Coming Clean for Economic Development

Charles Bartsch Senior Policy Analyst Economic Development		Elizabeth Collaton Senior Policy Analyst Pollution Prevention and Waste Reduction
	Edith Pepper Policy Analyst Brownfields Research

Coming Clean for Economic Development was prepared with an award (#99-06-07382) from the Economic Development Administration within the U.S. Department of Commerce. The statements, findings, and recommendations are those of the authors and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.

Reproduction of this report, with the customary credit to the source, is permitted.

The Institute organized the first national conference on brownfields cleanup and reuse in Chicago in June 1991. It also has published New Life for Old Buildings: Confronting Environmental and Economic Issues to Industrial Reuse (1991, 95 pages); released Industrial Site Reuse, Contamination, and Urban Redevelopment (1994, 49 pages), the first collection of case studies on communities struggling to redevelop contaminated industrial sites; participated in community brownfield coalitions in Chicago and Baltimore; and testified before congressional committees. The Institute also has arranged a series of forums, hosted by members of Congress, in Detroit, Cleveland, Pittsburgh, East Chicago, and Kalamazoo.

Northeast-Midwest Institute
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Executive Summary

Virtually every city in the nation's older industrial regions, no matter its size, grapples with the challenge of unused manufacturing facilities and other industrial sites. These properties include the shuttered steel mills in western Pennsylvania and Chicago's southeast side; mining operations in Montana and Arizona; closed timber mills that dot many small towns in Washington and Oregon; and declining defense contractors, metal plating factories, machine shops, and chemical plants in communities from Michigan to Mississippi.

Local public officials, economic development practitioners, and plant owners who have sought to revitalize fallow industrial properties face a daunting challenge: contamination of the buildings, equipment, and surrounding land and water. Public concern about health effects from hazardous chemicals, stricter environmental laws, and changing private-sector development priorities have made it increasingly difficult for communities to restore and reuse former manufacturing sites.

The precise magnitude of site contamination is unknown, but is no doubt pervasive and significant, especially in areas with long manufacturing histories. Some experts have suggested that more than 500,000 sites nationwide show evidence of at least some contamination which could trigger federal enforcement and liability rules and ultimately inhibit owners from selling the site, securing financing, or proceeding with reuse.

In framing the brownfield issue, it is essential to distinguish between Superfund high priority sites — the worst of the bad — and those sites characterized by low and medium levels of environmental contamination, typically industrial facilities in operation before the 1980 enactment of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund), the main federal environmental law affecting the cleanup and reuse of these sites. To date, the Environmental Protection Agency (EPA) has identified almost 1,300 high-priority sites that are the true environmental nightmares that present serious health and safety risks and require considerable time and enormous resources to remediate. The balance of affected sites — characterized as "brownfields" — generally are easier to clean and offer greater opportunities for reuse.

The interplay between the economic and environmental arenas is dominating community development strategies in more and more jurisdictions across the country. Acquiring, cleaning, and redeveloping older, and often abandoned, industrial sites can be very expensive and time consuming. In many situations, private developers and financiers are not able, or willing, to act on their own to ensure that the full economic potential of site reuse will be achieved. Rightly or wrongly, the ambiguity of statutes governing liability and cleanup has increased the uncertainties and perceived problems associated with brownfield activities. Heightened concern over environmental problems has brought a new dimension to the risks that lenders face and the hurdles that developers and local agencies must overcome. Cleveland Mayor Mike White has called contamination the number one issue facing development practitioners.

Communities that allow brownfield sites to remain inactive lose the tax revenue and employment opportunities generated by thriving operations. Existing streets and roads, water lines, rail spurs, and other infrastructure systems go unused, while additional tax revenues are spent to extend the same services to developments springing up in the outlying "greenfields" beyond the urban boundary. Coming Clean for Economic Development shows that vigilant attention to development priorities can help reverse these patterns and invite growth and investment back into existing cities.

Developing New Tools

Brownfield cleanup and reuse can be a costly proposition. The complicated process and legal hurdles can be expensive in terms of expenses and fees, and costly in terms of time delays. Site evaluation processes, testing, possible legal liabilities, and other factors often deter private-sector efforts to bring old industrial sites back to productive use.

Clearly, the public sector can do much to help level the playing field between greenfield and brownfield sites. Some existing federal economic development programs, while not targeted specifically to brownfield needs, are well suited to support site characterization and reuse projects. In the environmental arena, existing strategies aimed at transportation planning, traffic congestion mitigation, air quality improvement, and preservation of open space can supplement EPA's Superfund and brownfields programs in facilitating the reuse of industrial sites. Many of these strategies can be linked creatively to help tilt the balance toward brownfields redevelopment. In addition, Congress is considering several proposals to increase federal resources for brownfield projects.

