with tax policies
and other public policies, have tended to subsidize development of previously rural and
suburban land (greenfields) for decades, placing all urban land, at a further competitive
disadvantage (79, 36);
> Most brownfield sites, even those only suspected of having contamination, are given
valuations by appraisers that may exaggerate risks or costs, and thus face reduced access to
debt capital from institutions with prescribed "loan-to-value" lending limits (62); and,
> Due in large part to enduring, but inaccurate, myths about brownfield risks, concerns about
proj ect viability and stability of cash flow for loan servicing continue to limit the willingness
of lenders to fund, regardless of property valuations.
Insurance
Insurance is a vehicle for transferring risk and uncertainty. If premiums are not excessive, and if
Public Strategies for Cost-Effective Community Brownfield Redevelopment 13
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the coverage is appropriately designed for the specific brownfield project, insurance can address
exceptional proj ect uncertainties arising from environmental conditions - and even the exaggerated
fears remaining from problems that have not arisen since the late 1980s (80, 81). There are two main
problems with insurance in the current market: First, these policies are "manuscripted," written with
special language designed for each specific site or project. The complexity of policies forces EDOs
to use environmental insurance experts to help buy needed coverages. Second, the overwhelming
majority of individual brownfield sites are too small for insurance to be cost-effective for any single
project.
At present, the cost-effectiveness of any of the coverages available is related to project size more
than to the type of contamination problem involved. Given the high fixed costs of underwriting and
manuscripting, the individual project "cost cap" environmental insurance for remediation expense
overruns available today is considered to be efficient only for sites with a minimum cleanup costs of
$2,000,000 (92). Some states and insurers are beginning to address this problem through group
coverages. Lenders that buy their own coverages may acquire insurance for a portfolio of loan
holdings. For large EDOs or groups of smaller ones willing to negotiate group policies with insurers
that cover a number of different sites, environmental insurance could prove to be an exceptional
opportunity to enhance the market valuation of brownfields and attract new investment (63).
The emergence over the past five years of insurance coverage for the exceptional risks associated
with brownfields has the potential to significantly change the prospects for redevelopment efforts
(80, 21, 22, 63). Three major types of coverage are being under-written, each with its own set of
options and conditions, and each playing a different role in supporting brownfields redevelopment
by capping and quantifying risk for investors and their financiers (23):
> Cleanup Cost Cap coverages do what their name suggests: limit the costs of site preparation.
Cost overruns arise from unexpected costs either to address known conditions or to deal with
contaminants not discovered or identified when the cleanup was designed and approved. The
policies are intended to cover only the actual period of remediation. Some cleanups, such as
those that rely on phytoremediation (using plants to gradually neutralize toxics in the soil) or
those that involve extended pump and filtering operations (for contaminated groundwater),
may require longer term policies.
> Pollution Liability policies protect against lawsuits involving any of the special brownfield
risks, from health effects to reduced neighborhood property values. This form of coverage is
desirable for an extended period, but may be difficult to get for more than ten years in the
current market (92). Policies may be written so that successive owners inherit the protection,
a provision that may help to maintain the value of the property over time despite its possible
history of past contamination.
> Secured Creditor policies protect lenders against loss of principal for brownfield loans in the
event of defaults, eliminating any need for foreclosures. These policies do not protect developers
but may help them get bank financing. Banks and other lenders can buy policies themselves,
passing the cost on to borrowers, or may demand that borrowers obtain coverage before they
approve a loan.
Exit Strategies
Marketing brownfield sites and exiting from the brownfield development may be complicated by
the stigma attached to sites that have been remediated. It is important to consider the eventual
14 Public Strategies for Cost-Effective Community Brownfield Redevelopment
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disposition of sites as part of the initial development strategy. In the past, some EDOs have found
themselves with a growing inventory of remediated sites for which they have no immediate tenants.
This situation often is further complicated by low private market demand for any sites located in
previously developed areas of the city. Areawide strategies that consider brownfields in their
neighborhood context are, in many cases, useful tools. Other strategies sometimes involve obtaining
a commitment from local government offices and agencies to become the initial tenants of such sites,
at least until the private market demand emerges.
Public Strategies for Cost-Effective Community Brownfield Redevelopment
15
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Appendix A:
GUIDES TO BROWNFIELD REDEVELOPMENT PROCESSES
Table A-l describes many different "how to" guides to brownfields redevelopment. There is rapid
and ongoing change in the regulatory, legal, and financial climate for these projects. Consequently, we
have tried to indicate where the source material may be dated. Furthermore, we recognize that both the
goals of brownfields regeneration and the challenges and opportunities of such developments vary
tremendously among localities. Accordingly, it would be inappropriate to identify the "best" guide - or
even to rank the materials with regard to their apparent value.
Instead, we have provided a profile of the key features of some of the guides available to assist
EDOs. Many state economic development and environmental agencies write or sponsor manuals that are
specific to their programs, and other groups have generated guides with one or another special interest or
redevelopment concern in mind.
The volumes described here, even where we indicate a special focus or concern, provide types of
information and illustrative guidance that could be of value to many different EDOs across the country.
We have used organizational authorships in the table, rather than actual authors, to provide an indication
of the perspective guiding the preparation of each guide. This list should not be considered
comprehensive. Even the most recent guides will be obsolete as soon as the latest federal brownfields
legislation goes into effect later this year.
16
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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Table A-l
Guides to Brownfield Redevelopment Processes
Organizational Author - Title
(Citation Number)
Date
Comments
American Bar Association
Brownfields: A Comprehensive Guide
to Redeveloping Contaminated
Property (82)
1997
Somewhat academic. Good, but already
dated, description of state programs.
Center for Neighborhood Technology
- Recycling Contaminated Land: A
Community Resource Guide (83)
1996
Strongly focused on Chicago, but useful
for its orientation and focus on
community involvement in brownfield
project planning.
Consumers Renaissance Development
Corporation - Brownfield
Redevelopment Guide (84)
1998
Michigan specific. Strong community
development orientation. Good on
process.
Council of Great Lakes Governors-A
Blueprint for Brownfield
Redevelopment (56)
1998
Applies to Great Lakes States and
Provinces only. A lot of political fluff but
good descriptions of state programs.
Council for Urban Economic
Development - Brownfields
Redevelopment Manual (8)
1998
Limited discussion of actual development
projects, but strong on financial and other
tools.
Environmental Law Institute - A
Guidebook for Brownfield Property
Owners (85)
1999
Private sector orientation, but good
discussion on how to involve community
groups.
Georgia Tech Research Corporation -
Community Brownfield Guidebook
(86)
1996
Strong science. Limited case examples.
Information Provided
A: Legislation (liabilities, risks, financing concerns)
B: Physical contamination and remediation processes
C: State and federal programs
D: Private sources of financing and insurance services
E: Community involvement, environmental justice, and/or employment issues
F: Illustrative cases
Key to Column Codes:
^ Useful for current project planning and development program design
O: Outdated by the passage of time; too much has changed in the policy context
L: Limited scope of coverage; some information, but it may not be of great value
Public Strategies for Cost-Effective Community Brownfield Redevelopment
17
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Table A-l, continued
Guides to Brownfield Redevelopment Processes
Organizational Author -
Title (Citation Number)
Date
Comments
Int'l City/County Management
Assoc. & Northeast-Midwest
Institute - Brownfields
Redevelopment: A Guidebookfor
Local Governments and
Communities (26)
1997
The most comprehensive guide. Encyclopedic
but becoming dated as state programs change.
Strong community orientation.
Int'l. City/County Management
Association Putting the Pieces
Together: Local Government
Coordination of Brownfield
Redevelopment (87)
ND
Post-1996 survey of nearly 40 Pilots provides
excellent guidance on inter-organizational and
inter-agency coordination at the local level.
LEXIS/Matthew Bender Co.
Brownfields Law and Practice:
The Cleanup and Redevelopment
of Contaminated Land (88)
1998
Looseleaf, regularly updated and expanded
since first release, with chapters on each state
and on different liability and financing
concerns. Designed for attorneys providing
advice, not independent EDO deal-making
personnel.
Northeast-Midwest Institute -
Coming Clean for Economic
Development (89)
1996
Becoming dated, especially with regard to
federal and state government programs.
Northeast-Midwest Institute -
NewLife for Old Buildings (90)
1991
Seminal work, with details now outdated;
useful for understanding scope of problem.
Urban Land Institute - Turning
Brownfields into Greenbacks (16)
1998
Overly restrictive definitions of brownfields;
lacks community development perspective.
Strong on financials and good applied cases.
Information Provided
A: Legislation (liabilities, risks, financing concerns)
B: Physical contamination and remediation processes
C: State and federal programs
D: Private sources of financing and insurance services
E: Community involvement, environmental justice, and/or employment issues
F: Illustrative cases
Key to Column Codes:
^ Useful for current project planning and development program design
O: Outdated by the passage of time; too much has change in the policy context
L: Limited scope of coverage; some information, but it may not be of great value
18
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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Appendix B:
FEDERAL PROGRAMS AND POLICIES SUPPORTING BROWNFIELDS
REDEVELOPMENT
The sources of federal funds that might be used to clean or contain pollution or redevelop
brownfields extends well beyond the regularly identified efforts of the fifteen agencies participating in
the Federal Interagency Working Group on Brownfields. The range of federal funds available as of 1999
is well documented in the Northeast-Midwest Institute's Guide to Federal BrownfieldPrograms that is
available at: .
One outstanding source that documents the different possible ways of funding environmental
improvements, including brownfields reclamation, is available from the Environmental Finance Branch
of EPA, A Guidebook of Financial Tools: Paying for Sustainable Environmental Systems.
> The April 1999 update of this excellent compendium is available at:
.
> A CD-ROM version of the Guidebook is available from regional Environmental Finance
Centers, a list of which is available at: .
An alternative source that provides useful information on all federal programs and reviews the
economic development value of the funds and the private sector impacts of new activity is the Catalogue
of Domestic Assistance Program. The Catalogue lists all the major federal funding sources by types,
average award, likelihood of receipt for funds, and eligible applicants, among other useful tools. It
contains instructions on how to use it to find sources of funds and technical assistance for a variety of
different development projects. It can be found at: .
Table B-l offers an initial source for key detailed information: the web sites of the federal agency
programs discussed in this review. These web pages are updated regularly and cover eligibility and
application issues, often including the latest required application forms in downloadable form. The home
pages of the agencies themselves can be reached from these program-specific sites.
