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Financing Tools for Brownfield Revitalization Charlie Bartsch Vice President, ICF International Disadvantaged Brownfield Communities Network Webcast – December 14, 2006 www.icfi.com What this Presentation Will Cover … Financing tools to help disadvantaged communities – the fastest 15 minute overview you ever heard … Setting the stage – some context Highlights of federal programs Suggestions of applicable state initiatives Mention of local options Examples along the way … Promoting Brownfield Revitalization: Who Should Play? It’s all about partnerships Public sector – Federal, state and range of local governments Quasi-public sector – Development, port, housing authorities Non-profits – CDCs, CBOs, universities, cultural-social institutions Private sector – Lenders, developers, investors, transaction support partners How Can Federal, State and Local Programs Address Brownfield Financing Needs in Disadvantaged Communities? Reduce lender’s risk – Loan guarantees, companion loans Reduce borrower’s costs – Interest-rate reductions/subsidies, due diligence assistance Improve the borrower’s financial situation – Re-payment grace periods, tax abatements and incentives, training credits and funding, technical assistance help Provide comfort to lenders or investors – Loan guarantees, performance data Provide resources directly – Grants, forgivable/performance loans A Federal Programs “Laundry List”: What’s Been Used for Brownfield Activities? Loans EDA’s Title IX (capital for local revolving loan funds) HUD funds for locally determined CDBG loans and “floats” EPA capitalized brownfield revolving loan funds SBA’s microloans SBA’s Section 504 development company debentures EPA capitalized clean water revolving loan funds (priorities set/ programs run by each state) HUD’s Section 108 loan guarantees SBA’s Section 7(a) and Low-Doc programs A Federal Programs “Laundry List”: What’s Been Used for Brownfield Activities? Grants HUD’s Brownfield Economic Development Initiative (BEDI) HUD’s Community Development Block Grants (for projects locally determined) EPA assessment pilot grants EDA Title I (public works) and Title IX (economic adjustment) DOT (system construction and rehabilitation programs) DOT’s Transportation and Community System Preservation (TCSP) pilot grants Army Corps of Engineers (cost-shared services) A Federal Programs “Laundry List”: What’s Been Used for Brownfield Activities? Tax incentives and tax-exempt financing Targeted expensing of cleanup costs (through 12/31/07) New Markets Tax Credits Historic rehabilitation tax credits Low-income housing tax credits Industrial development bonds Tax-advantaged zones HUD/USDA Empowerment Zones (various incentives) HUD/USDA Enterprise Communities (various incentives) Which Federal Programs Are Most Commonly Used by Communities? EPA Site assessment, cleanup, RLF capitalization HUD Community Development Block Grants (CDBG), Section 108 loan guarantees, Brownfield Economic Development Initiative (BEDI) EDA Public works, planning economic adjustment Tax Incentives Rehabilitation/historic preservation, low income housing, new markets, brownfield cleanup expensing EPA Brownfields Brownfields – Fiscal 2006 $70 million available for brownfield site assessment, cleanup, RLFs, and job training grants to states, tribes, local governments, quasi public redevelopment agencies/authorities – non-profits eligible for cleanup grants $50 million to states/tribes for VCPs EPA funded all states and 292 local projects Brownfields – Fiscal 2007 Comparable funding levels anticipated EPA – Harley Davidson Dealership, Stamford CT $165,000 BCRLF loan covered cleanup (mostly soil removal) at former printing and engraving plant site Site redevelopment included renovation of two vacant turn-of-the-century buildings Leverage – $600,000 invested in a Harley Davidson showroom HUD Programs Community development program funding (CDBG, Section 108, BEDI) must meet one of HUD’s 3 broadly defined program objectives – Assist low- and moderate-income persons – Address slums and blight – Meet an urgent community need 70% of funds must help low- and moderate-income persons How Can Community Development Block Grant (CDBG) Funds Be Used For Brownfield Projects? CDBG – Locally determined economic/community development, planning, support services, housing; brownfield cleanup/reuse Eligible activities include: – planning for redevelopment or revitalization of brownfields sites – site acquisition – environmental site assessment – site clearance/preparation, including demolition – removal or remediation of contamination from sites or structures – rehabilitation of buildings – construction of real estate improvements HUD/CDBG – Jack Evans Police Station, Dallas TX Jack Evans police station, built on 3.2 acre former gas station/dry cleaner site CDBG used for site preparation, including cleanup and demolition HUD/CDBG – Visiting Nurses Assisted Living, Somerville, MA Project redeveloper, the nonprofit Visiting Nurses Association, remediated the site and demolished the existing structures VNA constructed an assistedliving facility and health center, containing 97 units for low-tomoderate income seniors Leverage – $100,000 in CDBG was used as a cost-containment reserve HUD Programs Section 108 Loan Guarantees Finances site clearance, property acquisition, infrastructure, or rehabilitation (including cleanup) activities too big for single-year block grant funding – Block grant recipients may borrow up to 5 times their entitlement, for up to 20 years – Requires pledge of future CDBG funds as collateral – Small cities must work through state CDBG agency HUD Programs Brownfields Economic Development Initiative (BEDI) Established to provide additional financial assistance for brownfield development projects supported by Section 108 – Must be used in tandem with Section 108 guarantee – Competitive grant application process – Non-entitlement small cities not eligible on their own HUD: 108/BEDI – Grove Hall Mecca, Roxbury, MA Abandoned manufacturing site, sold to community-based developer Total project cost was $13.2 million, including: – $3.6 million Section 108 – $3.6 