No single "best" public-sector approach fits since brownfield projects vary by type, developer, level and class of contamination, and financial position and desired return of the site owner or developer. Yet the variety of incentives — used separately or in combination — should be able to reduce the lender's risk, reduce the borrower's cost of financing, and ease the developer's or site user's financial situation.

State and local governments have an important role to play in brownfield cleanup and revitalization projects. In many respects, they are the innovators. Brownfield success stories, such as those recounted in this guidebook, typically are found in areas that have adopted their own site characterization and reuse tools, and creatively built on the foundation provided by federal programs and policies. An increasing number of state and local jurisdictions have crafted innovative mechanisms to help businesses and communities establish finance programs that ease the cost or terms of borrowing, fill funding gaps that the private sector will not bridge, or adapt environmental cleanup programs to the special needs of contaminated sites. The rapid adoption at the state level of voluntary brownfield cleanup programs is another indication of the heightened willingness of public agencies to experiment with new cleanup and financing protocols. Such innovation is helping drive federal attention to brownfields.

Resources

As much as brownfields is a national problem, finding the right solution resides in the local experiences of all of the stakeholders affected by these properties. Neighboring communities, area businesses and lenders, and local and regional officials are developing strategies and forming partnerships that help return brownfields to productive use.

Creatively crafted and carefully targeted incentives and assistance can help advance cleanup and reuse activities and achieve significant economic, social, and aesthetic benefits. These efforts do not have to be "giveaways." The notion of the entrepreneurial public sector, increasingly prevalent in many types of development programs, can be extended to brownfield initiatives. Public agencies and organizations that share in project risks also can share in their rewards by recovering some of their investment during subsequent site sale or development.

Brownfield revitalization increasingly is seen as an opportunity to alleviate sprawl, traffic congestion, and air quality problems in metropolitan areas. At the same time, some communities are viewing brownfield reuse as a means to address much-needed job development and training for dislocated workers and minority populations. Coming Clean for Economic Development provides the backdrop against which these environmental and development concerns play out in specific community situations. The guidebook also describes state and federal efforts to remove the barriers to brownfields cleanup and reuse.

How to Use This Guide

Economic development practitioners increasingly confront environmental concerns and the added costs associated with site contamination. Financial assistance efforts — the traditional purview of economic development agencies — address only part of the problem. More complicated to address are the liabilities and uncertainties created by environmental laws and programs. Economic development practitioners, therefore, need to understand these laws and programs — how they work, what concerns they can address, and how they can be packaged creatively with familiar financing tools.

Coming Clean for Economic Development attempts to bring this knowledge to local officials struggling to increase economic activity in their communities. This guidebook, which offers detailed information on state and federal regulations and programs, should help economic development practitioners understand the problems, opportunities, and available tools needed to thoughtfully integrate environmental cleanup into the economic development process. Recognizing that significant variations exist from site to site, it provides a contextual framework, rather than a cookie-cutter approach. The case studies of brownfield reuse success stories are meant to be illustrative, not definitive examples.

Framing the Issue. The first chapter analyzes the most common barriers to brownfield reuse, emphasizing national banking regulations and policies that inhibit financial institutions from taking more interest in brownfield projects.

Environmental Considerations. Chapter 2 reviews the environmental regulations and programs governing brownfield cleanup and reuse. It also examines several related issues, including environmental justice, job training, transportation planning, and open space preservation.

Financing Tools. Chapter 3 focuses on the many tried-and-true financing tools that can be given a brownfields "spin," or adapted to deal with the cleanup and reuse of contaminated industrial sites. In addition to federal tax incentives and programs administered by the Department of Housing and Urban Development, this section examines an array of state and local tools. The chapter also illuminates the environmental issues associated with reusing contaminated military facilities.

Environmental Program Tools. Chapter 4 describes the increasing number of innovative "voluntary cleanup programs" launched by state environmental agencies in order to bring consistency and certainty — in terms of time, effort, and cost — to the assessment and cleanup of contaminated sites.

Success Stories. In spite of numerous barriers, more and more communities are bringing new life to old buildings. Chapter 5 features eight in-depth case studies of projects that have worked. Each one is laid out in several sections: background and nature of the brownfield problem; how the challenge was met; the regulatory framework guiding the solution; how project financing was identified and structured; impacts and benefits stemming from reuse; and lessons learned.

In addition, Coming Clean for Economic Development provides numerous project and agency contacts for those wishing to follow up on specific ideas or examples. The guide also features a brief summary of the many federal legislative proposals introduced in 1995 to address brownfield issues.

Table of Contents

Executive Summary

Developing New Tools

Resources

How to Use This Guide