Attracting Development To Brownfields Sites: A Local Challenge

by Catherine Finneran

Development interest in brownfields sites has been growing steadily since the Environmental Protection Agency's (EPA) initiation of its national brownfields pilot program in the early 1990s. While, traditionally, environmental risk has been considered the major impediment to developing these sites, programs at the state and federal levels have gone a long way towards addressing these risks.

It is important to recognize that deterrents to the redevelopment of brownfields sites can come in other forms as well. Deteriorated infrastructure, out-of-date zoning, and overly complicated local approval processes often can severely hinder a brownfields redevelopment project in moving forward. With many key approvals for these projects needed at the local level, local governments are in a great position to "level the playing field" and better attract developers to these properties.

Local officials are finding new ways to streamline local approval processes, better market publicly owned sites, and offer incentives for redevelopment. These new approaches have been highly successful in attracting investment to high-priority properties in their communities.

Many developers agree: One of the most important things that a community can do to encourage development of brownfields sites, whether privately or locally owned, is to establish a single point of contact in the locality to deal with development issues.

A SINGLE POINT OF CONTACT IS IMPORTANT

Pete Pedersen is an investor in and developer of formerly industrial properties. In his company's efforts to buy, entitle, and master-plan contaminated properties, his firm, Renova Partners, LLC, has worked in several communities with no centralized point of contact for handling brownfields or development issues. The result has often been a prolonged and inefficient process of being bounced from one staff person to another. Navigating this maze can prove frustrating, and potentially can stall the progress of a development project.

In contrast, Pedersen's experience in working with the city of Phoenix has been extremely successful, thanks to the efforts of an established, central point of contact within Phoenix's office of environmental programs. When approached with an appropriate development proposal the city's brownfields program manager, Rosanne Sanchez, assumes the role of shepherding the project through local, county, and state approval processes.

Sanchez begins by bringing together all pertinent departments for a coordinated review of the development proposal. She also serves as an advocate for the project at the state and county levels, making first contact with outside agency staff to ensure that projects are prioritized for review. This high level of focused local attention has significantly expedited project approval and removed potential roadblocks for developers interested in locating in this community.

Unhappily, the reality is that many communities can't afford to employ a full-time staff person with the time and expertise to guide projects comprehensively through this process. Designating someone at the local level to direct questions is, however, important. Whether this person is a city or county manager, planning or economic development representative, or other staff member is relatively unimportant.

HAVE A PLAN

Charlie Houder, senior vice president for acquisitions of Preferred Real Estate Investment, Inc., agrees that it is of key importance that a local government adopt a proactive, can-do attitude when approached by a new developer with a plan that fits the community's vision for the site.

As developer, owner, and operator of office, industrial, and mixed-use real estate properties throughout the country, Houder's company specializes in sites with environmental, entitlement, and other challenges. Houder has seen some cases in which a high level of animosity is built up between town officials and past property owners of brownfields sites because of past losses of local employment and subsequent losses to the property tax base. According to Houder, a community must provide a clean slate for discussions with new developers so that these sites can get back into productivity as soon as possible.

A close partnership between the city of Chester, Pennsylvania, and Preferred Real Estate Investment, Inc., made the Phoenix Award winning PECO Energy waterfront redevelopment project a reality.

The 2005 EPA Phoenix-Award winning PECO Energy Project in Chester, Pennsylvania, is a case in which Houder's company has had great success in working with local officials through the development approval process. This 90-acre, former Philadelphia Electric Company property was home to an enormous coal-fired power plant that released hazardous material into the soil and groundwater, including the Delaware River. When the Pennsylvania Department of Environmental Protection and EPA began cleanup at this site, the property owner sold 63-acres to Houder's investment company to lease for offices, restaurants, shops, marinas, and housing along the city's waterfront.

Chester's city staff was committed from the beginning to working collaboratively toward offering a rigorous yet streamlined approval process. The concerted efforts of the community to help this project move forward resulted in a combined public and private investment of more than $300 million in the community, the creation of more than 2,000 jobs, and the donation of land to the city for greenspace and waterfront access.

When a local government issues a request for proposals (RFP) to sell a site, Houder suggests, it should avoid an overly burdensome RFP process. According to Houder, one of the most important things an RFP should contain is a clear path toward ownership that will ensure full site control by the selected developer.

RFPs in which the process for buying the property, or even whether the property is for sale, is left unclear will receive a relatively low response. Entering into a quasi-partnership with a locality on ownership is also not an attractive prospect. Knowing they can get site control expeditiously is highly important to interested developers.

