financing brownfields redevelopment projects a guide for ... · financing brownfields redevelopment...

United StatesEnvironmental ProtectionAgency

Urban and EconomicDevelopment Division

EPA 231-R-99-007October 1999

Financing Brownfields Redevelopment ProjectsA Guide for Developers

43Financing Brownfields Redevelopment Projects - A Guide for Developers

Financing BrownfieldsRedevelopment Projects:A Guide for Developers

Financing BrownfieldsRedevelopment Projects:A Guide for Developers

Urban and Economic Development DivisionU.S. Environmental Protection Agency

Washington, DC 20460

Financing Brownfields Redevelopment Projects - A Guide for Developers42

T his source book was compiled using information fromexisting studies, current bibliographical research,and interviews with experts including developers;

appraisers and insurers; and loan officers, vice presidents, andenvironmental risk managers from lending institutions. Thepublication was developed under EPA Purchase Order 6W-3586-NASA and EPA Contract Number 68-W4-0041,respectively.


Table of ContentsTable of ContentsIntroduction ..................................................................................................................1

Chapter 1: Redeveloping Urban Properties:The Potential for Exceptional Profits ......................................................................2

The Advantages of Urban Sites ................................................................................2Discounted Property Price .................................................................................. 2Low Infrastructure Costs .................................................................................... 2Favorable Zoning/Land Use Provisions ..............................................................3

Support For Brownfields Redevelopment .................................................................3

Chapter 2: Financing Sources and TechnicalAssistance for Brownfields Redevelopment ...........................................................5

Private Financing Sources ........................................................................................ 5Public Financing Sources .......................................................................................... 5

Federal .................................................................................................................6State..................................................................................................................... 9Local ....................................................................................................................9

Chapter 3: Preparing Project Finance Plans ..................................................... 11Brownfields Considerations .................................................................................... 11Elements of Project Finance Plans ......................................................................... 12

Chapter 4: Approaching Private Lenders ........................................................... 15Lender Experiences, Attitudes, and Policies ........................................................... 15Lender Policies on Environmental Assessments .................................................... 15Bank Size and Ownership ....................................................................................... 16Bank Commitment to Locality ................................................................................ 17

Chapter 5: Minimizing the Risks of Brownfields Redevelopment ................ 18The Liability Risks of Potential Contamination ..................................................... 18Federal Policies Offering Liability Protection ........................................................ 19State Policies and Programs Offering Liability Protection .................................... 20

No Further Action Letters ................................................................................ 20Covenants Not to Sue ....................................................................................... 21Prospective Purchaser and Buyer-Seller Agreements ..................................... 21Intervention in the Chain of Ownership .......................................................... 21

Structuring the Purchase to Lessen Risk Exposure .............................................. 22Indemnification ................................................................................................. 22Purchase Options .............................................................................................. 23Conditional Agreements to Lease ..................................................................... 23Subdividing ....................................................................................................... 23Joint Ventures ................................................................................................... 23

Compensating Lenders’ Risks ................................................................................. 23Loan-to-Value Ratio .......................................................................................... 24Sources of Collateral ......................................................................................... 24

Environmental Insurance Availability ................................................................... 24

Chapter 6: Environmental Site Assessments and Cleanup Alternatives ..... 26Environmental Site

Assessment Phases ........................................................................................... 26Site Remediation ..................................................................................................... 27

Oversight ........................................................................................................... 29Selecting Consultants ....................................................................................... 30Selecting Legal Counsel .................................................................................... 30

Appendix A: Resources ............................................................................................ 33


Financing BrownfieldsRedevelopment Projects �A Guide for Developes

Financing BrownfieldsRedevelopment Projects �A Guide for DevelopersIntroductionT his guide is intended for

developers and propertyowners devising strategies for

financing development projects on aban-doned or underutilized properties, knownas “brownfields.” An issue of particularimportance in devising and implementingfinancing strategies for brownfields rede-velopment is potential contaminationfrom previous site uses. The perception,presence, nature and extent of contamina-tion can affect the cost of redevelopmentand the liability risk, both of whichinfluence the ability to secure financing.Despite the costs and uncertaintiesassociated with potential site contamina-tion, many brownfields sites offer thepotential for exceptional returns oninvestment. Knowledgeable developersand property owners are increasinglycapitalizing on such redevelopment oppor-tunities. In addition to financial benefitsto developers and investors, brownfieldsredevelopment also offers substantialenvironmental, economic and social ben-efits, particularly for metropolitan areas.Cleaning up and returning these proper-ties to productive use can reduce humanhealth risks, provide jobs and needed taxrevenues and, depending on the use anddesign, can revitalize deteriorated neigh-borhoods and provide needed communityservices. Recognition of these benefits hasstimulated many federal, state and localgovernments to institute programs andpolicies to remove some of the barriers tofinancing brownfields redevelopment.

Together, public and private sectorleaders are implementing approaches to

increase funds for developers, minimizetheir liability concerns, and reduce delaysdue to contamination. As a result,developers and property owners across thecountry are realizing the financial feasibil-ity of redeveloping brownfields. Publicand private organizations are offeringfunds in the form of grants or debt that canreduce the cost of capital. The publicsector is also offering tax credits tobrownfields projects and encouraginginvestment by the private sector throughthe use of equity arrangements, financialassurances, liability assurances, informa-tion services, and legislative reforms.

This guide provides information onthese and other brownfields financingissues and informs developers and prop-erty owners on the most crucial aspects offinancing brownfields redevelopment:identifying potential financing sources,preparing project plans, approachingprivate lenders, minimizing the financialrisks associated with liability, and under-standing the site assessment and cleanupprocess. It also advises developers onselecting and utilizing specialized envi-ronmental and legal consultants. Severalof the guide’s exhibits list information thatdevelopers should obtain from lenders,environmental agency personnel, consult-ants, and lawyers in the course of theredevelopment process. In addition, theguide provides case study examples thatillustrate the practices and techniquesdiscussed. The appendix includes keycontacts and references.


Redeveloping Urban Properties:The Potential for ExceptionalProfits

Redeveloping Urban Properties:The Potential for ExceptionalProfits

I n the 1990s, government officialsacross the country started toprovide widespread support for

returning idle or underutilized urbanproperties to productive to generate taxesand employment opportunities that citiesdesperately need. As officials havestepped up their efforts to promote reuseprojects, developers have sought opportu-nities for profit in redevelopingunderutilized properties. Some firms areresolutely seeking out brownfields forinvestment; they can realize high returnsby applying their expertise in minimizingbrownfields project costs. Developers arefinding that expert management of theenvironmental risks can yield exceptionalprofits on brownfield sites.

The Advantagesof Urban Sites

Discounted Property PriceOne reason for the profit potential in

brownfields redevelopment is below-market or subsidized pricing of theproperties. Private sellers often prefer tolower the price of idle properties thanincur the costs associated with possiblecontamination. Abandoned sites, espe-cially, may be bought at minimal cost. Insome cases, they turn out to require littleor no cleanup. In addition, most citieshave a variety of sites awaiting redevelop-ment. The sites are usually acquired inone of two ways. First, sites may be takenfor tax delinquency; usually failure to payreal estate taxes. Second, economicdevelopment agencies may accumulate

land for economic regeneration, oftencombining small parcels together in largersites to attract new businesses. Such sitesare typically available at a subsidized oreven a symbolic price, at times as little as adollar. Eventually, these sites may yieldexceptional returns on the initial assess-ment and cleanup investments. Thedeveloper should be forewarned thatdeeply discounted sites are often highlycontaminated or have limited marketvalue and may be difficult to finance.

Low Infrastructure CostsIn some cases, preparation of

brownfields sites for redevelopment mayrequire more money and more time thanlaunching new greenfield construction,especially if the brownfields property isheavily contaminated. Other factors,however, compensate for the site assess-ment, cleanup costs, and time.

One compensating factors is thepresence of existing infrastructure atmost brownfields sites. On-site infrastruc-ture includes utility hookups, lighting, andsidewalks. Off-site infrastructure in-cludes storm sewers and drainage. Thepresence of such infrastructure can savedevelopment costs. Moreover, used urbansites usually can be redeveloped in theirentirety. They are rarely affectedretroactively by new zoning restrictions,applicable to greenfields, that oftenrequire that 50 percent or more of the landbe left undeveloped for roof and pavementrunoff. Thus, a project on a used urban sitemay need only half the land it wouldrequire in the suburbs.

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pter

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Costs of urban site redevelopment alsodepend on the state of existing buildings.Often the buildings do not need to bedemolished, but instead can be rehabili-tated and adapted for reuse at a fraction ofnew building construction costs.

Favorable Zoning/Land UseProvisions

The availability of urban sites alreadyzoned for development eases the process ofmeeting zoning requirements. Unlikesuburban greenfields development,brownfields projects rarely suffer delaysdue to zoning commission hearings anddecisions. In addition, city land userequirements and building codes oftenhave established set-back requirementsand other standards, leaving little roomfor negotiation. Conversely, in suburbanareas, local governments generally re-quire review and approval of landscapingand development plans. As in the case ofzoning, the need for detailed approval ofgreenfield site use and construction planscan generate uncertainty about finalrequirements and delay project implemen-tation. Such requirements can be moretroublesome than those at well-under-stood urban sites.

On balance, urban redevelopmenttypically involves less regulatory negotia-tion related to the development plans thansuburban development. The simplerdevelopment project approval process mayhelp defray the regulatory costs and offsetany project delays associated with poten-tial contamination of used sites.

Support For BrownfieldsRedevelopment

The current outlook for obtainingfunding for brownfields redevelopment isvery positive. In the last five years, the

federal government haslaunched a variety of effortsto encourage urban revital-ization by removing finan-cial barriers and providingfinancial incentives forbrownfields redevelopment.In February 1997, Presi-dent Clinton initiated theBrownfields National Part-nership (BNP), to “spurcleanup and redevelopmentat some 5,000 brownfieldssites around the U.S.” The BNP includes$300 million of federal investment inbrownfields cleanup and redevelopmentand another $165 million in loan guaran-tees. It also marshals the combined forcesof fifteen federal agencies now responsiblefor providing resources to brownfieldsremediation and redevelopment efforts.According to the President’s Council onEnvironmental Quality, this spendingshould leverage between $5 billion and $28billion in private brownfields investment,create 196,000 new jobs, and fosterimprovement in the quality of life for up to18 million Americans currently living nearbrownfields.1

The federal government has also beenquite active in the creation of taxincentives to spur development. Federaltax code allows developers to deductremediation expenditures from taxliability. Currently, qualified sites arerestricted to the following areas:

v Population census tracts withpoverty rates of 20% or higher;

v Population census tracts withpopulations less than 2,000 people

Brownfields Positives

q Below-market or subsidized realestate prices.

q Presence of existing infrastruc-ture.

q Developable in their entirety, noset asides for runoff.

q Well-established and favorableland use policies.

q Simple regulatory process for theapproval of development plans.

1 Council on Environmental Quality,Clinton Administration Expands Commitmentto Brownfields Redevelopment, May 13, 1997.


if more than 75% is zoned forcommercial or industrial use, or ifthe tract is contiguous to such atract;

v Empowerment zones or enterprisecommunities; and

v Brownfields Pilot sites announcedbefore February 1, 1997.

