September 2004 · Volume 86 · Number 8

The Brownfields Equation: Making Projects Add Up
by Danielle Miller Wagner
Most local government managers would agree that economic growth and housing development are worthy of their time and resource investments. The ways in which these local government and community priorities are achieved, however, vary dramatically depending on available and competing demands for resources, past practices, creativity and cooperation among stakeholders, and other factors.
One often-overlooked tool in the manager’s toolbox is the used or blighted property that sits idle or underused. These properties, called brownfields, are officially defined as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant” (Small Business Liability Relief and Brownfields Revitalization Act, 42 U.S.C.A. § 9601(39). 2003).
Job creation, housing development, and commercial and retail opportunities fuel the engine of economic development. A multitude of federal and state resources, combined with local government ingenuity, can be used to spur brownfields cleanup and redevelopment in support of economic development goals.
Despite the legal definition, brownfields can actually make endeavors like housing construction and job creation more doable and less expensive for local governments, all the while revitalizing neighborhoods through eliminating blighted properties. Don’t buy it? Read on for real-life examples of how local governments have made the brownfields equation work for them.
Job creation, housing development, and commercial and retail opportunities fuel the engine of economic development. A multitude of federal and state resources, combined with local government ingenuity, can be used to spur brownfields cleanup and redevelopment in support of economic development goals. 
Creating Housing Opportunities in Astoria, Oregon
At the time it was closed and abandoned in 1989, the Clatsop Lumber Mill in Astoria, Oregon, had operated as a plywood mill for more than 100 years and employed 217 people. Along with many other mills in the Pacific Northwest, this plywood mill suffered because of dwindling forest resources, regional environmental concerns, and global competition. The mill’s location along the banks of the Columbia River and at the entrance to the city’s downtown made the highly visible abandoned site an eyesore as passersby entered the city.
With assistance from a statewide program to assist economically distressed communities suffering from mill closures, the city established a community planning process that resulted in the Gateway Master Plan, an urban infill scheme to revitalize the mill site and its surroundings. During the planning process, a citizens’ advisory committee appointed by the mayor determined that the best reuse for the mill site would be as a residential neighborhood with a village-like atmosphere.
This decision meant that the site cleanup had to support residential uses by achieving the most stringent and expensive cleanup requirements. According to City Manager Dan Bartlett, “There was a very strong sentiment that we did not want our future options for site redevelopment to be limited by a shortsighted economic decision to leave higher levels of contamination on-site.”
Turning an abandoned mill site with unknown contamination into a residential neighborhood was neither an easy task nor a clear path for city officials, but this did not deter former Astoria Community Development Director Paul Benoit, who spearheaded the day-to-day effort and persevered despite many obstacles.
Some of the challenges included the approximately $5 million in debt that had been incurred by the cooperative of local residents who owned and previously worked at the mill. In addition, demolition and assessment activities uncovered buried and leaking capacitors, many tons of PCB-contaminated soils and debris, and contaminated sediments in the millpond.
The good news, however, was that the Oregon Department of Environmental Quality (DEQ) was looking to provide financial and technical support to jurisdictions in Oregon addressing brownfields. In 1995, the DEQ offered to undertake the cleanup of the mill site on the conditions that the city reimburse DEQ for half of the estimated $1.4 million in cleanup costs, and that the city take possession of the site. Further good news was the city’s receipt in 1997 of a portion of a U.S. Environmental Protection Agency (EPA) grant to conduct assessments to determine the level and extent of contamination at the site.

Before: Shown here in operation, the Portage Steel fabricating plant in Portage, Michigan, was closed and abandoned in 1989.
Given the challenge of repaying DEQ for half of the remediation costs, Astoria officials approached commercial banks and lenders, which required a guarantee from the city’s general fund. For this reason, Astoria instead approached ShoreBank Enterprise Pacific, a regional nonprofit conservation development fund that facilitates environmental and economic development in rural communities. ShoreBank authorized a loan of $750,000 that was secured by the contaminated real estate.
Following full remediation of the site, the city and DEQ signed a prospective-purchaser agreement affirming that the state will not hold the city or other future owners liable for past contamination at the site, as long as the institutional and engineering controls are upheld. With this agreement in place, the city took ownership of the property and then sold it to a developer selected through a design competition. Proceeds from the sale went to repay ShoreBank Enterprises Pacific.
Today, the developer, Venerable Properties, has completed Phases 1 and 2 of the 16-acre residential and mixed-use neighborhood, and Phase 3 is under construction. Eighty-two residential lots—plus apartment units, commercial and retail properties, and parks and paths—will complete the project. Leveraging the property sale, the city obtained a state highway fund grant to pay for construction of sidewalks and street improvements and to improve access to the property.

