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Assessment of State Initiatives to Promote Redevelopment of

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Assessment of State Initiatives to Promote Redevelopment of

    Assessment of State Initiatives to

    Promote Redevelopment of Brownfields

    Prepared for:

    U.S. Department of Housing and Urban Development

    Office of Policy Development and Research

    (HC #5966, Task Order 13)

    Prepared by:

    ICF Consulting

    Fairfax, VA

    The E.P. Systems Group, Inc.

    Louisville, KY

    December 1999

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Assessment of State Initiatives to Promote Redevelopment of Brownfields i

    ACKNOWLEDGMENTS

    This study was under the guidance of Edwin A. Stromberg of HUD‘s Office of Policy Development and Research by ICF Consulting and The E.P. Systems Group, Inc. (EPSG). Kathleen Boland of ICF Consulting served as overall Project Manager. Peter Meyer of EPSG was the Principal Investigator and author of this report. Field data collection was conducted by research teams in the three study states. MaryLynn Gentry-Riley conducted the data collection in Massachusetts, assisted in case study information gathering by Katherine Bowling and Margaret Maginnis of the EPSG. Professor Margaret Dewar, Chair, Department of Urban Planning, University of Michigan was responsible for the Michigan statistical and case study data; she was assisted by her research assistant, Katherine Whiteman. The Pennsylvania data collection was undertaken by H. Wade VanLandingham of VanLandingham Consulting.

    The entire study would not have been possible without the investigative efforts of these field operatives and the cooperation they received from their state environment and economic development agencies. We thus acknowledge the support and assistance of the Massachusetts Department of Environmental Protection, the Michigan Department of Environmental Quality, and the Pennsylvania Department of Environmental Protection. Their willingness to share their electronic data bases and to assist us in the interpretation of their records and of the actual implementation of the legislative and regulatory provisions governing their state brownfield programs was essential to the completion of this report.

    For additional information please contact:

    Edwin A. Stromberg

    Edwin_a._stromerg@hud.gov

    Kathleen A. Boland

    kboland@icfconsulting.com

    Peter Meyer

    epsysgrp@aol.com

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Assessment of State Initiatives to Promote Redevelopment of Brownfields iii

    Table of Contents

    Executive Summary ..................................................................................................................1

    Introduction ..............................................................................................................................1

    Limitations of the Study ...........................................................................................................2

    Selection of Study States .........................................................................................................2

    Differences in State Program Design and Study Findings ........................................................3 Conclusion and Policy Implications ..........................................................................................6 Section 1 - Background, Research Questions, and Analytical Approach .............................9 1.1 Do Variable Cleanup Standards Lower Cleanup Costs and Thus Result in

    Greater Cleanup Activity? ..............................................................................................11 1.2 Do Institutional Controls, Combined With Such Variable Standards,

    Stimulate Development?................................................................................................11 1.3 What is the Relative Importance of Regulatory Reforms and Financial

    Incentives in Stimulating Economic Development of Brownfields

    Properties, and Which Specific Mix of Those Interventions

    Appear to be Most Effective? .........................................................................................12 1.4 How Does the Impact of These Programs Vary With the Size or Type of

    Proposed Redevelopment Effort? ..................................................................................13 Section 2 - The Three States and Their Brownfield Programs .............................................15 2.1 Massachusetts ..............................................................................................................15

    2.2 Michigan ........................................................................................................................16

    2.3 Pennsylvania .................................................................................................................18

    Section 3 - Findings from State Practices .............................................................................21 3.1 Spatial Emphasis and Redevelopment Focus ................................................................21 3.2 Types of Contamination Most Frequently Addressed .....................................................22 3.3 Reliance on Different Cleanup Standards ......................................................................23 3.4 Adaptive Reuses: Types of Land Use Conversions .......................................................26 3.5 Utilization of Engineering and Institutional Controls .......................................................28 3.6 Environmental Concerns and Project Timing .................................................................29

iv Assessment of State Initiatives to Promote Redevelopment of Brownfields

    3.7 The Extent and Types of State Financial Assistance Provided

    for Brownfield Projects ...................................................................................................30 3.8 Significant Factors Shaping VCP Utilization and Project Outcomes ...............................33 3.9 VCP Impacts on Exceptional Project Costs ...................................................................34 Section 4 - Conclusion: Implications for Policy ....................................................................37 4.1 Findings on the Research Questions .............................................................................37 4.2 Remaining Unresolved Policy Issues .............................................................................38 Appendix A: Glossary of Key VCP Features

    Appendix B: Memorandum: Analysis of Pennsylvania Voluntary Cleanup Program

    Database

    Appendix C: Key Characteristics of the State Programs Studied

Assessment of State Initiatives to Promote Redevelopment of Brownfields 1

    Executive Summary

    Introduction

    The economic development of distressed neighborhoods and communities is a multifaceted challenge but one issue lies at its core: the difficulty of redeveloping many previously used sites into employment, housing and community facilities that will help to bring about a transformation of these areas as economic centers. Central to the prospects for economic development efforts is the environmental condition of these properties, because many past uses have resulted in on-site contamination that threatens human health and ecosystems.

