Brownfields Financing Basics: Show Me the Money $$$$$$$$

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Brownfields Financing BasicsShow Me the
Money

• Presentation by
• Charlie Bartsch
• October 6, 2004

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• What this presentation will cover. . .
• what financing gaps exist, and why public-sector
  support is needed
• commonly used federal programs and examples
• recap of programs especially applicable in
  distressed areas

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The Face of Brownfields
From This. . .
Bend, OR
Baraboo, WI

New London, CT
Somerville, MA
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The New Face of Brownfields
Bend, OR
Baraboo, WI
New London, CT
Somerville, MA
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Overview

• Keys to Building and Funding a Local Brownfields
  Program
• Defining a community vision
• Encouraging community involvement
• Fostering public-private partnerships
• Institutionalizing brownfield reuse strategies
• Tapping into reuse incentives

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The Red Zone

• The Project Development Process -- Simplified!
• What Impact Does Contamination Have on Financing?
• 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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Goals of Public Financing Tools What Can They
Do?

• Reduce lenders risk
• loan guarantees companion loans
• Reduce borrowers costs
• interest-rate reductions or subsidies due
  diligence assistance
• Improve the borrowers financial situation
• re-payment grace periods tax abatements
  training and technical assistance help
• Provide comfort to lenders or investors
• loan guarantees performance data
• Provide resources directly
• grants forgivable/performance loans

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Federal Programs The Laundry List
Federal Financial Assistance Programs That Can
be Applied to Brownfield Redevelopment Activities

• 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
• 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)
• Equity capital
• SBAs Small Business Investment Companies
• Tax incentives and tax-exempt financing
• Targeted expensing of cleanup costs (through
  12/31/03)
• Historic rehabilitation tax credits
• Low-income housing tax credits
• Industrial development bonds
• Tax-advantaged zones
• HUD/USDA Empowerment Zones (various
  incentives)
• HUD/USDA Enterprise Communities (various
  incentives)

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Federal Financing ProgramsEPA

• SITE ASSESSMENT GRANTS
• Funds pre-cleanup environmental activities for
  example, site assessment, inventories, planning,
  design, and outreach
• Typically, up to 200,000 per applicant/jurisdicti
  on
• Local governments, tribes, redevelopment
  agencies, regional councils, land clearance
  agencies, and similar entities eligible

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Consumers Energy Headquarters Jackson County,
MI

• In 1999 Jackson proposes the city of Jackson
  proposed a downtown brownfield site for Consumer
  Energys new corporate headquarters
• Project jump-started by 200,000 site assessment
  grant, which demonstrated viability for some of
  the 36 parcels assembled
• Ultimately, Consumers invests 70 million in new
  construction
• Consumers Energys relocation to downtown saves
  600 Jackson jobs, brings 750 new jobs into
  downtown

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r Kids Family Center New Haven, CT

• New Haven used 20,000 of its EPA site assessment
  grant funds at the future home of the r Kids
  Family Center
• Assessment found a 1,000-gallon underground
  storage tank containing a mixture of heating oil
  and water, and about 200 tons of TPH-contaminated
  soil.
• Cleanup was completed in 2001
• Connecticuts Department of Social Services
  provided two grants totaling 775,000 for
  building construction and site development, which
  was completed in the early summer of 2003.
• The center now employs five full-time and nine
  part-time staff members, serving up to 120
  families a year.

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Federal Financing ProgramsEPA

• SITE CLEANUP GRANTS
• Funds cleanups (new, starting in 2003) by
  eligible applicants at sites that they own
• Typically, up to 200,000 per site
• Local governments, tribes, redevelopment
  agencies, regional councils, land clearance
  agencies, and similar entities eligible
• Non-profits also eligible
• 20 match (funds or in-kind services) required

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Federal Financing ProgramsEPA

• BROWNFIELD CLEANUP REVOLVING LOAN FUND GRANTS
  (BCRLFs)
• Provides capital to establish RLFs to make low/no
  interest loans for cleanup
• Up to 1 million per recipient 20 match
  required
• Local governments, tribes, redevelopment
  agencies, regional councils, land clearance
  agencies, and similar entities eligible
• Starting in fiscal 2003, recipients may use up to
  40 of capitalization award for cleanup
  sub-grants at sites owned by sub-grantees
• Non-profits can be sub-grantees

