Brownfields Nuts

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Brownfields Nuts Bolts Promoting Site
Reuse in Massachusetts

• Charlie Bartsch
• Vice President, ICF International
• Massachusetts Brownfields Workshop
• March 29, 2007

www.icfi.com
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What this Brownfields Nuts Bolts
presentation will cover

• Overview of common threads concepts behind
  successful brownfield strategies
• Existing financing gaps, and why public-sector
  support is needed
• Introduction to commonly used tools
• Non-EPA federal development programs
• Federal tax incentives

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6 Common Threads Keys to Building
a Successful Brownfields Strategy

• Defining a community vision that includes site
  reuse
• Encouraging community involvement
• Working with empowered state voluntary response
  (VCP) programs
• Institutionalizing brownfield reuse strategies
• Fostering public-private partnerships
• Tapping into reuse incentives

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1stDefining a community vision that includes
site reuse

• Determine the best who to articulate it
• Connect brownfield opportunities to community
  revitalization priorities
• Recognize the role of planning in the visioning
  process
• Use community design workshops, charrettes,
  similar tools

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2ndEncouraging community involvement

• Need inclusiveness -- multi-stakeholder
  participation
• Need leadership from the top
• Provide adequate staffing/support
• Build on success -- develop the ability to move
  from one project to the next

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3rd Working with empowered state (VCP) programs

• At brownfield sites VCPs rule!!
• Federal brownfield revitalization act (2002) put
  final authority with states that have VCPs or
  comparable voluntary response programs
• Brownfield sites addressed thru VCPs are
  protected from EPA enforcement and cost recovery
  action
• Liability relief extended to prospective
  purchasers, contiguous property owners, innocent
  land owners
• All appropriate inquiry rule took effect Nov. 1

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3rd Working with empowered state (VCP) programs

• VCP/cleanup process has evolved since the 2002
  brownfield law made states the primary regulator
  of brownfield sites
• By expediting reuse with timeliness, certainty,
  finality
• With cost-cutting innovations -- new
  technologies, ICs, RBCA
• By better integrating cleanup strategies with the
  economic development process

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4thInstitutionalizing brownfield reuse strategies

• Make "brownfields" a routine way to do business
  
• Dedicate a staff/point person to support
  brownfields work
• Articulate a policy that commits local
  officials to promote brownfield reuse
• Target priority areas for revitalization

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5thfostering public-private partnerships

• Establish a climate that invites private
  investment in brownfields
• Build and carry out sustainable partnerships
• Work creatively with public programs -- give
  them a brownfields "spin"
• Acquire and prepare the best sites for
  revitalization

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6thtapping into reuse incentives

• Technical assistance and
• informational
• Procedural
• Financial bringing the green to
  brownfields

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The Brownfields Red Zone

• Impact of Contamination Why Incentives are
  Needed
• Conceptualizing and Planning the Project
• Economic Analysis for Marketing the Project

• Dealing with Stigma
• for Site Assessment
• Additional Underwriting/Site Development/R.O.R.
  Costs
• for Preparing a Cleanup Plan and Taking It
  Through
• VCP/State/Local Regulatory Agencies
• for Cleanup

Regular Real Estate Construction/Development
Costs When Site is Shovel Ready
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Lender Issues Why Do they Act the Way They Do
When You Say Brownfields?

• INSTITUTIONAL FACTORS
• Market policy-making structure
• Sphere of activity or market niche
• Level of sophistication and knowledge
• Comfort level with new cleanup technologies
• Past experience with contaminated sites

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Lender Issues Why Do they Act the Way They Do
When You Say Brownfields?

• PROCESS
• Does the project make good credit sense?
• Are regulators comfortable with the proposed
  approach?
• What legal tools will be used?
• NFA letter, indemnifications, deed restrictions,
  ICs
• Is the bank officer comfortable with
• Developer/developer expertise in brownfield
  projects?
• Environmental/technical consultants?
• Proposed end-use (i.e., industrial v.
  residential)?

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Finding the Right Financing Mix Who Should
Play?

• Public sector
• Federal, state, and range of local governments
• Quasi-public sector
• Development, port, housing authorities
• Non-profits
• CDCs, CBOs, universities, cultural-social
  institutions
• Private sector
• Lenders, developers, investors, transaction
  support partners

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How Have Public Sector Tools Been Used to Meet
Red Box Concerns?