    The importance of environmental issues in site re-use first came to the fore in national policy with the 1980 passage of the Comprehensive Environmental Response, Compensation and Liability Act, (CERCLA), or the Superfund law. The latter half of the 1990's has witnessed a widespread effort on the part of state legislatures to respond to local redevelopment barriers posed by past pollution in relation to CERCLA requirements. State after state promulgated ―voluntary cleanup programs‖ (VCPs) intended to relieve developers of uncertain liability risks and otherwise support regeneration efforts.

    Over 90 percent of states have some form of VCP in place as of late 1999. Many of these programs combine regulatory flexibility and liability relief with various forms of financial support for redevelopment. Some are targeted specifically at individual contaminated sites or neighborhoods in which such sites are common. The sites are often labeled as ―brownfields‖

    and can be characterized as abandoned, idled or underutilized industrial or commercial facilities, where redevelopment or expansion is complicated by suspected or identified past pollution. A large proportion of brownfields have been contaminated by leaking storage tanks for fuel and other petroleum products that, while excluded from CERCLA requirements, still pose problems for redevelopment, especially when groundwater pollution and in-soil migration of liquid contaminants has occurred. The redevelopment problem also arises from contamination of property previously committed to residential uses, where exceptional costs may arise from cleanup of lead, asbestos, PCBs, and other dangerous substances.

    This brownfield definition suggests, however, that the problems on the sites involve more than pollution. Tainted sites that are abandoned or sitting idle may be too small or be in a location that does not have much private market appeal. Underutilized sites appear not to generate the public benefits that could be gained from more intensive or different activity on them.

    The purpose of this study is to gain a better understanding of the current regulatory and economic development initiatives of states that could help promote the economic revitalization of depressed neighborhoods through the redevelopment of brownfield sites.

2 Assessment of State Initiatives to Promote Redevelopment of Brownfields

    Four central research questions were developed to guide the research process of this study:

    1. Do variable cleanup standards that permit site mitigation based upon intended uses,

    rather than any background standard, lower cleanup costs and thus result in greater

    cleanup activity?

    2. Do institutional controls, embedding land use limits in deeds and easements,

    combined with such variable standards, stimulate development?

    3. What is the relative importance of regulatory reforms and financial incentives in

    stimulating economic development of brownfields properties, and which specific mix

    of these interventions appears to be most effective?

    4. How does the impact of these programs vary with the size or type of the proposed

    redevelopment effort?

    Limitations of the Study

    The study constitutes a limited evaluation of the effectiveness of state brownfields redevelopment strategies in promoting the economic development of depressed urban areas. Best practices in state VCP design are difficult to identify because the programs have not been explicitly created to revitalize depressed areas, but rather have been designed to redevelop contaminated sites. The limited capability of the study to answer the research questions arose from two conditions. First, the availability of data on program outcomes was limited by the relatively recent adoption of VCP‘s for brownfields cleanup. Second, the scope of data maintained by the state agencies administering the VCP‘s was relatively limited, the result of an emphasis on cataloging environmental cleanups rather than on measuring the new economic activity resulting from regulatory flexibility and financial support.

    The findings of this study are only indicative. Without a massive commitment to field data collection and in the absence of confidential project financial information from developers, definitive findings on the efficacy of VCPs in generating redevelopment are difficult to attain. In addition, many contaminated sites were redeveloped before VCPs existed, and even after the adoption of VCPs, some developers mitigated sites without entering the state programs. With the data available from state VCP files, it was impossible to compare redevelopments under VCPs directly to those that took place outside the programs. The VCP data files, moreover, were often incomplete. Without comparisons and full information on the projects pursued through the state programs, the findings cannot be considered definitive.

    Selection of Study States

    The initial phase of the study consisted of a review of state VCP and economic development program structures and a reconnaissance of the availability of data in twelve states. These twelve states were selected in collaboration with HUD‘s Office of Policy

    Development and Research and included: California, Colorado, Georgia, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Pennsylvania, Texas, and Wisconsin.

