Q&A with Kate Lucas, AICP, RE|Solutions, LLC
As a planner specializing in entitlements, conceptual site design, land planning, and community engagement, Kate Lucas, planning project manager with RE|Solutions, LLC, has worked with over 45 different municipalities and numerous resident groups. She has managed the design, entitlement, and CEQA process for brownfield projects ranging from quarter-acre single-use sites to mixed-use projects of several hundred acres.
What is a brownfield?
A brownfield is a property whose redevelopment or reuse is complicated by prior uses that create the potential for contamination. Sometimes the property is known to be contaminated; other times, just the possibility of contamination can deter potential users and investors. The EPA estimates that there are hundreds of thousands of brownfields sites in the United States. They are present in almost every community. Gas stations and dry cleaners are the most recognizable and perhaps most common brownfields in a community, but the definition also extends to all kinds of other commercial and industrial sites, even those buildings containing Regulated Building Materials (RBMs) such as asbestos and lead-based paint. While the level of contamination on brownfields varies widely in severity, the formal EPA definition of a brownfield explicitly includes properties that are not actually contaminated, just perceived to be contaminated.
What are the challenges that typically prevent brownfields from being cleaned up and redeveloped?
While brownfields can present an excellent opportunity to the development community, the associated complexities are daunting. For many, concerns about inheriting liability for cleanup are the primary barrier to redevelopment. Would-be purchasers or developers are concerned that by purchasing a brownfield property they become a “potentially responsible party” (PRP), meaning that they could be financially liable for the cleanup of contamination that they did not cause. However, liability concerns can be addressed through the performance of “All Appropriate Inquiries” (AAI), which includes environmental investigations that are compliant with the current ASTM standard. If AAI is conducted correctly, the purchaser should receive what are called Bona Fide Prospective Purchaser (BFPP) protections, which protect the purchaser from cleanup orders. BFPPs must also take “reasonable steps” to address contamination on-site in order to maintain these protections. We highly recommend engaging the services of a real estate attorney with experience in brownfield deals if you are considering purchasing a property with known or suspected contamination.
The second major challenge to brownfield redevelopment is the cost. When greenfields (previously undeveloped land) are readily and cheaply available, it can be difficult to recoup the cost of investigations, cleanup, and ongoing monitoring from the end use. Lenders are also wary of liability issues, so it is extremely difficult to obtain financing for brownfields deals. When available, debt on brownfield properties often requires additional guarantees, underwriting hurdles, and a lower debt-to-equity ratio. On top of higher development costs, brownfields also carry the risk of discovering previously unknown environmental conditions, which can delay construction and significantly increase costs. However, a well-written environmental insurance policy can be used to mitigate costs due to the discovery of previously unknown contamination. We recommend reaching out to an experienced environmental insurance broker or attorney to make sure the policy you purchase provides the coverage you need.
The third major challenge to brownfield redevelopment is the amount of risk associated with addressing contamination, which ties into cost, schedule and liability concerns. Typically, brownfields projects take longer than greenfield developments due to the additional time required for investigations and cleanup. For some brownfields sites, like landfills, the site conditions may require significantly more complex building systems, further extending construction timelines. The more complex the redevelopment timeline, the more difficult it is to predict real estate market trends. For brownfields, there is almost always a higher risk that the demand may not be there when the project is finally complete.
Even though there are challenges to brownfields redevelopment, the benefit of redeveloping these properties is considerable. Brownfield redevelopment restores underused property to productive use, limits the growth of urban sprawl, and restores the environment, oftentimes in communities that have disproportionally experienced the negative effects of these uses for decades.
How can communities work with residents and developers to come up with economically feasible redevelopment plans that incorporate the needs of the residents?
Given the complexities of brownfields, educating elected officials, constituents, and other stakeholders is the first step to ensuring a successful redevelopment project. Misinformation can spread quickly, and stakeholders should have a clear understanding of the type of contamination present, what remediation will look like and how long it will take, and how these factors impact potential redevelopment options.
Once a baseline understanding of site conditions has been established, the local government and community should work together to establish a common vision for redevelopment. There are several federally available grants that can be used to fund community engagement, market studies, and other planning activities. Once a redevelopment framework has been established, the community can market its plans to developers who specialize in that product. Stakeholders should
be kept apprised of progress throughout the cleanup and redevelopment process, including opportunities for job training and placement.
What kind of funding opportunities are available for local governments? What kind of funding opportunities are available for the private sector?
Most federal funding is currently available only to the public sector, including city/town, county, and state governments, as well as school districts, special districts, economic development or redevelopment agencies, councils of government, tribes, and other local government agencies.
Funding is also available for qualified community development groups and non-profits meeting certain criteria. Other entities, such as workforce development agencies, are eligible for specific types of federal brownfields grant funding. Most brownfield funding available through the Colorado Department of Public Health and Environment (CDPHE) is also only available to non-profit and government agencies, although for-profit entities with sites enrolled in CDPHE’s Voluntary Cleanup Program (VCUP) are eligible for the Brownfields Revolving Loan Fund. For petroleum-contaminated sites, tank owners and operators are eligible for funding through the Petroleum Storage Tank Fund available through the Colorado Department of Oil and Public Safety. In addition, the Petroleum Cleanup and Redevelopment Fund provides assistance to petroleum site owners who are not eligible for the Petroleum Storage Tank Fund program.
While brownfields grant funding is only available to the public sector and non-profit entities, public-private partnerships (PPPs) are often the most effective way to address a brownfield site. By creating PPPs, local governments can leverage planning, investigation, and cleanup funds to attract developers and encourage uses that benefit the community as a whole.
What kind of brownfields funding was included in the recently passed infrastructure bill?
Congress recently passed H.R.3684, the Infrastructure Investment and Jobs Act, a $1 trillion spending bill. One of the only “buckets” to realize an increase in funding between the initial bill proposed during Summer 2021 and the final version, the current version includes $1.5 billion over the next 5 years for brownfields funding. Up to $600 million of this funding can be used for grants to communities, or $120 million per year. By comparison, the total of brownfields grants awarded in 2019 was only $64 million, so communities should be aware of substantially increased grant funding opportunities!
As a planner specializing in entitlements, conceptual site design, land planning, and community engagement, Kate Lucas has worked with over 45 different municipalities and numerous resident groups. She has managed the design, entitlement, and CEQA process for brownfield projects ranging from quarter-acre single-use sites to mixed use projects of several hundred acres.