Public Strategies for Cost-Effective Community Brownfield Redevelopment
19
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Tat
Federal Programs and Policies Su
)le B-l
pporting Brownfields Redevelopment
Agency and
program title
Program cover age/activity
Web Sources for More Information
EPA Brownfields
Assessment Pilot
Demonstrations
$200,000 to start a brownfields
reclamation program and pay for
site assessments
http://www.epa.gOv/swerosps/bf/pilot.htm#pilot
EPA Brownfields
Cleanup Revolving
Loan Funds
Up to $500,000 to capitalize a
revolving loan fund to pay for
brownfield cleanups
http://www.epa.gov/swerosps/bf/rlflst.htm
EPA Job Training
and Development
Demonstration Pilots
$200,000 for environmental
employment and training for
residents near brownfields
http://www.epa.gOv/swerosps/bf/pilot.htm#job
http://www.epa.gOv/swerosps/bf/j ob .htm
EPA
RCRA/Brownfields
Prevention Pilots
Contractor support to expedite
cleanups to avoid further
environmental problems
http://www.epa.gov/swerosps/bf/html-doc/bfrcra4p.htm
EPA Clean Water
State Revolving Loan
Fund
Funds can be used to address all
forms of water contamination
from brownfields
http://www.epa.gov/swerosps/bf/html-doc/cwsrf.ht
m
EDA Planning
Program Grants
Funds for up to 50% of planning
costs for brownfield projects,
especially for new jobs
http: //www. doc .gov/eda/html/planning .htm
http: //www. doc .gov/eda/html/planothr .htm
EDA Local
Technical Assistance
Program
Grants to distressed areas to get
assistance in addressing special
development issues
http: //www .doc .gov/eda/html/locltech .htm
EDA Public Works
and Development
Facilities Program
Funds for specific development
needs, with brownfields
enumerated as eligible activity
http: //www. doc .gov/eda/html/pwprog .htm
EDA Economic
Adjustment Program
Funds for particularly distressed
areas to plan or implement
redevelopment programs
http: //www .doc .gov/eda/html/econadj .htm
20
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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Table B-l, continued
Federal Programs and Policies Supporting Brownfields Redevelopment
Agency and
program title
Program cover age/activity
Web Sources for More Information
HUD
Community
Development
Block Grants
Entitlement grants for
neighborhoods; HUD has promoted
their use for brownfields
http ://www .hud .gov: 8 0/progde sc/cdbgent .html
HUD Section
108 Loan
Guarantees
Guaranteed loans to attract capital
to large development projects;
including brownfields
http://www.hud.gov: 80/progdesc/cdbg-108.html
HUD
Brownfields
Economic
Development
Initiative
Funds to complement those from
Sec 108 loans intended to redevelop
brownfields
http://www.hud.gov/bedifact.html
Army Corps of
Engineers
Expertise and engineering services
available to help cleanups,
especially along waterways
http ://hq.environmental .usace .army .mil/programs/brownfiel
ds/brownfields .html
Department of
Health and
Human
Services
Money from the Agency for Toxic
Substances and Disease Registry
and the National Institute of
Environmental Health Services can
serve off-site environmental health
needs of brownfield communities
http ://www. ATSDR.cdc .gov/COM/commhome .htm
http ://www .NIEHS .nih .gov/
DOT Federal
Transit
Administration'
s Livable
Communities
Initiative
Planning and technical assistance
support for local site reclamation,
transit planning and smart growth
efforts
http ://www.bts .gov/ntl/DOCS/livbro .html
DOT Federal
Highway
Administration.
Improving road access to
brownfields is a factor in highway
planning fund allotments
http ://www. fhwa. dot.gov/environment/bnfldmem .htm
Public Strategies for Cost-Effective Community Brownfield Redevelopment
21
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ENDNOTES
1 Kaiser, S-E. (1998, January). Commentary: Brownfield National Partnership. Public Works Management and
Policy 3(2), 196-201.
2 Knox, P. (1994). Urbanization: An Introduction to Urban Geography. Englewood Cliffs, New Jersey: Prentice
Hall.
3 Bartsch, C. and Collaton, E. (1996, March). Industrial Site Reuse and Urban Redevelopment - An Overview.
Cityscape: A Journal of Policy Development and Research, 2(3), 17-61.
4 Chilton, K. (1998, January). The Myth of the 'Environmental Problem': Cleanup Costs and Brownfield
Redevelopment. Public Works Management and Policy 2(3), 220-230.
5 Council for Urban Economic Development [Gilliland, E], (1999). Brownfield Redevelopment: Performance
Evaluation. Washington, DC: Council for Urban Economic Development.
6 Simons, R. and Iannone, D. (1997, June). Brownfields Supply and Demand. Urban Land 56, 36-38, 78.
7 Mundy, B. (1997, February/March). Intermediaries Influence Buyer Behavior. Brownfield News 1(1), 29-30.
8 Council for Urban Economic Development. (1998). Brownfields Redevelopment Manual. Washington, DC: Author.
9 Missimer, T. (1996). A Lenders Guide to Environmental Liability Management. Boca Raton, FL: CRC Press.
10 Public Policy Associates. (1996). The Impact of Environmental Liability on Access to Capital for Small Business.
Final Report to the US Small Business Administration. East Lansing, MI: Author.
11 O'Brien, J. (1989). EPA's Landowner Liability Guidance. Toxics Law Reporter 4(7), 184-191.
12 Schnapf, L. (1992, Summer). The EPA's Lender Liability Rule: Panacea or Pitfall? The Real Estate Finance
Journal 7(2), 41-47.
13 Meyer, P., and Reaves, C. (1997). Brownlining Banks: The Bank Merger Movement and Urban Redevelopment.
Journal of Economic Issues 31(2), 393-400.
14 Schwenke, R. (1997, September). Promises Kept: The Importance of Land Use Control. Paper delivered at the
Brownfields'97 Conference, Kansas City, MO.
15 Suchman, D. (1996, September). Summary of Symposium Discussion. Special Issue on Urban Environmental
Policy. Cityscape: A Journal of Policy Development and Research, 2(3), 63-79.
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22 Neuman, S. (1999, December). Tailored to Fit. Brownfield News 3(6), 29-31, 33-34.
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Emergency Response.
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25 Meyer, P., andLyons, T. (2000). Lessons from Private Sector Brownfield Redevelopers: Planning Public Support
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22
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29 Kronish., E. (1998, August). Tax Increment Financing. Brownfield News 2(4), 11-14.
30 Editors. (1995, May-June). Will Brownfields Initiatives Really Work? The Environmental Forum 12(3), 28-35.
31 Pepper, E. (1998). Strategies for Promoting Brownfield Reuse in California: A Blueprint for Policy Reform. San
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33 Wright, J. 1997. Risks and Rewards of Brownfields Redevelopment. 1997. Cambridge, MA: Lincoln Institute of
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34 Camagni, R., Capello, R., and Nijkamp, P. (1998). Towards Sustainable City Policy: An Economy-Environment
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37 Sierra Club. (1999). The Costs of Sprawl: It's Not Just About Cities. Retrieved April 17,2000 from the Worldwide
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38 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1995). The Brownfields
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39 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1999). Brownfields
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40 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1999). Brownfields
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41 US Department of Commerce, Economic Development Administration. (2002, March 1). Notice of Funding
Availability. Federal Register 67(41), 9544-9550.
42 Kaiser, S.-E., and Bennett, E. (1999). The Federal Role in Financing Brownfield Revitalization. In Financing
Brownfield Reuse (C. Bartsch, ed.). Pp. 53-56. Washington, DC: Northeast-Midwest Institute.
43 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1997). Brownfields Tax
Incentive: Quick Reference Fact Sheet. Washington, DC: Author.
44 Nickerson, J. (1998, November). A Comfortable Community. Brownfield News 1(2), 16-17, 19-22.
45 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1999). Brownfield Title VI
Case Studies. Three Volumes: Summary Report, Appendix A: Case Study Methodology, Appendix B: Pilot Case
Studies. Washington, DC: Author.
46 Fox, J. (1998, Nov.-Dec.). A Real Public Role. Environmental Forum 15(1), 18-21, 24-25, 27-30.
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47 Powers, C., ed. (1995). State Brownfields Policy and Practice: A Report ofan IRM Conference for State Officials.
Boston, MA: Institute for Responsible Management.
48 US Environmental Protection Agency, Office of Solid Waste and Emergency Response. (1994). Report on
State/Territory Non-NPL Hazardous Waste Site Cleanup Efforts. Washington, DC: Author.
49 Bartsch, C., Deane, R. and Dorfman, B. (2001). Brownfields "State of the States" Report: An End-of-Session
Review of Initiatives in the 50 States. Revised, November, 2001. Washington, DC: Northeast-Midwest Institute.
Retrieved June 15, 2002 from the World Wide Web:
50 ICF Consulting and The E.P. Systems Group, Inc. [P. Meyer] (2000). An Assessment ofState Brownfield Initiatives.
Washington, DC: US Department of Housing and Urban Development, Office of Policy Development and
Research. (Available at: .)
51 Larson, P. (1998, Sept.-October). A Culture of Innovation. Environmental Forum 15(5), 20-28.
52 US Congress, Office of Technology Assessment. (1995). State of the States on Brownfields: Programs for Cleanup
and Reuse of Contaminated Sites. Washington, DC Author.
53 Goodman, R. (1979). The Last Entrepreneurs: America's Regional Wars for Jobs and Dollars.'Boston'. SouthEnd
Press.
54 Bartsch, C., and Anderson, C. (1999). State Financing Program Initiatives. In Financing Brownfield Reuse (C.
Bartsch, ed.). Pp. 37-50. Washington, DC: Northeast-Midwest Institute.
55 Finegold, A. (1998). Revitalizing America's Brownfields: Economic Growth Through Environmental Protection.
Washington, DC: National Governors Association Center for Best Practices.
56 Council of Great Lakes Governors, Inc. (1998).. I Blueprint for Brownfield Redevelopment. Chicago: Author.
57 Kirschenberg, S. (1996, September). Institutional Controls: Tools for Brownfield Redevelopment. Paper delivered at
the Brownfields'96 Conference, Pittsburgh, PA.
58 Pendergrass, J. (1996, March). Use of Institutional Controls as Part of a Superfund Remedy: Lessons from Other
Programs. Environmental Law Reporter. 26(3), 10109-10123.
59 Powers, C. (1997, September). Promises Kept: Future Land Use and Institutional Controls. Paper delivered at the
Brownfields'97 Conference, Kansas City, MO.
60 Chalmers, J., and Jackson, T. (1996, January). Risk Factors in the Appraisal of Contaminated Property. The
Appraisal Journal 64(1), 44-58.
61 Chalmers, J., and Roehr, S. (1993, January). Issues in the Valuation of Contaminated Property. The Appraisal
Journal 61(1), 28-41.
62 Meyer, P. (1998). Real Estate Appraisers and Access to Redevelopment Finance. In Financing Brownfield Reuse
(C. Bartsch, ed.). Pp. 21-28. Washington, DC: Northeast-Midwest Institute.
63 Northern Kentucky University and The University of Louisville [Yount, K., and Meyer, P.], (2000/ Factors
Affecting Municipal Pursuit of Environmental Insurance as a Brownfields Redevelopment Strategy. Project Final
Report. Washington, DC: US Environmental Protection Agency, Office of Solid Waste and Emergency Response.
64 ASTM (American Society for Testing and Materials). (2000). El527-97 Standard Practice for Environmental Site
Assessments: Phase 1 Environmental Assessment Process. West Conshohocken, PA: Author.
65 ASTM (American Society for Testing and Materials). (2000). El528-96 Standard Practice for Environmental Site
Assessments: Transaction Screen Process. West Conshohocken, PA: Author.
66 ASTM (American Society for Testing and Materials). (2000). El903-97 Standard Guide for Environmental Site
Assessments: Phase II Environmental Assessment Process. West Conshohocken, PA: Author
67 Boyd, J., Harrington, W., Macauley, M., and Calhoon, M.E. (1994). The Impact of Uncertain Environmental
Liability on Industrial Real Estate Development: Developing a Framework for Analysis. Discussion Paper 94-03
REV. Washington, DC: Resources for the Future.
68 Larson, B. (1996, February). Environmental Policy Based on Strict Liability: Implications of Uncertainty and
Bankruptcy. Land Economics 72(1), 3342.
69 Meyer, P.(1998, January). Background Note on Insurance and BF Investment Decisions. Public Works
Management and Policy. 2(3), 243-250.
70 Roddewig, R. (1996, October). Stigma, Environmental Risk and Property Value. The Appraisal Journal 66(4), 375-
387.
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71 Noble, S. (1997, September). Think Like a Banker. BrownfieldNews 1(4), 28-29.
72 Plewa, R. (1998, August). The Lender's Due Diligence: Rhyme and Reason. Brownfield News 2(4), 21-22.
73 Bartsch, C., ed. (1999). Financing Brownfield Reuse. Washington, DC: Northeast-Midwest Institute.
74 Bowman, A.O., andPagano, M.A. (1998). Urban Vacant Land in the United States. Working Paper. Cambridge,
MA.: Lincoln Institute of Land Policy.
75 The Urban Institute. [Walker, C., Boxall, P., Bartsch, C., Collaton, E., Meyer, P., & Yount, K.]. (1998). The Impact
of Environmental Hazards and Regulations on Urban Redevelopment. Washington, DC: US Department of
Housing and Urban Development, Office of Policy Development and Research.
