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Brownfields Offer Developers Hope as Housing Options Dissipate
By: Daniel Johnson and Joseph Kesling
Is it possible for developers to provide affordable housing while cleaning up the environment, and still make money? With an open mind, some risk and a lot of cooperation between the public and private sectors, brownfields redevelopment might just be the missing link to solving these seemingly disparate endeavors.
Brownfields are abandoned or underutilized commercial or industrial properties that usually have some environmental contamination. The redevelopment of these neglected sites is becoming one of the most feasible ways to provide more housing, create a better environment and generate good profits for those who make it happen.
In some extreme cases, the cost of remediation is too expensive for the property to be redeveloped by the private sector. In others, the properties may be caught up in receivership or bankruptcy, with no responsible party able or prepared to bear the cost of environmental remediation. Some brownfields are actively in use, such as gas stations with leaking storage tanks, shopping centers afflicted with solvents from dry cleaners or industrial areas still suffering chemical spills from long ago. Federal, state and local governments, particularly the military, own a surprisingly large number of brownfields properties.
The shortage of developable land and continuing urban sprawl is an increasingly crucial problem shared by both the private and public sectors. Adaptive reuse of our nation¹s inner-city brownfields offers incredible opportunities to reverse this trend. They can serve as a sorely needed source of underutilized, close-in land for housing, and as a practical way to clean up our environment, while providing robust risk-adjusted returns on real estate.
The lack of affordable housing in San Diego has forced the city into a state of emergency. According to the San Diego Regional Chamber of Commerce, the city's Housing Affordability Index, a measure of the share of households that can afford a home at the median price, has fallen from 27 percent to 12 percent. Thus, the National Association of Home Builders has ranked the city's housing affordability the second worst in the nation. Also, the National Association of Realtors reports the median home price, $578,300 as of fall 2004, is expected to rise to $590,400 by next year, with the average home price at $622,600.
For developers, land must be accessible, conveniently located, properly zoned (or with a reasonable probability of being rezoned) and supplied with necessary public services, such as utilities and transportation. For the public sector, a new development should generate public revenue in excess of public costs, improve the surrounding environment, and provide an appropriate mix of both commercial real estate and housing for all income levels. Infill areas often fit all of these criteria, becoming perfect candidates for redevelopment projects.
Public-private partnerships are the key to successful transformations. The private sector brings development expertise and equity capital to the table, and expects an above-average, risk-adjusted rate of return for undertaking these projects. The public sector brings zoning and density variances or other concessions, and is often able to waive certain regulatory and compliance costs. Also, because the public sector has a mandate to facilitate affordable housing in redevelopment areas, states and municipalities often can bring tax-free financing, tax credits, credit guarantees or other incentives to bear. Successful development of a brownfield sometimes requires the use of a municipality's eminent domain powers to clean up title problems or provide unity for dismembered tracts.
In San Diego, the private and public sectors have teamed up for the remediation of a full city block of brownfields in the University Heights area. The property, formerly occupied by a McDonald's restaurant, a gasoline station, a car dealership, and most recently a California Department of Transportation right-of-way, was transformed into an office building and affordable housing. The redevelopment could not have been possible without the partnership between the City of San Diego's Redevelopment Agency, and a number of community stakeholders, including the San Diego Revitalization Corporation, private environmental consulting companies and the County Department of Environmental Health.
The City of El Cajon Redevelopment Agency and the El Cajon Community Development Corporation are also interested in developing brownfields land for its efforts in redeveloping El Cajon's Central Business District. While the redevelopment agency awaits word from the Environmental Protection Agency on whether or not they will be awarded a brownfields grant, long-term plans are being made for the redevelopment of the city's urban center, several projects have successfully cleaned up once contaminated sites and transformed them into commercial and residential uses.
Another example of successful brownfields redevelopment is the remediation of the East Village, including Petco Park and the associated development. The Centre City Development Corporation was responsible for acquisition of the properties being redeveloped, made possible in large part to the application of California's Polanco Redevelopment Act, which allows a redevelopment agency to order parties responsible for contaminated property to perform the necessary cleanup, and confers powerful immunities on developers, lenders and subsequent buyers. This redevelopment project earned both the prestigious Downtown San Diego Partnership "Alonzo" award, and the California Redevelopment Association's Award of Excellence for the brownfield project of the year in 2002.
The challenge in these projects is that they require highly specialized expertise to determine what a piece of property is worth both before and after the remediation process so the owners are aware how much they need to invest in the project to make money. At the same time, it must be determined how environmental concerns and risk can be mitigated, and calculate the costs to the project. Many times addressing environmental concern as part of the construction, versus a stand-alone project, can accomplish this.
Municipal governments need to work with these risk-adapted developers while the demand for residential developments continues to grow; otherwise, they must face the continued loss of developable land due to brownfields abandonment. Many developers find that the rewards outweigh the additional efforts of dealing with the environmental concerns in these projects. The cultivation of public-private partnerships is the key to successful reuse of the abandoned brownfields that exist today.
Daniel E. Johnson is the principal of Environmental Business Solutions (EBS), which functions as the San Diego office of SCS Engineers and may be reached at danj@ebsenvironmental.com .
Joseph L. Kesling is vice president and national partner for due diligence on behalf of SCS Engineers and may be reached at jkesling@scsengineers.com .