Recently, Congress introduced severalpieces of legislation to broaden eligibilityfor these incentives. Some of the proposedlegislation expands tax deductions to morecategories, while other proposed legisla-tion would apply the deduction to anyremediation expense at non-Superfundsites. Although this legislation is stillpending, it is likely that some broadeningon the federal tax incentive for brownfieldswill occur in 1999.2

Fueled by such federal actions, stateand local governments, as well as privatenon-profit organizations, have also initi-ated activities to promote economicdevelopment related to brownfields rede-velopment through financial assistanceand incentive programs. For instance, theEPA has become more flexible in terms ofthe required level of cleanup at brownfieldssites; now risk and end use are considered.Greater flexibility also applies to theconditions under which states can issueliability assurances, such as ProspectivePurchaser Agreements and CovenantsNot to Sue. The government hassubsidized environmental insurance poli-cies to make them affordable forbrownfields redevelopers. The eligibilityrequirements for existing economic devel-

opment funds have been restructured totarget brownfields redevelopment. Stateshave increased the availability of lowinterest loans by establishing revolvingloan funds, floating tax exempt redevelop-ment bonds, and making other economicdevelopment loan programs available tobrownfields redevelopment. Grants areoffered for site assessment and cleanup,and other grant sources are available forredevelopment. State and local tax codesnow allow site owners to take advantage offurther tax credits and abatements thatoffset cleanup costs.

On a local level, agencies such as landregistries and regulatory complianceassistance centers help educate develop-ers about suitable sites and regulatoryoptions. If the redevelopment projectoccurs in an area with environmentalproblems, regulators often reward devel-opers with timely review of cleanup andsite development progress. Environmen-tal justice sentiment may spur extracooperation and assistance for redevelop-ment of defunct sites in neglectedneighborhoods. Once prime areas of tradeand industry, these areas suffer from adisproportional accumulation of post-industrial effects, including possible sitecontamination. The rising concern forenvironmental justice suggests that devel-opment in these neighborhoods, wherepoor, minority citizens often live, is apublic service.

2 For more information on federal taxincentives, see forthcoming documents:Brownfield Tax Incentive Guidelines andBrownfield Tax Incentives- What’s In It for You?Available at http://www.epa.gov/brownfieldsin October, 1999.


Financing Sources andTechnical Assistance forBrownfields Redevelopment

Financing Sources andTechnical Assistance forBrownfields Redevelopment

T here is a large network ofgovernment and private pro-grams that provide support for

brownfields redevelopment. Many ofthese programs provide financial supportin the form of grants, loans, loanguarantees, bonds, and tax credits orenhancements. These funding sources aredescribed in detail here.

Private Financing SourcesIn many situations, polluters clean up

their contaminated property voluntarily,or buyers of the properties pay theremediation costs in exchange for dis-counted purchase prices. Alternatively,foundations might donate money forcleanup or companies may offer in-kindwork. The Clean Land Fund, dedicated toproviding financing for brownfields revi-talization, maintains a sustainable revolv-ing loan fund used for acquisition,remediation, and reuse of brownfieldsproperties. The National Association ofDevelopment Organizations ResearchFoundation conducts research onbrownfields in rural areas for the EPA.These two organizations are a smallsampling of a variety of private, non-profitcompanies dedicated to brownfieldsprojects. The Brownfields Non-ProfitsNetwork lists many others on theirInternet site: www.brownfieldsnet.org.

Property owners may also seekfinancing from private banks. While somecommercial banks are reluctant to investin brownfields due to liability concerns andperceived market disadvantages, the May

1995 amendment to the CommunityReinvestment Act encourages banks toinvest in brownfields by making them oneof the options for requisite communityinvestment. Community DevelopmentBanks (CDB) or other special community-based lenders are also likely sources ofprivate financing. CDBs are typically full-service commercial banks, chartered toprovide retail banking services in specificgeographic areas. Created to promoteinvestment in targeted economic develop-ment areas, CDBs provide advice andmake loans. Because they lend only forprojects within specified areas, developerswill not compete for funds with out-of-town investment alternatives. Moreover,many CDBs act as “agents” for otherbanks, including them in deals theystructure. Thus, CDBs may serve asliaisons for developers in attracting moneyfrom commercial banks.

Public Financing SourcesIn addition to providing incentives for

private investment, government pro-grams provide grants, loans, and taxcredits. Grants are usually awarded forsite preparation and infrastructure im-provements. Industrial developmentbonds, with lower than market interestrates and tax free interest, provide debtfinancing for fixed assets. Economicdevelopment agencies also offer loans atbelow-market rates of interest. Oftensome stipulation is attached, such as thecreation of new jobs. Financial assur-ances, such as loan guarantees and bond/loan insurance, assure lenders that they

Chapter 2


will be repaid by a secondary source if thedeveloper should default.

FederalU. S. Environmental ProtectionAgency

The U.S. Environmental ProtectionAgency (EPA) has launched its“Brownfields Economic RedevelopmentInitiative,” a program based on thepremise that cleaning contaminated prop-erty goes hand-in-hand with bringingeconomic vitality back to communities.The program includes several measures toencourage urban revitalization. It fundsbrownfields pilot projects throughout thecountry, provides capital for revolvingloan funds, develops job training pro-grams, and builds partnerships with othergovernment bodies and private associa-tions to facilitate redevelopment. EPA hasalso clarified many liability issues associ-

ated with possible brownfields sitecontamination. For more information onthis program, contact the applicable EPARegional Brownfields Coordinator (listedin the appendix) or consult EPA’s web site:www.epa.gov/ brownfields.

The Brownfields Assessment Demon-stration Pilot Program provides grants of$200,000 to assist in redevelopingbrownfields. Two hundred and fiftyAssessment Pilots were established be-tween 1995 and 1999. Additional pilotswill be selected in coming years. Thesepilot grants facilitate public and privateefforts, remove some regulatory barriers,and promote community cleanup. States,cities, towns, counties, and Indian tribesare all eligible for pilot grants. Thefunding must be used on activitiesinvolving sites that are not on theCERCLA National Priorities List and are

BROWNFIELDDEMONSTRATION PILOT GRANTSOregon Mills Conversion ProjectAstoria, Oregon

During the last decade, a vast number of timber mills have shut down in Oregon,displacing thousands of workers and leaving contamination behind. The City of Astoria,Oregon has responded by using an EPA Pilot Grant of $200,000 to team up withOregon�s Department of Environmental Quality and community groups to assess andplan conversion of the former mills. Following assessment, the Astoria Plywood Millis using a $700,000 loan from Shore Trust Advisory Services to cleanup the existingcontamination and redevelop the mill site into a multi-use area including a public prom-enade, shops, and housing. Following assessment, another mill site was purchasedby a private corporation and redeveloped into an industrial park; it is expected tocreate 1,000 new jobs. The EPA Pilot Grant was integral to jumpstarting this projectand ensuring its ultimate success.

Case study information from:http://www.epa.gov/swerosps/bf/html-docs/ss_orgmil.htm

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not undergoing RCRA corrective action,but have contaminants that endangerpublic health. Funds are intended for siteassessment and cleanup planning, not forcleanup, construction, or job training. Formore information, please see www.epa.gov/swerosps/bf/pilot.htm. Applicantsshould contact their regional brownfieldcoordinator for assistance; contact infor-mation is provided in the appendix.

EPA also provides funds to enablemunicipalities to capitalize revolving loanfunds for the cleanup and redevelopmentof brownfields sites. Brownfields develop-ers can borrow from the funds; when theypay back the loans, the money is used tofinance other projects. EPA’s revolvingloan program has been funded for FY99 at$35 million. This is intended to providecapital for 60 communities, with up to$500,000 for each community.

U.S. Department of Housing andUrban Development

The U.S. Department of Housing andUrban Development (HUD) also financesbrownfields redevelopment. HUD’s threetypes of financing programs are Commu-nity Development Block Grants (CDBG),3

Section 108 loan guarantees,4 andBrownfields Economic Development Ini-tiative grants (BEDI).5 Funds can be usedfor land acquisition, site assessment andremediation, and construction of publicfacilities. CDBG and Section 108 loansmust benefit low-income people, preventslums, or improve the health and safety ofcommunities. Since brownfields redevel-opment projects create jobs, promoteeconomic development and revitalization

of neighborhoods, and improve publichealth by cleaning contaminated areas,they constitute an appropriate uses ofthese funds.

The Section 108 Loan GuaranteeProgram uses CDBG funds as collateralfor loan guarantees. BEDI grants, whichmust be applied for in conjunction withSection 108 loan guarantees, provided atotal of $25 million in 1998 and willprovide the same in 1999. The averageBEDI grants are $1 million. This moneyserves as leverage for additional loans tosupplement those guaranteed by Section108.

HUD also designates EmpowermentZones and Enterprise Communities, whichchannel resources to some of the poorestand neediest urban areas. Such adesignation qualifies the municipalityreceiving the designation to: (1) accessQualified Empowerment Zone FacilityBonds; (2) receive a $3 million grant ofHuman Service Block Grant funds; and (3)claim up to $37,000 of accelerateddepreciation on new equipment purchasedby businesses in the EZ/EC. For moreinformation, call the HUD BrownfieldsHotline at 1-800-998-9999 or consult theweb site: www.hud.gov/progdesc/ezec.html.

U.S. Department of Health andHuman Services

The U.S. Department of Health andHuman Services (DHHS) offers additionalfunds, tax benefits, wage credits, and tax-exempt bond financing, which can beapplied to brownfields redevelopment byeither private or public agencies. DHHSlinks welfare reforms with brownfieldsredevelopment, and provides money in theform of Social Services Block Grants thatcan be used for job training in Empower-ment Zones and Enterprise Communities.

3 www.hud.gov/progdesc/cdbgent.html.

4 www.hud.gov/progdesc/cdbg-108.html.

5 www.hud.gov/progdesc/edi.html.


Two subagencies of the Department ofHealth and Human Services are theAgency for Toxic Substances and DiseaseRegistry (ATSDR) and the NationalInstitute of Environmental Health Ser-vices (NIEHS). These agencies supportbrownfields through health studies andenvironmental job training programs,respectively. For more information,consult the ATSDR web site: http://atsdr1.atsdr.cdc.gov:8080/OUA/.

U.S. Department of Commerce

The Department of Commerce (DOC)supplies resources through two agencies— the Economic Development Adminis-tration (EDA) and the National Oceanicand Atmospheric Administration (NOAA).EDA offers Economic Development andAdjustment Assistance Grants for busi-ness development in economically dis-tressed areas. Supported implementationactivities include revolving loan funds andinfrastructure improvements for redevel-opment. Average grants for projects rangefrom $200,000 to $300,000. Money can beused for area wide planning, market and

environmental studies,defense conversion, andpublic works to encour-age private investment.Private businesses mayapply for revolving loanfunds.

NOAA’s Coastal ZoneManagement Programuses Section 306 fundsfor coastal developmentprojects that could in-volve brownfields. Suchfunds, delegated by statesand local coastal re-source managers, can beused for purchasing land,

designing a site, or constructing publicaccess to the waterfront.

U.S. Department of Transportation

The U.S. Department of Transporta-tion (DOT) has funds available forbrownfields redevelopment as part of itsLivable Communities Initiative,6 a pro-gram designed to strengthen the linkbetween transit and communities. If theland use involves transportation, fundsmay be used for property acquisition, sitepreparation, and construction. Likewise,the Intermodal Surface TransportationEfficiency Act (ISTEA) funds environmen-tal projects related to transportation andfosters accessible jobs and housing. TheTransportation Equity Act for the 21stCentury (TEA-21) reauthorizes fundingpreviously available under ISTEA. If abrownfields site will become a transporta-tion site, then TEA-21 funds are availablefor its redevelopment. Both localgovernments and private developers mayapply for funds. In addition, TEA-21 fundsare available for transportation projects inconnection with brownfields redevelop-ment, such as new interchanges or roadupgrades.