76 US Conference of Mayors. (1998-2000). Recycling America's Land: A National Report on Brownfields
Redevelopment. Annual Reports 1, 2, and 3. Washington, DC: Author.
77 Birch, D., et alia. 1974. Patterns of Urban Change. Lexington, MA: Lexington Books.
78 Pepper, E. (1997). Lessons from the Field. Washington, DC: Northeast-Midwest Institute.
79 International City/County Management Association, with Anderson, G. (1998). Why Smart Growth: A Primer.
Washington, DC: International City Management Association.
80 Anderson, D. (1998, Summer). Development of Environmental Liability Risk Management and Insurance in the
United States; Lessons and Opportunities. Risk Management and Insurance Review 2(1), 1-22.
81 Meyer, P. (2000). Accounting for Stigma on Contaminated LandsThe Potential Contributions of Environmental
Insurance Coverages. Environmental Claims Journal 12(3), 33-55.
82 Davis, T., and Margolis, K., eds. (1997). Brownfields: A Comprehensive Guide to Redeveloping Contaminated
Property. Chicago, IL: American Bar Association
83 Greene, K. (1996). Recycling Contaminated Land, A Community Resource Guide. Chicago, IL: Center for
Neighborhood Technology.
84 Consumers Renaissance Development Corporation. (1998). Brownfield Redevelopment Guide. Jackson, MI: Author.
85 Environmental Law Institute. (1999).. I Guidebook for Brownfield Property Owners. Washington, DC: Author.
86 Leigh, N.G. and Hise, R. (1997). Community Brownfield Guidebook. Atlanta. GA: Georgia Tech Research
Corporation.
87 International City/County Management Association [Borak, D., and Meek, C.]. (ND). Putting the Pieces Together:
Local Government Coordination of Brownfield Redevelopment. Washington, DC: International City/County
Management Association.
88 Gerrard, M., ed. (1998). Brownfields Law and Practice: The Cleanup and Redevelopment of Contaminated Land.
New York: Matthew Bender & Co.
89 Bartsch, C. and Collaton, E. (1996). Coming Clean for Economic Development. Washington, DC: Northeast-
Midwest Institute.
90 Bartsch, C., Andress, C., Cooney, D., and Seitzman, J.(1991). New Life for Old Buildings. Washington, DC:
Northeast-Midwest Institute.
91 Trust for Public Land. (1999). 20 Cases of Brownfield Conversions to Parks. Washington, DC: Author. Retrieved
April 17, 2000 from the World Wide Web: .
92 Meyer, P. (2002) Introduction to Environmental Insurance. Paper prepared for Lincoln Institute Seminar on
"Reusing Brownfields & Other Underutilized Land," Cambridge, MA, May 2-3.
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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ABOUT THE AUTHORS
Wade VanLandingham has wide experience in all types of economic and
community development and planning. After a stint as Director of Neighborhood Planning for New
Orleans, LA, he served as Associate Director of the Local Economic Development Assistance
Project at The Pennsylvania State University, 1980-1987. Mr. VanLandingham then was Senior
Economic and Community Planner for Richard C. Sutter and Associates, Inc. of Hollidaysburg, PA,
1989-1997. He is now the Principal of his own consulting firm which specializes in development
planning and market analysis for local economic development organizations. In addition to doing
training in economic development for planning professionals, Mr. VanLandingham has taught
courses in economic geography, urban geography, planning theory, community systems, regional
analysis, economic development, and public policy for the Departments of Geography and
Community Studies at Penn State. In the past several years he has been involved in various
brownfield research proj ects for HUD, EPA, and EDA. VanLandingham Consulting, 315 Loveville
Road, Warriors Mark, PA 16877, (814) 692-8584
Peter B. Meyer is Professor of Urban Policy and Economics at the
University of Louisville, where he conducts research on all aspects of brownfields financing and
public policy to stimulate site mitigation and reuse. He directs the EPA Region 4 Environmental
Finance Center at the university as part of his Center for Environmental Policy and Management,
focusing on state and local finance and economic aspects of smarter growth strategies. Dr. Meyer's
community development teaching and practice includes ten years as Director of the Local Economic
Development Assistance Center at The Pennsylvania State University, where he was on the faculty,
1968-1987. Dr. Meyer has authored an array of brownfield studies for EPA, HUD and EDA, and his
major current work for EPA involves analysis of uses of environmental insurance in brownfield
projects and a study of the types of economic development incentives most likely to attract
developers to brownfields.
26
Public Strategies for Cost-Effective Community Brownfield Redevelopment
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State Brownfield Financing
Tools and Strategies
by
Charles Bartsch
and Barbara Wells
Northeast-Midwest Institute
www.nemw.org
April 2005
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State Brownfield Financing Tools and Strategies
Because capital gaps remain the biggest barrier to brownfield redevelopment, more than
half the states have created some type of brownfield financing program. Direct financial
assistance, such as loans and grants, and indirect financing tools, such as tax abatements and
credits, meet several objectives. They can target specific parts of the project, such as site
preparation. They can increase the level of comfort among other lenders that finance these
projects by providing loan guarantees that limit their potential losses. They also can ease the
borrower's cash flow by plugging certain capital holes or off-setting some up-front costs of site
cleanup. These state incentives recognize that no specific type of public-private partnership or
single financing approach can meet the needs of every brownfield project.
This report describes some notable examples of successful state tools and strategies for
filling capital gaps in brownfield cleanup and redevelopment projects. They include:
Targeted Financial Assistance
Connecticut: Dry Cleaner Remediation Fund
Florida: Loan Guarantees
Illinois: Flexible Terms Under Brownfield Cleanup Revolving Loan Fund
Indiana: Revolving Loan Fund
Massachusetts: State Brownfields Redevelopment Access to Capital (BRAC) Insurance
New Jersey: Project-Based Coordination of Financing Tools
Ohio: Environmental Bond Issues
Ohio and Pennsylvania: Water Pollution Control Loan Fund
Tax Incentives
Colorado: Cleanup Tax Credit
Florida: Voluntary Cleanup Tax Credit and Tax Refund for Job Creation
New York: Cleanup, Real Property, and Insurance Tax Credit
Wisconsin: Cancellation of Delinquent Taxes
Planning, Assessment, and Cleanup Programs
Michigan: Local Brownfield Redevelopment Authorities
Wisconsin: Brownfield Site Assessment Grant Program
Infrastructure Development
Massachusetts: Transportation Construction
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Targeted Financial Assistance
Connecticut: Dry Cleaner Remediation Fund
Thanks to a 1 percent sales tax on dry cleaning services, every clean shirt in Connecticut
supports brownfield financing. The tax supports the Dry Cleaner Establishment Remediation
Fund, which provides grants of up to $50,000 a year for three years, totaling up to $150,000, to
dry cleaner business operators to deal with the unique environmental problems caused by dry
cleaning solvents and chemicals. The grants may be used for site cleanup, containment, and
mitigation of pollution from releases of tetrachloroethylene, Stoddard solvents, and other dry
cleaning chemicals, and also for the prevention of such pollution and to provide potable drinking
water when necessary.
To be eligible for the funding, applicants must prove that at least two banks have refused
to provide them with conventional financing on reasonable terms or in reasonable amounts.
They also must currently operate the establishment, be current in filing all state and federal taxes,
and certify that they are involved in no outstanding litigation proceedings. Grant applications are
evaluated based on risk to public health, magnitude of the problem, cost and environmental
effectiveness of the proposal, and the availability of funds. So far, the state has awarded grants
totaling up to $3 million to about 40 applicants. About 10 sites are in the monitoring stage and
will complete remediation within the next two years.
Contact: Dimple Desai, Program Manager, Connecticut Department of Economic & Community
Development, 860/270-8151.dimple.desai@po.state.ct.us.
Florida: Loan Guarantees
Florida's Brownfield Area Loan Guarantee Program targets primary lenders that finance
brownfield redevelopment, providing coverage of up to 10 percent of the original loan balance or
the outstanding balance, whichever is less. The program covers losses from default due to
environmental and other causes for up to five years, but the council that approves applications
may consider a request to renew or issue a new guarantee for up to five additional years for loans
and/or projects that demonstrate continued prospects for ultimate success.
Although the program shows promise for resolving a small project funding gap, only one
developer has used the guarantee to date. It appears that for most projects, the coverage of 10
percent is not enough. The program may be amended to increase the maximum coverage during
Florida's legislative session beginning on March 1, 2005, when the state's entire brownfield
program will be reviewed.
Contact: Mary Helen Blakeslee, Executive Office of the Governor, OTTED, 850-922-8743,
marvhelen.blakeslee@myflorida.com.
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Illinois: Flexible Terms Under Brownfield Cleanup Revolving Loan Fund
Illinois' federally funded Brownfield Cleanup Revolving Loan Fund has provided $1.5
million in loans to municipalities, with almost $1 million more in the works, thanks to very
flexible terms that make the loan payment contingent on the redevelopment of the property.
After launching the program, the Illinois Environmental Protection Agency (IEPA)
realized that many municipalities could not use the loans, despite interest rates as low as 2
percent, because local regulations required the municipalities to establish a repayment stream.
For most brownfield sites, a repayment stream cannot be assured because there is no guarantee a
developer will purchase the remediated site. In fact, often municipalities gift brownfield sites to
developers, realizing no profit but spurring economic growth. In response to this barrier, IEPA
negotiated with EPA Region 5 to amend the loan rules.
Under the rules, the loan agreement specifies that if during the agreement period (up to
15 years) the site or a portion of the site is sold or the title transfers, or if the site or portion of the
site is leased, traded, or developed, the borrower will repay a portion of the loan. Repayment is
based on profit or cash flow realized by the municipality. These terms not only enabled
municipalities to apply for the loans, but also freed Illinois EPA from having to pursue inaction
on loans that municipalities cannot repay. To date the terms have been well worth the risk; two
developers are interested in the first site to be cleaned up using $425,000 in program funds.
Contact: Steve Colantino, Manager, Illinois Office of Brownfields Assistance,
Steve.Colantino@epa.state.il.us.
Indiana: Revolving Loan Fund
Indiana's State Environmental Remediation Revolving Loan Fund (the Brownfields
Fund) supports key funding for brownfield site assessments and cleanup. Created by the state
legislature in 1997, the fund is administered by the Indiana Development Finance Authority
(IDF A) in cooperation with the Indiana Department of Environmental Management (IDEM).
The law provided $10 million over three years to eligible cities, towns, and counties;
grants for assessments approved by IDFA and IDEM; and loans for IDEM- and IDFA-approved
assessments or remediation (including demolition). Today the program is funded at $1 million
per year. Applicants are evaluated according to several criteria, including the ability to repay,
their available matching funds, and their economic development potential. About half of the
funding was allocated to jurisdictions with fewer than 22,000 people.
Each year the Brownfields Fund sets aside $50,000 for Just In Time Fundingavailable
outside the normal grant roundsfor Phase II site assessments that are needed for immediate
economic development project needs. A city, town, or county must match these grant dollars
one for one and certify that a company or developer is imminently interested.
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Legislation added $5 million to the Brownfields Fund in 1999 for forgivable loans. For
projects that meet economic development goals determined by the community, 20 percent of the
loan may be forgiven. Priority is given to former gas station or UST sites, or facilities located
within one-half mile of a child-care center or school. Brownfields Fund applicants may partner
or apply with private entities that did not cause or contribute to any contamination, and loan
recipients may re-loan the money to an eligible private entity with the same provisions for
forgiving 20 percent.
The fund also supports five brownfield incentives:
Site Assessment Grant Incentive : Provides grants of up to $7,500 for Phase I assessment
or $50,000 for Phase II assessment (per applicant, per funding round) to cities, towns, and
counties. Private parties may be co-applicants. The grants pay for environmental
investigation at identified brownfield sites, including asbestos and lead-based paint
surveys.
Low Interest Loan Incentive: Provides loans of up to approximately $700,000, with
interest rates of 2.5 percent to 3.0 percent, to cities, towns, and counties for the cost of
remediation or demolition at brownfield sites. Eligible activities include: soil and
groundwater cleanup, demolition activities, asbestos and lead paint abatement, and
additional investigation.