• To reduce lenders risk
• loan guarantees companion loans
• To reduce borrowers costs
• interest-rate reductions or subsidies due
  diligence assistance
• To improve the borrowers financial situation
• re-payment grace periods tax abatements and
  incentives technical assistance help
• To provide comfort to lenders or investors
• loan guarantees performance data
• And of course to provide resources directly
• grants forgivable/performance loans

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Packaging brownfield project financing -- the
Pink Floyd strategy

• Money, its a crime.Share it fairly but dont
  take a slice of my pie.
• BF Translation Its all about leveraging
• Creatively using development and
• environmental programs to meet a range
• of site redevelopment needs, attract
• private financing for
• assessment, clean up, demolition, renovation,
  ICs, marketing, upgrades, preparation, etc.
• while fitting program eligibility
• and competing for resources Animals,
  1977

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Financing Programs A Federal Laundry List
Whats Been Used in Brownfield Redevelopment
Transactions?

• Loans
• EDAs Title IX (capital for local revolving loan
  funds)
• HUD funds for locally determined CDBG loans and
  floats
• EPA capitalized brownfield revolving loan funds
• SBAs microloans
• SBAs Section 504 development company debentures
• EPA capitalized clean water revolving loan funds
  (priorities set/ programs run by each state)
• HUDs Section 108 loan guarantees
• SBAs Section 7(a) and Low-Doc programs
• USDA business, intermediary, development loans
• Grants
• HUDs Brownfield Economic Development Initiative
  (BEDI)
• HUDs Community Development Block Grants (for
  projects locally determined)
• EPA assessment pilot grants
• EDA Title I (public works) and Title IX (economic
  adjustment)

• Grants (continued)
• DOT (various system construction and
  rehabilitation programs)
• DOTs transportation and community system
  preservation (TCSP) pilot grants
• Army Corps of Engineers (cost-shared
  services)
• USDA community facility, business and
  industry grants
• Equity capital
• SBA Small Business Investment Companies
• Tax incentives and tax-exempt financing
• Targeted expensing of cleanup costs
• Historic rehabilitation tax credits
• Low-income housing tax credits
• Industrial development bonds
• Energy efficiency construction credits
• Tax-advantaged zones
• HUD/USDA Empowerment Zones
• HUD/USDA Enterprise Communities

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How Have these Programs Been Used to Support
Brownfield Redevelopment?

• brownfield redevelopment/revitalization planning
• site acquisition
• environmental site assessment
• site clearance, demolition, and removal of
  buildings
• rehabilitation of buildings
• removal or remediation of contamination
• construction of infrastructure and related
  improvements that enhance brownfield site value
• Activities carried out in partnerships with the
  private sector, or to leverage private
  participation

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Financing Programs Key Federal Partners

• EPA
• Site assessment, cleanup, RLFs, job training
  grants VCP support
• HUD  
• CDBG Economic/community development, planning,
  support services, housing
• Section 108 Loan guarantees for site
  prep/infrastructure
• BEDI Brownfield economic development initiative
  
• EDA 
• Public works/economic adjustment/planning

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Financing Programs Key Federal Partners (cont.)

• USDA
• Business and industry loans and loan guarantees
• Community facilities grants
• Army Corps of Engineers
• Planning, engineering
• DOT
• Infrastructure enhancement, construction,
  improvement, cleanup

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HUD/CDBG -- Westside Business Park Kansas City,
MO

• KC Terminal Railway rail yard and maintenance
  facility, in use from 1914 to mid-1960s
• Challenge -- addressing rail-yard contaminants
  while preserving distinctive brick buildings
• Resources included CDBG, state ED, rehab tax
  incentives
• Result former rail roundhouses transformed into
  office space, creating 600 new jobs

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HUD/108-BEDI Stamping Building Wheeling, WV

• Downtown Wheeling Stamping Building, abandoned
  and deteriorating for 10 years
• 1-million BEDI grant and 2.25 million in
  Section 108-guaranteed loan used for the
  redevelopment of the building
• Historic rehab tax credits cash flow used in
  financing pro forma linked to Section 108
• Result 88,000 square feet of new commercial
  (incubator) space tenants have created 100 new
  jobs

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EDA Bates Mill Lewiston, ME

• Textile mill, shut down in 1993, redeveloped in
  stages as small business incubator
• EDA funding supported site cleanup and
  infrastructure upgrading activities, part of 41
  million financing package
• Result 19 tenants occupying 284,000 sq. ft,
  with 1,000 employees
• Mill generated 160,000 in taxes in 1993 today,
  543,000 per year even with tax incentives in
  place

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DOT Riverfront revitalization -- Moline, IL

• largely abandoned riverfront, former
  industrial/warehousing uses
• converted to residential and marina/mixed use
  complex and commercial space
• 3.2 million in state and federal funding
  included DOT funds for roads and enhancements

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USDA Charleston Place Seaford, DE

• Abandoned sewing factory, built in 1920s
• Developed by non-profit Better Homes of Seaford
• 600,000 USDA rural development loan, plus DE
  Housing Authority and private bank participation
• Ribbon cutting 1/9/06 fully occupied by March

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Federal tax incentives that can be linked to
sustainable development all at little or no
cost to you.