Other Federal Agencies

Additional sources of public fundingare available through the National ParkService, the State Underground StorageTank Trust Fund Program, the Appala-chian Regional Commission SupplementalGrants, and the Federal Housing FinanceBoard. The Finance Board has aCommunity Investment Cash AdvanceProgram designed to finance the rehabili-tation of low-income housing.

6 http://www.fta.dot.gov/library/planning/livbro.html.

Main Sources of Federal FinancialAssistance

q EPA: Brownfields Economic Rede-velopment Initiative, Brownfields As-sessment Demonstration Pilot Grants,Revolving Loan Program.

q HUD: Community DevelopmentBlock Grants (CDBG), Section 108Loan Guarantee Program, BrownfieldsEconomic Development Initiative(BEDI), EZ/EC designation.

q DHHS: Tax benefits, wage credits,and tax-exempt bond financing,health studies and job training.

q DOC: Economic Development andAdjustment Assistance Grants,Coastal Zone Management Program.

q DOT: Livable Communities Initiative,ISTEA/TEA-2 funds.


StateStates provide financial incentives

such as grant and loan funds, insurancefor lenders, and tax credits. If a project isrisky, a state agency may become involvedand see it through to completion.Developers should contact relevant stateenvironmental and economic developmentagencies to learn about available financingprograms and sources. Contact names arelisted in the appendix.

As of July 1999, 47 of the 50 states hadestablished Voluntary Cleanup Programs(VCPs) to provide for cooperative arrange-ments between owners or prospectiveowners and state environmental agenciesto prepare sites for redevelopment. VCPsprovide oversight for environmentalcleanup, technical guidance, cleanupverification, and most importantly, liabil-ity assurances. These assurances come inthe form of No Further Action Letters,Covenants Not to Sue, Certificates ofCompletion, and other liability releases.VCPs hasten the cleanup process andprovide clear technical guidance andcleanup standards. Some also offer lowinterest loans or grants for environmentalsite assessments, cleanups, or redevelop-ment. Contact people for each state arelisted in the appendix and on EPA’s website: www.epa.gov/ swerosps/bfstcntct.htm.

LocalFinancial assistance at the local level

involves the use of tax incentives. Fortystates offer tax increment financing (TIF),a system used by local governments tofund redevelopment efforts with predictedincreases in local property taxes. The useof TIF is facilitated by state laws thatallow the establishment of special districtsto collect TIF revenues and issue debt.

Abatements are another local tax toolthat freeze the assessed value of land at itspreimprovement rate. Reduced taxesattract developers, and after redevelop-ment, taxes are gradually increased toreflect the new assessed value. The termsof the tax abatement may depend on thenumber of new jobs created or the locationof the brownfields site.

The federal Empowerment Zone/Enterprise Community program (EZ/EC)provides funds for local authorities toallocate at their discretion. With an EZ/ECdesignation, cities receive a one-time $3million grant of Human Services BlockGrant Funds. Portions of these funds canbe used to fund brownfields redevelop-ment projects that are directly tied to theemployment of EZ/EC residents. EZ/ECdesignation also provides EmpowermentZone/Wage Tax Credits, which giveemployers a $3,000 tax credit for everyemployee hired who lives within theEmpowerment Zone boundaries. Desig-nated EZ/ECs also have access to qualifiedEmpowerment Zone Facility Bonds. Thesetax-exempt bonds provide up to $3 millionto finance the construction of privately-owned, new or expanded facilities and topurchase machinery for projects within anEmpowerment Zone or Enterprise Com-munity.

Many municipalities have designatedtheir own “redevelopment areas” or“special economic development districts.”Sites within such zones receive priority forproposal and site development review byplanning and oversight agencies. Thelocation also gives developers priorityaccess to development funds and to stateor local subsidies for assessment andcleanup costs.


Another method of local funding,public sector equity participation, useslease arrangements, reclamation banks,and city ownership to allow the public toassume part of the risk of brownfieldsredevelopment projects. In return,subsequent increases in tax revenues onimproved properties repay the public forits share in the risk.

Tax-exempt bonds can be used to raisecapital for redevelopment. The higher taxrevenues realized from the redevelopmentredeem the bonds. Tax-exempt generalobligation bonds or revenue bonds canfinance a publicly owned facility. Underthe IRS code, five percent of the profits of ageneral obligation debt issue can be usedfor activities that do not otherwise qualifyfor tax-exemption. Cities issue generalobligation bonds and back them with thecredit of the city.

Qualified 501(c)(3) bonds can be usedto finance a non-profit owned facility withnon-profit beneficiaries. These bonds aretypically issued by state agencies, depend-ing on the nature of the non-profit entity.Such bonds are supported by the full faithand credit of the non-profit organization ora specific revenue stream. Industrialdevelopment bonds, a form of tax-exemptbonds, finance manufacturing facilities.

Competition can limit the availabilityof funds already difficult to win due todemanding eligibility requirements. In-vestors and developers should contacttheir local economic development andenvironmental agency offices to learnwhat assistance is available and what theapplication process entails.

COMBINED FUNDINGFallon/St. Vincent Medical CityWorcester, Massachusetts

Fallon and St. Vincent Health Care merged in 1992 with the goal of building a state-of-the-art integrated health facility in an urban setting. Excited about the prospects ofthe facility, the City of Worcester, Massachusetts, created a new institution, theWorcester Redevelopment Authority, to work with the developers and target juxta-posed brownfield sites for acquisition. The city and state split a total of $42 million inexpenses to demolish existing structures, remediate, and prepare the properties fornew construction. The land was then sold to Fallon/St. Vincent for $6.4 million witha Covenant Not to Sue. The facility is projected to create 3,000 new jobs and bring in$875 million in direct economic impacts within 10 years, which is a great return oninvestment for all parties involved.

Case study information from:http://www.nemw.org/lessons.htm

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Preparing ProjectFinance PlansPreparing ProjectFinance Plans

A well written project finance planallows financially soundand socially beneficial redevelop-

ment projects to get off the ground.Developers use finance plans to convincelenders that their projects will generateenough revenue to repay borrowed debt.The three primary elements of the planare: the funding amount the developerneeds to borrow, what the money will beused for, and the costs and benefits of theproject. A developer should clearlyarticulate, but not exaggerate, the positiveaspects of the plan.

Brownfields ConsiderationsThe widely held belief that brownfields

redevelopment projects present highfinancial risk at low rates of return mayprovide an added challenge to attractingfinancing. Lenders need confidence inborrowers’ knowledge of brownfieldsredevelopment, and this should be ad-dressed in the project finance plan. Aproject proposal must be both realistic andpromising. Due to the uncertain nature ofcleanup, developers should allow for costoverruns in their budgets. Workingclosely with environmental and engineer-ing professionals will facilitate generationof realistic cost estimates.

Increasingly, lenders are overcomingtheir earlier beliefs that brownfieldprojects are not financially viable. Gov-ernment guarantees help to increaseviability, but to earn federal assistance, aproject must have a convincing proposaldemonstrating that benefits outweigh

costs. Benefits include improvement inthe local economy, environmentalremediation, conservation, environmentaljustice, tax revenues, and returns oninvestment. While the government mightsubsidize environmental, social, and eco-nomic development benefits, they want tosee financial returns that justify invest-ments.

Preparing project finance plans willhelp with applications for governmentfunds. Although the requirements ofapplications vary according to fundingsource, many of the elements are likely tobe the same. For example, the Depart-ment of Housing and Urban Developmenthas three interconnected economic devel-opment financing programs — Commu-nity Development Block Grants, Section108 Loan Guarantees, and the BrownfieldsEconomic Development Initiative. Activi-ties receiving funding from any of thethree sources must benefit low incomepeople, prevent slums, or address condi-tions that threaten community health andsafety.

Proposals are rated according to theextent of the problem addressed, thesoundness of the approach, financial need,and the organizational experience of theapplicant. Bonus points are given toprojects in certain Brownfields ShowcaseCommunities. Project finance plansshould explicitly address social, environ-mental and broad economic benefitsrequired by the sources they are targeting.

Chapter 3


Elements ofProject Finance Plans

When preparing finance plans, devel-opers should keep their audience in mind.A lender wants to be reassured that theproject will be completed. Developersshould include evidence of completedsimilar projects, and of planning andpredevelopment work in their financeplans. Documents proving site control orcontract of sale, architect’s plans, letters ofinterest from other funders, and a marketstudy showing demand for the serviceoffered on the brownfield site are alsohelpful.

Below is a table listing the elementsthat are important to include in a projectfinance plan. The elements includedescriptions of the project, the propertyand its location, the development team,the costs and benefits, the market for theproject, the financing involved, andfinancial projections. Developers shouldtailor plans to meet the requirements oftheir lenders; not all of the elements listedin the table are necessarily essential toevery plan.

Elements to Include in a Project Finance Plan

Formal Loan Request

� Name of borrower.� Type and amount of loan requested.� Intended use of loan.� Location of project.

Project Description

� Brief description of site, site history, and developer.� Economic justification. List of other sources of proposed financing.� Plan for environmental remediation.� Documentation of engineering and design work. Description of planned

construction and rehabilitation.� Status report on legal approval/permitting process.� Timeline of events.

Property Location and Description

� Detailed description of site including size, features, condition, past andpresent use, buildings, and zoning designation.

� Description of neighborhood and block including socioeconomic conditionof area.

� Emphasis on positive aspects such as recent investments in neighborhoodor preexisting amenities.

� Discussion of access to transportation, stores, schools, parks, etc.� Local maps.

Project Sponsorship/Ownership

� Detailed description of private and public sector sponsorship and support.� Outline of legal ownership structures for constructing and operating the

project.� Identification of owners and operators of project.


Elements to Include in a Project Finance Plan(continued)

Development Team

� Description of the developer�s organization, history, goals, operatingbudget, and staff size.- Provision of resumes of the executive director, project manager, and

property manager.- Demonstration of ability to plan and manage.- Mention of past achievements with similar projects.

� If an architect is involved, brief description of firm and any similar projectscompleted.

� Description of the contractor. Provision of contracting firm�s financialstatements and list of similar projects completed.

Project Costs

� Initial capital costs to construct project.� Project development, design, engineering, and regulatory approval costs.� Project operating and maintenance costs.� Financing costs.

Project Benefits

� Analysis of financial feasibility (direct return on investment).� Analysis of economic impacts (jobs, income, expenditures).� Analysis of fiscal impacts (e.g., tax revenues, infrastructure costs, public

service costs).� Evaluation of social benefits to community (e.g., aesthetic improvements,

public services, environmental justice).

Market

� Evidence that there is demand for the property at the projected salesprice; thus, loans can be repaid.- Rental or sales prices on comparative properties.- Recent appraisals from similar properties.

� Assessment of local supply of goods or services offered.- Real estate absorption rates.- Explanation of how redevelopment businesses can compete with

other similar businesses.� Mention of experience in selling goods or services or credentials of broker

who will be handling the sales.

Proposed Structure of Financing/Financial Analysis

� Sources and amounts of financing (private/public debt, private equity,federal and state grants, and annual operating revenues). Breakdown ofinterim versus permanent financing.

� Analysis of terms and conditions of proposed financing sources.� Description of credit enhancements (collateralizations, guarantees, credit

insurance).� Development budget showing how funds will be used. Certainty that

sources and uses of funds will balance. Costs include:- Acquisition.- Construction and development.