Petroleum Remediation Grant Incentive : Provides grants of up to $250,000 per applicant,
per funding round, for cities, towns, and counties to clean up petroleum at brownfield
sites. Eligible activities include underground storage tank removal, preparation of
corrective action plans, IDEM-approved remediation, and monitoring.
Voluntary Remediation Tax Credit. Offers a credit against Indiana tax liabilities to
persons or entities for conducting voluntary cleanup at eligible brownfield sites. The
maximum amount of the credit equals the lesser of 10 percent of the remediation cost or
$100,000.
Federal Grant Matching Incentive : $2 million is available through calendar year 2005 for
matching grants of up to 20 percent of a local government's federal brownfields award.
No application process required, but applicants for federal brownfield funding must
notify IDFA of pending application through a letter of intent.
Contacts: Sara Westrick Corbin, Indiana Development Finance Authority,
swestrick@idfa.in. gov: Michelle Oertel, Indiana Department of Environmental Management,
moertel@dem.state.in.us. Web page: www.idfabrownfields.com.
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Massachusetts: State Brownfiehls Redevelopment Access to Capital (BRAC) Insurance
The Massachusetts Brownfield Redevelopment Access to Capital Program (MassBRAC)
makes low-cost environmental insurance available to parties that clean up or redevelop
brownfield sites anywhere in the state. Projects that qualify for the program obtain state-of-the-
art policies provided by AIG Environmental. In addition to pre-negotiated, below-market pricing
for coverage under the program, the state further subsidizes the cost of program policies at the
rate of 25 percent of the policy cost, up to a maximum of $25,000 per policy.
Available coverage includes cleanup cost cap (stop-loss) protection for those involved in
an active remediation project, and pollution legal liability coverage to protect parties from
unknown or unidentified contamination on brownfield sites that are being redeveloped. Lenders
to projects involving the or redevelopment of a brownfield site also can obtain protection through
a no-cost endorsement to a borrower's pollution legal liability policy. The policy automatically
transfers all coverage to the lender in the event of a loan default/foreclosure.
Applying for insurance under the MassBRAC Program is no different from applying for
any environmental policy, and the program has developed simple and streamlined procedures for
obtaining program and subsidy approval as well. Since the program's inception in 1999, it has
provided coverage for over 240 brownfield redevelopment projects in Massachusetts and nearly
$5 million in state-funded insurance premium subsidies.
The program is administered by Massachusetts Business Development Corporation
(MassBusiness), a state-monitored private development company that also provides loan and
investment capital to businesses in throughout Massachusetts. As of June 2004, BRAC had
assisted 227 projects, leveraging $133 million in cleanup funds and $1.7 billion in private
investment.
Contact: Thomas Barry, Vice President, Massachusetts Business Development Corp. and
Director, Brownfields Redevelopment Access to Capital, 781-928-1106, tbarry@mass-
business.com.
New Jersey: Project-Based Coordination of Financing Tools
The New Jersey Brownfields Redevelopment Interagency Team (BRIT) offers
brownfield project developers, municipal officials, and others engaged in brownfield
redevelopment projects coordinated information and access to a full range of state resources in
more than 24 agencies. Coordinated by the New Jersey Department of Community Affairs'
Office of Smart Growth, the team convenes to review specific projects and identify the particular
mix of resources best suited to assessing, cleaning up, and developing the project, emphasizing
the application of smart growth principles in the plans and design.
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Since its inception in 2003, the
BRIT has fully reviewed 50 brownfield
projects and provided additional
consultation at another 50 sites. The BRIT
also creates special task groups to find
ways to improve brownfield policies and
programs when its work points to specific
needs. These issues are collaboratively
explored by the BRIT and the NJ
Brownfields Redevelopment Task Force,
created by statute pursuant to the state's
Brownfield and Contaminated Site
Remediation Act of 1988 (N.J.S.A58:10B-
1 et seq). The task force then makes policy
recommendations to the governor and
legislature.
Typically the municipality or entity
seeking to redevelop a brownfield siteor
an entire redevelopment area that includes
brownfield propertiescontacts Frances
Hoffman, chair of the BRIT, for guidance
in accessing state technical and financial
assistance. If a site seems to require the
attention of just one or a few state agencies,
Hoffman connects the project contact with
the appropriate agencies. However, for
complex brownfield sites that require the involvement of more than four or five state agencies,
Hoffman visits the site for a preview and then convenes the BRIT to identify and weave together
the resources needed for addressing legal issues, planning, environmental requirements,
infrastructure development, and financing.
The BRIT draws on numerous state financing tools in various agencies, such as:
N.I Economic Development Authority
Hazardous Discharge Site Remediation Loan and Grant Program: provides loans and
grants to private, municipal and applicants for assessments, remedial investigation, and
remediation, following approval by DEP.
Petroleum Underground Storage Tank Remediation Upgrade and Closure Program:
provides loans and grants to business owners, homeowners, and municipalities to
upgrade, close, and remediate discharges associated with underground storage tanks.
Partial List of Agencies and Programs in the BRIT
Board of Public Utilities
Department of Agriculture
Department of Community Affairs
Council on Affordable Housing
Housing and Community Resources
Housing and Mortgage Finance Agency
Office of Smart Growth
Redevelopment Authority
Department of Education
Department of Enviromnental Protection
Green Acres
Historic Preservation
Enviromnental Infrastructure Trust
Office of Brownfield Reuse
One Stop Permit Coordination
Site Remediation and Waste Management Program
Bureau of Contract and Fund Management
Department of Health and Senior Services
Department of Law and Public Safety, Division of Law
Department of Transportation
Department of Treasury
Commerce and Economic Growth Commission
Economic Development Authority
Brownfields Redevelopment Office
Schools Construction Corporation
New Jersey Transit
Department of Labor
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Revenue Allocation District Funding: available to assist municipalities in encouraging
revenue-generating development projects in a revenue allocation district as part of a
locally approved redevelopment plan.
Redevelopment Area Bond Financing: provides long-term, low-interest bonds for
infrastructure improvements and other predevelopment costs, including demolition and
remediation. Sites must be in formally designated redevelopment areas, with an
agreement for payments in lieu of taxes between the municipality and the site owner.
Fundfor Community Economic Development, helps finance feasibility studies and other
pre-development costs to determine if real estate-based economic development projects
involving profit or nonprofit organizations are viable.
Brownfields Redevelopment Loan Program: provides low-cost interim financing for
brownfields remediation costs for business owners and developers with a signed
brownfield reimbursement agreement with the New Jersey Commerce and Economic
Growth Commission and Treasury.
N.I Redevelopment Authority
Bond Program: provides qualified small-issue bonds for acquiring, constructing, and
renovating capital facilities.
NJRAUrban Site Acquisition (NJUSA) Program: provides funds for the acquisition, site
assembly, and redevelopment of properties that are part of urban redevelopment plans.
NJRA Loan Guarantee Program: provides credit enhancements through loan guarantees
for projects unable to obtain conventional bank financing.
N.I Commerce and Economic Growth Commission
Brownfields and Contaminated Site Remediation Reimbursement Program (in
cooperation with the state Department of the Treasury): allows for qualified developers
to obtain reimbursement of up to 75 percent of authorized remediation costs incurred
during the redevelopment process. Reimbursement funds come from the generation of
new taxes associated with a completed, approved project.
Urban Enterprise Zone (UEZ): revitalizes the local, regional, and state economies by
funding economic development projects-including infrastructure improvements,
economic development planning, and brownfield remediation-in the state's designated
urban enterprise zones in the state.
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N.I Department of Community Affairs, Office of Smart Growth
Smart future planning grants: provides funds for planning initiatives that meet smart
growth objectives, including more livable and sustainable communities, and are
consistent with statewide and regional planning precepts. Matching funds are not
required, but applicants are encouraged to seek multiple sources of funding, including
offerings of in-house staff time.
N.I Environmental Infrastructure Trust
Low-interest loans: financing at half the market rate or better to public agencies and
private water purveyors for the construction of infrastructure that benefits water quality
and drinking water safety, including acquisition, cleanup, and project completion.
N.I Housing and Mortgage Finance Agency
Market-oriented Neighborhood Initiative: financing for the development of market-rate
and mixed-income homeownership units in urban areas and neighborhoods that need
revitalization and redevelopment.
Federal Low Income Housing Tax Credits: for developers of qualified rental properties to
reduce their federal tax liability, with awards of eligibility points for brownfield projects.
Multifamily Housing Loans: permanent take-out financing, construction-only loans, and
construction loans that convert to permanent financing.
Contact. Frances Hoffman, Chair, Brownfields Redevelopment Interagency Team, Department
of Community Affairs, Office of Smart Growth, 609/292-3096, fhoffman@dca.state.nj .us, Web
site: www.nismartgrowth.com.
Ohio: Environmental Bond Issues
A major environmental bond issue approved by Ohio voters in November 2000 provided
$200 million for brownfield cleanup. The following year, the Ohio Legislature created two
programs that use the bond funds, allocating 80 percent to the Clean Ohio Revitalization Fund
(CORF) and 20 percent to the Clean Ohio Assistance Fund (COAF). In consultation with the
Ohio Environmental Protection Agency (Ohio EPA), the Ohio Department of Development
(Ohio DOD) Office of Urban Development administers the programs with a unique emphasis on
managing costs as well as budgets. As a result, many projects have been completed under
budget, including a recent project that saved $800,000.
CORF is a statewide, competitive grants program governed by the Clean Ohio Council.
It provides grants for brownfield site acquisition, demolition, remediation, and limited
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infrastructure improvement. The projects are evaluated using a scored application based on
economic benefit and environmental improvement, focusing on Ohio's older communities that
deteriorated as cities and economic conditions changed. The maximum project award is $3
million, and applicants must provide a minimum match of 25 percent of total project costs. In
2002 and 2003, CORF awarded almost $80 million in grants for 34 projects, and an additional
$40 million will be awarded in 2005 and 2006.
COAF is a discretionary program, administered by Ohio DOD, which is available only to
cities and counties that have been designated as distressed based on their employment rates,
average wages, and poverty levels. COAF provides grants for Phase I and Phase II
Environmental Site Assessments, cleanup projects, and public health projects. The cleanup
grants are analogous to the CORF grants, but the public health grants are used for projects in
which cleanup will have no quantifiable economic benefit, such as cleanup of groundwater. The
grant requires no match. As of January 2005, 47 grants totaling more than $14 million had been
approved.
For both programs, ODOD seeks to control costs at the outset of the application process.
CORF uses a transparent application process in which applicants in effect grade themselves,
working to quantify exactly what will happen in the project. For potential COAF applicants,
ODOD first works with the distressed community to improve its projects and suggest various
approaches, and then considers funding them.
Once projects are underway, ODOD's efforts to control costs include the following
activities:
Requiring that applicants use their own established competitive procurement processes to
obtain the lowest costs for their services and materials.
Analyzing paid invoices from all applicants to determine median costs for specific
services and materials, which provide a reference point for estimated costs on future
applications. Applicants estimating higher costs for these services must obtain lower
prices or explain why their costs are higher than the median.
Performing front-end audits that require full documentation of all project invoices before
ODOD will pay for them.
ODOD obtains a full picture of the brownfield sites and verifies costs with the help of a full-time
staff member who makes site visits to monitor activities.
Contact: Amy Alduino, Brownfield Coordinator, Ohio Department of Development, 614/466-
0761, aalduino@odod.state.oh.us.
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Ohio and Pennsylvania: Water Pollution Control Loan Fund
The Clean Water State Revolving Fund (CWSRF) can be an important source of funding
for projects at contaminated sites that threaten water quality. Ohio has been at the forefront of
these efforts, issuing loans for brownfield assessments and cleanups through its Water Pollution
Control Loan Fund (WPCLF). Administered by the Ohio Environmental Protection Agency
(Ohio EPA), the fund makes loans available to both municipalities and private entities,
particularly those participating in the state's Voluntary Action Program (VAP). The prospective
WPCLF loan recipient does not necessarily have to be a participant in the VAP as long as the
work performed directly benefits surface/groundwater.
