C. Benefits from a Changing Framework:
Across the country, the EPA, state, and local governments hope that by merging environmental cleanup with economic development they can revitalize aging cities by encouraging industry to halt their flight to our nations greenfields. “When a contaminated site sits in the middle of a community, even after the immediate danger to public health has been removed, that neighborhood looses jobs, looses its tax base, looses hope. Meanwhile, development goes on outside the city, in fields and forests never before developed, leading to more driving and creating of more pollution.” The recent and continuing change of laws and regulations will spur development of our nations 450,000 brownfields. The development of brownfields will raise the tax base of our cities, bring jobs back into the community, limit urban sprawl, stop the development of unneeded infrastructure, and most importantly clean the environment in which we live.
D. Opportunities for Developers:
Developers, according to teaching, have an 8 stage model for Real Estate Development: inception of idea, refinement of idea, feasability, contract negotiation, formal commitment, construction, completion and formal opening, property, asset and portfolio management. In considering a project for development, a developer must analyze each step in the model. With the changing of environmental laws and regulations conserning brownfields the redevelopment of such a project begins to make sense.
While the 8 stage model helps in ascertaining the opportunities and pitfalls of a project, the true test to developing any piece of property is will it make money? Does the potential profit outweigh the risk associated with the development? In the past, while profits from redeveloping a brownfield may have been great the risk of “joint and several liability” was almost always greater than the upside potential. The elimination of this liability along with the “covenant not to sue” offers the developer protection from any unknown hazards.
Elimination of unexpected future expenses enables the developer to clearly define the costs associated with redevelopment of a brownfield. The developer can create pro-forma s adding cleanup costs to the cost of development. Additional incentives give the developer the tax right to deduct the cost of the entire cleanup in the year the expenses were paid (under pre-described circumstances). This deduction enables the developer to indirectly have the government pay a large portion of the cleanup expense. The developers pro-forma s for a brownfield redevelopment project may now look quit positive.
State and federal agencies want brownfield redevelopment. Every community wants the best for its residents. Economic growth, cleaner land, preservation of greenfields and a pretty view are all desired throughout our country. To further intice developers government agencies offer grant money to communities for the redevelopment of brownfields. Application is based on counties, with many counties having millions to offer developers. Further the
E. Case Studies:
1. A Case Study from the Grand Rapids Business Journal, August 5, 1996
Following a $ 7 million investment to purchase and renovate the former Autobond Corp. building at 706 Bond Ave. NW, Grand Rapids Spring & Stamping Inc. and its subsidiary Optimum Manufacturing Inc. have moved into the facility, creating 160 new jobs in the downtown area.
The 110-square-foot expansion has allowed GR Spring & Stamping to increase
its stamping capacity in the new facility while opening up space in the company’s Walker facility to expand its spring-manufacturing operation. The move also has enabled Optimum Manufacturing, previously in a leased building in Byron Township, to expand its plastic-injection molding and assembly capabilities.
But if Michigan’s environmental law had not undergone sweeping changes that
went into effect in June 1995, the Autobond building would have remained vacant,
as it had for the previous four years. “It was a good building at a good price,”
said James Zanacki, president of GR Spring & Stamping, “and it met our needs
better than another option we were looking at. But it had an environmental problem.”
Until the law was changed a year ago, the state’s flagging a property as a “site of environmental contamination” had the same effect as a ship’s quarantine for the plague — no one wanted anything to do with it. Buying one of these so-called brownfield sites also bought the liability for the contamination and its cleanup. Furthermore, the cleanup had to return the site to pristine condition, clean enough for a preschool playground.
The only way around the new-owner liability was to enter into a Covenant Not to Sue (CNTS), an agreement with the state not to sue the new owners and to require the seller
to clean up the site out of the proceeds from the sale. The complexities of a CNTS were ominous enough to limit the number granted to just 37 in the 1991-95 time period in which this was the only way for a buyer to avoid the liability for the site s contamination.
Not surprisingly, few brownfield sites were reclaimed. Instead, business expansions and new construction continued to target the so-called greenfield sites in order to eliminate the risks and costs of purchasing a contaminated property. Because greenfield sites largely are undeveloped areas, this kind of development often requires new infrastructure and contributes to urban sprawl.
A year ago, state policy on reclamation of brownfield sites was completely reversed. Major amendments, introduced by Rep. Kenneth R. Sikkema, R-Grandville, were enacted to Michigan’s primary environmental cleanup law, Part 201 of the Natural Resources and Environmental Protection Act, Act 451. The amendments allowed new purchasers, operators or lenders who foreclosed on brownfield sites to obtain an immediate exemption from liability for existing contamination by performing a Baseline Environmental Assessment (BEA) to distinguish existing contamination from any that might occur in the future.