Elements to Include in a Project Finance Plan(continued)

Proposed Structure of Financing/Financial Analysis (continued)

- Soft costs incurred as part of the development process (constructionperiod interest, architectural fees, legal fees, bank fees, and mortgagerecording tax).

- Annual operating and maintenance costs.� Pro forma financial statements showing expected annual income and

expenses.

Implementation Plan

� Timeline and schedule showing sequence of events.

Exhibits

� Most recent annual report of organization in charge of project.� Audited financial statements for the past three years.� Developer�s organizational budget for the current year. List of sources of

income.� Evidence of site control such as a deed, ground lease, contract of sale, or

option agreement.� Architect�s plans and specifications.� Detailed bid from contractor.� Photographs of the building or site.


ApproachingPrivate LendersApproachingPrivate Lenders

P otential private real estatelenders include commercialbanks, insurance companies,

saving and loan associations, pensionfunds, and bank trust departments.However, the lenders most likely tofinance urban brownfields projects arecommercial banks, which will be the focushere. They are legally required tomaintain diverse portfolios of investmentsand to reinvest in the communities that dobusiness with them. Under the federalCommunity Reinvestment Act (CRA),banks must disclose their lending in theneighborhoods in which they have branchesand from which they draw deposits.Brownfields investments generally helpthese banks earn and maintain their CRAstatus.

Lending decisions made by privatelenders are influenced by a variety offactors. As addressed in Chapter 3, themerits of the project weigh heavily in thedecision, as well as the applicant’s creditrating. In addition, banks’ internalpolicies regarding brownfields propertiesand loan size, as well as regulatoryconstraints and incentives, will play a rolein lending decisions. This chapter focuseson these policy and regulatory aspects ofobtaining financing from private lendinginstitutions.

Lender Experiences,Attitudes, and Policies

Lenders’ attitudes toward brownfieldsredevelopment projects and experiencewith them will affect their willingness to

make redevelopment loans for brownfieldsproperties. Some banks will have explicitpolicies about loans for brownfieldsredevelopment. Lender attitudes andpolicies will vary by location and by bank.

Generally, it is easier to get aredevelopment loan in an area with a longindustrial history, where lenders viewpast site pollution as a common problemthat urban areas must address. In non-industrial areas, it may be easier to getredevelopment loans from local branchesof banks whose urban headquarters mayhave environmental risk managementexperts with brownfields experience.

Lender Policies onEnvironmental Assessments

Most lenders require some type ofenvironmental site assessment for usedproperties. The requirements varyaccording to the size of the loan and theprobability of site contamination. Forsmall loans on sites with low risks ofcontamination, lenders only need toconduct environmental screenings. Dur-ing an environmental screening, a loanofficer inspects the site, and a developerfills out a questionnaire about its past use.For larger loans on sites with a higher riskof contamination, lenders require Phase Iassessments performed by experts (moreinformation about site assessments isprovided in Chapter 6).

A developer may occasionally betempted to overlook an environmentalscreening detail. While such actions may

Chapter 4


be advantageous inquickly securing financ-ing, cutting corners onsite assessments canhurt developers in thelong run. It is indevelopers’ best inter-est to know if proper-ties they own or wantto buy have environ-mental problems andthe nature of suchproblems. It is also intheir best interest toreveal to lenders allthat they know aboutpast uses of sites dur-

ing environmental transaction screening.For legal self-protection, developers shouldbe sure to keep copies of any documentsthat they submit to lenders, includingstatements about site environmentalconditions.

Bank Size and OwnershipBecause the debt requirements of

brownfields projects and typical loan sizesfor lenders vary substantially, loan sizeand bank size have to be matchedproperly. In some cases, a smallcommunity bank may be appropriate; inothers, a large multi-billion dollar bankthat operates in several states or eveninternationally may be more suitable. Thebest match will depend on the needed loansize and the lending practices of the bank.

There are community, regional, andmulti-national lending institutions. Thebanks in a developer’s community may belinked to bank holding companies thatown banks in other states or regions. Insuch cases, the practices of a local bankmay be affected by the holding company’sbrownfields policies. Also, an institution’sgeographic coverage is not always relatedto the size of its assets. A community banka in large city may have greater assetsthan a regional bank.

Environmental Assessments:Some Important Dos and Don�ts

q DO investigate the past uses of aproperty and learn about possibleenvironmental problems.

q DO keep careful records ofenvironmental documents submitted tolenders.

q DO adopt a policy of transparency anddisclosure with lenders regarding anyenvironmental issues that face theproperty.

q DON�T minimize the loan request orallow an incomplete environmentalassessment; developers may be legallyor economically damaged in the futureby such practices.

Factors to Consider in Selecting Lenders

SMALL LENDERS (With Assets Under $100 Million)

Relative Advantages� Local area focus.� Small loan expertise.Relative Disadvantages� Maximum loan amount may be too small for some redevelopment

projects.� May have a rigid policy of rejecting loans on contaminated property.

LARGE LENDERS (With Assets of $100 Million or More)

Relative Advantages� Expertise to help borrowers deal with environmental problems.� May be flexible and open to loaning on environmentally suspect proper-

ties.Relative Disadvantages� Minimum loan amount may be too large for small redevelopment projects.� May be less willing to invest in local commercial real estate because it

has more lending options.� Transaction costs may be higher due to multiple oversight levels.


The table on page 16 presents therelative advantages and disadvantages ofsmall and large lending institutions,which developers should consider whendeciding to approach a small local bank ora larger lender. The advantages of smallerlenders stem from their focus on localareas and small loans. Also, many smallbanks form consortiums or partnershipswith other banks, which allow them tomake loans that exceed their loan ceilings,usually for additional fees. The advan-tages of larger lenders with small businessdivisions lie in their environmentalexpertise and lending flexibility. Theyhave their own environmental riskspecialists to assess the viability ofbrownfields investments. This canfacilitate loan approvals and help develop-ers with their assessments of financial riskassociated with site contamination.

In sum, the decision to approach asmall or a large bank largely depends onthe size of the loan needed for the projectand the environmental risk expertiseneeded.

Bank Commitmentto Locality

As stated previously, the federalCommunity Reinvestment Act (CRA)provides banks with incentives for meet-ing the credit needs of their communities.It strongly encourages investment in lowto moderate income neighborhoods. Fed-eral regulators rate banks according totheir performance in offering loans inthese communities. Recent amendmentsto CRA have increased pressures on banksto make more loans in lower incomeneighborhoods, and regulators now awardCRA credits specifically for brownfieldsredevelopment.

While other, perhaps less risky,options to earn CRA credits exist, the Actmay provide some incentive for banks toinvest in brownfields. CRA ratings cangreatly affect bank profitability, becauseregulators use the scores when decidingwhether to approve branch openings andother proposed bank moves. Since poorCRA ratings can hurt banks, competitionfor financially sound projects in lowincome neighborhoods has increased. Thismay favor brownfields developers. Theyshould approach banks that are eager tomake investments that will generate CRAcredits.

Summary of General Information DevelopersNeed From Potential Lenders

q Minimum lending amount for specific types of projects, (e.g., thoserequiring site remediation, construction loan, mortgage, small busi-ness loan). There is no point in applying for a loan if the bank�slending priorities exclude a given project.

q Loans made for other projects in the area. This will help the devel-oper determine if the property area is stigmatized in the eyes of thelender.

q Procedures for processing loans on brownfield properties (e.g., homeoffice or holding company role, role of environmental risk manageror specialist).

q List of approved environmental consultants for site assessments.

q Loan amount threshold for requiring a Phase I site assessment.

q Copies of the environmental transaction screen, buyer�s affidavit,and other forms used for expedited environmental review.

q Environmental condition documentation included in Closing Require-ments list.

q Stage of an application review at which specialists are involved(e.g., property appraiser, Phase I site assessor or engineer, internalreviewer of Phase I findings, Phase II assessor or engineer).

q Role of loan applicant in hiring and paying for specialists. Thedeveloper needs to understand the loan application costs and thelender�s review process. If there is a choice of lenders, a developermay as well start with the least expensive one, other things beingequal.

q Flexibility in dealing with situations that may fall outside normalloan approval criteria. Lenders often reject projects that do notmeet criteria such as acceptable land or site preparation costs as aproportion of total project costs. Such criteria are based on pastbank investments that do not reflect successful brownfields rede-velopment projects. Therefore the criteria may not be appropriatefor brownfields projects. The more rigid the bank is in assuring allprojects fit these standards, the more difficult its loan approvalprocess.


Minimizing the Risks ofBrownfields RedevelopmentMinimizing the Risks ofBrownfields Redevelopment

A major concern that lenders havein relation to financingbrownfields redevelopments is

the liability risk faced by owners ofcontaminated sites. Owners, prospectivepurchasers, and lenders can minimizethese risks by taking advantage ofgovernment programs and policies and bystructuring ownership and purchasingarrangements to reduce liability exposure.Environmental insurance policies are alsoavailable. General information on ap-proaches available to limit liability forowners and lenders and subsequentlyincrease the potential for obtainingfinancing are presented here. Owners andlenders should consult environmentallawyers and engineering experts about thebest ways to address specific liabilityconcerns.

The Liability Risksof Potential Contamination

Contrary to popular preconceptions,many former industrial use urban proper-ties are not contaminated. Whileproperties that once housed dry cleaners,gas stations, metal plating shops, andother operations heavily reliant on toxinsare more likely to be contaminated, manyare fairly clean and can be remediated atminimal or no cost to developers. In mostcases, the cleanup costs are borne bycurrent or past owners, rather than thedeveloper. Nevertheless, the potentiallysignificant liability associated with stateand federal hazardous waste site laws isoften a major deterrent to some developersand lenders.

The federal CERCLA law imposes“strict, joint and several liability” for pastpollution on all parties in a property’s“chain of title.” This chain includes all theprevious and current owners and users of aproperty from the onset of pollution.“Strict” liability means that propertyowners and business operators may beheld liable for environmental cleanupwithout regard for negligence or fault.“Joint and several” liability applies tosituations where more than one Poten-tially Responsible Party (PRP) exists. Anyone party can be assigned the fullresponsibility for environmental harmcaused by several parties, even if thedamage was done before the party ownedor occupied the site.

The “innocent landowner defense”offers protection from CERCLA liability.To claim this protection successfully,owners must prove that they:

v Bought the property after thepolluting occurred,

v Did not know, and had no reasonto know, that the site wascontaminated when they boughtit, and

v Exercised “due diligence” beforethe purchase (i.e., they conductedall appropriate inquiry that wasconsistent with “good commercialand customary practice”).

Therefore, developers should invest inthorough site assessments and make theirpurchases conditional on the results.

Cha

pter

5


Developers who decide to buy will havecomplied with due diligence requirements.

Concerns about lending on potentiallycontaminated properties stem from oldercourt decisions in which lenders were heldliable for contamination on properties onwhich they foreclosed, or had the capacityto participate in the management ofbusinesses to which they made loans. In1996, however, CERCLA was amended bythe Asset Conservation, Lender Liability,and Deposit Insurance Protection Act(ALDA) to limit and clarify lender liability.This legislation provides lenders withdetailed guidance on how they can beinvolved in a borrower’s activities withoutparticipating in management and assum-ing liability. The law also specifies actionslenders can take to avoid liability if theyforeclose; as long as they sell or re-leasethe property at the earliest practicabletime, on commercially reasonable terms,their liability exemption remains intact.