Assessment of State Initiatives to Promote Redevelopment of Brownfields 3

    These states were examined for the degree to which they exhibited the following characteristics:

    ; a high level of programmatic stability, to enable consistent analysis of program

    outcomes over time,

    ; availability of data in electronic form, and

    ; willingness of program staff to provide access to data.

    Other criteria for state selection included the scale of state programs, in terms of the number of redevelopment projects supported per year from which data could be gathered for statistical analysis with significant results, and the importance of urban redevelopment as a state policy priority.

    Of the twelve states in the initial phase, three were selected for in-depth study. These states were Massachusetts, Michigan and Pennsylvania. Data was collected from state databases, interviews were conducted of program participants, and program structures were studied in an attempt to arrive at tentative answers to the research questions. Differences in State Program Design and Study Findings

    For the states selected for study, program descriptions and data employed for statistical analysis of program outcomes is accurate as of July 1998. Consequently, the effect of modifications in policies or program structures could not be measured by this study. It is important to note that major changes in the Michigan and Massachusetts programs have occurred since July 1999.

    State brownfields programs have evolved at an extremely rapid rate, shifting over time towards provision of greater incentives for redevelopment as a means of attracting more private sector capital. The rapid rate of change makes it difficult to paint an accurate picture of the structure of state VCP‘s and the context in which they operate at a given point in time. Recognizing however, that such a limitation is common in a study of this nature, key VCP policies and practices in the three states and their relevance to promoting redevelopment of environmentally compromised sites can be described from the data collected.

    Key differences in policy included the following.

    ; Pennsylvania was the only truly voluntary VCP program: in Massachusetts and

    Michigan, site contamination was discovered, the condition had to be reported,

    publicly announced, and a mandatory cleanup plan put in place.

    ; Massachusetts did not provide liability relief or other support to a potentially

    responsible party attempting to clean up a site. In contrast, the other two states

    would provide support to these parties.

    ; Pennsylvania was the only state of the three that included residential sites in its VCP,

    and thus had a greater focus on asbestos and lead pollution problems.

4 Assessment of State Initiatives to Promote Redevelopment of Brownfields

    ; Michigan provided the most funds for redevelopment of sites under the state VCP,

    while Massachusetts provided the least. However, funds received from other

    economic development programs often balanced out the pattern of support.

    ; Pennsylvania provided new developers with full relief from third party liability claims

    on cleanups approved under the VCP, while Massachusetts expressly excluded any

    such protection.

    ; All three states provided for engineering controls to avoid the need for complete

    removal of contamination, and tied restrictions on future uses to those controls, but

    only Michigan took cost-effectiveness into formal consideration when it assessed the

    use of engineered solutions.

    ; Public notice requirements varied across the states, with Michigan maintaining the

    most open notice process.

    ; The conditions under which an approved cleanup could be ―reopened‖ ranged from a

    breakdown of the engineering controls put in place for the cleanup in Massachusetts,

    to the Pennsylvania condition of increased ―economic feasibility‖ of further cleanup.

    In addition to specific policy differences, the practices used in implementation of the VCP programs varied among the states. The key practice differences included the following.

    Spatial Emphasis and Focus. All the states studied have designated special target

    areas for redevelopment, however they permit sites in any area to be redeveloped under their VCPs. Michigan offered VCP projects the most priority access to state redevelopment area subsidy funds of the three states, followed by Pennsylvania and Massachusetts. The limited spatial targeting at the time indicates that the VCPs were environmental programs, with their economic development benefits secondary to environmental concerns.

    Types of Contamination Most Frequently Covered. While the majority of VCPs were

    designed to address hazardous materials consistent with the CERCLA definitions, an average of 16 percent of projects across the three states (and almost one third of projects in Massachusetts) addressed petroleum products, which are not covered under CERCLA. Of the remaining projects, some clearly included lead and/or asbestos as the primary contaminants and thus also fell outside the CERCLA definition. The VCPs have generally rejected the federal CERCLA strictures and instead addressed the pollutants that appeared to be most important in obstructing contaminated site redevelopment. Half or more of the VCP projects involved responses to non-CERCLA types of pollution.

    Reliance on Different Cleanup Standards. All three VCPs took the critical step of

    offering some form of cleanup standard flexibility. Massachusetts linked this flexibility with intended land uses and accessibility, while Michigan focused on whether the intended use was residential, commercial or industrial. Pennsylvania combined state-wide with site-specific standards for different uses, and offered redevelopers choices as to which remediation standard to meet. Sixteen percent of Pennsylvania cases and eleven percent of those in Massachusetts were cleaned to background, which suggests that cleanup costs were not significant for those cases. An additional 44 percent of Massachusetts cases were found to have contaminants that

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