WPCLF loans for brownfields cannot exceed $3 million per project, and the loan period
cannot exceed 10 years. Eligible projects include Phase I and II assessment activities (e.g.
literature searches, site evaluation studies, sampling, monitoring, and laboratory tests) and
remediation. Like CWSRF programs in other states, Ohio's WPCLF offers loans at varying
interest rates and durations, with lower interest rates for small and disadvantaged communities,
short-term loans, and special projects dealing with municipal compliance maintenance, water
conservation, and construction of nonconventional technologies. Wastewater and nonpoint-
source pollution projects, including brownfields and USTfields, are both eligible for funding as
long as they benefit water quality and are listed in the state's Nonpoint Source Management
Plan.
Ohio EPA also offers linked-deposit loans to private organizations and individuals for
nonpoint source projects (especially agricultural best management practices), upgrading failed
on-lot wastewater treatment systems, urban stormwater runoff control, stream corridor
restoration, and forestry and land development best management practices. WPCLF loans can
enable businesses to expand on formerly contaminated property. For example, when Liniform
Services could not obtain private financing for a Phase II site assessment on property adjacent to
its dry cleaning facility, Ohio EPA provided a five-year WPCLF loan of over $60,000. With an
interest rate of approximately 3 percent, the loan financed Phase II investigation activities,
including soil and groundwater sampling. Once the assessment and subsequent cleanup were
complete, Liniform Services received a covenant-not- to-sue from Ohio EPA through the VAP,
enabling facility expansion to proceed. The loan was repaid using a revenue stream from
accounts receivable, with inventory and cash as extra collateral.
In Cleveland, the WPCLF funded a brownfield cleanup prior to site redevelopment.
Grant Realty purchased the 20-acre former Sunar-Hauserman Company site to build a centrally
located corporate headquarters, despite environmental assessments showing that soil and
groundwater had been contaminated with solvents. A $1.6-million WPCLF loan, at an interest
rate of approximately 4 percent, covered the cost of treating contaminated subsurface soil and
groundwater. The repayment source came from a tank-cleaning operation, with personal loan
guarantees and a second position mortgage as additional collateral. With assistance from the
Cuyahoga Brownfields Pilot Program, Grant Realty applied to Ohio's VAP for a covenant-not-
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to-sue and was issued a no further action letter.
The Hemisphere Corporation, a brownfield redevelopment company, obtained WPCLF
loans totaling approximately $3 million to assess and clean up a 27.5-acre brownfield site,
known as the Stickney West Industrial Park (SWIP), in the heart of an area undergoing extensive
redevelopment in Toledo. The site remediation will prime the parcel for redevelopment and
remove threats to groundwater and water quality in Sibley Creek and the Ottawa River.
Although Toledo boasts the fourth-largest port on the Great Lakes and one of the largest
railway centers, redevelopment of nearly two-thirds of the city's commercial and industrial real
estate has been hindered by environmental concerns. To encourage development, in 1997
Toledo obtained a $200,000-targeted brownfield assessment grant from U.S. EPA. Toledo used
part of the grant for a Phase I assessment on a 68-acre commercial/ industrial site surrounded by
three landfills, which identified soil contamination and threats to water quality in Sibley Creek
and the Ottawa River. In 1999, the Hemisphere Corporation purchased a portion of the property,
now known as SWIP, and agreed to conduct a Phase II assessment, clean up the parcel in
accordance with the Ohio VAP, and redevelop it.
In the spring of 2000, Hemisphere received a WPCLF loan of $500,000 to fund a Phase II
assessment that confirmed suspected surface soil contamination and, in accordance with the
VAP, determined the cleanup standards at a level that would allow industrial activities to resume
on the site. To fund the cleanup, Hemisphere received a second WPCLF loan of approximately
$2.5 million at an interest rate of about 4 percent over five years (extending to 10 years if the
loan is not in default). To cover additional costs and provide security for the WPCLF loans,
Hemisphere has worked with Toledo, Ohio EPA, and the Ohio Water Development Authority,
the secondary agency for the WPCLF that generally acts as a financial adviser to Ohio EPA for
CWSRF loans. Repayment sources for the loan include payment from the city for the soil
needed to cap its landfill, tipping fees from one of the landfills, rental fees from the completed
SWIP project, and settlements between the city and EPA for environmental liability related to
the site.
Despite these successes, Ohio EPA has received no new requests for loan assistance since
the creation of Ohio's brownfield grant programs in 2001. This may signify a preference among
applicants for grants over loans, and either grants are sufficient to meet the needs of current
brownfield entrepreneurs or prospective applicants are delaying seeking loans until possibilities
of receiving grants are exhausted.
Contact: Greg Smith, Ohio Environmental Protection Agency, (614) 644-2798,
greg.smith@epa.state.oh.us. Web site www.owda.org/html/1 pans.asp.
The CWSRF program is a key part of Pennsylvania's efforts to protect the water
environment, promote community revitalization, and support economic development. The
Pennsylvania Infrastructure Investment Authority (PENNVEST) works across state and federal
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agencies to identify opportunities to use CWSRF funds and coordinate funding efforts. In 2004,
PENNVEST extended the use of its funds to include the remediation of brownfields that pose a
threat to local groundwater or surface water sources, and U.S. EPA Region 3 approved the new
brownfield guidelines in July of that year.
The latest Pennsylvania Water Quality Assessment Report, conducted in 2002 under
Section 305(b) of the Act, identified industrial facilities, underground storage tanks, hazardous
waste sites, abandoned landfills, above-ground storage tanks, manure/fertilizer applications,
chemical facilities, and septic systems as major sources of groundwater contamination in the
state. By dedicating a portion of the 2004 CWSRF funds to brownfields, the program assists the
DEP Bureau of Land Recycling and Waste Management in implementing the Land Recycling
Program to clean up groundwater and brownfield sites.
PENNVEST sets aside 30 percent of its annual CWSRF funding to address brownfields,
totaling $48 million in 2004. Two of the state's 12 new CWSRF projects approved in 2004
involved brownfield remediation and received loans totaling $2.7 million at county cap interest
rates for a maximum term of 20 years. Under the program guidelines, loans to one municipality
may total up to $11 million per project, increasing to $20 million for projects that serve two or
three municipalities. PENNVEST currently has four brownfield projects using CWSRF funds
underway:
The Riverfront South Brownfields Remediation Project in Bensalem Township received a
$5.3-million loan to clean up a 26-acre industrial site along the Delaware River. The loan
has a two-year term and interest rate below 4 percent.
The Ashley Yard Project in Ashley received $795,650 for two years at an interest rate
below 3 percent to complete site characterization.
The Norristown Brownfields Remediation Project in the borough of Norristown received
$1.9 million for two years at a rate below 4 percent to conduct environmental assessment
and site remediation, trash and debris removal, building demolition, asbestos abatement,
and site preparation at a former asbestos manufacturing facility.
The Philadelphia Authority for Industrial Development received a $1,75-million loan to
construct drinking water distribution lines, sanitary sewer collection lines, and
stormwater facilities to eliminate soil and groundwater contamination and support
commercial development on 4.5 acres of a 70-acre site at the City of Philadelphia Navy
Yard.
Contact: Beverly Reinhold, Project Management, PENNVEST, 717/783-6589.
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Tax Incentives
Colorado: Cleanup Tax Credit
Colorado passed a Brownfields Tax Credit in 1999 as part of the governor's smart growth
initiative, to make brownfield redevelopment more attractive and viable. Properties must be
located in a municipality with a population of at least 10,000 and be eligible for inclusion under
the state's Voluntary Cleanup and Redevelopment Act. The bill provides an income tax credit of
up to $100,000 per property to offset up to $300,000.
For any tax year beginning on or after January 1, 2000, and ending before December 31,
2005, applicants may obtain 50 percent of the first $100,000 spent on cleanup; 30 percent of the
next $100,000; and 20 percent of the third $100,000. To the extent the allowable credit exceeds
the net tax liability, the excess may be carried forward for up to five years. The Colorado
Department of Public Health and Environment's Voluntary Cleanup Program reviews the site's
cleanup plan and associated costs to provide the certification required to obtain the tax credit
from the Colorado Department of Revenue.
By January 2005, 12 applicants had used about $1 million in tax credits. Because it takes
a few years for the public to become familiar with new tax credits, interest is expected to
increase. The state legislature will consider extending the credit beyond December 2005 this
year.
Contacts: Joe Vranka, Superfund and PA/SI Unit Leader, Colorado Dept of Public Health and
Environment, 303/692 3402, ioe.vranka@state.co.us; Dan Scheppers, Hazardous Materials and
Waste Management Division of CDPHE, 303/692-3398; Daniel.Scheppers@state.co.us. Web
site www, cdphe. state. co.us/hm/bftaxhowto. asp.
Florida: Voluntary Cleanup Tax Credit and Tax Refundfor Job Creation
The 1998 Florida Legislature created the Voluntary Cleanup Tax Credit to encourage
voluntary cleanup at brownfield sites in designated Florida Brownfield Areas and other specified
sites contaminated by dry cleaning solvents. One key to the program's success is that the credits
are transferable, so that local governments and nonprofit developers that cannot use the credits
may transfer them to businesses as an incentive to reuse brownfield sites or to mitigate costs
incurred to perform brownfield site rehabilitation.
The program provides tax credits to eligible applicants for up to 35 percent of the costs of
voluntary cleanup activities that are integral to site rehabilitation, not to exceed $250,000 per site
per year. Each year FDEP may grant up to $2 million in tax credits, which can be applied to the
state's Corporate Income Tax or Intangible Personal Property Tax in Florida. In fiscal 2003-
2004, the program awarded tax credits totaling $1 million for 16 sites. The Voluntary Cleanup
Tax Credit Rule (Chapter 62-788, F.A.C.) provides the administrative process, guidelines and
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forms for application for these tax credits.
Florida's Brownfield Redevelopment Bonus encourages redevelopment and job creation
in designated Brownfield Areas through a tax refund of up to $2,500 for each new job, or 20
percent of the average wage of the jobs created, whichever is less. Of the $2,500, $500 is a fully
optional match, so that the bonus often functions as a $2,000-job bonus. All tax refunds can be
applied to many tax categories, including corporate income, ad valorem, intangible
personal property, insurance premium, and sales and use taxes.
The refund is available to any business that locates at a brownfield site in a designated
Brownfield Area and qualifies under Florida's Qualified Target Industry (QTI) tax refund
program. This program provides a tax refund of at least $3,000 per job created to businesses in
targeted industries that create at least 10 jobs and pay an average annual wage of at least 155
percent of the local, state, or MSA average.
Applicants that do not qualify under the QTI program may still qualify for the brownfield
bonus by creating at least 10 jobs (with benefits) in a designated Brownfield Area and making a
fixed-capital investment of at least $2 million in mixed-use business activities. Applicants also
must show that the project will diversify and strengthen the local economy and promote capital
investment in the area surrounding the rehabilitated site.
Contacts: Patrick W. Kennedy, Incentive Manager, Enterprise Florida, Inc., 850/487-2157
pkennedv@eflorida.com; Roger Register, Brownfields Liaison, Florida Department of
Environmental Protection, 850/245-8934, roger.register@dep.state.fl.us.
New York: Cleanup, Real Property, and Insurance Tax Credit
Effective in the tax years beginning April 1, 2005, New York State will offer tax credits
to participants in the Brownfield Cleanup Program and have entered into a brownfield cleanup
agreement with the Department of Environmental Conservation. The tax credits offset the costs
of site preparation, property improvements, on-site groundwater cleanup costs, real property
taxes, and environmental insurance premiums. Tax credit eligibility requires a certificate of
completion, issued by DEC, stating that remediation requirements that were set forth in the
brownfield cleanup agreement have been achieved. To claim the tangible property credit
(similar to an investment tax credit for development), the property must be placed in service after
the certificate of completion is issued. All the credits available under the Brownfield Cleanup
Program are refundable credits.