After: Now the remediated and redeveloped Portage Centre Plaza is located on the Portage Steel and Precision Machine sites.
According to Bartlett, creating residential reuse from a former brownfields site has proved to be a wise economic decision, as the new neighborhood property values will exceed the highest values of the plywood mill, and the new development is a much more desirable neighbor to the surrounding sections of the city.
Success with this project has led a number of city leaders, residents, and business leaders to recognize that addressing brownfields is a viable way to get property back into productive use. This realization has contributed to the current partnership with Pacific Corp to tackle the cleanup and redevelopment of an old gasification power-plant site, for which the city has just been awarded a $200,000 brownfields assessment grant from the EPA. According to Bartlett, “Success breeds success!”
Redeveloping Retail in Portage, Michigan
Once an economic engine in the midwestern city of Portage, the abandoned Portage Steel Fabricating plant and the adjacent Precision Machine manufacturing facility ceased operations in 1989 and 1988, respectively. Located in the geographic center of the city, at the intersection of two major roadways, the area was originally envisioned by the community as a commercial destination in the Portage Comprehensive Master Plan (1981), long before these facilities were closed.

This former and now historic grain mill was relocated from a Brownfields site to its current site in a city park in Portage, Michigan.
During the subsequent city-center area plan (1982) and master plan update (1996) processes, local government officials, working with residents, further identified a need for commercial development at this prime location. In addition, the population of the surrounding neighborhoods was growing because of expanding residential development, which was generating a need for additional retail uses.
As a result of these important location and market factors, city officials considered the probability of a successful commercial redevelopment project to be very good, even with the added expenses of environmental remediation.
After the site had sat idle for more than 10 years, city officials sought out opportunities for public/private partnerships to redevelop it. Local developer Plaza Corp Realty Advisors approached the city about building a 105,400-square-foot, $11 million retail center at the site. According to City Manager Michael Stampfler, partnership was the main ingredient in this city’s first and successful foray into brownfields redevelopment. “We were thrilled to have a private sector partner willing to make investments towards breathing new life into the City Centre area,” says Stampfler.
Knowing that the Michigan Department of Environmental Quality had a program to revitalize contaminated properties, city officials, in cooperation with the developer, applied for a site reclamation grant to conduct assessment and cleanup of the property. The $300,000 awarded to the city through this program was used to cover approximately 60 percent of the costs of soil and groundwater remediation, as well as demolition and remediation of dilapidated buildings containing lead and asbestos.
Given the rapid pace of development within the United States and the shortage of greenfields, or previously unused properties, a large percentage of all future development projects will by necessity take place on previously used and potentially contaminated sites.
To further assist the developers, city leaders formed a brownfield redevelopment authority composed of Portage residents. Their charge was to review and make recommendations to the city council about the project. To make the project work financially, the brownfield redevelopment authority recommended that the council approve a brownfields redevelopment plan.
Approval of the plan enabled the developer to apply for a state of Michigan single-business tax credit. Through this credit, Plaza Corp was allowed to receive an amount equal to 10 percent of eligible investments in demolition, construction, and site improvements. As part of the brownfields redevelopment plan, the city made water and sewer service available to the area surrounding the site and also upgraded adjacent roadways to improve site access.
According to Jeffrey Erickson, director for planning and development services, “We could not have undertaken a project of this magnitude without a public/private partnership. Each party brought their strengths to the table, and together we created a project that worked for the city, its residents, and the developer.”
Consistent with various community comprehensive-planning efforts, the project has attracted desirable, new private investment. To date, construction is complete on the first four out of five phases of construction, and 80 percent of the available retail space has been leased.

