| By
Danielle Miller Wagner
Most local government managers would agree that economic growth and housing
development are worthy of their time and resource investments. The ways
in which these local government and community priorities are achieved,
however, vary dramatically depending on available and competing demands
for resources, past practices, creativity and cooperation among stakeholders,
and other factors.
One often-overlooked tool in the manager’s toolbox is the used or
blighted property that sits idle or underused. These properties, called
brownfields, are officially defined as “real property, the expansion,
redevelopment, or reuse of which may be complicated by the presence or
potential presence of a hazardous substance, pollutant, or contaminant”
(Small Business Liability Relief and Brownfields Revitalization Act, 42
U.S.C.A. § 9601(39). 2003).
Despite the legal definition, brownfields can actually make endeavors
like housing construction and job creation more doable and less expensive
for local governments, all the while revitalizing neighborhoods through
eliminating blighted properties. Don’t buy it? Read on for real-life
examples of how local governments have made the brownfields equation work
for them.
Job creation, housing development, and commercial and retail opportunities
fuel the engine of economic development. A multitude of federal and state
resources, combined with local government ingenuity, can be used to spur
brownfields cleanup and redevelopment in support of economic development
goals.
Creating Housing Opportunities in Astoria, Oregon
At the time it was closed and abandoned in 1989, the Clatsop
Lumber Mill in Astoria, Oregon, had operated as a plywood mill for more
than 100 years and employed 217 people. Along with many other mills
in the Pacific Northwest, this plywood mill suffered because of dwindling
forest resources, regional environmental concerns, and global competition.
The mill’s location along the banks of the Columbia River and at
the entrance to the city’s downtown made the highly visible abandoned
site an eyesore as passersby entered the city.
With assistance from a statewide program to assist economically distressed
communities suffering from mill closures, the city established a community
planning process that resulted in the Gateway Master Plan, an urban infill
scheme to revitalize the mill site and its surroundings. During the planning
process, a citizens’ advisory committee appointed by the mayor determined
that the best reuse for the mill site would be as a residential neighborhood
with a village-like atmosphere.
This decision meant that the site cleanup had to support residential uses
by achieving the most stringent and expensive cleanup requirements. According
to City Manager Dan Bartlett, “There was a very strong sentiment
that we did not want our future options for site redevelopment to be limited
by a shortsighted economic decision to leave higher levels of contamination
on-site.”
Turning an abandoned mill site with unknown contamination into a residential
neighborhood was neither an easy task nor a clear path for city officials,
but this did not deter former Astoria Community Development Director Paul
Benoit, who spearheaded the day-to-day effort and persevered despite many
obstacles.
Some of the challenges included the approximately $5 million in debt that
had been incurred by the cooperative of local residents who owned and
previously worked at the mill. In addition, demolition and assessment
activities uncovered buried and leaking capacitors, many tons of PCB-contaminated
soils and debris, and contaminated sediments in the millpond.
The good news, however, was that the Oregon Department of Environmental
Quality (DEQ) was looking to provide financial and technical support to
jurisdictions in Oregon addressing brownfields. In 1995, the DEQ offered
to undertake the cleanup of the mill site on the conditions that the city
reimburse DEQ for half of the estimated $1.4 million in cleanup costs,
and that the city take possession of the site. Further good news was the
city’s receipt in 1997 of a portion of a U.S. Environmental Protection
Agency (EPA) grant to conduct assessments to determine the level and extent
of contamination at the site.
Given the challenge of repaying DEQ for half of the remediation costs,
Astoria officials approached commercial banks and lenders, which required
a guarantee from the city’s general fund. For this reason, Astoria
instead approached ShoreBank Enterprise Pacific, a regional nonprofit
conservation development fund that facilitates environmental and economic
development in rural communities. ShoreBank authorized a loan of $750,000
that was secured by the contaminated real estate.
Following full remediation of the site, the city and DEQ signed a prospective-purchaser
agreement affirming that the state will not hold the city or other future
owners liable for past contamination at the site, as long as the institutional
and engineering controls are upheld. With this agreement in place, the
city took ownership of the property and then sold it to a developer selected
through a design competition. Proceeds from the sale went to repay ShoreBank
Enterprises Pacific.
Today, the developer, Venerable Properties, has completed Phases 1 and
2 of the 16-acre residential and mixed-use neighborhood, and Phase 3 is
under construction. Eighty-two residential lots—plus apartment units,
commercial and retail properties, and parks and paths—will complete
the project. Leveraging the property sale, the city obtained a state highway
fund grant to pay for construction of sidewalks and street improvements
and to improve access to the property.
According to Bartlett, creating residential reuse from a former brownfields
site has proved to be a wise economic decision, as the new neighborhood
property values will exceed the highest values of the plywood mill, and
the new development is a much more desirable neighbor to the surrounding
sections of the city.
Success with this project has led a number of city leaders, residents,
and business leaders to recognize that addressing brownfields is a viable
way to get property back into productive use. This realization has contributed
to the current partnership with Pacific Corp to tackle the cleanup and
redevelopment of an old gasification power-plant site, for which the city
has just been awarded a $200,000 brownfields assessment grant from the
EPA. According to Bartlett, “Success
breeds success!”