The state offers three types of credits:
The brownfield redevelopment credit provides business tax credit consists of three
separate and distinct credits that provide a business tax credit of 12 percent or a personal
tax credit of 10 percent for the costs of site preparation, tangible property (i.e.,
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development), and on-site groundwater remediation. These percentages increase by 2
percent for sites cleaned up to unrestricted condition, and increase by 8 percent if at least
half of the qualified site is located in an area designated as an environmental zone by the
commissioner of economic development.
The remediated brownfield credit for real property taxes provides a tax credit based on
the real property taxes imposed on a qualified site. The credit is available for 10
consecutive years, beginning in the year a taxpayer is issued a certificate of completion.
The credit is for 25 percent of the eligible real property taxes imposed on the site,
multiplied by the "employment number factor"-a percentage based on the number of
people employed by the taxpayer or his lessee. If the entire qualified site is located in an
environmental zone, the percentage for purposes of calculating the credit increases from
25 percent to 100 percent. There is no limit on the total amount of this credit allowed for
a qualified site, which is determined by multiplying $10,000 times the number of
employees at the site. If the taxpayer also is eligible to claim the HEZE real property tax
credit, he or she must make an irrevocable choice between the two.
The environmental remediation insurance credit provides a one-time credit for up to
$30,000 or 50 percent of the premiums paid for environmental remediation insurance,
whichever is less. Such insurance is required for one or more of the following: on-site
cleanup of pre-existing pollution; third-party claims (for bodily injury or property
damage); cost of each policy covering on-site cleanup of pre-existing pollution
conditions; cost-coverage; and re-opener coverage.
Contact: Chris Costopoulos, New York State Department of Environmental Conservation,
518/402-9711, cicostop@gw.dec.state.ny.us.
Wisconsin: Cancellation of Delinquent Taxes
In 1999, Wisconsin's legislature adopted tax provisions that can help local governments
achieve the cleanup and redevelopment of contaminated, tax-delinquent properties. For many
brownfield sitesespecially where the local government has used various grant programs to
complete preliminary assessments of contaminationthe provisions have removed the combined
barriers of contamination and tax delinquency that prevented developers from acquiring them.
The provision for cancellation of delinquent taxes (s. 75.105, Wis. Stats.) enables
counties and the City of Milwaukee to cancel all or a portion of unpaid property taxes on a
contaminated property, provided that the Wisconsin Department of Natural Resources has
approved a written agreement with the party receiving the tax benefit to investigate and clean up
the contamination. This party can be the current property owner or a third party proposing to
acquire the property or work with the current owner.
To develop a tax cancellation agreement, the dialogue starts with the local taxing
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authority to determine the extent to which the authority is willing to reduce or eliminate the
delinquent taxes (discretionary authority). Then an agreement is prepared with the DNR that
details the investigation and cleanup required in exchange for canceling the taxes. In many
cases, the party receiving the tax benefit develops a separate agreement with the local taxing
authority regarding tax, schedule, and redevelopment issues. If for any reason the tax
cancellation agreement is not implemented, the cleanup agreement with the DNR is nonbinding.
By January 2005, taxes were cancelled at eight brownfield properties, and several had
been cleaned up and redeveloped. Examples include the former Pingle Oil bulk plant property
in Ashland, which has been redeveloped as a towing service/auto repair business, and a
contaminated property on 1420 State Street in Racine, which has been redeveloped as a large
supermarket and adjacent parking.
Another tax provision (s. 75.106, Wis. Stats.) enables counties and the City of Milwaukee
to foreclose on tax-delinquent brownfields and assign the foreclosure judgment to a new owner
for redevelopment. The party requesting assignment of the foreclosure judgment must have a
written agreement, approved by the DNR, regarding cleanup of the contamination. Before the
law was enacted, municipalities had to take ownership of foreclosed property and assume the
liability for cleaning it up and selling it. Fearing the costs of remediation, cities often chose not
to pursue ownership of abandoned properties.
This provision has been used at six brownfield sites, and other sites are under
consideration. A notable example is the Sherman Perk coffee shop, located in a formerly
vacated gas station, which became a pilot case for the new foreclosure provision. By 2000, the
Sherman Perk building had been vacant for 10 years, tax delinquent for nine, and scheduled to be
razed by city order because of structural deterioration and fuel contamination. At that point, Bob
Olin became interested in developing the property and began negotiating an agreement with the
city and DNR, under the new tax provisions, to acquire it through foreclosure and clean it up.
The foreclosure process began in October 2000 and concluded five months later in March
2001, with finalization in court on April 9. As a small, community-based developer, Olin faced
critical financial hurdles in getting his project underway. He worked with a variety of public
agency partners, obtaining $30,000 in grants from the city and county of Milwaukee to help
cover the costs of site cleanup, and $100,000 from the Wisconsin Department of Commerce
Brownfield Revitalization Program to help finance redevelopment.
In addition, ESV, LLC, used the foreclosure provision to redevelop the former Wisconsin
Waste Paper property on Newhall Street in Milwaukee into a new small animal hospital, and
Ralos, LLC, redeveloped the former Solar Paints and Varnish property into a new manufacturing
plant for construction equipment.
Contact: Dan Kolberg, 608/267-7500, Wisconsin Department of Natural Resources,
kolbed@dnr.state.wi.us. Web site http://www.dnr.state.wi.us/org/aw/rr/financial/del taxes.html.
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Planning, Assessment, and Cleanup Programs
Many brownfield projects have particular difficulty getting financing together for three
specific activities:
early-stage site assessment,
defining a site remediation plan (which the owner needs if he wants to get take the site
through a state voluntary cleanup program in order to get some finality on liability
concerns); and
carrying out the cleanup itself.
A growing number of states are stepping up to help remove the major stumbling block this
financing gap creates. New financing incentives and creative use of existing programs advance
brownfield projects as a logical extension of the states' traditional economic development
mission.
Michigan: Local Brownfield Redevelopment Authorities
In 1996, Michigan authorized cities and counties to establish Brownfield Redevelopment
Authorities, which have TIF and bonding authority. Structurally, they are based on the widely
recognized and popular development authority entities, which increases their acceptance among
communities and private entities that might be uncomfortable with a strictly environmental
program. The authorities can adopt brownfield plans that identify the eligible activities to be
conducted on an eligible property and provide for the use of TIF to capture property taxes to
reimburse the costs of the eligible activities.
TIF is based on the tax increment of a brownfield site: the tax revenues it generated the
year the property was included in the brownfield plan. When cleanup and redevelopment of the
property increases its value, and thus the tax revenues it generates, the increased tax revenues
(captured taxes) are used to pay the cost of eligible environmental response and redevelopment
activities at the site. Tax increment revenues that are eligible for capture include all property
taxes including taxes levied for school operating purposes (with approval from the DEQ
or MEGA). Taxes already captured as part of an existing tax increment financing plan
(under other state laws) and taxes levied to pay off specific obligations are exempt.
Under the Brownfield Redevelopment Financing Act, 1996 PA 381, as amended (Act
381), only a BRA can capture new property tax value from a redeveloped eligible property and
use the captured funds to reimburse those who incurred eligible expenses on that property. The
BRA may also establish a Local Site Remediation Revolving Fund from eligible tax capture to
cover eligible expenses on other eligible properties within the BRA's jurisdiction.
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The property owner also may apply for a Single Business Tax Brownfield
Redevelopment Credit for eligible investments made at an eligible property, if it is included in a
brownfield plan. This credit can total 10 percent of any innocent party's development (not
cleanup) costs, up to $1 million. In urban communities that have created an Obsolete Property
Rehabilitation District, property owners can receive an abatement of up to 100 percent of real
property taxes for a brownfield site for up to 12 years.
By October 2004, some 225 cities and towns and 11 counties had set up authorities that
provide one-stop shops for information, technical assistance, and resources. They have proven
especially helpful in small towns, where they have spearheaded redevelopment projects in towns
with as few as 1,500 people.
Contact: Darlene Van Dale, Michigan Department of Environmental Quality, 989/705-3453,
vandaled@michigan.gov. Web site http://www.michigan.gOv/deq/0,1607,7-135-
33114110_23246-63521-,00.html.
Wisconsin: Brownfield Site Assessment Grant Program
Wisconsin's Site Assessment Grant Program (SAG) helps local governments conduct
initial activities and investigations at contaminated sites, awarding $1.7 million in grants in its
third year (2004-2005). The grants may fund Phase I and II environmental assessments, site
investigation, demolition of any structures or buildings, asbestos abatement (if it is a necessary
part of demolition activity), and removal and proper disposal or treatment of abandoned
containers, underground hazardous substance storage tank systems,
or underground petroleum storage tanks.
In each application round, a local government may submit only one application for a
large grant and one application for a small grant for a single property, but may request funds for
more than one property in each round or submit a grant application covering multiple,
contiguous properties. Eligible sites or facilities are abandoned, idle, or underused, where
expansion or redevelopment is hindered by actual or perceived environmental contamination.
Applicants must use the grant for one or more properties with known or suspected contamination
and may not be the party who caused it. A local government does not have to own the property
to qualify for the grant, but it must have access to the site within 60 days of a grant award to
carry out the grant activities. The grants also require a match of at least 20 percent of the grant
request in the form of cash, in-kind services, or a combination of both, but recent changes to the
program allow the match to be provided by any local governmentnot just the applicant.
To prepare to apply for a SAG, local governments do the following:
locate eligible sites or facilities;
determine what activities need to be performed;
obtain cost estimates for activities from a qualified professional;
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get access and/or ownership;
collect information on the history of the site, occupants and cause of contamination;
budget for the match; and
create and approve a municipal resolution in support of the project.
Since 1998, SAG has received 374 applications and awarded 212 grants totaling $6.56
million to investigate and clean up 742 acres of land. The grants have paid for 72 Phase I
environmental site assessments, 119 Phase II environmental site assessments, 149 site
investigations, the demolition of 261 structures and buildings, and the removal of 197
underground storage tanks.
Brownfields addressed through SAG include tax-delinquent or bankrupt properties that
formerly received funding through Wisconsin's Brownfield Environmental Assessment Program
(BEAP). This U.S. EPA brownfields pilot program, which operated from 1996 to 2000,
provided U.S. EPA funding for the state department of natural resources to conduct Phase I and
II assessments and other investigations at tax-delinquent or bankrupt properties nominated or
acquired by their city or county. Because the BEAP was a U.S. EPA brownfields pilot,
properties also qualified for a federal tax incentive.
The BEAP accepted 43 properties from 1996-2000. All of the 1996 properties and
several of the 1997 and 1998 properties have been redeveloped, have future use plans, and/or are
being cleaned up. The remaining properties are in various stages of redevelopment. Many of the
properties audited with BEAP resources were redeveloped with no further public subsidy.
Contact: Andrew Savagian, Remediation and Redevelopment Program, Wisconsin Department
of Natural Resources, 608/261-6422, Andrew. Savagian@dnr. state, wi .us.
Infrastructure Development
Massachusetts: Transportation Construction
The Massachusetts Executive Office of Transportation and Construction has invested
millions of dollars in infrastructure improvements to facilitate brownfield reuse. One of the most
notable examples is the Lawrence Gateway project at the former Oxford Paper plant. Located at
the entrance of the Lawrence historic, the contaminated site original became the focus of cleanup
and redevelopment efforts in conjunction with a highway project that provided Massachusetts
Highway Department funds. Plans developed in 1994 called for demolition of existing Oxford
buildings, construction of road interchanges, and creation of a public park.
In its first two years, the Lawrence Gateway Project leveraged over $160 million in
public and private investment for Lawrence's historic district, including $4.5 million from the
Massachusetts Highway Department. However, despite promises of leveling the Oxford plant in
1995, by May 2000 it still hadn't occurred. State transportation secretary Kevin Sullivan helped
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to keep the project alive, working with the city to accept liability for possible contamination.
