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Innovative Funding Mechanisms for Municipalities, CBOs, and Private Developers
Adequate funding is essential to brownfields’ investigation, remediation and redevelopment. State financial assistance for these activities can very substantially increase the likelihood that a redevelopment project will be completed.
Redevelopment of a former Westinghouse Electric site in Bridgeport, Connecticut, illustrates how state funding can make redevelopment feasible. Westinghouse ceased industrial operations on the site—a 515,000 square foot electric facility located in the heart of the business district—in the 1980s. Subsequently, because of a decline in the immediate area's economy, there was very little development activity and Westinghouse couldn’t sell the property. After an ill-fated plan to put low-income housing on the site, Westinghouse eventually took the site off the market. It formed a partnership with the Bridgeport Office of Planning and Economic Development (OPED) and negotiated a deal whereby the City agreed to purchase the site from Westinghouse for one dollar after Westinghouse cleaned it up. Agreeing to demolish the structure on the site and redevelop it, the City created a community development corporation (WECDC). Made up of local business people and residents, it secured significant financing from the State, including $10 million from the Connecticut Department of Economic and Community Development and $2 million in State funds earmarked by the Governor for the area as part of a $100 million four year commitment to the City of Bridgeport. An additional $2 million came from HUD. The funding enabled the City to demolish structures on the site that had been major barriers to redevelopment.
Public financial assistance for brownfield redevelopment can also help ensure that communities will be meaningfully involved in planning, implementation and follow-up. The benefit is not only to the community but also to the developer, because community involvement can help allay the concerns of local residents about the local impact of a project and get a community on board quickly.
Still, community development block grants and other direct state assistance may not always be available to municipalities or community-based organizations for brownfields projects. In most cases, private developers must provide the bulk of the financing for redeveloping brownfield sites. Private-sector financial incentives are therefore crucial in making brownfields as appealing to developers as greenfields.
Private developers need financing for site assessment, site purchase, and demolition activities to get a project underway. Financial incentives such as tax increment financing (TIF) and corporate tax credits, property tax exemptions and abatements, are among tools that have effectively encouraged beneficial redevelopment in many states and municipalities.
In addition, providing financing to private developers can help stimulate local job creation, one of the primary goals of brownfield redevelopment for many communities—particularly for low-income communities. One way to accomplish this is by tying such incentives as TIF and tax credits to specific job creation, local-hiring and job-training goals. Similarly, limiting up-front funding to projects with feasible redevelopment plans that add value to the community would promote the use of public funds that are consistent with building sustainable communities.
States can also provide greater funding or special tax incentives for brownfield redevelopment in designated “special need zones” where the jobs produced by brownfield redevelopment are especially needed. These areas are often referred to as “Enterprise” zones, “Neighborhood Preservation” areas or “Redevelopment” zones. Sometimes these financial incentives take advantage of federal Empowerment Zones.
Private sector financial assistance provided by the state can also be structured to ensure that there is effective community involvement in brownfield revelopment. State assistance can be coupled with a requirement for community involvement in planning, clean up and redevelopment. State financing can also be structured to ensure that projects meet more stringent cleanup criteria.
Cleanup Flexibility and State Oversight
Flexible cleanup standards are a key factor in the success of many redevelopment projects. They allow cleanups that are tailored to the end use (an apartment complex may require more thorough cleanup than if the end use is for a big box store and parking lot, for example) and they employ institutional controls—administrative or legal requirements—instead of requiring adherence to standards that may be prohibitively expensive. Institutional controls can include land use and zoning restrictions (easement, covenants, etc.), as well as specific building permit requirements. When used in conjunction with “engineering controls”—such as waste treatment and containment of hazards on the property—they can significantly reduce and/or minimize human exposure to contamination in the property.
Reducing the cost of potentially expensive site cleanups—while protecting long term public health—can make the critical, marginal difference between a clean-up and continued contamination. In many cases of successful redevelopment, flexible remediation alternatives such as pathway elimination (leaving contamination in place but capping/paving over it) versus excavation (of the contaminants) have been successfully utilized where residential development was not the planned end use. While government must be careful not to allow what’s been derided as a “pave and wave” approach, carefully capping contaminants instead of excavating them saved one developer $8 million in cleanup costs without health consequences.
Nevertheless, states must ensure that cleanup standards adequately protect the health of the surrounding community. Since a significant objective of a brownfields initiative is to benefit these communities, states must ensure that cleanups do not place community health at risk far into the future. This goal can be accomplished by providing for future long-term state access to monitor the site and community notification requirements when certain institutional (legal and administrative) controls are put in place.