While this legislation encourageslenders to make loans on brownfieldsproperties, they still have reason to tracksite environmental issues closely for thefollowing reasons.

v Lenders are mainly concernedwith borrowers’ ability to repayloans and this ability may bejeopardized by unexpected andexpensive cleanup.

v Lenders may fear that if theyforeclose, environmental prob-lems will lower the value of theircollateral.

v Lenders may become liable if theiractions extend beyond those cov-ered by the liability exemption.

In short, it is in the interest of both lenderand developer to conduct a thorough siteassessment. An overview of assessmentprocedures is provided in Chapter 6.

Federal Policies OfferingLiability Protection

An important part of EPA’s brownfieldseffort is to assure prospective purchasers,lenders and property owners that, undercertain conditions, they need not beconcerned with federal CERCLA liability.Over the last two years, the EPA has takenseveral steps to reduce uncertaintiesassociated with brownfields properties.For example, EPA has issued policystatements that have:

v Indicated the Agency will notpursue owners of otherwise un-contaminated property situatedabove groundwater polluted by aneighboring property;7

v Announced increased consider-ation of anticipated future landuse in selecting cleanup rem-edies;8

v Expanded the circumstances un-der which the Agency will enterinto Prospective Purchaser Agree-ments involving Covenants Not toSue for contamination that existedbefore a landowner purchased aproperty;9

7 Final Policy Toward Owners of PropertyContaining Contaminated Aquifers, www.epa.gov/swerosps/bf/gdc.htm.

8 Land Use in the CERCLA RemedySelection Process, www.epa.gov/swerosps/bf/gdc.htm.

9 Guidance on Settlements with ProspectivePurchasers of Contaminated Property, www.epa.gov/swerosps/bf/gdc.htm.


v Outlined criteria for determiningwhen lenders and municipalitiesare exempt from federal enforce-ment if they involuntarily acquirepolluted property;10

v Expressed willingness to issueComfort/Status Letters that pro-vide redevelopers with EPAinformation about a specific siteand indicate EPA plans not to takefederal action at the site;11

v Provided soil screening guidanceto help decision-makers quicklydetermine which portions of a siterequire further study and whichpose little risk to human healthand may be developed withoutfurther study and extensivecleanup.12

Some of these policies apply more tolarge redevelopment projects where con-tamination is a major problem, than tosmall-scale projects without significantcontamination. Prospective PurchaserAgreements, for example, are givensparingly. For a developer to be eligible,EPA must have acted or anticipate actionon the property, and redevelopment mustoffer substantial advantages, includingcleanup and community benefits such asjob creation. Likewise, Comfort/StatusLetters are considered only if there is arealistic perception or probability ofincurring CERCLA liability.

Most contaminated brownfields sitesundergo cleanup through state programs,and EPA involvement is unlikely. EPAhas negotiated “Memoranda of Agree-ment” with some state environmentalagencies, which minimize duplication ofstate and federal efforts. They indicateEPA’s intention not to take action on sitesin approved state Voluntary CleanupPrograms unless the EPA determines thata site poses a substantial danger to publichealth or the environment.

Despite the fact that CERCLA involve-ment in most brownfields site redevelop-ments is unlikely, the determined federaleffort to facilitate brownfields redevelop-ment by addressing CERCLA liabilitybarriers provides some assurance todevelopers and lenders. It also shapesstate policies and programs that are morelikely to guide redevelopment efforts.

State Policies and ProgramsOffering Liability Protection

Assurances against liability for past orcurrent pollution are also available frommany states. The forty-seven states thathave Voluntary Cleanup Programs offersome form of protection against liability.Twenty-one states offer No Further ActionLetters or No Further RemediationAgreements, thirteen offer Covenants Notto Sue, others offer unique protections thatdo not fall into these categories. OnlyNorth Dakota, South Dakota, Wyoming,and Nevada offer no guarantees.

No Further Action LettersNo Further Action (NFA) letters may

be issued by a state environmental agencyonce a site has been cleaned up. Suchletters, state that the regulatory agencyrequests no further environmental cleanup.Reopener clauses limit NFA letters, and

10 CERCLA Enforcement Against Lendersand Government Entities that Acquire PropertyInvoluntarily, www.epa.gov/swerosps/bf/ascii/involun.txt.

11 Policy on the Issuance of Comfort/StatusLetters, www.epa.gov/swerosps/bf/html-doc/confmemo.htm.

12 Soil Screening Guidance: Fact Sheet,www.epa.gov/superfund/resources/soil /index.htm.


the value of the liability protectionprovided by the letter depends on thelanguage used in the reopener. Somestates have detailed descriptions of thespecific conditions that may trigger re-examinations of cleanup adequacy; othersleave the possibilities vague. The NFAletter, however, lessens the likelihood offuture government re-examination of thesite by assigning it a low priority. An NFAletter can make it easier to get lendersupport for a project. In some states,lenders insist on such a letter as acondition of loan approval.

Covenants Not to SueState Covenants Not to Sue may be

used as part of formal agreements betweenstates and buyers and sellers. In suchcovenants, the state offers assurance that,in return for meeting specified cleanupstandards, it will not sue for furthercleanup. In some cases, the covenant issubject to reexamination if new informa-tion about contamination emerges. Therequirements for proof of cleanup comple-tion vary from state to state and involvedifferent costs. Some states only ask theowner to conduct the cleanup recom-mended by licensed environmental engi-neering professionals; others may demandfull state agency oversight of cleanupprocedures.

Prospective Purchaserand Buyer-Seller Agreements

Many state laws also have provisionsthat help buyers limit costs and liabilityfor site contamination that occurs prior topurchasing property. Such provisions aresometimes referred to as “ProspectivePurchaser Agreements” or “Buyer-SellerAgreements.” These agreements protectthe new owners from liability for pastcontamination that occurred under previ-

ous ownership. While these contractsshould be arranged with legal assistance,state personnel can offer expertise inframing the agreements. Some statescharge a fee for preparing and negotiatingagreements; others offer the service forfree.

Intervention in the Chain ofOwnership

A buyer may also secure protectionfrom liability by involving the state oranother public agency (such as a county,municipality, landbank, or redevelopmentauthority) in the cleanup process andchain of title. Some states have laws thatpermit a public entity to take title to a siteand arrange for its cleanup, sometimes atthe seller’s expense. The public entity isgenerally protected from liability. Afterthe site has been cleaned up, the statecertifies that it will protect future ownersfrom any costs imposed by state courts asthe result of joint and several liability. Ineffect, the period of public ownershipbreaks the chain of title and limits thebuyer’s liability, just as in buyer-selleragreements.

Summary of General Information DevelopersNeed From State (and Local) Environmental Agency Personnel

q Guidance on how to apply for and work with special state (local)programs or policies that deal with the redevelopment of poten-tially contaminated properties.

q The existence of certain conditions (development, extent of con-tamination, etc.), that may make participation in a state (local)program mandatory. Benefits of participating in these programsinclude: Covenants Not to Sue, No Further Action Letters, or otherliability assurances.

q The procedures and conditions for recognized or certified Buyer-Seller or Prospective Purchaser Agreements under which liabilityprotections will be provided, the cost of the agreements, and theanticipated length of time needed for their approval.

q Inspections required to assure cleanups, and the average waitingtime before an inspector checks a site. Inspection of work may bethroughout the cleanup process or only after the cleanup is com-pleted.


Structuring the Purchase toLessen Risk Exposure

Under the provisions of joint andseveral liability, parties that owned aproperty during or after the time thatcontamination occurred may be heldresponsible for environmental damageand cleanup costs. This means a developermay be able to engage prior owners incleanup cost-sharing, thus reducing thefinancial risks. In such situations, lenderswill be more confident that loans will besatisfied even if unexpected cleanup costsoccur.

A variety of measures that minimizedevelopers’ cleanup costs and liabilityexposure are described below. Each

involves working with the seller to developa mutually agreeable plan. A legal expertversed in real estate and environmentallaw should draft the agreements.

IndemnificationPurchase and sales agreements for

contaminated properties can state that thebuyer is indemnified by the seller fromresponsibility for environmental cleanup.Many real estate documents containlanguage minimizing the innocent parties’potential liability. Provisions can beincluded to protect buyers (and subse-quent site owners) from possible lawsuitsfor problems due to past pollution. Asnoted earlier, Buyer-Seller or ProspectivePurchaser Agreements can be arrangedunder some state environmental laws.

SUBDIVIDINGGlendale Technology CenterGlendale, Wisconsin

The City of Glendale purchased the site of a former canning operation in 1996 inhopes of cleaning up and revitalizing the large tract of deteriorating property. Uponassessment, however, the city found extensive contamination; soil on parts of theproperty was contaminated with heavy metals, underground storage tanks were dis-covered, and elevated levels of pollutants were found in groundwater under certainsections. In order to separate the heavily contaminated from the lightly contaminatedareas, the city subdivided the site into 11-acre and 24-acre parcels. The 11-acreparcel was lightly contaminated, so remediation and development proceeded withgreater ease and at lower cost. A private developer constructed a new building on theproperty and leased it to a business interiors company. The 24-acre parcel was sub-divided again to further isolate the heavily contaminated sections; less contaminatedsections were remediated and received a Certificate of Completion from the state.Had the site not been subdivided, cleanup would have been lengthy and cost prohibi-tive; with subdivision, it was easier for the city to remediate and market the proper-ties.

Case study information from:http://www.dnr.state.wi.us/org/aw/rr/brownfields/glendale.html

Focus On:


Purchase OptionsBuying an option to purchase a

property, rather than buying it outright,can motivate the seller to conduct acleanup. The buyer holds the right topurchase the property, but does not taketitle until the site is clean. If the seller failsto meet a cleanup deadline, the buyer canabandon the option at minimal cost. Inaddition, the buyer can share the cleanupcosts with the seller and account for themin a reduced purchase price.

Conditional Agreements toLease

Conditional Agreements to Lease arean alternative for those who want tooccupy a site, but do not need to own it.The arrangement obliges the propertyowner to clean up the property prior toleasing and requires the tenant to leasethe property for a specified time if thecleanup is completed. Leasing a site withknown contamination that has not beencleaned up requires careful consideration;a lessee (operator) may be held legallyliable for cleanup costs, even after thelease has expired.

SubdividingA large site may be subdivided into

smaller parcels, allowing the contami-nated section of the property to beseparated from the clean developablesections. While the seller cleans up thecontaminated section, the buyer canredevelop the clean parcels. Returningpart of the property to productive reusecan improve the desirability of the areaand also help finance the cleanup. Thedeveloper can also arrange a purchaseoption on the contaminated parcel andplan to develop it after cleanup iscomplete.

Joint VenturesA property owner who

wishes to sell quickly andobtain funds for cleanupmay be willing to form ajoint venture with thebuyer. The seller mayagree to pay most of theestimated cleanup costsand to indemnify the buyeragainst future liability.Such an arrangement canbe better for the developerthan a simple indemnityfrom prior owners, becausethe seller’s commitment tocleanup is strengthened bya share in the financialreturns from redevelopment.

Compensating Lenders� RisksDevelopers seeking support from

lenders need to provide acceptable secu-rity for loans. Lenders evaluate loanapplications against a variety of riskfactors. In addition to the liability andfinancing implications of site environmen-tal conditions, two other factors arecentral to lenders’ decisions on brownfieldsredevelopment projects.

v Loan or credit risk: The riskthat a borrower will be unable tomake payments mandates reviewof the project’s financial viabilityand the borrower’s credit rating.

v Collateral risk: The risk that thelender will not recoup the value ofthe loan from sale of the collateral,if foreclosure occurs, leads toreduced loan-to-value ratios if thevalue of the collateral is uncertain.