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Firebarn St. Anthony Falls, MN

• Vacant former car dealership and auto
  services/body work facilities
• Prospective new user demanded clean site
• Hennepin County Health Dept. made a 240,000
  BCRLF loan for soil and groundwater cleanup
• 30 million mixed-use redevelopment complex built
  on clean site -- 78 housing units, and 45,000
  square feet of commercial/
• retail/office space

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Federal Financing ProgramsEPA

• CLEAN WATER STATE REVOLVING LOAN FUNDS
• Funds activities (such as removal of underground
  tanks, contaminated soil, basic site assessments)
  to correct or prevent water quality problems
• State program, with state-set project priorities
• Offers loans, up to 20 years, to communities or
  private parties
• Potential use at brownfield sites with water
  quality issues
• No limit on fund amounts

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Grant Realty Cleveland, OH

• Ohios Clean Water State Revolving Loan Fund
  provided 1.6 million to the Grant Realty company
  at an interest rate of about 4 percent to finance
  cleanup of a 20-acre industrial site
• Water connection groundwater impacts on the
  Cuyahoga River
• Site re-used for light industry and commercial
  purposes
• Repayment source revenue from a tank-cleaning
  operation, along with personal loan guarantees
  and a second position mortgage as additional
  collateral
• With assistance from the Cuyahoga County
  brownfields program, owner applied to Ohios VAP
  for a covenant-not-to-sue and was issued a no
  further action letter.

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Federal Financing Programs HUD

• COMMUNITY DEVELOPMENT BLOCK GRANTS
• Activities locally determined
• Can include coping with contamination as part of
  financing for site preparation or infrastructure
  development
• Can be lent to private companies under some
  circumstances

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How Can CDBG Funds Be Used For Brownfield
Projects?

• Eligible activities include
• planning for redevelopment or revitalization of
  brownfields sites
• site acquisition
• environmental site assessment
• site clearance
• demolition and removal of buildings
• rehabilitation of buildings
• removal or remediation of contamination from
  sites or structures
• construction of real estate improvements

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Visiting Nurses Assisted Living -- Somerville, MA

• This former mattress factory, vacant for more
  than two years.
• Assessment found contaminants including barium,
  lead and petroleum
• The project's redeveloper, the non-profit
  Visiting Nurses Association, remediated the site
  and demolished the existing structures
• VNA constructed an assisted-living facility and
  health center, containing 97 units for
  low-to-moderate income seniors.
• 100,000 in CDBG was used as a cost-containment
  reserve.

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EXAL Corporation Youngstown, OH

• Plant built in distressed neighborhood area,
  operator pledged to consider community residents
  in a "1st hire" agreement
• 40 million in private investment, creating 88
  manufacturing jobs
• CDBG used to pay for first year of loan, to
  allow EXAL to cover brownfield-related site
  preparation costs
• EXAL now covers all loan costs from operations
  income stream

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Chevy Place Rochester NY

• Former downtown auto dealership and service
  garage
• CDBG used for site assessment, partial cleanup
• Now, 77 new residential units, coffee house, and
  restaurant

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Shaws Supermarket --Bangor, ME

• Bangor acquired and cleared the six-acre Bangor
  Gas Works site 25 years ago, doing a partial
  cleanup
• Site cleanup was completed at the site when the
  Boulos Company proposed building a
  60,000-square-foot Shaws Supermarket
• Bangor used 350,000 in CDBG and 975,000 in TIF
  financing for final cleanup
• The Boulos Company invested 7 million in
  developing the building and associated site
  improvements, and Shaws spent 1.8 million on
  equipment and furnishings for the store.