In a successful Oregon redevelopment project, the state Department of Environmental Quality included provisions regarding future testing and site access into their Prospective Purchaser Agreements with the City and the developers, conditioning liability protection on such access. This project was undertaken to clean up and redevelop seven plywood mill sites in Astoria, Oregon that were abandoned when the Northwest timber industry declined. The project was led by the Rural Development Initiative (RDI)—a nonprofit development corporation that provides assessment, training and technical assistance to rural communities by working with those communities directly or with organizations that support rural communities—in conjunction with the mill owners, private financial partners (including banks and law firms) and community-based redevelopment teams. RDI organized “local action advisory committees” (LACs) in the area surrounding each site to discuss and evaluate options for re-use of the properties and to shape redevelopment strategies. RDI conducted initial assessments of the sites to determine the level of contamination. Where levels of contamination were high, the site was usually entered into the state’s voluntary cleanup program. The Department of Environmental Quality (DEQ) then conducted investigations and determined the proper remedial action. In accordance with the state cleanup law, the developer of each site enters into a Prospective Purchaser Agreement (PPA) which limits future liability but also stipulates cost-sharing provisions for remediation, on-going requirements for testing and future access by the DEQ. The PPA also mandates the involvement of DEQ in redevelopment planning activities.
As others have recognized, successful brownfield redevelopment which also promotes revitalization of communities depends heavily on transparency in cleanup and redevelopment process. At a minimum, such transparency requires community notification and collaboration in the decision about which engineering and institutional controls to employ in the cleanup process. Early and ongoing community outreach is important for convincing local residents that a remediation project is safe. If the public is excluded from the planning process from the beginning, they are far more likely to be hostile to the project. Full disclosure to the community of the contaminants that will be left on the site should be required. In addition, institutional controls should be monitored by the local community and city government and not by the developer.
Moreover, the state has an ongoing duty and legally defined role in protecting the public health and the environment. For example, states can “scale” funding toward public health goals, by providing increased funding for projects that meet the most stringent cleanup standards, as opposed to cleanups based on site specific risk-based factors (according to the future use of the property). Such financial incentives will encourage cleanups that are more protective of the public health and do not create problems in the future regarding institutional controls. If more funding is available to a developer for the remediation stage of development as opposed to the assessment stage, a developer is more likely to remediate the site to a more protective standard.
Public/Private Partnerships and Community-Based Planning
Strong public/private partnerships, therefore, are often central to meaningful community participation in site remediation and redevelopment and hence successful brownfield redevelopment and urban revitalization. A crucial component of the Oregon project discussed above was the collaboration between the community and the property owners in the redevelopment process. These partnerships entail building relationships between private developers, community based organizations and other locally-based institutions that can mold the redevelopment effort at a particular site, while also planning the revitalization of distressed neighborhoods. Moreover, to the extent that a project advances a community’s separate growth plans, “it stands a better chance of securing public and private investment, as well as gaining political and community support.”
Active involvement of local governments, in particular, has been crucial in many successful brownfield redevelopments and revitalization efforts. This involvement can range from the negotiation of the sale of the property between the parties and coordination of public involvement in a project to undertaking actual cleanup and remediation activities.
In many successful brownfield projects where the municipality owned the property, the municipality undertook site remediation itself or conducted its own investigations. In some cases, it discovered there was little contamination. Typically, municipalities make these investments where a private entity has development plans but is unwilling to take on the substantial financial risks and uncertainties associated with redevelopment. In these cases, the developer approaches the local government, promising to buy the land and develop it if the municipality agrees to resolve the environmental issues. In other instances, the municipality forms a development agency to oversee the redevelopment. Such local investments in brownfield properties can pay off when they trigger revitalization of an entire area. In turn, municipalities benefit from these investments in the long run as property taxes and revenues return much or all of taxpayers’ initial outlays.
The redevelopment of LTV Southside Works project in Pittsburgh, Pennsylvania is a good example of the importance of public and private collaboration in bringing a project to fruition. When industrial activity on this site ended, the local community development organization, the Southside Local Development Corporation, was formed to ensure that development would be consonant with expressed community needs. The Southside LDC began to discuss the future of the site with a group of community representatives comprising the Southside Planning Forum. This resulted in a series of ten policy recommendations to guide redevelopment, including potential reuses of the site. After a major public outcry against the Pittsburgh Urban Redevelopment Authority’s plan to build a gambling casino on the site, the Authority and the Southside Planning Forum entered into an agreement requiring a community-based planning process.
