Transcript Slide 1

Brownfield Redevelopment
and Reuse
Charlie Bartsch
Vice President/Brownfield Expert
ICF International
July 18, 2007
www.icfi.com
Redevelopment with an Environmental
Twist -- Emergence of “Brownfields”
• Redevelopment takes place on sites that have been used
before
• Given the economic history of so many places,
redevelopment sites are often former older industrial or
commercial facilities with at least some degree of real or
perceived contamination – including…
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Big former chemical, steel, other industrial sites
Small manufacturing sites – foundries, tool-and-die shops, tanneries
Mining, timber, and food processing in rural areas
Rail yards, utility sites
Commercial facilities such as gas stations, dry cleaners – even old
supermarkets, restaurants
1 Million Brownfields May Exist…
Bend, OR
Baraboo, WI
Somerville, MA
New London, CT
50,000 Successes and Counting….
Bend, OR
Baraboo, WI
Somerville, MA
New London, CT
Process and Funding Barriers to
Brownfield Reuse
What steps need to be worked through for the
brownfield redevelopment process to work?
Identifying contamination
• Unknown contamination
• Known contamination with unknown cleanup cost
and time
Addressing contamination
• Determining end user to decide “how clean is clean”
• Defining cleanup plan to know when cleanup is
complete
Process and Funding Barriers to
Brownfield Reuse (cont.)
What steps need to be worked through for the
brownfield redevelopment process to work?
Meeting project economic challenges linked to
environmental cleanup
• For site assessment, remediation, underwriting
expenses, institutional controls, environmental
insurance
Finding redevelopment financing for brownfields
• Leveling financial playing field between greenfield
and brownfield development in the face of real or
perceived environmental risks
“Liability” – In a Financing Context
The issue of "liability" is evolving in practice -from liability in the traditional legal sense to
lender and new owner concerns over:
• reduced value of collateral because of environmental
factors and perceptions
• borrower inability to pay both cleanup costs and loan
obligations simultaneously -- cash flow capability of
the project to absorb remediation
• lender having to assume cleanup costs in the event of
foreclosure, in order to dispose of the property
• lender having to forfeit collateral in the face of
cleanup that exceeds asset value
Voluntary Cleanup Programs/Voluntary
Response Programs (VCPs)
At brownfield sites – state VCPs rule!!
Federal Brownfield Redevelopment Act (2002)
put final authority with states that have VCPs or
comparable voluntary response programs
• Brownfield sites addressed thru VCPs are protected from
EPA enforcement and cost recovery action (except in the
case of a few statutorily defined re-openers)
• All 50 states now have these programs in place
• VCPs/voluntary response programs are a new effort –
half these programs are less than 5 years old
VCPs and Redevelopment
Increasingly, VCPs are a Key Economic
Development Facilitator
VCP process certainty brings comfort and closure
VCP assurances increase willingness of developers
to consider contaminated sites, innovative
technologies, and institutional controls -- all of
which encourage them to go forward with redevelopment
VCPs foster state and local redevelopment
partnerships
Redevelopment process through a
“brownfield” lense
Step 1 – identifying a brownfield site, its
options
Step 2 – learn about your state VCP
• Process, costs, time-frame
Step 3 -- identifying interested parties
• Direct parties – buyers, sellers, PRPs,
technical/transaction support
• Indirect parties – citizens and other stakeholders
• Environmental regulators
Redevelopment process through a
“brownfield” lense
Step 4 – defining the contamination plan of attack
• Excluding contaminated portion
• Capping
• Innovative technologies possible?
Step 5 – preparing a brownfield feasibility analysis
• Determine costs for environmental consultants and tests, legal
fees linked to contamination
• Prepare cleanup plan
• Satisfy lender requirements
• Establish prospective purchaser liability relief
• Define ongoing environmental monitoring needs
Redevelopment process through a
“brownfield” lense
Step 5 (cont) – preparing a feasibility analysis
• Identify factors that could limit project feasibility,
such as diminished market demand, high cost of
cleanup, stigma
• Consider sources of funding for site assessment
and cleanup
Step 6 – negotiating and structuring the deal
• Determine responsibility for cleanup, financial
incentives, allocation of private liability incentives
such as insurance or indemnifications
• Secure public liability assurances
Redevelopment process through a
“brownfield” lense
Step 7 -- purchasing or selling the contaminated
property
• Establish site access and environmental information
provisions
• Define time frames for pre-development activities
Step 8 -- carry out cleanup
• By “who” depending on step 7
• Goal is to win VCP and market approval, provide
comfort to lender, protect health and the
environment
Redevelopment process through a
“brownfield” lense
Step 9 -- monitoring ICs, preserving NFA
• Defining who will do it, who will pay for it, how
it will be ensured over time
Step 10 -- doing it again!