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Community Development Block Grant Float Loan
Program

• The CDBG float provides short-term fixed-rate
  gap financing for business projects which create
  or retain jobs for low and moderate-income
  people.
• To obtain financing, companies must be
• willing to make jobs available to lower income
  people
• able to obtain an irrevocable letter of credit
  from a bank to secure their loan
• States may advance floats on behalf of small
  cities to whom distribute CDBG funds

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Federal Financing Programs HUD

• SECTION 108 LOAN GUARANTEES
• Finances site clearance, property acquisition,
  infrastructure, or rehabilitation (including
  cleanup) activities too big for single-year block
  grant funding
• Block grant recipients may borrow up to 5 times
  their entitlement, for up to 20 years
• Requires pledge of future CDBG funds as
  collateral

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Federal Financing Programs HUD

• BROWNFIELD ECONOMIC DEVELOPMENT INITIATIVE (BEDI)
  
• Established to provide additional financial
  assistance for brownfield development projects
  supported by Section 108
• Must be used in tandem with Section 108 guarantee
  
• Competitive grant application process

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Grove Hall Mecca Roxbury, MA

• Seven underground storage tanks were removed from
  the site, along with contaminated soil that was
  recycled into an environmentally acceptable
  product..
• The property was sold to a community-based
  developer
• Total development cost was 13.2 million key HUD
  resources included
• 3.6 million Section 108
• 3.6 million from the HUD BEDI
• Current occupants of the Grove Hall Mecca mall
  mall include retail, food, and banking services,
  as well as a supermarket that opened in fall
  2001. The redevelopment has created more than
  250 full-time jobs.

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Stamping Building Wheeling, WV

• The Wheeling Stamping Building in the Wheeling
  National Heritage Area had been abandoned and
  deteriorating for more than a decade
• HUD funding for site preparation and building
  renovation was key
• 1-million BEDI
• 2.25 million in Section 108
• The City and its developer, the Ohio Valley
  Industrial and Business Development Corporation,
  created 88,000 square feet of new commercial
  space in Stamping Building.
• 85 professional and high-tech jobs now housed
  there

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Old Montgomery Ward Distribution Center Fort
Worth, TX

• Historic, 800,000-square-foot building on a
  45-acre site
• Damaged in March, 2000 tornado
• Proposed reuse mixed light industrial/commercial
  /office
• HUD financing tools include
• 13 million Section 108 loan
• 2 million BEDI grant
• Other financing tools being used
• Historic rehab tax credits
• DOT (CMAQ) for related road and sidewalk
  infrastructure
• State tax abatements and fee waivers

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Federal Financing Programs HUD

• HOME Investment Partnership Program
• Provides grants to states for housing
  construction and renovation
• Non-profits and for-profits eligible
• Well suited for partnership with other programs

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Bostons Hope Properties Dorchester, MA

• Following completion of EPA-funded site
  assessment, Boston Aging Concerns/ Young and Old
  United, Inc., bought the property
• The nonprofit spent about 300,000 to clean up
  the properties and is currently building 41
  residential units on 9 different sites for
  intergenerational families.
• Total project cost is 8.5 million, covered by
  private and public funds, including HOME funds.
• The groundbreaking took place in early 2004

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Phoenix Heights Waukesha, WI

• 69 energy-efficient homes completed, many for
  moderate income families
• 13.5 million project, including 3.13 million in
  public funds, for
• 1.87 million in state funds for cleanup
• 415,000 in CDBG for construction
• 575,000 in state and HOME funds for buyer
  assistance
• 405,000 in annual property taxes generated

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Federal Financing Programs EDA

• ECONOMIC DEVELOPMENT ADMINISTRATION
• Two major programs (1) public works grants
  finance industrial development site and
  infrastructure preparation, and
• (2) economic dislocation program capitalizes RLFs
  for distressed areas EDA also supports rural
  planning. 2/3 of all resources traditionally go
  to small towns and rural areas

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University Village Riverside, CA

• Deteriorating mixed-use, economically distressed
  30 acre site adjoining UC-Riverside
• 950,000 in EDA funding for infrastructure
  improvements, part of multi-agency funding
  package that included HUD and DOT monies
• The result a 410,000 square-foot retail and
  entertainment center, which includes conference
  space for university use

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Texaco Station Lockport, IL

• Abandoned gas station converted to a retail
  telecommunications business
• EDA funded site preparation, including cleanup

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Federal Financing Programs ACE

• ARMY CORPS OF ENGINEERS
• Can provide planning and technical support if you
  can make the brownfields/waterfront connection
• Technical assistance on a cost-reimbursable or
  matched basis
• Local governments eligible reicpients

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East St. Louis, IL Riverfront