The City eventually bought the LTV site from the owners, and the State Department of Environmental Protection oversaw site remediation. Funding for assessment and remediation came primarily from the municipal capital budget and a state Industrial Site Reuse Program grant. The property was eventually sold to private developers who financed the development of new housing , retail uses, entertainment facilities research and development offices. Southside Local Development Corporation continues to work on the project to ensure that a portion of the 6,000 jobs expected to be created will go to community members.
The LTV project was successful largely because the urban redevelopment authority bought the property and worked with the surrounding community—including holding several community meetings to solicit opinions from the residents. Strong partnerships were created between the community–which had a history of activism, including several community-based organizations—the City, the State, and private parties, including the original developer. Had the property been bought and redeveloped entirely by a private developer the community may have had little or no say in how the site was remediated and what was built there.
Community Outreach
The Circle F project in Trenton, New Jersey is a good example of municipally-fostered community involvement. The redevelopment of this factory worked in large part because the City of Trenton reached out to the community, the community then took on the project, and the City and community were united in their determination to see the project completed.
When the Circle F factory closed, the City designated the site as a “Neighborhood Preservation Area” and eventually bought half of the property. Circle F cleaned up the site to meet State of New Jersey guidelines in exchange for a Letter of Completion from the New Jersey Department of Environmental Protection.
There was no community organization or involvement at the time the Circle F factory closed, even though many residents wanted the site cleaned up. The Director of the city’s “Neighborhood Preservation Program” organized community residents and counseled them on how to articulate their concerns and neighborhood needs to public officials. From that point, residents became involved in every step of the process, working with the City to choose a developer, Lutheran Social Ministries, a local company open to community involvement in development decisions. The community association formed out of these efforts worked with the company to choose a local architect to design a housing complex that would serve the community’s needs—including housing for seniors, a community center, and a large public space for interaction between neighbors.
Like the Circle F project in Trenton, there was significant community involvement in the North Birmingham Industrial Redevelopment Project in Birmingham, Alabama. But unlike Circle F, community-involvement structures were already in place, specifically the 25 year-old Citizen Participation Program, which was created to help ensure that all neighborhoods are represented and that each community’s goals are realized in City projects.
The North Birmingham project involved the cleanup and redevelopment of an old industrial area once the home of numerous heavy industries. The decline of industrial activity left a site littered with contaminated industrial property and surrounded by severely economically distressed neighborhoods. Community participation was extensive. The Neighborhood Council elected by each neighborhood under the city’s “Citizen Participation Program” worked with the City to reach consensus on an appropriate development plan. Various other non-profit organizations took part in the development; these included the Greater Birmingham Ministries, which conducted a door to door survey to assess housing needs in the area; the Birmingham Environmental Clearinghouse (created with funds from EPA Pilot Project program), which ran community outreach and education and oversaw environmental issues for the site; and the North Birmingham Economic Revitalization Coordination, created by the Clearinghouse, which coordinated redevelopment (made up of local residents, bankers and business people). Other local organizations and institutions also broadly supported the project.
The project has been working largely because the structures were in place for community involvement and the community took “ownership” of the project. The community and the Clearinghouse worked together on all aspects of redevelopment from overseeing cleanup and choosing end users to relocating residents. Redevelopment is proceeding in a way that also promises revitalization of the community. The project is attracting businesses and employment opportunities for the residents. Job training programs have been established to teach neighborhood residents the skills needed for the industries that would be coming in. In the end, the City’s support, the activism of the local community, the presence of community based organizations, and the formation of partnerships between all of these actors proved indispensable to the success of the revitalization effort.
Although municipal governments are generally in a better position than state governments to conduct public outreach, state governments can also step in and work with communities where the local government has not focused on brownfield redevelopment—which in turn can help create opportunities for these communities to initiate projects themselves. State outreach can provide communities the opportunity and tools to identify and redevelop sites of their choosing, as opposed to sites the municipality identifies for redevelopment and later involves the community. If the only sites that are redeveloped are the ones that a municipality identifies and pursues, many sites will be left out. There may be sites that a community perceives to be in need of redevelopment, but the community does not know that state redevelopment funds are available. Public outreach is an integral part of a state policy that seeks to involve communities in redevelopment and possibly provide the opportunity for community revitalization.
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