The Future of Ohio Brownfield Redevelopment- Lessons learned and New

Directions

Joe KoncelikTucker Ellis LLPJoseph.koncelik@tuckerellis.com(216) 696-2373Ohioenvironmentallawblog.com

The Problem

Picture: Affordable Housing Institute

What Causes Brownfields to Occur

• Market forces- More room to grow, attract talent and lower taxes

• Expansion of business• Closure/relocation of businesses• Moving to a “better area”• Lower tax rates or incentives

• Environmental laws- Liability, financing considerations and extensive delays

• Superfund liability• Legacy Environmental Issues- RCRA, BUSTR

Brownfield v. Greenfield• Studies show businesses in urban areas find it

less costly to move the entire company’s operations to a greenfield site than to expand current facility in the city

Ex: Cleveland Company – Cost $1.2 million more to develop adjacent property than to move to suburban location

• Study in Ohio found that the cost of developing a brownfield was four times the cost of building on a greenfield- Brownfields: Cleaning and Reusing

Social Issues

• Unemployment- Higher unemployment rates caused by the lack of industry

• Vacant facilities- Invite abuse, including stripping of parts and materials, vandalism or arson and “midnight dumping”

• Urban Blight (“Symbols of decline”)- discourage urban investment and contribute to pervasive sense of poverty and hopelessness- Eisen National Envtl. Policy Inst.

• Infrastructure- Investment shifts from urban core to suburbs. More infrastructure money needed due to urban sprawl

• Jobs and Taxes- Jobs and associated taxes migrate away from urban centers

• Taxes = Critical source of funding for Cities (Less money for public education, transportation and infrastructure)

Environmental Issues

• Contaminated Sites- – Brownfields present public health risks to

exposure to contaminants– Migration of contamination- impacts to other

properties, discharge to surface water or vapor intrusion

• Urban Sprawl- – More impacts to wetlands and streams– More traffic (less use of public

transportation)

Photo: Museum of the Cities

Industry Leaves

Decrease tax base and job

loss

Infrastructure and City

services suffer

Criminal activity

increases and urban decline

Blight and Urban Decline

Brownfield- The Vicious Cycle

Positive Attributes of Brownfield Redevelopment

Benefits of Brownfield Redevelopment

• Every public dollar spent on brownfield revitalization leverages $2.50 in private investment

• Every acre of brownfields reused saves 4.5 acres of greenspace

• Increases tax base in the urban core• Brings jobs and investment back to urban core

Ohio’s Brownfield Problem

Ohio • Urban Sprawl Rankings (2014

Smart Growth America)– Canton 93– Dayton 116– Toledo 117– Columbus 138– Cleveland 153 – Youngstown 17

• Cincinnati- (Smart Growth America)– 1996-2005– Thirty (30) businesses move from transit

accessible areas to areas without transit– Eight (8) business to the opposite

Cleveland- Urban SprawlCuyahoga Planning Commission

Developed Land- 1948 Developed Land- 2002

Roughly the Same Population

OhioNumber of Brownfields In Ohio

Local Level – 119 Brownfields in Lucas County (1996)- 62% of real estate transactions

encumbered by environmental issues– 350 Brownfields in Cleveland with 1,000 to 2,000 condemned structures– Cuyahoga Planning Commission- 40,000 acres or 14% of County’s land was

industrial at some point

State Wide– 1,291 CERCLIS sites in Ohio – 1,026 RCRA sites (2001)– Over 10,000 brownfield sites

(Inventoried by Local GovernmentsU.S. EPA Joe Dufficy- 2005)

Picture: Western Reserve Port Authority

Ohio’s Current Brownfield Redevelopment Policies

Ohio’s Current StrategyAddressing Liability

Voluntary Action Program-• Slow process (can take months just to perform VAP Phase II, years for cleanup)• Costly ($100k to $200k on Phase II alone)• Complexity

– Example: Fortune 10 company- sites all over U.S. highly critical of complexity and rigor of program

• Cleanup flexibility? (Yes, but still very costly)

“All Appropriate Inquiries” or Bona Fide Purchaser Defense (CERCLA)• Good

– Guesstimate- For every 10 deals (7 BFPD, 2 nothing and less than 1 goes VAP)– Fast and low cost

• Bad– Only a CERCLA defense– No Ohio counterpart– No disclosure of public information– No assurance by regulators that issues addressed appropriately