• 250,000 in Corps funding under the Planning
  Assistance for States program
• City providing required match
• Project involves analysis of 1,100 acres of
  mostly abandoned, mostly industrial riverfront,
  planning options and costs for new public and
  private uses (artists rendering at right)

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Old Mill District Bend, OR

• Former sawmill operation (from 1922 to 1994)
  on 250 acre site on the Deschutes River that
  flows through downtown Bend.
• Major challenges included defining sections
  of the site for cleanup, as part of phased
  development plan, and changing land use from
  industrial to mixed use. Oregon DEQ cleanup
  program facilitated this process.
• Currently, 15 commercial businesses now
  operate on the site future plans call for
  expanded retail, residential units, and a sports
  arena.

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Center of Hope Dallas, TX

• The Center of Hope was developed on a 1.8-acre
  brownfield site including a 40,000 square foot
  building, previously used by USACE.
• USACE conducted an environmental investigation of
  the property and identified asbestos-containing
  materials and lead-based paint.
• Demolition was done in February 2001
  construction began in April 2001. The Center of
  Hope was opened on February 26, 2002.
• Valued at 1 million, the property was conveyed
  through GSA to Union Gospel Mission at no cost.
  Labor and materials, including construction
  management services, building components and
  furniture, were donated.

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Federal Financing Programs DOT

• TRANSPORTATION PROGRAMS (DOT)
• DOT highway and transit construction programs can
  support brownfields by
• (1) helping upgrade existing facilities
• (2) offer transportation amenities that improve
  access to and marketability of sites
• (3) fund facilities and structures that serve as
  part of the remedial solution

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Tank Facility to Train Station -- Emeryville, CA

• The City and developers constructed an Amtrak
  station on a parcel that was once a Chevron tank
  facility
• . The Emery Station 1 (ES1), 247,000 square feet
  of office, was completed in 1999. ES3 consists
  of a parking structure under 100 residential
  units, completed in 2002. The city worked with
  EPA to develop this site into a transit center
• A pedestrian bridge was built with ISTEA funds
  and an access road to the project was partially
  funded from an EPA BCRLF loan.

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Marsh Island Carry Old Town, ME

• Transformation of an under-used contaminated site
  to a revitalized waterfront park and commercial
  property
• Funding included a 400,000 Enhancement Grant
  from Maine DOT for the park and walkways
• Other sources included
• 400,000 CDBG for infrastructure around the
  commercial building
• 24,500 from the National Trails Recreation Act
  for trails, walkways, and river stabilization
• 8,000 from ME Forest Service for tree planting.

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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.
• Expired 12/31/03 Congress re-renewed to
  12/31/05, retroactive to the first of this year

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Inryco and Babcock Wilcox Milwaukee, WI


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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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Sherman Perk -- Milwaukee, WI
Before
After
Tank Removal
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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
• States get a population-based allocation for
  distribution to communities and non-profits

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American Can Company New Orleans, LA

• Developer Historic Restoration Inc. transformed
  this abandoned warehouse into new apartments with
  retail and parking space
• Total project cost -- 42 million
• The projects Welfare to Work program targeted
  low/middle income workers for the 250
  construction jobs, and 20 percent of homes are
  set as affordable units.
• Louisiana allocated a 29 million in Low Income
  Housing tax credits that provided access to
  low-interest financing with a requirement to
  provide 20 percent of the total units for
  affordable income community.
• Other financing included
• 5-million HUD Section 108 loan,
• 1-million BEDI loan
• 1-million city economic development loan.
• Kimberly-Clark Corporation, through its
  subsidiary Housing Horizons, provided 8.5
  million in tax-credit equity for approximately
  7.8 million in historic tax credits.

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Albina Corner Portland, Oregon

• The Albina Corner is located on a
  three-quarter-acre site adjacent to a bus line
  and near a major light rail station. The area is
  a main street to several inner-city
  neighborhoods, where for several years small
  scale contaminants have deterred reuse.
• Today, the Albina Corner is being redeveloped
  into a mixed-use area that includes 48 units of
  low-income housing built over 12,000 square feet
  of commercial space. Some of the features
  include a child care center and a second floor
  courtyard and play lot
• LIHTCs one of 14 funding sources.