Scenarios for Risk MinimizingTransactions and Buyer/Seller

Arrangements

q Indemnification: When the buyerwants to purchase outright with noties to the seller.

q Joint Venture, Subdividing: Whenthe buyer is willing to work closelywith the seller on a continual ba-sis.

q Purchase Options: When the buyerwants to purchase contingent uponcleanup.

q Conditional Agreements to Lease:When buying is not a requirementfor occupancy.


Loan-to-Value RatioWhatever the project, the smaller the

loan relative to the value of the project, thelower the risk to the lender. Thedeveloper’s equity participation, theportion of the project the developer ownsthrough personal investment, can besacrificed for cash to service the loan.Lenders expect some minimum equityparticipation by the owner/developer onany project (perhaps 15% to 20%), but thepercentage can vary. The greater theequity participation, the easier it is tosecure a loan.

Even in the unlikely case of adeveloper providing more than half of theproject cost in equity, a lender may stillrefuse funds because the deal involves toohigh a loan-to-value ratio. Lenders rarelywill lend 100 percent of collateral assetvalue under any conditions. Lending asmaller percent of collateral value protectslenders against collateral risk. It allowsfor the cost of selling an asset and for apossible drop in expected property value.On brownfields sites, especially ones thathave not been fully remediated, lendersmay provide well below 70 percent of theproperty value, the ratio sometimes usedas a maximum for purchases of developedcommercial properties.

Sources of CollateralThe first item of collateral developers

usually offer lenders is the propertytargeted for redevelopment. If this isinsufficient to cover the loan, developershave two choices:

v Reduce the level of the loan byscaling back the project or provid-ing more equity; or

v Provide additional collateral, suchas other real estate holdings,stocks, bonds or mutual funds.

Developers may have working capitalabove and beyond the amount committedto redevelopment projects. Sometimes,lenders assume that such capital will coversome of the loan and collateral risk.

Environmental InsuranceAvailability

Recent changes in legislation andtechnology have caused substantial growthin the environmental insurance market asunderwriters are better able to calculaterisks. In 1998, the four main providers ofenvironmental insurance were AmericanInsurance Group, the industry leader with19 years in the business, Reliance, Zurich,and Kemper. Increased competition hasled to lower prices and more flexiblepolicies. Policies now span the range fromtwo thousand to several million dollars.Coverage for multiple sites helps reducethe cost for developers. Two basic types ofinsurance policies exist — Cost OverrunInsurance and Cleanup Liability Insur-ance. Cost Overrun Insurance coverscleanup projects that overrun theirbudgets, and Cleanup Liability Insurancecovers liability associated with cleanup.

Cleanup Cost Overruns. Coveragefor cleanup cost overruns can greatlyreduce both loan risk and collateral risk forprojects that include removing or contain-ing past contamination. Cleanup costoverruns can jeopardize a project, increas-ing loan risk. However, if a project isabandoned due to excess cleanup cost,incomplete cleanup will reduce theproperty’s value as collateral. Coverageagainst overruns lasts until the cleanup iscomplete. The insurance company covers


any amount beyond the original estimatedcost of the project; coverage can be as highas $200 million. Developers can choose toreduce their costs by selecting policieswith deductibles.

Cleanup Liability Insurance.Cleanup liability insurance applies toaccidental property damage or bodilyinjury involving third parties on- or off-siteduring cleanup. Policies might includecleanup of preexisting, unknown contami-nation recently discovered or contamina-tion spread due to cleanup activities.Some policies include provision for newcontamination. Policy holders who makeevery effort to comply with environmentalregulations and unknowingly contami-nate their property may receive protectionagainst claims or remediation costs.

Since liability claims can arise longafter actions are taken, developers need todetermine the value of these two types ofpolicies for specific projects. Issues toconsider include:

v Duration of the initial policy.Policies are generally available forup to fifteen years. This maysuffice only if a developer expectsto sell the property and/or obtainprotection such as a state cleanupapproval.

v Coverage provided for “succes-sor” owners. Coverage can beextended to subsequent owners ortenants, but extension can dilutecoverage limits.

An indirect benefit of insurance is thepressure placed on firms to keep theirproperty clean; firms with clean recordspay less than firms that have polluted.However, some firms are still reluctant to

purchase insurance. They may assumethat the government will step in and fundthe cleanup if the firm pollutes the landand then goes bankrupt. Anotherdifficulty comes from the circular nature ofthe insurance process. The insurancepolicy is needed to secure financing forcleanup, but insurance agencies do not liketo sign policies until they have seen anapproved cleanup plan.


Environmental SiteAssessments and CleanupAlternatives

Environmental SiteAssessments and CleanupAlternatives

M ost lending institutions rou-tinely require that envi-ronmental assessments be

conducted on previously used propertiesfor which they are considering loans forredevelopment. This chapter discussesassessment phases and provides anoverview of basic cleanup alternatives forhandling contamination.

Environmental SiteAssessment Phases

Environmental engineers have estab-lished standard assessment phases todetermine if sites are contaminated, howserious contamination is, and whatcleanup will cost. These studies should beconducted by professionals.

Phase I assessments determinewhether there is likely site contamination.The studies do not involve digging ortesting. Instead, they review past uses ofproperties and environmental permits forpractices such as tank storage, land orwater waste disposal, and waste incinera-tion. Site visits are conducted to assessany visible problems, such as distressedvegetation or leaking drums. Theprocedures for Phase I studies have beenstandardized by the American Society forTesting and Materials (ASTM), aprofessional association of engineers.Depending on site history, Phase Iassessments usually cost from $2,000 to$5,000 and take one to three weeks tocomplete. An assessment will eitherdetermine that the site is clean or indicatepotential contamination. Establishing the

existence and extent of contaminationrequires a Phase II assessment.

Phase II assessments determine thenature and extent of potential sitecontamination. The studies involve sam-pling and testing of water and soil. Basedon Phase I findings, soil sampling isconcentrated in sections where contami-nation is most likely. Phase II assess-ments take from two to eight weeks toconduct. These tests generally cost from$5,000 to $15,000, but can be moreexpensive for large and complex sites andthose with groundwater contamination. Alow level of contamination does notnecessitate cleanup. If cleanup isnecessary, it might be accomplished withsimple measures such as removing drumsfrom the site. Other cases may requiremore extensive remediation and Phase IIIassessments.

Phase III assessments evaluate thealternatives for site clean up and theimplementation time and cost for eachalternative. The studies may involve moreon-site testing to determine if thecontaminants have spread, perhaps evento adjacent properties. These studiestypically take from three to ten weeks tocomplete. The costs usually exceed $7,000,and can be much higher, depending on siteconditions. The least expensiveremediation alternative identified in aPhase III assessment may not be the mostprofitable. If it fails to satisfy the lender orenvironmental agency inspector, addi-tional engineering work would imposenew costs and perhaps delays.

Cha

pter

6


Most lenders require a Phase I siteassessment for loans over a specifiedthreshold, which varies between banksand according to the particulars of theproject. For loans below the threshold,lenders generally require Phase I assess-ments only for properties that once housedbusinesses that use toxic chemicals, suchas former metal works, chemical manufac-turing facilities, dry cleaners, or servicestations.

For small loans outside the high-riskcategory, lenders use an “environmentaltransaction screen” recommended byASTM. The screen usually involvesconducting a site inspection and filling outa questionnaire. Only if this screeningraises a red flag does the lender require aPhase I assessment. The exhibit on page28 presents a sample of typical screeningconsiderations that developers should beable to answer before investing time andmoney on plans for redevelopment orapproaching lenders.

Site RemediationDepending on the results of site

assessments, lenders will want assurancesthat any contamination will be cleaned upin a way that complies with all relevantenvironmental laws and regulations, andthat the process will be overseen, asnecessary, by the relevant authorities.Such assurances will minimize thefinancial risk associated with the cost ofcleanup and the possibility of futureproblems.

The choice of method to deal with sitecontamination depends on the nature andextent of the contamination. It is beyondthe scope of this document to providedetailed discussion of alternative methodsavailable for addressing site contamina-

tion. Developers should consult specialistsin environmental engineering in caseswhere site contamination is an issue. Ingeneral, however, there are four ap-proaches.

The first is to excavate the contami-nated soil and/or pump contaminatedgroundwater for storage or treatment at ahazardous waste facility. As long as thesource of the contamination is removed orcontrolled, this approach permanentlyaddresses the problem.

The second approach is to treat thecontamination on-site, using any of avariety of technologies. The technologiesinclude bioremediation, or use of microor-ganisms to degrade contaminants; vitrifi-cation, or heating soil to convert contami-nated materials to inert products; soilwashing, or excavating soil and washingout its contaminants; and soil vaporextraction, which involves removing vola-tile organic pollutants through vaporextraction wells. If groundwater isaffected, a pumping and treatment systemmay need to be installed and will requireregular testing and maintenance.

The third method uses engineeringcontrols, such as installing subsurfaceliners and paving over contaminatedareas, to isolate and contain the pollution.These solutions, used with increasingfrequency, require monitoring to assuretheir long-term effectiveness.

The fourth approach is referred to as“passive remediation.” This relies onnatural processes over time to degrade thecontaminants. Passive remediation isapplicable only at sites where thecontaminants:


Sample Environmental Screening Considerations

1. Historical use of site.Examples of sites that may be contaminated include:- gas stations, motor repair facilities, vehicle sales facilities;- commercial printing facilities, dry cleaners, photo developing laboratories;- junkyards, landfills, waste treatment, storage, disposal or recycling facilities;- former military bases, other decommissioned federal operations that routinely

used toxic chemicals.

2. Items stored on-site.Possible evidence of contaminants include:- discarded automotive or industrial batteries, paints, pesticides or other

chemicals;- industrial drums or sacks of chemicals.

3. Waste disposed on-site.Evidence of on-site waste include:- landfill materials brought from off-site;- liquid waste disposal facilities, such as pits, ponds, and lagoons;- significantly stained or burned soils and �distressed� vegetation.

4. Presence of underground or aboveground storage tanks.Evidence of USTs include:- vent pipes;- fill pipes;- pavement repairs.

5. Stains and/or foul odors.

6. Presence of private wells that may have been contaminated.

7. Septic or sewage pre-treatment facility.

8. Knowledge of the owner or current occupant, or records of:- government action against violations of environmental laws or regulations;- existence of petroleum products or hazardous substances on the site;- prior site assessments that indicated contamination or recommended further

assessment of the property;- lawsuits or administrative actions involving actual or possible release of

hazardous substances on the site.

9. On-site operations showing evidence of:- transformers, capacitors or hydraulic equipment on site showing signs of

leaking;- transformers, capacitors or hydraulic equipment on site for which records

indicate they may contain PCBs.

10. Evidence of asbestos (friable and non-friable) present on the property or anyrecords of asbestos removal or abatement in the past.

11. For residential structures, the condition of interior painted surfaces and theextent of paint peeling.

12. A record of the property, or adjacent properties, in any of the automated govern-ment hazardous waste site data bases.

13. Properties on the following government environmental action databases withinthe specified distances from the site:- NPL (National Priorities List or Superfund Sites) � 1 mile;- CERCLIS List (EPA site investigation list) � 0.25 mile;- RCRIS TSD Facilities (licensed hazardous waste facilities) � 0.25 mile.


v will biodegrade,

v will not migrate, and

v have insignificant impact on hu-man health and the environment.

These sites require monitoring to ensurethe conditions are being met.

