Revitalizing Brownfields: New Benefits from Old Sites

by Charles Bartsch, Northeast-Midwest Institute

The issue of brownfields first burst onto the economic development scene in 1991, following several court rulings related to responsibility for contamination. Since that time, they have become a major concern in communities all across the country, but especially those struggling to make the transition from an obsolete to a modern economy. They pose significant challenges for local officials and economic development agencies, but also significant opportunities.

The voluntary cleanup programs (VCPs) now in place in virtually all states have gone a long way towards addressing key brownfield concerns and bringing more certainty to site reuse, but local governments are still typically finding brownfield redevelopment to be a costly proposition. The complicated process and legal hurdles of acquiring, cleaning and reusing these sites can be expensive in terms of site preparation expenses and fees, and costly in terms of time delays. In many situations, private developers and financial institutions are not able or willing to act on their own to ensure that the full economic potential of site reuse will be achieved.

Critical funding gaps are, in fact, the primary deterrent to site and facility reuse. Local governments, though, can find creative ways to help overcome the obstacles that environmental contamination brings to the economics of site reuse. For decades, local governments have used public finance and related mechanisms to stimulate economic activity in certain geographic areas or industries. Now, publicly-driven economic development initiatives are reaching into new sectors and incorporating new concerns, such as environmental improvement.

Promoting reuse: What goals should incentives seek?

Incentives for private sector participation in brownfield cleanup and reuse, tailored to sites’ specific needs, should be able to meet one or more of the following goals:

• Reducing the lender’s risk – make capital more available by providing incentives for lending institutions to help companies or projects at sites deemed very risky because of their prior uses;

• Reducing the borrower’s cost of financing – make capital more affordable by subsidizing loan carrying costs, or with initiatives that reduce loan underwriting and documentation costs; and

• Easing the developer’s or site user’s financial situation – incentives such as tax credits can help improve the project’s cash flow.

Public-sector support does not have to be limited to helping specific companies; other related activities can be financed that help improve the broader brownfield investment climate. For example, localities can assume some of the responsibilities for site preparation and cleanup, recovering some of their costs during subsequent site sale or development. They can support brownfield activities by allocating public works resources, or earmarking tax revenues or loan repayments from other programs to help pay for necessary project activities, such as site testing or soil removal. And, communities can promote “no cost” initiatives such as interagency streamlining and links to cost-saving innovative cleanup technologies.

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