• Rehabilitation tax credits
• Low income housing tax credits
• New markets tax credits
• Energy Policy Act of 2005 tax credits
• Brownfield expensing

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Federal Financing Programs Tax Incentives

• REHABILITATION TAX CREDITS
• Taken the year renovated building is put into
  service
• 20 credit for work done on historic structures,
  with rehab work certified by state
• 10 credit for work on non-historic structures
  build before 1936 no certification required

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Rehab tax credits Renaissance Grand Hotel St.
Louis, MO

• Developer led public-private partnership that
  renovated two defunct historic landmark hotels,
  in addition to 23-story new construction
• Project included the old Statler Hotel, built in
  1917 -- the 1st air-conditioned hotel in the
  country
• Kimberly-Clark Corp provided tax equity for
  several million dollars in historic
  rehabilitation tax credits
• Credit as leverage Financing package included
  tax exempt bonds, brownfield cleanup tax
  expensing, empowerment zone tax incentives

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Rehab tax credits Harley Davidson Dealership
Stamford CT

• 2 abandoned buildings including a former
  printing and engraving plant site
• Resources leveraged included a 165,000 loan from
  a city brownfield RLF, for cleanup (mostly soil
  removal)
• Site redevelopment included renovation of two
  turn-of-the-century buildings
• Redeveloped into a new 600,000 Harley Davidson
  showroom
• 10 rehab tax credits helped with project cash
  flow

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Federal Financing Programs Tax Incentives

• LOW-INCOME HOUSING TAX CREDITS
• Can encourage capital investment in affordable
  housing projects on brownfield sites, other
  targeted sites
• States get a population-based allocation for
  distribution to communities and non-profits
• Massachusetts has received 182 million, from
  1987 to 2005, supporting 30,000 units

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LIHTCs Brian J. Honan Apartments Boston, MA

• Allston-Brighton CDC saw an opportunity to
  develop former Legal Seafoods fish processing
  plant into affordable housing
• Environmental assessment funding, low-income
  housing tax credits key parts of financing
  incentive package needed to attract capital,
  convince funders that the project would work
• Result affordable units in a sustainable
  development green energy, pedestrian access to
  groceries, shops, transit

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Federal Financing Programs Tax Incentives

• NEW MARKETS TAX CREDITS
• Gives investors federal tax credits for making
  equity investments in designated Community
  Development Entities (CDEs) for use in low-income
  communities
• CDEs use their allocations to make loans or
  investments in qualified businesses and
  development activities which may include
• Community facilities such as health or child care
• Charter schools
• For-profit and non-profit businesses
• Homeownership projects
• 712 million in NMTCs allocated in 2006 to 8
  CDEs identifying MA as a market service area

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New Markets Tax Credits Bethel Center
Chicago, IL

• Bethel New Life, a faith-based CDC, used 1.5
  million in NMTC allocation to develop 23,000
  sq.ft. Bethel Center on an abandoned site
  adjoining an elevated rapid transit station
• Center houses employment and day care services, 6
  commercial storefronts
• LEED gold certified

After
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Federal Financing Programs Tax Incentives

• ENERGY POLICY ACT OF 2005 TAX CREDITS
• Commercial building deduction of up to 1.80 per
  sq. ft. for buildings that achieve a 50 energy
  savings target
• Up to 60 cents per sq. ft. for buildings meeting
  at least a 162/3 target
• 30 credit business solar energy tax credit, from
  1/1/06 thru 12/31/07
• 10 starting 1/1/08

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Federal Financing Programs Tax Incentives

• BROWNFIELD EXPENSING TAX INCENTIVE
• Deduction pegged to cleanup costs, which allows
  new owners to recover cleanup costs in the year
  incurred only incentive targeted to private site
  owners
• Can include
• Site assessment, cleanup, monitoring costs
• Costs related to install/monitor institutional
  controls
• State VCP fees and associated costs
• Removal of demolition debris
• Original incentive expired 12/31/03 most
  recently extended until 12/31/07 (retroactive to
  1/1/06)

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Alliance Environmental/Goodwill Fire Department
West Chester, PA

• 8.5 acre former pharmaceutical property and
  dump site in economically distressed area
• Cleaned and redeveloped by Alliance
  Environmental
• Now, location of Good Will Business Park
  100,000 sq. ft. of retail, public service
  facilities including fire department and district
  court
• Incentive provided Alliance with nearly
  800,000 in tax relief

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Thank you!

• If you have questions.
• If you need additional examples and information.
• Charlie Bartsch
• cbartsch_at_icfi.com
• [phone]