Ohio’s Current Brownfield StrategyIncentives

Brownfield Grant and Loan Programs

Clean Ohio, JobsOhio Revitalization Program, ODSA Abandoned Gas Station Fund, local brownfield grant and loan programs • Small number of projects (even 30 per year

insufficient)• JobsOhio and Clean Ohio $1 -$3 million per site

in grants to offset costs of brownfield versus greenfield

• JobsOhio targeting business expansion and job growth (Narrow list of eligible development projects)

Tax Incentives- Spur Brownfield Redevelopment Projects• Ohio Historic Preservation Tax Credit

– 284 projects to rehabilitate 398 historic buildings in 52 different Ohio communities

• New Market Tax Credit

Do Not Make Projects Happen• VAP Automatic Tax Abatement O.R.C.

§5709.87– New renovations or new structures not

eligible– Assumes that properties tax valuations

reflected presence of contamination– Ohio law makes it difficult to present

evidence supporting a reduction

VAP and Clean Ohio Statistics1995-2015

VAP Cleanups Completed659 NFA’s Submitted 132 Withdrawn, denied, revoked or pending527 Covenants-Not-Sue

Clean Ohio (2001-2012)*160 CORF Projects Completed (Greater Ohio)

1995-2001 (Pre-Clean Ohio) 17 CNS per year2001-2015 (During Clean Ohio) 35 CNS per year

* More data than JobsOhio

Incentives Work!Public Incentives Result in Private Investment

2013 Greater Ohio Clean Ohio Study• As of 2012 CORF spent $315,231,174 on 160 projects

• Average incentive was $1.97 million dollars per project

• $4.67 in new economic activity for every dollar spent

Scorecard on Brownfields

10,000 – 527 VAP CNS = 9,437*

270 years to address all of Ohio brownfields – If we sustained Clean Ohio for that many years (35 CNSs per year)– Assumes no new brownfields were created in that time period

$18.5 billion incentives to address current brownfields (Assuming average Clean Ohio Cost per project)

Rethinking Ohio’s Brownfield Strategy

Strategies to Get Ahead of the Brownfield Curve

Need to be Faster- We need policies that address environmental issues at the speed of “business”– Assessment and cleanup needs to occur in months, not years to match up with business needs

Need to Lower Costs- Need to limits costs associated with addressing legacy issues– $13,000 per acre to assess a brownfield site– $66,000 per acre to remediate (Cleveland Dept. of Economic Development)– 32% - 35% Public Subsidy on assessment and cleanup for current brownfield projects

Effectively Address Liability- – Provide liability protection for “White Knight” buyers– Broad liability, multiple regulatory programs– Third party liabilities- Ex: Vapor Intrusion

Broad Based Incentives- – We need incentives that cast a wide net– Leverage growth to allow for more incentives

Address Public Health and Target Catalyst Projects- – Target the most contaminated sites for limited grant incentives

Retooling Ohio’s Brownfield ToolboxPublic Incentives

Rethink Grant Awards-

1. Recognize Limited Funding– Continue use for assessment work– Gets projects out of the starting gate

• Answers key upfront issue- How much?

2. Target Appropriate Sites for Cleanup– Public Health Sites

• Highly contaminated• Solvent plumes

– Catalyst Development Sites• Target Key areas• Create a development domino effect

Retool Tax Incentives1. Free Market Approach

– Thirteen states east of the Mississippi using tax incentives predominantly

– Open up to residential, entertainment as well as business expansion

– Addressing urban blight (i.e. MORE SITES!)

2. Proposal– Drop VAP Automatic Tax Abatement

• Too difficult to utilize• 10 years is too long• Change law on tax valuations of contaminated property

– Create New Brownfield Tax Credit• Rebalance brownfield vs. greenfield development• Assessment and cleanup costs

– Tax reductions offset by tax gains• Cleanup costs eligible• Local taxes increase for increase in property taxes• Employment taxes go up

Retooling Ohio’s Brownfield ToolboxRethinking Programs to Address Liability

VAP- • best for “highly contaminated” sites• Review ways to reduce costs (assessment and cleanup)• Reduce complexities of the program (going the wrong direction)

Create Ohio “All Appropriate Inquires” Defense• Address risks to facilitate redevelopment• Provide liability protection• Reduce assessment and cleanup costs• Provide incentive for public disclosure • Learn from other states- NEXT PRESENTATION!

Conclusion- Thanks for listening!!!

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