Learning that a site for redevelopment is affected by real or perceived environmental contamination can be one of the biggest barriers to community revitalization. Brownfield sites, which are defined by the North Carolina Department of Environmental Quality as “abandoned, idled or underused properties where the threat of environmental contamination has hindered its redevelopment,” pose legal and financial challenges to prospective developers. Lenders are typically wary of providing financing to projects with substantial risk for litigation around environmental contamination. Remediating pollutants can also be a costly endeavor for developers.
Despite the challenges, remediating brownfield sites has many benefits for a community. Environmentally, redeveloping on a brownfield site saves greenspace, utilizes existing infrastructure, cleans the air and water, and preserves natural habitats. Additionally, since many brownfield properties are neglected eyesores, remediation can have a positive impact on adjacent property values and crime rates while contributing to a sense of community pride.
Cleaning up brownfield sites can be made possible through the US Environmental Protection Agency Brownfield Grants Program and the North Carolina Brownfields Program which ease the legal and financial barriers to redevelopment. This post, the first in a series of two, provides an overview of these state and federal programs that communities and developers can use to make redevelopment on brownfield sites happen. The next post in this series will provide two case studies of how these programs were used successfully for community revitalization purposes in the North Carolina communities of Concord and Williamston. For a primer on brownfields redevelopment, first check out this post.
US EPA Brownfield Grants Program
The US EPA Brownfields Grant Program provides funds to local governments and nonprofit organizations on a competitive basis for the assessment and cleanup of brownfield sites. Launched in 1995, the EPA’s brownfields initiative helped to distinguish brownfield sites from those more highly contaminated “superfund” sites. The following seven brownfield grants, which are explained in further detail on the US EPA website, provide financial and technical assistance to communities to make brownfield remediation projects successful:
- Assessment grants: Provide funding to inventory, characterize, assess and conduct planning and community involvement related to brownfield sites up to $350,000. Coalitions of three or more eligible entities can jointly apply for grants up to $1,000,000 for assessment.
- Cleanup grants: Provide up to $200,000 to state or local government entities or nonprofit organizations to carry out cleanup activities at brownfield sites.
- Area-wide planning grants: Provide funding for communities to research, plan, and develop implementation strategies in areas with one or more brownfields to encourage cleanup, reuse, and area-wise revitalization up to $200,000.
- Revolving loan fund grants: Enable states, political subdivisions, and Native American tribes to make low-interest loans to carryout cleanup activities at brownfield properties. Entities are eligible for up to $1,000,000 to provide in loans to qualified projects.
- Environmental Workforce Development and Job Training Grants: Funding provided to eligible agencies to recruit, train, and place predominantly low-income, minority, unemployed, and underemployed workers in jobs pertaining to the cleanup and assessment of brownfield sites in their communities.
- Multi-purpose pilot grants: The EPA is pilot-testing a new grant program that allows communities to apply for one grant for both the assessment and cleanup of a single site.
- Training, research and technical assistance grants: Provides grant funding for technical assistance to improve the community’s capacity to accomplish brownfield cleanup projects.
These grant programs are important financial resources for municipalities to plan for and redevelop brownfield sites. However, they do not limit legal liability for environmental contamination for prospective developers. By combining the US EPA brownfield grants with brownfield agreements through the state on a project-by-project basis, the feasibility of redevelopment increases.
NC Brownfields Program
The North Carolina Brownfields Program establishes an agreement for site clean-up between prospective developers and the state’s Division of Waste Management of the Department of Environmental Quality (DEQ). Authorized in 1997 by a state statute known as the Brownfields Property Reuse Act, the program addresses the question of legal liability and provides a financial benefit to developers by providing a property tax exclusion for qualified improvements for the first five years after remediation takes place.
The brownfields agreement, once signed, defines what activities need to be done to make the site suitable for development. Prospective developers are not responsible for cleaning the site up to regulatory standards, as parties responsible for contamination would be. Instead, they only have to clean the site up to less-stringent redevelopment standards. This agreement, in effect, acts as a covenant not-to-sue offered to the developer provided that all of the required activities are completed. The developer can bring this agreement to a lending institution with a well-defined liability for environmental clean-up in order to receive financing for the project. The agreement is also transferrable to future owners and developers, so long as they complete the activities required for site clean-up and were not originally responsible for contamination on the site.
The NC Brownfields program does not provide any direct funding to a project; rather, the covenant and property tax exclusion act as de facto incentives to developers. Starting in the first calendar year after the improvements have been made, owners can apply for property tax exclusions for the “qualifying improvements.” Qualifying improvements are the improvements made to real property that are subject to the brownfields agreement.
Starting in year 1, property tax calculations would exclude 90% of the value of the qualifying improvements, declining to a 10% exclusion in year 5, the final year of eligibility. More detailed information about how the property tax exclusion is applied can be found here.
According to the NC DEQ, brownfields agreements have resulted in more than $2 billion in private investment in sites across the state that would have otherwise been left abandoned. Stay tuned for a future blog post that provides two case studies that show how US EPA and NC Brownfields Program have helped to return brownfields to productive uses in North Carolina communities.
Tim J. Quinn is a Community Revitalization Fellow with the Development Finance Initiative. He is also a second-year master’s student in City and Regional Planning at UNC Chapel Hill where he is specializing in economic and real estate development.