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HUD Announces FY 2005 Brownfields Economic Development Initiative (BEDI) Competition
Recently the U.S. Department of Housing and Urban Development (HUD) announced the 2005 competition under the Brownfields Economic Development Initiative (BEDI) for a total of approximately $24 million in grants.
Since 1998, the BEDI program has helped communities redevelop abandoned or underutilized property where redevelopment is complicated by the presence or potential presence of contamination.
Under current law, BEDI grants must be used for projects or activities also supported by HUD Section 108-guaranteed loan program.
The deadline for BEDI applications is June 17, 2005.
For more information, see the BEDI program section of HUD's 2005 SuperNOFA at http://www.hud.gov/offices/adm/grants/nofa05/grpbedi.cfm . Back to Table of Contents
Citizen's Guide to Institutional Controls Released
Recently, the Environmental Protection Agency (EPA) issued Institutional Controls: A Citizen's Guide to Understanding Institutional Controls at Superfund, Brownfields, Federal Facilities, Underground Storage Tanks, and Resource Conservation and Recovery Act Cleanups (OSWER 9255.0-98). The document was a collaborative effort of several Office of Solid Waste and Emergency Response offices and the Office of Site Remediation Enforcement in the Office of Enforcement and Compliance Assurance.
Intended to complement existing EPA program guidance, the document provides communities with a plain language guide to institutional controls (ICs). ICs are legal or administrative tools (e.g., permits, deed notices, and easements) put in place at sites to ensure protection of human health. The question-and-answer style guide:
- Defines and discusses different types of ICs and explains when they are used;
- Identifies who may be involved in implementing, monitoring, and enforcing ICs;
- Addresses questions about potential reuse and redevelopment; and
- Encourages citizens to help select appropriate ICs and ensure their successful implementation.
The final document is available on the Institutional Controls Guidance web site at http://www.epa.gov/superfund/action/ic/guide/citguide.pdf .
For additional information, contact Marisa Guarinello, Office of Superfund Remediation and Technology Innovation at guarinello.marisa@epa.gov .
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Somerville's Head Start Program Benefits from Brownfields Revitalization
Last week marked a new beginning for the Community Action Agency of Somerville, MA's (CAAS) Head Start program. After looking for a home that would bring together its children's educational programs that were historically scattered throughout the city, its quest for a new, central location to house its programs has finally come to fruition.
Creativity and perseverance paid off when CAAS spotted three vacant lots on Allen Street, a cluster of brownfields located in the densest neighborhood of Somerville, MA. Using an EPA Brownfields Assessment Grant of $350,000 awarded to the city in 1996, CAAS and the city worked together to assess all three sites for contamination. The work revealed soil and/or water contaminated by polychlorinated byphenyls (PCBs), volatile organic compounds (VOCs), polycyclic aromatic hydrocarbons (PAHs), antimony, arsenic, lead, and nickel.
With the assessment work complete, CAAS purchased the properties and began remediating the site. EPA supported the clean-up phase of the project with an additional $200,000 EPA Brownfields Cleanup Grant in 2003, and a $500,000 loan from EPA's Brownfields Cleanup Revolving Loan Fund in 2004. Additional funding for the project came from multiple private and public donors, including the U.S. Dept. of Housing and Urban Development Block Grant program, the U.S. Dept. of Health and Human Services Administration for Children, the Boston Community Capital Fund, two anonymous private foundations, and the CAAS' capital campaign.
Before building on the new site, Head Start classes were held at various locations throughout the city. Operating under one roof saves the program money and allows it to spend more on its unique early childhood education programs for children of low-income families. CAAS determined that it would save money on administration and transportation costs as well. The facility opened in mid-March with eight classrooms that serve a total of 126 children.
By cleaning up these blighted properties and opening this educational facility, the city of Somerville and CAAS will restore pride in the neighborhood, improve the tax base for the city, and provide a valuable resource for the children of low income families - a great example of a true brownsfields success story.
More information on Brownfields projects in New England is available at http://www.epa.gov/ne/brownfields/ .
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Collaborative Effort Develops New Smart Growth Publication
The Association of Collegiate Schools of Planning in conjunction with the Lincoln Institute for Land Policy has released Partnerships for Smart Growth: University-Community Collaboration for Better Public Spaces. Linking the worlds of community development, higher education administration, and urban design, this accessible guidebook offers useful information on how universities and communities can best develop partnership projects. Its focus on Smart Growth projects further enhances its value for those interested in how urban, suburban, and rural growth can be accommodated while preserving open spaces and quality of life.
Written under a cooperative agreement with the U.S. Environmental Protection Agency (EPA), Partnerships for Smart Growth profiles 13 university-lead collaborations on Smart Growth initiatives. The chapters include geographically diverse locations and urban, suburban, and rural projects. Each case includes a comprehensive discussion of how and why the project was initiated, who was involved, what techniques were employed, what were the pitfalls, and what was the outcome. The result is a book with wide appeal for university administrators, land-use planners and administrators, and community development experts. Chapters are arranged by examples of Smart Growth in Curriculum, at Research Centers, by Collaboration, and in the Community.
For more information about this document or EPA's Smart Growth work with universities, contact Kevin Nelson at 202-566-2835 or at nelson.kevin@epa.gov .
Download or view sections of Partnerships for Smart Growth: University-Community Collaboration for Better Public Spaces at http://www.epa.gov/smartgrowth/univ_collaboration.htm .
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