Exploring options beyond local boundaries

St. Paul, Minn., is one of many cities that have broken the brownfields barrier without breaking their budgets. Since 1997, the St. Paul Port Authority has partnered with neighborhood organizations to select brownfields sites for redevelopment.

Through creative use of public and private funding, it has completed several projects, replacing brownfields with light industrial manufacturing facilities and donating land for designated open spaces.

Local governments have long sought to rid their landscapes of brownfields, but they have been hindered by lack of funding, as well as by liability issues surrounding potential contamination at the sites. That has begun to change in recent years, however, as the federal and state governments have worked to remove legal barriers and provide incentives for redevelopment.

In the last five years in particular, the federal and state governments have dedicated funds for use in local brownfields projects. Additionally, they have broadened the scope of existing grant and loan programs to include brownfields. Together, the financing and incentive options have made it easier for local governments to take on redevelopment and to leverage private involvement in the work.

Federal avenues broaden

Prior to seeking funding, local government officials should analyze the proposed project and outline the goals and anticipated benefits. Once the outline is complete, officials can use that information to match their project’s mission to that of agencies with available funding.

Assistance can come in many forms (e.g., grants, loans, tax relief), and applicable programs may or may not be designed expressly for brownfields redevelopment. For example, St. Paul has funded its brownfields projects with a combination of general obligation bonds, tax increment financing, local sales tax revenues, municipal grants, loan guarantees, Economic Development Administration grants, Community Development Block Grants, Enterprise Community grants, and EPA Brownfields Pilot grants.

The U.S. Environmental Protection Agency is one of the most visible assistants in local brownfields redevelopment. Since 1995, the agency has provided funding to more than 300 state and local governments under Brownfields Assessment Demonstration Pilots (BADP). Grant recipients are selected on a competitive basis and receive up to $200,000 over two years. Funds are applied to pilot projects that test redevelopment models; explore ways to remove regulatory barriers; and promote coordination of federal, state and local resources in site assessment, cleanup and redevelopment.

EPA also is a leading participant in the Brownfields National Partnership Action Agenda, a plan developed by the federal Interagency Working Group on Brownfields in 1996. The Agenda calls for a $300 million investment in community redevelopment projects, backed by economic and service commitments from 25 organizations, including 15 federal agencies. In addition to EPA, participating agencies include the Department of Housing and Urban Development, the Economic Development Administration, the Department of Transportation and the National Oceanic and Atmospheric Administration.

As part of the Agenda, each of the participating federal agencies has established its own mission, defining how it will invest in redevelopment efforts. EPA’s Brownfields Economic Redevelopment Initiative includes BADP as well as Brownfields Cleanup and Revolving Loan Fund Pilots. Under the latter program, a city may receive up to $500,000 over five years, using the money to offer low-interest loans and leverage private involvement in its cleanup project(s). EPA also has established Brownfields Job Training and Development Demonstration Pilots; the program offers local governments up to $200,000 over two years to train residents in cleanup issues and practices, and prepares them for future employment in the environmental field.

Like EPA, HUD is offering targeted brown-fields funding through its Brownfields Economic Development Initiative (BEDI). Earlier this year, Congress appropriated $25 million for BEDI to provide grant assistance to communities participating in the Section 108 Loan Guarantee program. Funds may be used to enhance the security of the guaranteed loan or to improve the viability of a project financed with a guaranteed loan. Additionally, HUD supports use of its Community Development Block Grants for brownfields projects that meet the agency’s national objectives.

States target brownfields

Just as the federal government offers a variety of financing opportunities for local brownfields projects, state governments are expanding their avenues of aid. For example, some states offer grants, technical assistance or special re-development zones where incentives such as tax increment financing (TIF) can beapplied. With TIF, site improvements such as environmental cleanup and redevelopment are financed using the difference between the property’s current assessed value and the value of the property after improvements.

Public benefit and economic development components of brownfields projects often qualify them for state funding. States may offer programs – for example, industrial revenue bonds or development funds – through their departments of commerce; tax credits for job creation, training or capital improvements; small city programs through their HUD allocations; or historic rehabilitation tax credits. Some state environmental departments offer brownfields technical assistance or grants, or they provide financial support indirectly through programs such as clean water bonds.

The possibilities for brownfields funding continues to grow. Better America Bonds, which would provide $9.5 billion in bonding authority to preserve open space, protect water quality and clean up brownfields, are proposed as part of the Clinton Administration’s Livability Agenda. The interest-free bonds would be payable in 15 years. Bondholders would receive federal tax credits equal to the amount of interest they would have received from the communities.

Creative financing is the key to budget-saving brownfields redevelopment. By combining federal, state and private funds with their own resources, local governments have more opportunities than ever to turn abandoned and contaminated sites into attractive, economically productive properties.

Michael Bryan is a brownfields specialist for Research Triangle Institute. He can be reached at (919) 485-2719 or by e-mail at [email protected].