By 2003, the complex Lawrence Gateway Project was still underway. In the project's
Quadrant Area, the Massachusetts Executive Office of Transportation and Construction (EOTC)
was connecting transportation enhancements to the redevelopment of two major brownfield sites:
Oxford Paper and GenCorp, Inc. EOTC invested $30 million in the reconfiguration of the Route
495/Marston Street interchange, constructing new off-ramps, realigning an intersection for easier
access, installing new traffic signals, and rehabilitating nine bridges and two walls. In addition,
EOTC is undertaking the Canal Street Realignment/Spicket River Bridge Replacement Project,
which will raise the entire roadway profile to span a new pedestrian walkway.
Because the Spicket River Bridge's substructure will occupy the footprint of one of the
old mill buildings on the Oxford Paper site, all five buildings on the site needed to be demolished
for the project to go forward. EOTC committed the resources needed for demolition and
cleanup, with the City of Lawrence expected to complete the remediation work in 2003 or early
2004. EOTC planned to begin bridge construction in 2003.
The estimated cost of cleaning up the Oxford site will total more than $13 million, with
$9 million in transportation funds contributed through 2002 by the Massachusetts Highway
Department and the Federal Highway Administration. In addition, GenCorp provided $636,973
for Oxford cleanup and is matching $100,000 for site assessment from Mass Development with
an additional $40,000. Cleanup of the Oxford site makes cleanup of the GenCorp site more
sustainable as well, because water flowing through an underground raceway connecting the sites
transfers contamination between them. The EOTC project will ensure that both sides are
stabilized at once.
Contacts: Joe D'Angelo, Massachusetts Highway Department, District Four, Phone: 781/641-
8409; Robert Devaney, Director, Environmental Engineering, GenCorp, Inc., Phone: 978/683-
7123.
20
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Incorporating Brownfields
Revitalization Projects into Regional
Comprehensive Economic Planning
The Impact on Rural
and Small Metropolitan Redevelopment
October 2004
A report by the
National Association
of Development
Organizations (NADO)
Research Foundation
I NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS
Research foundation
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Brownfields and Economic Planning
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Incorporating Brownfields Revitalization
Projects into Regional
Comprehensive Economic Planning
The Impact on Rural
and Small Metropolitan Redevelopment
Written by
Kelly Novak, Research Manager
Laurie Thompson, Director of Programs
© Copyright by the NADO Research Foundation
Research foundation
400 North Capitol Street, NW, Suite 390
Washington, DC 20001
202.624.7806. Fax 202.624.8813
email info@nado.org* Web www.nado.org
October 2004
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Table of Contents
Executive Summary
3
4
5
6
7
Focus Group 1
Focus Group 2
Focus Group 3
Focus Group 4
Focus Group Participants
8-9
Acknowledgements
This report is based on regional focus group discussions held in conjunction with three of the Economic Development
Administration's (EDA) 2002 regional conferences and NADO's 2002 Washington Policy Conference. The discussion groups
were hosted by the NADO Research Foundation and were largely attended by regional development organizations that represent
rural and small metropolitan communities.
We thank the 31 regional development organizations1, county authorities, state and federal enviromnental, economic and trans-
portation organizations and national non-governmental organizations that participated in the project. Special thanks are extend-
ed to Sven-Erik Kaiser, Enviromnental Protection Agency's (EPA's) Outreach and Special Projects Staff for Brownfields and
EDA's Brownfields Coordinator, Dennis Alvord. We also extend a special thank you to Bob Turner (EDA Denver Regional
Office); Bettye Atkinson (EDA Seattle Regional Office); and Robin Bush (EDA Chicago Regional Office) for their assistance in
coordinating discussion groups. This report was prepared with assistance from EPA (R-82718401-4).
With support from EPA, the NADO Research Foundation began researching the level of brownfields redevelopment activity in
rural areas in 1998. The initial outreach and education for rural and small communities was designed to research and publish
reports focused on identifying and exploring obstacles. Profiles of rural and small community successes in brownfields assess-
ment, cleanup and redevelopment were included in the Foundation's previous reports.
The NADO Research Foundation has written four reports and a resource guide pertaining to rural brownwfields.2 In 1999, the
Foundation researched over 200 regional development organizations to identity real assessment, cleanup and redevelopment
obstacles. The findings were published in Reclaiming Rural America's Brownfields: Alternatives to Abandoned Property.
The NADO Research Foundation released Reclaiming Rural America s Brownfields: Alternatives to Abandoned Property,
(2001) based on brownfields site visits and interviews. As a follow-up to the previous reports, discussion groups involving 27
regional development organizations were hosted and the outcomes were published in The State of Rural and Small Metropolitan
Brownfields Redevelopment. The reports validated earlier findings about the obstacles in brownfields redevelopment. These two
reports profiled 16 rural and small communities and demonstrated how rural and small communities' assessment, cleanup and
redevelopment can overcome related obstacles. The reports also presented recommendations applicable to overcoming obstacles
and the discussion groups allowed organizations an opportunity to offer brownfields peer-exchanges. In addition to the
Foundation's work in identifying obstacles and solutions, the Brownfields Resource Guide for Rural and Small Communities3
offers small and rural communities a one-stop publication for brownfields needs.
The Research Foundation's rural and small communities brownfields outreach and research continues with the release of this
report. We are pleased to note that four of the regional development organizations that participated in the discussion
groups/peer-exchanges for this report received EPA pilot assessment grants in 2002.
' A regional development organization is also known as an Area Development District, Council of Governments, Planning and Development District, Economic
Development District, Economic Development Commission, Business Development Corporation, Local Development District, Regional Planning Commission and
Regional Development Council.
^Reclaiming Rural America's Brownfields
Reclaiming Rural America's Brownfields: Alternatives to Abandoned Property
Brownfields Resource Guide
The State of Rural and Small Metropolitan Brownfields Redevelopment
Six Common Threads: Weaving Successful Brownfields Projects in Rural and Small Communities
^Updated September 2004; available to download at www.nado.org/pubs/index
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Executive Summary
Four focus group discussions in 2002 attended by brownfields and economic development professionals from Economic
Development Districts (EDDs), federal, state and local government and non-governmental organizations focused on the fre-
quency that brownfields revitalization projects are included into regional economic development plans, such as comprehensive
economic development strategies (CEDS).4
Most participants concluded that incorporating brownfields revitalization into regional economic development planning is bene-
ficial to successful redevelopment in rural and small metropolitan communities. This conclusion was the same among non-EDD
participants. Participants determined that changes in the Small Business Liability Relief and Brownfields Revitalization Act, or
brownfields law, (PL 107-118) signed into law January 2002, will have significant implications for rural and small metropolitan
communities. Specifically, the mandatory 20 percent match for grants, the prohibition of indirect costs inclusive of administra-
tive costs and the required property ownership and resulting liability complications will likely impede brownfields redevelop-
ment in rural and small metropolitan communities.
Participants at each discussion group agreed that measuring the success of rural and small metropolitan brownfields redevelop-
ment requires different criteria and timeframes than determining success among urban brownfields redevelopments. In addition,
the limited scope and inquiries about brownfields in general among the group discussions confirmed the sense that brownfields
outreach to rural and small communities is still needed to promote successful redevelopment in these communities.
Each focus group size was designed to be small to facilitate constructive and inclusive discussion. Regional development organ-
izations that provide services, such as economic development planning, for rural and small communities, federal, state and local
government representatives; and professionals involved in brownfields revitalization attended the focus group meetings.
These discussions took place before the law's changes were officially available (via EPA draft guidelines) in September 2002.
Consequently, the discussions lacked inclusion of the guidelines for threshold criteria for community notification and ranking
criteria for community need. Inclusion of these facts might possibly have had an impact on discussion outcomes.
Participants focused on six questions:
1. Is there a relationship between regional economic conditions and brownfields revitalization projects?
2. Why is it, from your perspective, that brownfields are or are not incorporated into your area's (regional and community)
economic development strategic plans?
3. How is brownfields redevelopment viewed in your region/community? Is it considered a local issue?
4. Have regional approaches to brownfields redevelopment been undertaken in your region? Is there a solid inventory of
potential brownfields sites? Is there an entity assigned to do inventories?
5. Are brownfields considered as part of a larger smart growth strategy, a way to control sprawl?
6. Are enviromnental and social justice initiatives a part of brownfields redevelopment in your region?
The discussion participants represented 34 regional development organizations from 25 states, the District of Columbia and the
Commonwealth of the Northern Mariana Islands, of which 30 are EDA-designated and funded EDDs. Each discussion was held
on-site at each EDA regional conference or NADO policy conference.
The CEDS is a plan that emerges from a broad-based continuous planning process addressing the economic opportunities and constraints of a region. It is the
primary tool used by all Economic Development Districts (EDDs) for regional economic development. For more information refer to the "Definitions" section
of this report.
Brownfields and Economic Planning
3
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Focus Group One: Washington, DC, April 14, 2002
EPA Regions Covered: Boston, Philadelphia, Atlanta, Chicago, Dallas
Key Discussion Points:
There is a relationship between regional economic condition and brownfields redevelopment. In fact, brownfields
redevelopment was part of the CEDS process in some regions, resulting in increased brownfields assessments.
Brownfields redevelopment among rural communities is envisioned as a local economic and environmental
venture, as well as a need. Using abandoned textile mills as an example, the group discussed their roles as
community center. Redevelopment of these sites is a local concern because of the loss of the industry, and the
central location is a matter that local leaders intending to re-build and diversify their economies must consider.
RDOs play an integral part in the redevelopment process; in fact, some participants reported that the RDO was
instrumental throughout the planning phase and in assuring that any contamination findings would not be
complicated by outside regulators.
Environmental and social justice initiatives are critical components of many brownfields projects. 169 sites in
Connecticut, mostly located in high poverty areas, prompted the exploration of job-training support from EPA.
Controlling sprawl, especially in rural and small metropolitan communities, is a positive benefit of brownfields
redevelopment. Many local elected officials involved in developing community CEDS prefer to revitalize the
center of their communities rather than add to the fringes.
Factors involved in successful brownfields redevelopment projects in rural and small communities
included:
Positive community reception due to support from local officials well educated about brownfields redevelopment
opportunities.
Ability to leverage and co-mingle additional funds without taking funding opportunities away from other local
projects.
Including the project into all community planning, such as transportation improvements plans (TIPs), zoning, CEDS,
watershed plans and land use studies.
Having a solid inventory of "potential" sites.
Obstacles common to rural brownfields revitalization included:
Inadequate financial resources to support inventorying and multiple assessments, as well as a
shortage of resources available for cleanups.
Difficulty accessing funds for redevelopment beyond EDA funding, such as the HUD Brownfields Economic
Development Initiative (BED!) program requiring use of section 108 loan funds as collateral.
Turnover in staff and local elected officials.
Lack of resources necessary to hire qualified staff.
Obtaining community buy-in because of the belief that documenting a contamination will lead to local financial
hardship, costly cleanups and difficulty in property re-sale or inability to reuse the property for desired purposes.
Inability to obtain insurance coverage for small redevelopment projects due to lack of resources and disinterest of
insurers.
Abundant green space drives demand for redevelopment down and reduces the cost of greenfields development.
4
Brownfields and Economic Planning
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Focus Group Two: Chicago, Illinois, EDA Chicago Region Conference,
Chicago May 8, 2002
EPA Region Covered: Chicago
Key Discussion Points:
There is a relationship between economic conditions and the existence of brownfields. Specifically, during years
of economic decline the number of brownfields sites increased. In developing CEDS, local leaders feel that
redeveloping their brownfields sites would be an avenue to job creation.
Community reluctance to inventorying potential brownfields sites was a key obstacle to including brownfields in
CEDS. Participants felt that the community reluctance was rooted in a misunderstanding of the definition of a
brownfields and resulted in a fear of liability and cost upon local government.