Engineering controls and passiveremediation are generally the leastexpensive methods of contaminationmanagement. However, environmentalagencies do not always allow them becausethe contamination may pose a continuoushazard when left in place untreated. Suchapproaches are more acceptable in statesthat allow consideration of future land usein determining remediation methods andhave variable cleanup requirements de-pending on sites’ intended use. In suchsituations, developers need to protect theirsites from unintended uses through“institutional controls.” These controlsensure by legal means that the site’s use

will remain compatible with its cleanuplevel. Controls include various deedrestrictions to meet specific site needs.They may, for example, restrict site use toindustrial purposes, prevent excavation incontaminated sections of the site, orinclude easements to let inspectorsmonitor any remaining contamination.Institutional controls trigger a review ofthe need for further cleanup if the owner oruser seeks a different use. A developerwho takes on a redevelopment project forfuture sale should consider a thoroughenvironmental assessment to determinewhat cleanup level will ensure unre-stricted future use of the site.

OversightMany states have Voluntary Cleanup

Programs (VCPs) or similar brownfieldsprograms with one of three kinds ofenvironmental agency involvement. Insome states, agency personnel provide

HOW VCPS AID CLEANUPSOccidental Chemical Corporation (OxyChem)Clark County, Indiana

OxyChem closed its 26-acre southeastern Indiana chemical plant in 1991, creating anexpansive and highly contaminated brownfield. OxyChem, the Indiana Department ofEnvironmental Management (IDEM), the Indiana Department of Commerce, and thecities of Clarksville and Jeffersonville formed a partnership to address contaminationand future use issues. In 1993, OxyChem hired a private contractor to remediate thesite under Indiana�s Voluntary Remediation Program (VRP). In return for cleaning upthe site, the state agreed not to hold OxyChem responsible for past contamination.Once remediated, OxyChem received a Certificate of Completion from IDEM and aCovenant Not to Sue from the Governor�s office. These VRP liability assurancesprotect past, present, and future owners from any future enforcement action, andwere essential to brokering the deal that transformed the site into the profitable retailcenter that it is today.

Case study information from:http://www.glc.org/projects/robin/cases/occidental.html

Focus On:


direct technical guidanceand oversight throughoutthe cleanup process. Al-ternatively, state agen-cies rely on licensed pro-fessionals to provide ex-pertise and oversight dur-ing the cleanup, and topresent evidence of itscompletion. In otherstates, environmentalagency staff only conductthe final review of thecleanup paperwork andmay visit the site to verifycompletion of the job.

Developers participating in VCPs mayhave to wait for initial inspections and payagency staff for oversight. In return, theygain major advantages. First, statecleanup reviews boosts lenders’ willing-ness to finance projects. Second, theyminimize the risk that the state will orderfurther cleanup in the future. Third, manyprograms offer varied and advancedtechnical assistance. Finally, statecleanup certification for VCP sites isgenerally very prompt.

Selecting ConsultantsAs previously noted, small-scale

brownfields developers, who have noreason to expect site contamination, maynot need to hire specialized consultants.For others, however, the advice ofspecialists in environmental engineeringand law may be necessary to conductdevelopment efforts in the most cost-effective way.

Environmental engineering consult-ants conduct site assessments and cleanup.They usually work for developers, notbanks. However, because banks have toapprove project plans, developers shouldselect consultants who are acceptable to

their banks. Banks dealing with potentialcontamination have lists of approved siteassessment firms. If an unlisted firm hasassessed the site, the bank may ask thedeveloper to pay for having the assess-ment reviewed by the bank’s assessor oreven for an additional bank-authorizedassessment.

Before hiring consultants, developersshould obtain lists of bank-approvedconsultants, select two or three firmsappearing on the lists of multiple banksand ask each for a Phase I proposal. Bycomparing the actions, time-frames, andcosts proposed, the developer will be ableto select the best firm.

In some cases, a bank will want tocontract a site assessment firm directly,charging the developer for the cost. Thedeveloper should agree, but pay for theassessment only if the firm is also on otherbanks’ lists. If the first bank declines tofinance the project, the developer cansubmit the site assessment to the nextlender without hiring another firm.

Selecting Legal CounselFor brownfields sites where contami-

nation is highly probable, an environmen-tal law specialist may be essential. A realestate lawyer may lack expertise withenvironmental law and liability issues.Environmental lawyers can help develop-ers minimize investment risk and opti-mize returns, and thereby increaselenders’ willingness to finance projects.

Structuring the purchase deal. Alawyer can prepare a purchase contractlimiting the developer’s liability expo-sures (see Chapter 5). The costs arenegligible if the contract structure canencourage the bank to finance the projector help the seller with the cleanup.

How States Arrange Paymentfor Oversight Services:

Some Examples

q per hour

q per work plan review

q percentage of estimated costs inadvance

q application fee

q VCP participation fee

q deposit

q by site size

Many states use of combination of abovemechanisms. For example, Illinoischarges a $5000 fee, or 50% of the an-ticipated cost of oversight, whichever isless.


Determining seller-buyer respon-sibilities for contamination. Legalcounsel can draft documents stipulatingthe seller’s liability for pollution on thesite. Some state environmental depart-ments will also help prepare suchcontracts. Even with the cleanupcompleted, developers may want to specifyprotection from liability for contaminationthat was not discovered or adequatelydealt with during the cleanup.

Negotiating with other potentiallyresponsible parties. In some instances,a developer may want to locate andnegotiate cleanup costs with a party otherthan the seller. Many potentiallyresponsible parties will contribute tocleanup costs in order to avoid litigation.In a worst case scenario, however, it maybe necessary to take court action to pursueparties legally responsible for cleanupcosts.

Structuring loan collateral. Insome cases, structuring collateral may becomplicated. For example, a developermay want to form a separate legal entity tobear the risk of a brownfield redevelop-ment. There are various organizationalstructures that can assure lenders accessto other collateral or can limit thedeveloper’s legal liability. They vary fromstate to state and require legal expertise.Possible arrangements include:

v Offering one or more of thedeveloper’s other assets as collat-eral for a brownfield loan, when alender rejects the use of the site ascollateral;

v Creating a limited liabilitycompany (LLC) to conduct theredevelopment of a brownfield

site, if there may be a legal right to“pierce the corporate veil” andpursue the owner’s other assets;

v Taking advantage of any publicsector loan guarantees, liabilityprotections or other special incen-tives for brownfields redevelop-ment (since any such incentiveswill involve contracts that gobeyond the loan and real estatepurchase agreements familiar tomost developers).

Summary of General InformationDevelopers Need in SelectingEnvironmental Consultants

q Names of banks that list the firm amongtheir approved site assessors for conduct-ing Phase I studies.

q Proposal indicating the protocols used toconduct Phase I study and a cost esti-mate of the study. The consultant/engi-neer should use the ASTM protocol.

q Experience in doing site cleanups, de-scriptions of recent cleanup jobs, and ref-erences. If the site has a contaminationproblem, the developer may save moneyby having the cleanup done by the firmthat does the assessment. Also, the firmhas a stronger incentive to do an accu-rate and full assessment if it knows itwill have to deal with any missed con-tamination problem in the event the de-veloper asks for a cleanup. Finally, themore experience the firm has, the morelikely it is to be up-to-date on alternativecleanup technologies. This could savethe developer cleanup costs and makethe lender more confident.

q Experience and qualifications documen-tation for any subcontractors who willbe involved. Documentation on all sub-contractors will make both lenders andregulators more comfortable.


Summary of General Information DevelopersNeed in Selecting Real Estate And Environmental Lawyers

q Type of real estate and environmental law services provided by the firm. Large firmscharge more per hour, but usually they can both structure a real estate deal and helpdevelopers comply with environmental laws.

q Experience working with financial institutions in the area as a representative of buyers inreal estate purchases. Some lawyers specialize in representing buyers, while others haveexperience representing sellers or financial institutions. Developers need firms experi-enced in working for buyers. Developers also need firms accustomed to working with thelenders they expect to approach, for several reasons.

- Developers are better off if their lawyers help them anticipate the lenders� demands.

- An understanding built up between the developers� lawyers and the prospective lend-ers is helpful.

- It is more cost-effective for developers to use the same lawyers throughout the rede-velopment process.

q Examples of the deals the lawyer might structure to limit future liability and remediation/redevelopment costs. There are many ways of structuring deals to limit liability andunexpected costs. An expert lawyer should be able to show developers examples of howthese arrangements work.


ResourcesResources

Recommended ReadingThe EPA Internet homepage, http://www.epa.gov/brownfields, provides infor-mation on many aspects of brownfieldsredevelopment, including financing, in-centives, liability, and relevant legisla-tion.

To obtain the following books, contactNortheast Midwest Institute, 218 DStreet, SE, Washington, DC 20003;telephone: (202) 544-5200; fax: (202) 544-0043; http://www.nemw.org.

v Bartsch, Charles, Elizabeth Collaton,and Edith Pepper. Coming Clean forEconomic Development: A ResourceBook on Environmental Cleanup andEconomic Development Opportunities.Northeast Midwest Institute. 1996.

v Brownfields Redevelopment: A Guide-book for Local Governments andCommunities. International CountyManagers Association and NortheastMidwest Institute. 1997.

v Pepper, Edith. Lessons from the Field:Unlocking Economic Potential with anEnvironmental Key. Northeast Mid-west Institute. 1997.

The following book is available from theAmerican Bar Association PublicationOrders, PO Box 10892; Chicago, IL 60610-0892, telephone: (800) 285-2221.

v Davis, Todd and Kevin Margolis.Brownfields: A Comprehensive Guideto Redeveloping Contaminated Prop-erty. American Bar Association. 1997.

The following book is available from theUrban Land Institute, 1025 ThomasJefferson St., NW, Suite 500W Washing-ton D.C. 20007-5201; telephone: (800) 321-5011; http://www.uli.org

v Simons, Robert A. Turning Brownfieldsinto Greenbacks. Urban Land Insti-tute. 1998.

To obtain the booklet below, contact theLincoln Institute of Land Policy, 113Brattle Street, Cambridge, Massachusetts002138-3400; telephone: (617) 661-3016;http://www.lincoln.edu

v Wright, James. Risks and Rewards ofBrownfield Redevelopment. LincolnInstitute of Land Policy. 1997.

The Urban and Economic DevelopmentDivision of the U.S. EPA in Washington,DC 20460 provides the followingdocument, among others on infill andbrownfields redevelopment. Telephone:(202) 260-2127; fax (202) 260-0174;www.smartgrowth.org

v Smart Development: RestoringEconomy, Environment, and Commu-nity. Urban and Economic Develop-ment Division. 1998.

Appendix A


EPA Regional Brownfields CoordinatorsEPA regional brownfields coordinators provide support for brownfields developers byanswering questions on relevant issues. They work with applicants selected in theBrownfields Assessment Demonstration Pilot Program to finalize their cooperativeagreement packages.

