Financing

The process of acquiring, cleaning up, and redeveloping brownfields can be very expensive.  Fear of contamination can increase lending costs by three-fold and clean-up costs can range from the tens of thousands into the millions of dollars. Lenders are often hesitant to lend money to small nonprofit developers working on brownfields because of the possibility that the brownfield property, their only collateral, may plunges in value due to found contaminants. Non-profits are also usually interested in small parcels of land in low-income communities, where returns on investment are much smaller than for prime locations, such as waterfronts, which are more attractive to for-profits and cities.

As a result of these complications, brownfields redevelopment projects need a combination of public investment and private financing to be successful.  In addition, measures that simplify the regulatory environment, provide liability relief, and clarify clean-up standards (see Challenges) can make lenders more comfortable.

Since the inception of the EPA's Brownfields Initiative Program in 1995, there has been a growing interest in revitalizing brownfields and the availability of funding and the number of incentives offered to communities have markedly increased. The Brownfields Center at Carnegie Mellon University offers an instructive guide to funding for all stages of brownfields redevelopment.  The Brownfields Financing Options site is available through the Projects link on Carnegie Mellon's web site. 

Federal Financing Tools

The two main federal agencies that directly work with cities and communities to support brownfields work are the EPA and HUD.  The Army Corps of Engineers also provides technical assistance for assessment, clean-up, and redevelopment in those areas where the brownfields redevelopment will help water quality, such as sites near rivers and lakes.  The Department of Commerce's Economic Development Administration and the Department of Transportation (through the Livable Communities program) also support the redevelopment of brownfields.

U.S. Environmental Protection Agency (EPA)

The EPA offers a number of funding resources within its Brownfields Economic Redevelopment Initiative including:
Pilot programs, to assess brownfields sites and to test clean-up and redevelopment models (each selected site is funded up to $200,000 over two years).
Job training pilot programs, to provide remediation work to communities affected by brownfieldsand prepare residents for future work in environmental fields.
Clean-up loan fund programs, to capitalize local revolving loan funds that will make loans for the environmental clean-up of brownfields.  Each loan is funded up to $500,000 over five years.
Targeted Brownfields Assessments, to provide funding and/or technical assistance for environmental assessments at brownfields sites throughout the country.

U.S. Department of Housing and Urban Development (HUD)

HUDoffers several programs that fund communities and cities working to redevelop brownfields.
Brownfields Economic Development Initiative (BEDI).  BEDI funds provide communities with clean-up and economic redevelopment funds. These funds are used to improve the viability of projects funded with Section 108 loan guarantees. They ensure that a project will be financially successful and will be able to repay the Section 108 loan guarantee.  BEDI funds can be used for acquiring land, economic development, and related activities. BEDI grant funds may be used for any eligible activity under the Section 108 program including property acquisition, economic development, public facilities, or related activities.
Community Development Block Grants (CDBG).  The CDBG program provides funds for revitalizing communities and redeveloping contaminated sites.  The grants, which are allotted to cities, help ensure affordable housing, provide services to the most vulnerable in the communities, create jobs, and expand business opportunities.
CBDG resources can be used to finance the rehabilitation of privately owned buildings and sites and to cover specific costs related to labor, material, construction, or renovation.
To be eligible for CDBG funds, cities must prove that the brownfields redeveleopment meets at least on of HUD s national objectives:

• Benefit low and moderate income persons
• Prevent or eliminate slums or blight
• Address conditions that present urgent threats to the health and safety of a community

Section 108 Loan Guarantees . These guarantees allow local governments to finance economic and physical development, public facilities, and other large-scale brownfields redevelopment projects.  Section 108 provides communities with a source of financing for economic development, housing rehabilitation, public facilities, and large-scale physical development projects.  Activities funded by Section 108 must meet the same requirements as the CDBG program. Both CDBG and Section 108 are better suited for larger industrial sites and require city involvement.  CDCs can request this grant money from their city.

Renewal Communities, Empowerment Zones, and Enterprise Communities.   These are geographic areas targeted to receive special federal incentives in order to promote and build public-private partnerships.   They offer significant economic incentives that can be used for brownfields clean-up and redevelopment.
U.S. Department of Commerce
The Economic Development Administration (EDA) has an Economic Development Information Clearinghouse that describes what EDA has done to promote brownfields redevelopment.  Two EDA programs are of particular interest:
The EDA Local Technical Assistance Program could be used for predevelopment studies. It provides grants to organizations for research and organizational capacity building aimed at solving a particular problem and retaining/creating jobs.
The EDA Public Works and Development Facilities Program provides grants to help distressed communities attract new industry, expand business, diversify their economies, and attract private-sector jobs.
U.S. Treasury
Brownfields Tax Incentives.  Created in partnership with the EPA, these incentives allow environmental clean-up costs to be fully deductible in the year they are incurred, rather than having to be capitalized. The government estimates that while the tax incentive costs approximately $300 million in annual tax revenue, it is expected to leverage $3.4 billion in private investment and return 8,000 brownfields to productive use.

State Financing Tools

There are many different funds available for brownfields redevelopment at the state level.  Not all states have such tools, but it is worth exploring.  States also offer tax abatement or reduction, small business loans, and other incentives.
Here are some examples of state brownfields funding tools:
The California Environmental Redevelopment Fund (CERF) is a private, for-profit corporation that will finance the clean-up of contaminated sites across the state.  CERF will provide a variety of lending products to businesses, developers, and public entities to facilitate the development of brownfield sites.California also has CalReUSE, a government-funded program that was put in place to promote the redevelopment of brownfields by providing access to forgivable loans that are meant to fund site assessment and remediation.
The Illinois Environmental Protection Agency Office of Brownfields Assistance lists the following Illinois programs: a $10 million Brownfields Redevelopment Loan Program for municipalities, a grant program also for municipalities, a $3.5 million brownfield clean-up revolving loan fund, and a bank participation loan program in Chicago for commercial or industrial loans.
The Governor's Office for Brownfields Revitalization in Massachusetts provides comprehensive assistance in accessing all brownfields and economic development programs and offers troubleshooting for government-related issues.  Among Massachusetts's programs are the Brownfields Redevelopment Fund, which is run by MassDevelopment in partnership with the Brownfields Advisory Group and provides flexible financing for site assessments and clean-up actions in economically distressed areas and Brownfields Redevelopment Access to Capital (BRAC), a $15 million environmental insurance fund based on two state negotiated policies provided by AIG.

Government Incentives for Private Brownfields Financing

Community Reinvestment Act (CRA).  The CRA requires lending institutions to make capital available for low- and moderate-income urban neighborhoods.  In 1995, the EPA and the Office of the Comptroller of the Currency revised CRA regulations to allow brownfields projects in low- to moderate-income neighborhoods to qualify as part of meeting the CRA obligation.
Industrial Development Bonds (IDB).   IDBs are private bonds issued to manufacturers for property acquisition, new plant construction, facility rehabilitation, and new equipment purchases.  The tax-exempt bonds range from $1 million to $10 million.  Federal IDBs cannot be used for brownfields cleanup costs, but some state laws do include brownfields remediation as an acceptable use for state bonds.
Rehabilitation Tax Credits (RTC).  RTCs target sound, older structures; they allow a percentage of the tax credit to be taken from the total federal tax liability for the year when rehabilitation occurred. They can be used to redevelop brownfields properties that have an existing structure that is safe to keep, but requires some rehabilitation.
Land Donation. Many brownfields are located on land with little or no market value.  Donation of this property is tax deductible, making it an attractive option for property owners who are no longer interested in ownership and cannot sell the land.