A lack of understanding about the potential impact that economic planning can have on improving the
success rate of redevelopment projects was apparent. Participants commented that state brownfields programs are
not as effective as they could be, and recommended that states" brownfields programs should make use of the
established partnerships that RDOs have when doing outreach. RDOs felt they could offer state programs an
appropriate forum to educate local decision makers.
By making brownfields an economic priority within the EDA CEDS process, the federal government was able to
encourage future redevelopment success in rural areas. By engaging other agencies to support brownfields
redevelopment with grants to cover the costs of tasks associated with redevelopment, federal agencies were able to
help RDOs gain more access to technology, such as Geographic Information Systems (GIS), to support the
inventorying process through agencies like EDA.
Alternative technologies for cleanup and incorporation into redevelopments would help offset redevelopment costs
for rural areas. However, several participants stated that many rural areas lack knowledge about alternative
technologies and the consultants used on redevelopment projects do not always know about cost-effective
alternatives either. Rural peer exchanges might help educate decisionmakers in rural areas about alternative
technologies and offer models for incorporating renewable energies into their redevelopment projects.
The importance of inventorying at the state level on a regional basis seems to work. Focusing on redevelopment
regionally offers communities a way to facilitate smart growth planning. The CEDS process and the tie to
economic development have influenced the direction taken and success of their redevelopment projects.
Brownfields and Economic Planning
5
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Focus Group Three: Kansas City, Missouri, EDA Denver Region Conference,
June 10, 2002
EPA Regions Covered: Kansas City and Denver
Key Discussion Points:
The new brownfields definition's inclusion of mine-scarred lands, the hardship on rural areas to get brownfields
started due to the proposed 2002 guidelines to prohibit indirect/administrative costs, and the required 20 percent
match were discussed at length. There were also many questions about liability associated with existing public
ownership of sites.
Participants could not agree on the relationship between brownfields and regional economic conditions. Several
participants felt the economic impact of brownfields redevelopment is a long-term investment and measuring the
economic success of redevelopment in rural areas is a complex matter that includes assessing the tangible (number
of jobs created) and intangible (community involvement) results of a project. The potential for rural brownfields
redevelopment projects to become job-training sites was addressed.
The number one obstacle experienced in pursuing (or even considering) brownfields projects is a lack of
community buy-in and, in some cases, reluctance on the part of private property owners. Because of this, it is
understandable why ten out of the 15 RDO participants included brownfields as an economic priority in their
CEDS. Participants felt that by incorporating brownfields into their CEDS enabled local leadership to reach across
the remoteness of their regions" rural communities and support redevelopment start-ups.
Other obstacles included:
Superfund sites in their region had heightened community fear in exploring potential brownfields sites. Many
communities have not included brownfields as a priority in their CEDS because open or green space is abundant,
putting greenfields development in a position of being more cost-efficient than brownfields redevelopments.
Interest in the new law's definition of brownfields, in particular mine-scarred lands and the proposed guidelines
for application to the EPA brownfields program, dominated discussion.
This discussion session was the largest with 18
participants representing 15 RDOs. Attendance was large in part
due to the fact that the EPA brownfields program pilots had been
announced. Much of the discussion that took place reflected an
understanding of what the redevelopment opportunities were as a
result of the new expanded definition of brownfields and the
proposed distribution of the funds, offering a direct cleanup
program and special petroleum cleanup funds.
6
Brownfields and Economic Planning
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Focus Group Four: San Diego, California, EDA Seattle Region Conference,
September 4, 2002
EPA Regions Covered: Seattle and San Francisco
Key Discussion Points:
There is a direct relationship between economic conditions and brownfields in their regions. The participants
reported many of their potential economic development locations are now brownfields sites, inhibiting economic
development, healthy community development and smart growth. Specific responses included:
An abandoned oil field in one small city is centrally located; as a result, economic development has
sprawled to the outskirts of the community.
Redeveloping brownfields would make space available for light industrial development.
The groundwater contamination resulting from exiting brownfields has inhibited development
immediately surrounding these sites.
Lack of information about and understanding of brownfields has often prevented redevelopment from being
included in the CEDS process. Education and outreach are necessary because of the new brownfields
definition.
Participants from Alaska and the Northern Mariana Islands noted that the brownfields program is new to
their community and the education process is still taking place, but felt that brownfields redevelopment
would be locally accepted. The participant from the Northern Mariana Islands further stated they are looking
into how brownfields would fit into their development plans.
Only one participant reported they have approached brownfields on a regional scale; a redevelopment
agency was formed to assist the less technologically equipped rural communities to address potential site
inventorying and propose inclusion of the sites in community CEDS. Rural areas are typically more
focused on basic infrastructure development, such as water and roads, and often do not have the budget
or staff to pursue brownfields redevelopments.
A lack of understanding and lack of information about brownfields was identified as the number one
obstacle to brownfields redevelopments.
Brownfields and Economic Planning
7
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Focus Group Participants
Focus group participants represented 34 regional development organizations in 25 states, the District of Columbia
and the Commonwealth of the Northern Mariana Islands.
WASHINGTON, DC, NADO POLICY CONFERENCE, APRIL 2002
Arkansas
Kathy Lee, Southwest Arkansas Planning and Development District
Connecticut
Richard Eigen, Valley Regional Planning Agency
Florida
Carolyn Deckle, South Florida Regional Planning Commission
Leel Czeck, South Florida Regional Planning Commission
Georgia
Greg Halverson, Central Savannah River Area Regional Development Center
Indiana
Debby Beavin, Indiana 15 Regional Planning Commission
Michigan
Sandeep "Sean" Dey, West Michigan Shoreline Regional Development Commission Muskegon
Oklahoma
Blaine Smith, Association of South Central Oklahoma Governments
Texas
Jake Brisbin, Rio Grande Council of Governments
Washington, DC
Mary Sivage, DOT Truman Fellow, NRDP Livable Rural Communities Task Force
Tom Groenveld, International City/County Management Association (ICMA), Brownfields Program
Katie Whiteman International City/County Management Association (ICMA) Brownfields Program
CHICAGO, ILLINOIS, EDA CHICAGO REGION CONFERENCE, MAY 2002
Illinois
Kent Tucker, Village of Rautoul
Indiana
Sara Westrick, Indiana Development Finance Authority
Susan Tynes, Indiana Department of Enviromnental Management - Brownfields Program
Judy Weatherholt, Southwestern Indiana Regional Development Commission
Debby Beavin, Indiana 15 Regional Planning Commission
Minnesota
Robert Hutton, Region 5 Regional Development Commission Minnesota
Ohio
Robert F. Hickey, Economic Development Administration Chicago Region
Joe Hadley, Northeast Ohio's Four County Regional Planning and Development Organization
Lana Watkins, Ohio Mid-Eastern Governments Association
Gil Peterson, Eastgate Regional Council of Governments
8
Brownfields and Economic Planning
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KANSAS CITY, MISSOURI, EDA DENVER REGION CONFERENCE, JUNE 2002
Colorado
John Stump, San Luis Valley Development Resources Group
Iowa
Kelly Deutmeyer, East Central Intergovernmental Association
Tom Masey, Upper Explorerland Regional Planning Commission
Mary Kunkle, Iowa Northland Regional Council of Governments
Kansas
Randall Hrabe, Northwest Kansas Planning and Development Commission
Missouri
John Murrell, South Central Ozark Council of Governments
James Dancy, South Central Ozark Council of Governments
Debi Richardson, Southwest Missouri Council of Governments
Montana
Connie Ternes Daniels, Headwaters RC & D/Economic Development District
Evan Barrett, Butte Local Development Corporation
Cheryl MacArthur, Great Falls Development Authority
Paul Tuss, Bear Paw Development Corporation
Nebraska
Terry Meier, Southeast Nebraska Development District
South Dakota
Ted Dickey, Northeast Council of Governments
Eric Senger, Northeast Council of Governments
Utah
Jeri Hamilton, Southeastern Utah Association of Local Governments Economic Development District
Brett Behling, Southeastern Utah Association of Local Governments Economic Development District
Wyoming
Erin Alspach, North East Wyoming Economic Development Coalition
SAN DIEGO, CALIFORNIA, EDA SEATTLE REGION CONFERENCE, SEPTEMBER 2002^
Arizona
Joe Brannan, SouthEastern Arizona Governments Organization
Rosanne Sanchez, City of Phoenix, Office of Enviromnental Programs
California
Dion Jackson, University of Southern California
Jack Marshall, City of Ventura, Information Technology Division City Hall
Thomas Mix, EPA Region 9
Oregon
Anne Berblinger, EDA Seattle Region
Washington
Karen L. Borell, EDA Seattle Region
^ Included three attendees from California, and one attendee from Alaska and the commonwealth of the Northern Mariana Islands.
Brownfields and Economic Planning
9
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NADO and NADO Research Foundation
The National Association of Development Organizations (NADO) is a public interest group founded in 1967 to promote com-
munity, economic and rural development in America's small metropolitan and rural regions. The Association is the largest and
leading advocate for a regional approach to development. NADO's members are regional development organizations (RDO) that
work directly with local governments to develop comprehensive locally driven economic and community development strate-
gies.
The NADO Research Foundation established in 1988, is a 501(c)(3) affiliate of NADO that provides research, education and
training to community and economic development practitioners and policymakers. The Foundation identifies issues and devel-
ops training strategies to help professionals and local elected officials.
NADO
-A- ^ NAT1CWIJ- ASOWTOM QF ceiRCPVGtf CflfiWJEATlCW
Research foundation
The National Association of Development
Organizations (NADO)
Research Foundation
400 North Capitol Street, NW, Suite 390
Washington, DC 20001
Phone: 202.624.7806; FAX 202.624.8813
Web site www.nado.org
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Revitalizing Southeastern Communities
, flftr -f
Environmental Insurance Approaches
Community should understand and promote the use of environmental insurance as a strategy for
reducing the risk at brownfields for private sector parties. There is a whole new wave of insurance
mechanisms that aim to bring certainty to brownfield financing risks. Environmental insurance can
facilitate brownfields acquisition or sales; help satisfy regulatory responsibilities; minimize liability for
past, present or future operations; and the cap site remediation costs. Insurance can help deals close
more easily, because (I) unexpected cleanup costs encountered during the development process will
not add to the developer's anticipated costs; and (2) insurance can cover the possibility that the costs
of additional contamination will not affect the site reuser's ability to pay off mortgages or other notes.
The four most common types of insurance tools used to facilitate brownfield projects are:
1. environmental remediation insurance, for releases that occurred before the policy was
written but discovered after the policy was in place. More and more lenders are requiring
environmental remediation insurance to give them some comfort and cover;
2. stop-loss or cleanup cost-cap coverage, which protects against cost over-runs once a
cleanup plan is defined, or against additional costs resulting from changes in regulatory
standards;
3. pollution legal liability insurance, which offers protection against problems stemming from
the migration of contamination to other sites, or for third-party and property injury claims; and
4. secured creditor insurance, which insures the balance of loans when the borrower defaults
and there is an environmental condition on the property.
A few states have started to explore ways to enhance the availability of brownfield insurance at sites
within their borders. Some cities and states are linking small developers or site owners with insurers,
or helping to form a portfolio of sites to spread risk and costs. For example, in 1999, Massachusetts
adopted a new state program that set up a $15 million fund to subsidize site reuser's environmental
insurance costs, up to 25 percent. The Massachusetts program has been used at more than 160 sites,
leveraged $75 million for cleanup, helped create $1 billion in new brownfields investment, and
contributed to the creation of I 1,500 new jobs. California and Wisconsin are also exploring
environmental insurance strategies. Moreover, localities can now use EPA brownfields assessment and
cleanup grants to pay for environmental insurance premiums.
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Websites:
www.envirobank.org - Environmental Bankers Association
www.brownfieldslaw.com - Brownfields Redevelopers Association
www.brownfieldsassociation.org - National Brownfields Association
www.epa.gov/brownfields/insurebf.htm - Urban Brownfields Redevelopment
www.uli.org/ - Land Institute
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