Equally important, the amendments set completely new, flexible cleanup standards based on the future use of the site and reasonable risk assumptions. Pristine is no longer the
only acceptable measuring stick, and the Michigan Department of Environmental Quality (DEQ) no longer assumes that children will be playing on factory floors. In fact, new owners no longer need to remediate all on-Site contamination completely before they can put brownfield properties back into productive use. “Due care” activities must be performed, however, to ensure that employees and customers can use the property safely and that their activities do not make the contamination worse. And the new law does require current owners who caused contamination to diligently pursue due-care activities
to meet the changed standards.
The building purchased by GR Spring & Stamping had groundwater contamination.
“As I understand it, the contamination is 50 feet below the surface …,” Zawacki explained. “It wasn’t a problem from the previous owner. It was just here, and I’ll bet you 50 percent of this area has that creek going through, and so you couldn’t do anything with all these old buildings. So now there are wells in place to monitor it. We have a due-care program. One of the reasons we sealed the floor … (was) so nothing could leak through. If we take dirt out of the building, it’s got to be checked. We haven’t gone down 50 feet, but I don’t think it’s health hazard to anybody here. It’s just been unrealistic in the past. If the law had remained unchanged, we wouldn’t have bought this building. In fact, nobody would have bought this building.”
With a year of the reversed policy under its belt, the DEQ has reported that 425 BEAs were received in the first 11 months following passage of the amendments — more than 10 times the number of CNTSs received in the preceding four years. In addition, in May 1996 the DEC conducted a telephone survey of 35 municipalities and found that 20 of those municipalities had seen an increase in actual redevelopment of brownfield properties, representing more than $ 220 million in private investment and the creation of 2,379 jobs.
Another outcome of the amendments has been a reduction in the number of sites now defined as environmentally contaminated. Adding in properties where the necessary cleanup activity has been completed, a total of 197 brownfield sites have been removed from the state’s inventory of more than 3,600. And 463 of these are located in Kent County.
“It is ironic that the old “Polluter Pay” law actually allowed the real polluters to escape the costs of cleanup and forced those with deep pockets to shoulder the burden,” Sikkema observed. “In one year’s time, our reforms have done more to help the environment and the economy than over the prior four years. That’s something to be proud of.”
2. A Case Study from Barr Engineering Company. A Twin Cities Minnesota firm.
Before: Old Beltway Dump
The Brownfields Concept: One of the main barriers to the purchase and reuse of contaminated properties is the fear purchasers and investors have of assuming unlimited liability to clean up pollution created by others. Land recycling programs have been established at the federal and state levels to encourage the redevelopment of contaminated urban properties in order to return them to productive use, creating jobs and preserving green areas outside of cities. These programs, in effect, limit the CERCLA liability that a purchaser ordinarily would have. The clean-up and reuse of these properties presents a unique opportunity for partnership between government agencies and private parties to achieve environmental protection, economic growth, and land use management.
After: Park Nicollet Clinic
Managed Risk — Successful Brownfields Redevelopment: Barr recognizes that different potential property uses require different standards of cleanup. Through our experience working within a variety of state VIC programs, Barr has successfully integrated risk evaluation with future land-use planning so that reasonable and appropriate cleanup
levels could be established. This resulted in environmental solutions that were protective, as well as time-saving and cost-effective.
Environmental and Public Health Benefits: The public’s exposure to pollutants at urban contaminated sites is minimized or reduced, as are the environmental impacts associated with industrial and commercial relocation to suburban green spaces.
Social and Economic Benefits: Abandoned sites are returned to productive use and to tax rolls. Short term construction and long-term permanent manufacturing jobs are created. Existing industrial areas and infrastructure are used and urban areas are revitalized.
Bibliography
1. Urban Land; Vol. 55, #6, page 43.
2. Chicago Tribune; 3,1:2, May 30, 1996.
3. “Superfund Liability May Add to Urban Sprawl, Congress Told.” Liability Week. April 26, 1993.
4. Brownfields, Not Heavy Contamination, Deserve Cleanup Investment, Official Says. BNA Environment Daily.
5. General knowledge of Brownfields garnered via Lexis/Nexis.
6. EPA Home Page.
7. Brownfields Inc. Home Page.
8. Committee for the National Institute for the Environment Home Page.
9. Grand Rapids Business Journal, August 5, 1996.