LOWELL IS A CASE IN POINT

Lowell, Massachusetts-a Brownfields Showcase Community and mobile workshop location for the Brownfields 2006 Co nference-has had great success in attracting developers to municipally owned brownfields sites. Currently, Lowell is marketing the 15-acre Hamilton Canal District site, a prime location in walking distance to the downtown and to the third-largest intermodal transit station in the state.

According to Brian Connors, director of economic development for the city, before marketing the site the city assembled the property through eminent domain and negotiated acquisitions, to ensure clear conveyance of title to the selected developer. To market the property, Lowell also developed a comprehensive Web site that contains key information on the project and the benefits of locating in the city.

World headquarters for the biotechnology company Genzyme is located on a large brownfields site in Cambridge, Masschusetts.

As a result of this Web site and an extensive marketing campaign undertaken by the city, Lowell has received hundreds of developer requests for the site's RFP. This number far exceeds the responses to other local disposition processes that Lowell has undertaken.

Another remarkable aspect of the Hamilton Canal District project is that the city will offer an expedited permitting process to the chosen developer. Once a team has been selected, Lowell will work with this developer to conduct a multiday planning charrette toward developing a master plan for the project. The goals of the charrette will be to solicit input from the community on the reuse of the site, and ultimately, to write a form-based code that will replace the underlying zoning within the district boundary.

At the end of this process, the site will be fully entitled, eliminating the procedural delays and risks typically associated with such projects. For more information on the Hamilton Canal District project, visit the Web site at http://www.hamiltoncanal.com.

MAKE INCENTIVES AVAILABLE

Incentives are the most obvious draw for a developer considering locating in a particular community. According to Ed Daley, city manager of Winchester, Virginia, incentives like tax-increment financing or the creation of a community development corporation demonstrate to developers the local government's willingness to assist with a project. Daley believes that an infusion of local dollars, whether through direct funding or reduced taxes, is an important commitment that communities can make.

Phoenix, Arizona, has appropriated $4 million of its capital-improvement bond funds to provide grants to private developers and nonprofit corporations undertaking brownfields projects through their Brownfields Land Recycling Program. While this funding cannot be used for cleanup, it has proved invaluable to developers facing high infrastructure and development costs.

One project that benefited from this funding was the Copper Leaf subdivision, a 750-home, mixed-income community in the South Mountain area of Phoenix. At first, the developer hesitated to assume environmental cleanup costs above a certain amount. To give the developer the confidence to move forward, the city agreed to assume all costs over a negotiated dollar amount, using funding from these grants.

Communities can create further incentives for developers by using funding gained through federal programs. According to Cedric Kam, an economic development specialist at HUD, a change in community development block grant regulations made in May 2006 promotes brownfields redevelopment by formally including environmental remediation as an eligible cost.

The grant fund program the city of Phoenix, Arizona, created using capital improvement bond funds made the Copper Leaf subdivision project a success.

Local officials can use CDBG and Section 108 funding to offer grants and loans to developers for acquisition, remediation, demolition, and construction at these sites. Also, local governments can offer loans to developers for remediation under the EPA Brownfields Cleanup Revolving Loan Fund program.

And, of course, it is essential that a community be fully familiar with state incentives available to developers. Access to low-interest loans, tax credits, environmental insurance, and liability protection can often make a deal happen that otherwise would not.

In Massachusetts, a local government can request that the key state agencies administering brownfields programs-MassDEP, MassDevelopment, MassBusiness, and the Office of the Attorney General-work with local staff to navigate the brownfields redevelopment process. In some states, economic development agencies and brownfields organizations help communities market these sites, too.

BROWNFIELDS CONFERENCE

The Brownfields 2006 Conference, scheduled for Boston on November 13-15, 2006, is a great opportunity for local government staff members to learn from each other, as well as directly from developers, about attracting investment to local brownfields sites. This year's conference features more than 130 educational sessions, 200 exhibits, special training events, mobile workshops, networking forums, and film screenings.

A key part of the conference is the third annual Brownfields Transaction Forum, scheduled for November 13. This forum is for communities that want to showcase and market their sites to potential developers. In 2005, more than 200 properties were featured, and scores of developers and transaction-support professionals attended the event. The foundations of several deals were laid for sites in Michigan, Colorado, and Ohio and more are expected in 2006.

To register online for the conference, along with the transaction forum, go to www.brownfields2006.org

Catherine Finneran is brownfields coordinator, MassDEP, Boston, Massachusetts (don@northstarideas.com). Contributions to this article were made by Pete Pedersen of Renova Partners, LLC, and Charlie Houder of Preferred Real Estate Investment, Inc. Both companies are involved in planning the 2006 Brownfields conference in Boston.

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