Redeveloping Retail in Portage, Michigan
Once an economic engine in the midwestern city of Portage, the abandoned
Portage Steel Fabricating plant and the adjacent Precision Machine manufacturing
facility ceased operations in 1989 and 1988, respectively. Located in
the geographic center of the city, at the intersection of two major roadways,
the area was originally envisioned by the community as a commercial destination
in the Portage Comprehensive Master Plan (1981), long before these facilities
were closed.
During the subsequent city-center area plan (1982) and master plan update
(1996) processes, local government officials, working with residents,
further identified a need for commercial development at this prime location.
In addition, the population of the surrounding neighborhoods was growing
because of expanding residential development, which was generating a need
for additional retail uses.
As a result of these important location and market factors, city officials
considered the probability of a successful commercial redevelopment project
to be very good, even with the added expenses of environmental remediation.
After the site had sat idle for more than 10 years, city officials sought
out opportunities for public/private partnerships to redevelop it. Local
developer Plaza Corp Realty Advisors approached the city about building
a 105,400-square-foot, $11 million retail center at the site. According
to City Manager Michael Stampfler, partnership was the main ingredient
in this city’s first and successful foray into brownfields redevelopment.
“We were thrilled to have a private sector partner willing to make
investments towards breathing new life into the City Centre area,”
says Stampfler.
Knowing that the Michigan Department of Environmental Quality had a program
to revitalize contaminated properties, city officials, in cooperation
with the developer, applied for a site reclamation grant to conduct assessment
and cleanup of the property. The $300,000 awarded to the city through
this program was used to cover approximately 60 percent of the costs of
soil and groundwater remediation, as well as demolition and remediation
of dilapidated buildings containing lead and asbestos.
To further assist the developers, city leaders formed a brownfield redevelopment
authority composed of Portage residents. Their charge was to review and
make recommendations to the city council about the project. To make the
project work financially, the brownfield redevelopment authority recommended
that the council approve a brownfields redevelopment plan.
Approval of the plan enabled the developer to apply for a state of Michigan
single-business tax credit. Through this credit, Plaza Corp was allowed
to receive an amount equal to 10 percent of eligible investments in demolition,
construction, and site improvements. As part of the brownfields redevelopment
plan, the city made water and sewer service available to the area surrounding
the site and also upgraded adjacent roadways to improve site access.
According to Jeffrey Erickson, director for planning and development services,
“We could not have undertaken a project of this magnitude without
a public/private partnership. Each party brought their strengths to the
table, and together we created a project that worked for the city, its
residents, and the developer.”
Consistent with various community comprehensive-planning efforts, the
project has attracted desirable, new private investment. To date, construction
is complete on the first four out of five phases of construction, and
80 percent of the available retail space has been leased.
The impact
on the community has been significant. A once-unproductive property and
eyesore is now a useful asset that provides convenient shopping, dining,
and other goods and services not previously offered here. According to
City Manager Stampfler, “The redevelopment of this area has increased
the stability of our commercial sector and has added more than 125 jobs
in the five short years since construction began. This project was really
a win-win.”
Tools and Resources That Make Brownfields Deals Work
As any real estate expert will tell you, three of the most important things
needed for a successful real estate transaction are location, location,
and location. Both of these examples illustrate that brownfields located
on premium real estate—such as at the gateway to the city, at a
scenic viewpoint, or in the center city close to housing and office space—make
a brownfields transaction feasible for all parties involved.
In both cases, the local government’s investments consisted of technical
expertise; work with community residents to get input and buy-in; general
coordination with all stakeholders, including the state, the developer,
and lenders; and limited financial investments.
For projects without the potential for significant returns on investment,
such as those involving a less desirable location or a nonrevenue-generating
use, like a public recreation area, plenty of opportunities remain for
local governments to participate successfully in brownfields redevelopment.
While not
every funding or incentive program that will help has the brownfields
moniker in its title, many state and federal programs can be used to make
the brownfields equation work. See boxes to right for highlights of several
of these tools and resources.
Future Prospects
Given the rapid pace of development within the United States and the shortage
of greenfields, or previously unused properties, a large percentage of
all future development projects will by necessity take place on previously
used and potentially contaminated sites.
Many brownfields developers, as well as traditional developers without
brownfields experience, are embracing this new reality. Similarly, local
governments are finding creative ways to eliminate the blight caused by
brownfields while achieving their other community priorities.
Partnerships between local government officials and private developers
are becoming the norm in brownfields revitalization projects. According
to midwestern brownfields developer Larry Kilduff of the Kilduff Company,
“Without exception, political will on the part of local government
officials is the ultimate determinant of success.” He adds, “Public/private
partnerships in which both parties take the time to understand each other’s
strengths and limitations, and to support each other every step of the
way, have helped even the most difficult projects to come to fruition.”