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Selected USDA Rural Development Programs
Possible Brownfield Links

• Community facility loans and grants can support
  development activities that include industrial
  park sites or access ways
• Business and industry loans are available to
  public or private organizations to improve the
  economic and environmental climate in rural
  communities.
• Intermediary Re-Lending Program intermediaries
  such as local governments are loaned money to
  re-lend to companies, in order to finance
  business facilities
• Rural development grants given to provide
  operating capital and finance emerging private
  business and industry, including conversion,
  enlargement, or modernization of buildings,
  plant, and equipment.

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East Coast Steel Greenfield, NH

• The New Hampshire Department of Environmental
  Services (NHDES) used 88,964 in funding from EPA
  New England to conduct state-led Targeted
  Brownfield Assessment at the 2.54-acre East Coast
  Steel site in Greenfield, NH, beginning in fall
  2000. Cleanup was completed in late 2003
• In 2004, the town redeveloped the site as a
  community septic system and open space park
• USDA Community Facilities Loan was a critical
  part of the project funding, along with G.O. bond
  proceeds

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The Brownfields Lending Climate

• Lender issues -- Why Do Bankers Act the Way They
  Do When You Say Brownfields?
• TOOLS
• What legal tools will be used
• NFA letter, indemnifications, deed restrictions,
  institutional controls, covenants not to sue?
• What private financial tools will be used
• Escrows, collateral discounts?
• What public financial tools will be used
• Grants, loans, tax credits, guarantees, other
  mechanisms ?
• Will environmental insurance be used? Does it
  make financial sense for the project?

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The Brownfields Lending Climate

• Institutional Factors Why Do Bankers Act the
  Way They Do When You Say Brownfields?
• Market policy-making structure
• Sphere of activity or market niche
• Level of sophistication and knowledge
• Comfort level with new cleanup technologies
• Past experience

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The Brownfields Lending Climate

• Over-riding concerns Why Do Bankers Act the Way
  They Do When You Say Brownfields?
• Certainty of collateral value over time
• Soundness of marketing plan is the end use
  something that anybody wants?
• Ongoing compliance with institutional controls
• Cleanup cost/financing and timing concerns
• VCP process
• Grant application, approval, and disbursement
  time

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Low-Cost/No-Cost Tools That Enhance the Climate
for Brownfield Transactions

• Institutional controls
• Proprietary
• Governmental
• Innovative remedial technologies
• Mr. Wizard meets economic development
• Cost saving technical assistance and project
  support
• Environmental insurance
• Remediation insurance
• Stop-loss coverage
• Pollution legal liability insurance

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Home Depot Honolulu, Hawaii

• Institutional controls
• First site through Hawaii VCP
• Institutional controls such as venting,
  capping, monitoring wells key to economic
  viability of project

56
Williamsport, PA

• Innovative technologies
• former airplane engine factory, abandoned nearly
  50 years, with groundwater contamination that
  proved too costly to treat by conventional means
• state and local governments worked with
  developer to identify innovative cleanup
  technology that would work within standards of
  VRP
• Result retail complex and parking facility

57
Kaiser Steel Mills/ California Speedway
Fontana, CA

• Role of environmental insurance
• Former Kaiser Steel Mill operation (from 1942 to
  1983) on 23 acre site.
• Project was a result of a large partnership
  between the public and private sector.
• Site assessment and cleanup took 5 months. The
  raceway and interior facilities were used as an
  environmental cap.
• The California Speedway Opened in June 1997.
  Last Year, the Speedway generated 12.5 million
  in economic activity, 2.5 million in tax
  revenues and 1200 new jobs.

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Web Site

• www.nemw.org/brownfields.htm
• Federal Legislative Proposals to Promote
  Brownfield Cleanup and Redevelopment - whats
  happening in Congress
• State of the States - profiles of state VCPs,
  including new information on financing
  incentives, economic benefits, eligible
  contaminants, cleanup standards, and
  institutional controls
• Guide to Federal Brownfield Programs - detailed
  information on programs throughout the federal
  government that can promote and support
  brownfield cleanup and redevelopment
• Financing options for brownfield cleanup and
  redevelopment
• Contacts in state and federal brownfield programs
  
• Link to EPA brownfield home page
• Links to brownfield databases and organizations