The impact on the community has been significant. A once-unproductive property and eyesore is now a useful asset that provides convenient shopping, dining, and other goods and services not previously offered here. According to City Manager Stampfler, “The redevelopment of this area has increased the stability of our commercial sector and has added more than 125 jobs in the five short years since construction began. This project was really a win-win.”
Help for Local Governments
State Resources: Michigan and Oregon
A myriad of state programs are designed to promote brownfields redevelopment, generally through state voluntary cleanup programs, which are usually administered by state departments of the environment or natural resources. These programs serve as cooperative mechanisms by which site owners, local governments, developers, and nonprofits can approach the state for assistance in site cleanup and for some protections from future state liability at a site. Additional information about the programs in Oregon and Michigan is outlined below. For information about your state’s brownfields resources and incentives, contact the appropriate state government office. 
Michigan
Baseline Environmental Assessments (BEAs) and Due Care. BEAs are used to gather information about a property being transferred, so that existing contamination can be distinguished from any new releases that might occur after the new owner or operator takes over the property. This practice limits the liability of future owners.
Brownfield Redevelopment Assessment (BFRA) Grants. State staff members provide a limited number of free site investigations to customers, including local units of government and developers, to evaluate properties for redevelopment. BFRAs give enough information to make remedial and due-care decisions before a party commits to purchase and/or redevelop a property.
Brownfield Redevelopment Grants. These grants offer funding of up to $1 million to investigate and remediate brownfields for private development. The redevelopment must have an identified economic development component, such as private investment, job creation, and/or an increase in property-tax value.
State Revitalization Loan Fund. This low-interest loan is provided to conduct the site assessments, eligible demolition, and interim response activities necessary to perform assessment and demolition. Loans may be repaid from brownfield authority tax captures (described below).
Brownfield Authorities. These entities can be assembled by any local government 1) to capture increases in property-tax revenues generated by the redevelopment of eligible properties to reimburse parties for the costs of eligible redevelopment activities (tax-increment financing); 2) to use captured tax revenues to finance a local site-remediation revolving fund that can be used to clean up other sites; and 3) to provide eligibility for a single-business tax credit to a taxpayer in return for investments on an eligible site (single-business tax). 
Oregon
Prospective Purchaser Agreements. This type of agreement is legally binding between the Oregon Department of Environmental Quality (DEQ) and a prospective buyer of contaminated property. Agreements limit the purchaser’s liability to the state for environmental cleanup at the property, in exchange for providing a substantial public benefit, such as a contribution to cleanup at the site.
Targeted Brownfields Assessments. Performed by DEQ or its contractors, TBAs generate detailed information on soil and groundwater conditions at a site and, if necessary, make recommendations and cost estimates for cleanup.
Brownfields Redevelopment Fund. Administered by the Oregon Economic and Community Development Department (OECDD), this fund provides loans and/or grants of up to $200,000 if a brownfield is located in an economically distressed community; otherwise, the maximum award is $150,000.
Community Development Block Grants. The OECDD allocates portions of its CDBG funds for brownfields redevelopment and downtown revitalization.
Credit Enhancement Fund. The OECDD offers this insurance tool to help fund businesses that use the loan proceeds to clean up brownfields sites.
Technical Assistance to Brownfields Communities. This program is administered by Oregon State University and furnishes educational materials and training programs related to cleanup, public health, and risk issues, as a means of assisting communities in getting their views heard in decision-making processes.
 	
Tools and Resources That Make Brownfields Deals Work 
As any real estate expert will tell you, three of the most important things needed for a successful real estate transaction are location, location, and location. Both of these examples illustrate that brownfields located on premium real estate—such as at the gateway to the city, at a scenic viewpoint, or in the center city close to housing and office space—make a brownfields transaction feasible for all parties involved.
In both cases, the local government’s investments consisted of technical expertise; work with community residents to get input and buy-in; general coordination with all stakeholders, including the state, the developer, and lenders; and limited financial investments.
For projects without the potential for significant returns on investment, such as those involving a less desirable location or a nonrevenue-generating use, like a public recreation area, plenty of opportunities remain for local governments to participate successfully in brownfields redevelopment.
Help for Local Governments
Federal Resources
The federal government has made brownfields cleanup and redevelopment an economic development and environmental priority, based on federal estimates of approximately 450,000 brownfields in the United States (U.S. Government Accounting Office, Community Development, Reuse of Urban Industrial Sites, GAO/RCED-95-172, 1995).
The U.S. Environmental Protection Agency (EPA) is the lead federal agency with a mandate to help local governments and communities address their brownfields concerns. Other agencies are involved in brownfields cleanup and redevelopment, including the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Commerce, specifically the Economic Development Administration (EDA). The table contained within this box outlines a small sample of the financial and technical assistance resources available to local governments. All are either specifically designed for or can be used for purposes of brownfields revitalization.
For additional information on the programs listed below, visit the Web sites of the individual federal agencies.	
While not every funding or incentive program that will help has the brownfields moniker in its title, many state and federal programs can be used to make the brownfields equation work. Several of these tools and resources are highlighted in the boxes on pages 25, 26, and 27. 
Future Prospects
Given the rapid pace of development within the United States and the shortage of greenfields, or previously unused properties, a large percentage of all future development projects will by necessity take place on previously used and potentially contaminated sites.
Many brownfields developers, as well as traditional developers without brownfields experience, are embracing this new reality. Similarly, local governments are finding creative ways to eliminate the blight caused by brownfields while achieving their other community priorities.
Partnerships between local government officials and private developers are becoming the norm in brownfields revitalization projects. According to midwestern brownfields developer Larry Kilduff of the Kilduff Company, “Without exception, political will on the part of local government officials is the ultimate determinant of success.” He adds, “Public/private partnerships in which both parties take the time to understand each other’s strengths and limitations, and to support each other every step of the way, have helped even the most difficult projects to come to fruition.”
Despite stagnant budgets, many Given recent increases in available state brownfields programs have evolved to become smarter and more user-friendly. Likewise, the federal brownfields law has clarified some of the liability issues previously hindering brownfields redevelopment, and federal agencies have launched new initiatives and funding opportunities.
Finally, given the innovation and spirit of collaboration that accompany so many brownfields projects, brownfields remain a positive force contributing to environmental and economic progress at the local level.
For more information on brownfields cleanup and redevelopment, visit www.icma.org and www.BrownfieldSource.org, ICMA’s brownfields Web resource.
Danielle Miller Wagner is program director of brownfields programs, International City/County Management Association (ICMA), Washington, D.C. (dwagner@icma.org). Julie Pearson, project manager, ICMA, contributed to the Astoria example.