EPA Region

Region 1

Region 2

Region 3

Region 4

Region 5

Region 6

Region 7

Region 8

Region 9

Region 10

EPA Headquarters

States inthe Region

CT ME MANH RI VT

NJ NYPR VI

DE DC MDPA VA WV

AL FL GAKY MS NCSC TN

IL IN MIMN OH WI

AR LA NMOK TX

IA KSMO NE

CO MT NDSD UT WY

AZ CA HINV AS GU

AK IDOR WA

Contact Address,Phone, Fax

John F. Kennedy Federal BuildingOne Congress StreetBoston, MA 02203(617) 918-1209 Fax (617) 918-1291

290 Broadway, 18th FloorNew York, NY 10007(212) 637-4314 Fax (212) 637-4360

1650 Arch StreetPhiladelphia, PA 19103(215) 814-3129 Fax (215) 814-3254

Atlanta Federal Center61 Forsyth StreetAtlanta, GA 30303(404) 562-8661 Fax (404) 562-8628

77 West Jackson BoulevardChicago, IL 60604-3507(312) 886-1960 Fax (312) 886-7190

First Interstate Bank Tower1445 Ross Avenue, Suite 1200Dallas, TX 75202-2733(214) 665-6735 Fax (214) 665-6660

726 Minnesota AvenueKansas City, KS 66101-2728(913) 551-7000 Fax (913) 551-7063

999 18th Street, Suite 500 (EPR)Denver, CO 80202-2405(303) 312-6803 Fax (303) 312-6071

75 Hawthorne Street, H-1San Francisco, CA 94105(415) 744-1730 Fax (415) 744-2180

1200 Sixth AvenueSeattle, WA 98101(206) 553-6523 Fax (206) 553-0124

US EPAOffice of Solid Waste and Emergency ResponseWashington, DC 20460(202) 260-4039 Fax (202) 260-6606


State Programs and ContactsMost states have at least one, if not multiple, contact people to answer questions oncleanup procedures. Contact people provide oversight for environmental cleanup,information on loan and grant availability, technical guidance, and cleanup verification.47 out of 50 states have official VCP programs; North Dakota, South Dakota andWyoming do not have official programs.

State Contact Address, Phone, Fax

Alabama Department of Environmental ManagementLand Division1751 Congressman WL Dickinson DriveMontgomery, AL 36109(334) 271-7732 Fax (334) 279-3050

Alaska Department of Environmental ConservationContaminated Sites Remediation Program410 Willoghby AvenueJuneau, AK 99801(907) 465-5390 Fax (907) 465-5262

Arizona Department of Environmental QualityVoluntary Remediation Program3303 North Central AvenuePhoenix, AZ 85012(602) 207-4166 Fax (602) 207-4236

Arkansas Department of Pollution Control and EcologyHazardous Waste Division8001 National DriveP.O. Box 8913Little Rock, AR 72219-8913(501) 682-0833Fax (501) 682-0565

California California Environmental Protection AgencyDepartment of Toxic Substances ControlP.O. Box 806Sacramento, CA 95812-0806(510) 540-2122 Fax (916) 323-3700

Colorado CO Department of Public Health and EnvironmentHazardous Materials and Waste Management Div.4300 Cherry Creek Drive SouthDenver, CO 80246-1530(303) 692-3449 Fax (303) 759-5355

Connecticut Department of Environmental ProtectionWater Management Bureau79 Elm StreetHartford, CT 06106-5127(860) 424-3705 Fax (860) 424-4057



D.C. Department of HealthEnvironmental Health Administration51 N Street, NEWashington, DC 20002(202) 645-6080 Fax (202) 645-6622

Delaware Department of Natural Resources and Environmental ControlSite Investigation and Restoration Branch715 Grantham LaneNew Castle, DE 19720-4801(302) 395-2600 Fax (302) 323-4561

Delaware Department of Revenue820 N. French StreetWilmington, DE 19801(302) 577-8455 Fax (302) 577-8656

Florida Department of Environmental ProtectionBureau of Waste CleanupTallahassee, FL(850) 488-3935

Georgia GA Department of Natural ResourcesEnvironmental Protection DivisionSuite 1462Hazardous Waste Management Branch205 Butler Street, SEAtlanta, GA 30334(404) 657-8600 Fax (404) 657-0307

Hawaii HI Department of Health, Hazard Evaluation, and Emergency Response919 Ala Moana BoulevardRoom 206Honolulu, HI 96814(808) 586-4249 Fax (808) 586-7537

Idaho Division of Environmental Quality1410 North Hilton StreetBoise, ID 83706(208) 373-0502 Fax (208) 373-0576

Illinois Illinois Environmental Protection AgencyBureau of LandDivision of Remediation Management1021 North Grand Avenue EastP.O. Box 19276Springfield, IL 62794-9276(217) 782-6761 Fax (217) 782-3258

Indiana Department of Environmental ManagementVoluntary Remediation ProgramIndianapolis, IN(317) 308-3106

State Programs and Contacts (continued)



Iowa IA Department of Natural ResourcesEnvironmental Policy DivisionLand Quality BureauWallace State Office BuildingDes Moines, IA 50319(515)242-6346 Fax (515) 281-8895

Kansas Department of Health and EnvironmentDivision of EnvironmentBureau of Environmental RemediationForbes Fields Building 740Topeka, KS 66620-0001(785) 296-1675 Fax (913) 296-1686

Kentucky Department of Environmental ProtectionDivision of Waste Management14 Reilly RoadFrankfurt, KY 40601(502) 564-6716 Fax (502) 564-4049

Louisiana Department of Environmental QualityInactive & Abandoned Sites DivisionP.O. Box 82178Baton Rouge, LA 70884-2178(225) 765-0487 Fax (504) 765-0484

Maine Voluntary Response Action Program CoordinatorBureau of Hazardous Materials & Solid Waste ControlME Department of Environmental ProtectionState House Station 17Augusta, ME 04333-0017(207) 287-2651 Fax (207) 287-7826

Maryland MD Department of the EnvironmentVoluntary CleanupBrownfields Division2500 Broeing HighwayBaltimore, MD 21224(410) 631-3437 Fax (410) 631-3472

Massachusetts Department of Economic DevelopmentBoston, MA(617) 727-3206

Massachusetts Office of the Attorney GeneralEnvironmental Protection Division200 Portland StreetBoston, MA 02114(617) 727-2200 Fax (617) 727-9665

Massachusetts Department of Environmental ProtectionBureau of Waste Site Cleanup1 Winter Street, Floor #7Boston, MA 02108(617) 556-1121 Fax (617)556-1049




Michigan MI Department of Environmental QualitySite Reclamation UnitP.O. Box 30426Lansing, MI 48917(517) 373-9540 Fax (517) 373-9657

Minnesota Minnesota Pollution Control AgencyGroundwater & Solid Waste Unit520 Lafayette RoadSt. Paul, MN 55155-4194(651) 296-9707 Fax (612) 296-9707

Minnesota Department of Trade and Economic DevelopmentSt. Paul, MN(612) 297-4132

Mississippi Department of Environmental QualityPollution Control & Hazardous Waste DivisionP.O. Box 10385Jackson, MS 39289-0385(601) 961-5171 Fax (601) 961-5741

Missouri MO Department of Natural ResourcesVoluntary Cleanup SectionP.O. Box 176Jefferson City, MO 65102(573) 526-8913 Fax (573) 526-8922

Montana MT Department of Environmental QualityRemediation DivisionP.O. Box 200901Helena, MT 59620-0901(406) 444-0492 Fax (406) 444-1901

Nebraska NE Department of Environmental QualitySuperfund Section1200 N StreetThe Atrium Building, Suite 400Lincoln, NE 68509-8922(402) 471-3388 Fax: (402) 471-2909

Nevada Division of Environmental ProtectionBureau of Corrective Actions333 West Nye LaneCarson City, NV 89706(775) 687-4670 Fax: (775) 687-6396

New Hampshire Department of Environmental ServicesWaste Management DivisionState Site Corrective Action Section6 Hazen DriveConcord, NH 03304(603) 271-3503 Fax (603) 271-2456




New Jersey Department of Environmental ProtectionSite Remediation Program401 East State St., P.O. Box 434Trenton, NJ 08625-0434(609) 292-1250 Fax (609) 292-2117

New Mexico Environment DepartmentVoluntary Remediation ProgramP.O. Box 26110Santa Fe, NM 87502(505) 827-2754 Fax (505) 827-2965

New York Department of Environmental ConservationDivision of Environmental Remediation50 Wolf RoadAlbany, NY 12233-7010(518) 457-5861 Fax (518) 457-9639

North Carolina Department of Environmental and NaturalResourcesDivision of Waste Management Bureau401 Oberlin Road, P.O. Box 29603Raleigh, NC 27611-7687(919) 733-2801 ext. 353 Fax (919) 733-4811

North Dakota Department of Health and Consolidated LabsDivision of Waste ManagementP.O. Box 5520Bismarck, ND 58506-5520(701) 328-5166 Fax (701) 328-5200

Ohio Ohio Environmental Protection Agency1800 Watermark Drive, P.O. Box 1049Columbus, OH 43266-0419(614) 644-2279 Fax (614) 644-3146

Oklahoma OK Department of Environmental QualityWaste Management Division1000 Northeast 10th Street, 8th FloorOklahoma City, OK 73117-1212(405) 702-5100 Fax (405) 271-1342

Oklahoma Department of Environmental QualityWaste Management Service1000 Northeast 10th StreetOklahoma City, OK 73117-1212(405) 271-7128 Fax (405) 271-1342

Oregon Department of Environmental QualityWaste Management & Cleanup Division811 S.W. Sixth AvenuePortland, OR 97204(503) 229-5913 Fax (503) 229-6977




Pennsylvania Department of Community and EconomicDevelopmentGrants Office, 494 Forum BuildingHarrisburg, PA 17120(717) 787-7120 Fax (717) 772-2890

Pennsylvania Department of Environmental ProtectionBureau of Land Recycling & Waste ManagementPhiladelphia, PA(717) 783-7816

Rhode Island Department of Environmental ManagementOffice of Waste Management235 Promenade StreetProvidence, RI 02908(401) 222-2797 Fax (401) 222-3812

South Carolina Department of Health and Environmental ControlBureau of Land & Waste Management2600 Bull StreetColumbia, SC 29201(803) 896-4000 Fax (803) 896-4292

South Dakota Department of Water and Natural ResourcesDivision of Environmental Regulation523 East Capitol, Foss BuildingPierre, SD 57501(605) 773-5868 Fax (605) 773-6035

Tennessee Program ManagerTN Department of Environment and ConservationDivision of Superfund401 Church Street, 4th Floor, L & C AnnexNashville, TN 37214(615) 532-0900 Fax (615) 532-0938

Texas TX Natural Resources Conservation CommissionVoluntary Cleanup ProgramMC:221, P.O. Box 13087, MC-221Austin, TX 78711-3087(512) 239-5891 Fax (512) 239-1212

Utah Department of Environmental QualityDivision of Environmental Response andRemediation168 N. 1950 West, 1st FloorSalt Lake, UT 84116(801) 536-4100 Fax (801) 536-4242

Vermont VT Agency of Natural ResourcesDepartment of Environmental Conservation103 South Main StreetWaterbury, VT 05671-0404(802) 241-3888 Fax (802) 241-3296




Virginia Department of Environmental QualityP.O. Box 10009Richmond, VA 23240(800) 592-5482 Fax (804) 698-4234

Washington Department of EcologyToxics Cleanup ProgramP.O. Box 47600Olympia, WA 98504-7600(360) 407-7170 Fax (360) 407-7154

West Virginia WV Division of Environmental ProtectionOffice of Environmental RemediationSite Investigation and Response Section1356 Hansford StreetCharleston, WV 25301(304) 558-2508 Fax (304) 558-0256

Wisconsin Wisconsin Department of Natural ResourcesDivision of Environmental Quality101 South Webster Street, P.O. Box 7921Madison, WI 53707-7921(608) 267-6713 Fax (608) 267-2768

Wyoming Department of Environmental QualitySolid and Hazardous Waste Division122 West 25thCheyenne, WY 82002(307) 777-7752 Fax (307) 777-5973