Despite stagnant budgets, many Given recent increases in available state
brownfields programs have evolved to become smarter and more user-friendly.
Likewise, the federal brownfields law has clarified some of the liability
issues previously hindering brownfields redevelopment, and federal agencies
have launched new initiatives and funding opportunities.
Finally, given the innovation and spirit of collaboration that accompany
so many brownfields projects, brownfields remain a positive force contributing
to environmental and economic progress at the local level.
For more information on brownfields cleanup and redevelopment, visit www.icma.org
and www.BrownfieldSource.org, ICMA’s brownfields Web resource.
Danielle
Miller Wagner is program director of brownfields programs, International
City/County Management Association (ICMA), Washington, D.C. (dwagner@icma.org).
Julie Pearson, project manager, ICMA, contributed to the Astoria example.
Reprinted with permission from the September 2004 issue of Public Management
(PM) magazine, published by the International City/County Management Association,
Washington, D.C.
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Help
for Local Governments
State Resources:
Michigan and Oregon
A myriad of state programs are designed
to promote brownfields redevelopment, generally through state voluntary
cleanup programs, which are usually administered by state departments
of the environment or natural resources.
These programs serve as cooperative mechanisms by which site owners, local
governments, developers, and nonprofits can approach the state for assistance
in site cleanup and for some protections from future state liability at
a site.
Additional information about the programs in Oregon and Michigan is outlined
below. For information about your state’s brownfields resources
and incentives, contact the appropriate state government office.
Michigan
Baseline Environmental Assessments
(BEAs) and Due Care.
BEAs are used
to gather information about a property being transferred, so that existing
contamination can be distinguished from any new releases that might occur
after the new owner or operator takes over the property. This practice
limits the liability of future owners.
Brownfield
Redevelopment Assessment (BFRA) Grants.
State staff members provide a limited number of free site investigations
to customers, including local units of government and developers, to evaluate
properties for redevelopment. BFRAs give enough information to make remedial
and due-care decisions before a party commits to purchase and/or redevelop
a property.
Brownfield
Redevelopment Grants.
These grants offer funding of up to $1 million to investigate and remediate
brownfields for private development. The redevelopment must have an identified
economic development component, such as private investment, job creation,
and/or an increase in property-tax value.
State Revitalization
Loan Fund. This low-interest
loan is provided to conduct the site assessments, eligible demolition,
and interim response activities necessary to perform assessment and demolition.
Loans may be repaid from brownfield authority tax captures (described
below).
Brownfield
Authorities. These
entities can be assembled by any local government 1) to capture increases
in property-tax revenues generated by the redevelopment of eligible properties
to reimburse parties for the costs of eligible redevelopment activities
(tax-increment financing); 2) to use captured tax revenues to finance
a local site-remediation revolving fund that can be used to clean up other
sites; and 3) to provide eligibility for a single-business tax credit
to a taxpayer in return for investments on an eligible site (single-business
tax).
Oregon
Prospective Purchaser
Agreements. This type of agreement
is legally binding between the Oregon Department of Environmental Quality
(DEQ) and a prospective buyer of contaminated property. Agreements limit
the purchaser’s liability to the state for environmental cleanup
at the property, in exchange for providing a substantial public benefit,
such as a contribution to cleanup at the site.
Targeted
Brownfields Assessments.
Performed by DEQ or its contractors, TBAs generate detailed information
on soil and groundwater conditions at a site and, if necessary, make recommendations
and cost estimates for cleanup.
Brownfields
Redevelopment Fund.
Administered by the Oregon Economic and Community Development Department
(OECDD), this fund provides loans and/or grants of up to $200,000 if a
brownfield is located in an economically distressed community; otherwise,
the maximum award is $150,000.
Community
Development Block Grants.
The OECDD allocates portions of its CDBG funds for brownfields redevelopment
and downtown revitalization.
Credit
Enhancement Fund.
The OECDD offers this insurance tool to help fund businesses that use
the loan proceeds to clean up brownfields sites.
Technical
Assistance to Brownfields Communities.
This program is administered by Oregon State University and furnishes
educational materials and training programs related to cleanup, public
health, and risk issues, as a means of assisting communities in getting
their views heard in decision-making processes.
Federal
Resources
The federal government has made brownfields
cleanup and redevelopment an economic development and environmental priority,
based on federal estimates of approximately 450,000 brownfields in the
United States (U.S. Government Accounting Office, Community Development,
Reuse of Urban Industrial Sites, GAO/RCED-95-172, 1995).
The U.S. Environmental
Protection Agency (EPA) is the lead federal agency with a mandate to help
local governments and communities address their brownfields concerns.
Other agencies are involved in brownfields cleanup and redevelopment,
including the U.S. Department of Housing and Urban Development (HUD) and
the U.S. Department of Commerce, specifically the Economic Development
Administration (EDA). The table contained within this box outlines a small
sample of the financial and technical assistance resources available to
local governments. All are either specifically designed for or can be
used for purposes of brownfields revitalization.
For additional
information on the programs listed below, visit the Web sites of the
individual federal agencies.
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