million from BEDI Leverage – Grove Hall Mecca mall has generated more than 250 full-time jobs, $100,000 tax revenues Economic Development Administration (EDA) Two major programs – public works grants finance industrial development site and infrastructure preparation economic dislocation program capitalizes RLFs for distressed areas EDA also supports rural planning 2/3 of all resources traditionally go to small towns and rural areas Federal tax incentives that can be linked to community brownfield revitalization – all available at little or no cost to you ... Rehabilitation tax credits Low income housing tax credits New markets tax credits Brownfields cleanup tax expensing Federal Financing Programs: Tax Incentives Rehabilitation Tax Credits Taken the year renovated building is put into service 20% credit for work done on historic structures, with rehab work certified by state 10% credit for work on “non-historic” structures build before 1936; no certification required Rehab Tax Credits – Old Northampton Fire Station, Northampton, MA Old Northampton Fire Station, built in 1872, shut down in 1999 13,000 sq. ft. building redeveloped into office space, small scale retail Cash flow impacts of rehab tax credits a key part of the economic viability of this project Federal Financing Programs: Tax Incentives Low-Income Housing Tax Credits Can encourage capital investment in affordable housing projects on brownfield sites – States get a population-based allocation for distribution to communities and non-profits LIHTCs – Albina Corner, Portland, OR 3/4 acre Albina Corner is adjacent to a bus line and near a major light rail station Site redeveloped into a mixed-use area that includes 48 units of low-income housing built over 12,000 square feet of commercial space; includes a child care center and a second floor courtyard and play lot LIHTCs one of 14 funding sources. Federal Financing Programs: Tax Incentives New Markets Tax Credits Gives investors federal tax credits for making equity investments in designated Community Development Entities (CDEs) for use in low-income communities To date – $12.1 billion in credits allocated by Treasury (thru CDFI) in 233 CDE awards Key to community success – find a CDE partner! Federal Financing Programs: Tax Incentives New Markets Tax Credits CDEs use their allocations to make loans or investments in “qualified businesses” and development activities – which may include: – Community facilities such as health or child care – Charter schools – For-profit and non-profit businesses – Homeownership projects New Markets Tax Credits – Bethel Center, Chicago, IL Bethel New Life, a faithbased CDC, used $1.5 million in NMTC allocation to develop 23,000 sq. ft. Bethel Center on an abandoned site adjoining an elevated rapid transit station Center houses employment and day care services, 6 commercial storefronts A f t e r Federal Financing Programs: Tax Incentives Brownfield Expensing Tax Incentive Deduction pegged to cleanup costs, which allows new owners to recover cleanup costs in the year incurred; only incentive targeted to private site owners – Expired 12/31/05 – Congress passed retroactive extension last week, effective thru 12/31/07 – Petroleum contaminated sites made eligible Brownfield Expensing Incentive: Qualified Environmental Cleanup Costs Costs paid to abate or control a hazardous substance at a “qualified contaminated site” – Site assessment, cleanup, monitoring costs – Costs necessary to install an institutional or engineering control – State VCP fees and associated costs – Removal of demolition debris Potential community marketing tool Alliance Environmental/Goodwill Fire Department – West Chester, PA 8.5 acre site in economically distressed area Now – Good Will Business Park: 100,000 sq. ft. of retail, public service facilities including fire department and district court Incentive provided developer with nearly $800,000 in tax relief Brownfield Financing: What Are the States Doing? Tax credits, abatements, and incentives linked to site reuse Targeted financial assistance programs Direct grants/financial assistance Tax Credits, Abatements, Incentives Offered by 22 states, including Deferral of increased property taxes – Connecticut and Texas Remediation tax credits – Illinois and Wisconsin Cancellation of back taxes – Wisconsin and Massachusetts Rebates of sales taxes to offset cleanup costs – New Jersey Tax incentive “menu” – Missouri Environmental insurance tax credit – New York Targeted Financial Assistance Offered in 19 states, including Indiana’s forgivable remediation loans, newly expanded to petroleum sites Florida’s tax “bonus refund” pegged to job creation Florida’s low-interest loans for contractor/tax lien purchases Massachusetts, Wisconsin’s insurance subsidies Michigan’s Brownfield Redevelopment Authorities Kansas’s focus on agricultural-related contaminants Direct Financing Assistance Offered in 13 states, including Low interest cleanup loans – Delaware, Indiana, and Wisconsin Remediation grant funds – New Jersey, Minnesota State revolving loan or redevelopment funds – Indiana, Michigan, Wisconsin, and Massachusetts ‘Just in time” Phase II site assessment program – Indiana Targeting state clean water RLF to brownfield site cleanup – Maine, New Mexico, New York, Ohio Brownfield Financing: Most Common Local Tools Making the Brownfield $$ Needs Fit with the Tried and True Tax increment financing/TIF variations Tax abatements/reductions Property transfers Tying it Together at the Community Level – Westside Business Park, Kansas City, MO Terminal Railway rail yard and maintenance facility, 1914 to mid-1960s Challenge – preserving brick buildings that were to serve as key marketing strategy in a distressed part of downtown Key partners – Hispanic Economic Development Corporation, environmental insurance provider, and state historic preservation office Resource mix – included CDBG, state ED, state and federal rehab tax incentives, local business development loans Result – former roundhouses transformed into office space, creating 600 new jobs Thank you! If you have questions … If you need additional examples and information … Charlie Bartsch cbartsch@icfi.com (202) 862-1134