• Communities and developers often build on their
experience and initial success – level of effort
economies of scale
Public Redevelopment Support Can Take
Many Forms, Have Various Goals…
 Reduce lender’s risk
 loan guarantees; companion loans
 Reduce borrower’s costs
• interest-rate reductions or subsidies; due diligence
assistance
 Improve the borrower’s financial situation
• re-payment grace periods; tax abatements; training and
technical assistance help
 Provide comfort to lenders or investors
• loan guarantees; performance data
 Provide resources directly
• grants; forgivable/performance loans
Federal Financial Assistance Programs
for Redevelopment
Loans
 EDA’s Title IX (capital for local revolving loan
funds)
 HUD funds for locally determined CDBG loans
and “floats”
 EPA capitalized brownfield revolving loan
funds
 SBA’s microloans
 SBA’s Section 504 development company
debentures
 EPA capitalized clean water revolving loan
funds (priorities set/ programs run by each state)
 HUD’s Section 108 loan guarantees
 SBA’s Section 7(a) and Low-Doc programs
Grants
 HUD’s Brownfield Economic Development
Initiative (BEDI)
 HUD’s Community Development Block Grants
(for projects locally determined)
 EPA assessment grants
 EDA Title I (public works) and Title IX
(economic adjustment)
Grants (continued)
 DOT (various system construction and
rehabilitation programs)
 DOT’s transportation and community
system preservation (TCSP) pilot grants
 Army Corps of Engineers (cost-shared
services)
Equity capital
 SBA’s Small Business Investment
Companies
Tax incentives and tax-exempt financing
 Targeted expensing of cleanup costs
(through 12/31/07)
 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)
State Brownfield Innovations
• Tax credits, abatements, other incentives
linked to site reuse (22 states)
• Targeted financial assistance (19 states)
• Direct grants/financial assistance (13 states)
• Process initiatives to enhance/support
brownfield revitalization (14 states)
Common Local Financing Tools
Putting a Brownfields “Spin” on the Tried-andTrue…
• Tax increment financing/TIF-type financing
• Tax abatements
• Tax forgiveness
• Special service areas or taxing districts
• Revolving loan funds (RLFs)
• General obligation bonds
• Property transfers
Housing projects on vacant properties
and brownfield sites – diverse
situations, places, types, and
financing …
 Project Freedom – Lawrence, NJ
 Charleston Place -- Seaford, DE
 Berkey and Gay Building – Grand Rapids, MI
 Mills of Carthage – Cincinnati, OH
 Victor Building – Camden, NJ
 Visiting Nurses Assisted Living – Somerville, MA
 American Can – New Orleans, LA
Project Freedom – Lawrence, NJ
• Project Freedom at Lawrence is a 54-unit
apartment complex and community
center designed and constructed
especially for adults with disabilities.
• This 13-acre site was a vacant lot owned
by the New Jersey Department of
Transportation (DOT) for 50 years.
• Lawrence Township acquired the
property from DOT; Project Freedom
negotiated a 75-year lease with a deed
restriction for affordable housing.
• Unexpected contamination, ash and
demolition debris from historic fill, was
addressed with an engineering control –
the building’s concrete slab serves as a
cap
• New Jersey DEP has issued a No Further
Action (NFA) letter
• Project Freedom opened in November
2003; by January 2004 it was fully
occupied
Charleston Place – Seaford, DE
• Abandoned sewing
factory, built in 1920s
• Developed by non-profit
Better Homes of Seaford
• $600,000 USDA rural
development loan, plus
DE Housing Authority
and private bank
participation
• Ribbon cutting 1/9/06;
fully occupied by March
manufacturer, abandoned in 1960s
• $35 million cleanup/conversion to
mixed use
– 242 apartments
– 100,000 sq ft commercial
(restaurant, retail, prof. offices)
– 450 space parking ramp
• Rehabilitation tax credits key to
attracting individual equity
contributions
• 90 permanent jobs created
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Berkey and Gay Building -- Grand
Rapids, MI
Former downtown furniture
Mills of Carthage – Cincinnati, OH
• Abandoned industrial property
transferred to new owner at below
market value
• As part of deal, owner agreed
to take site through Ohio VCP,
clean it up, and reuse it
• First new housing in Carthage
neighborhood in 40 years
Victor Building – Camden, NJ
• Abandoned former RCA Victor Building
on Camden’s waterfront, with pervasive
PCBs
• Site intended for residential re-use;
challenge was keeping $7 million cleanup
manageable
• NJDEP provided t.a. to developer,
working with him on remedial and
monitoring applications, ICs, entombment
of residual PCBs – strategies that allowed
cleanup and redevelopment to go forward
concurrently, all with considerable cost
savings
• Result – $60 million private investment in
341 units, 1st market rate housing built in
Camden in 40 years, landmark “Nipper
Tower” saved
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Visiting Nurses Assisted Living -Former mattress factory,
Somerville, MA
vacant 2 years.
Contaminants included
barium, lead and petroleum
The project's redeveloper, the
non-profit Visiting Nurses
Association, remediated the
site and demolished the
existing structures
VNA constructed an assistedliving facility and health
center, containing 97 units for
low-to-moderate income
seniors.
Leverage -- $100,000 in
CDBG was used as a costcontainment reserve.
American Can Company – New Orleans, LA
• Developer transformed this National
Register landmark, abandoned
warehouse on 6.6 acres
• Converted to 268 new apartments
(20% affordable) with retail and
parking space
• Total project cost -- $42 million
• Financing included -- $5 million
HUD Section 108 loan, $1 million
BEDI loan, $1 million city economic
development loan; $29 million
LIHTC allocation
• Rehab tax credits critical component
• Kimberly-Clark Corporation,
through its subsidiary Housing
Horizons, provided tax-credit equity
for approximately $7.8 million in
historic tax credits.
For further information………..
For additional examples and information….
[email protected]
(202) 862-1134
www.icfi.com