MAXIMIZING YOUR BROWNFIELDS POT OF GOLD

2009-06-01T08:39:33.901-07:00

By Rip Patten , PE, LSP, LEED-AP>

Credere Associates has worked with many communities and regional planning commissions in developing and executing local and regional Brownfields Redevelopment programs. We specialize in both public funded (mostly through EPA Brownfields grant funding) and private funded Brownfields redevelopment projects.

The Credere Brownfields Blog is a collection of thoughts and ideas generated during our daily practice of Brownfields redevelopment. Its target audience is staff implementing Brownfields programs, other Brownfields Professionals, and state and local regulators. We are always open to questions, comments and other opinions as well as ideas for future blogs. Please feel free to comment directly on the blog or e-mail Rip Patten with your ideas at rpatten@crederellc.com.

Receiving a $200,000 EPA Brownfields Assessment grant is a tremendous opportunity to redevelop old abandoned sites in your community or region and also to create needed jobs, increase your local tax base and create more greenspace. However, despite this awesome opportunity, some Brownfields programs fail to achieve the kind of success and/or program momentum that they should. In our opinion, the lack of overall programmatic success comes from two common dilemmas that occur.

DILEMMA #1 - There are excellent sites in the region that would fit well with the program, yet site owners are unwilling to participate, and

DILEMMA #2 – Many sites get entered into the program and assessed, but no redevelopment actually happens.

I want to focus this blog on the first dilemma. (Please see my next blog for addressing the second dilemma, coming soon).

The idea for this blog came from a question we received from a potential client after an interview regarding the implementation of a regional Brownfields Program. I feel that the question posed accurately characterizes the dilemma.

Question: In our region, our experience has been that there are plenty of Brownfield sites, but not too many candidate sites – meaning that for one reason or another, our inventory contains a number of sites that did not appear to be “ripe” for assessment. One of the chief barriers was in finding property owners who were willing to be a part of the assessment program. What would be your approach to solving this problem?

To us, solving this problem relies very heavily on developing a thorough inventory of sites that you have for the region (or municipality). A thorough inventory is a very powerful tool and can be used to guide the planning commission in obtaining “willing” owners and thus, candidate sites.

From what we have seen, the most common candidate sites with owners willing to participate in the Brownfields Program are either:

Privately owned Brownfields sites generating little or no cash flow – Private owners that have sites that are completely vacant and are thus generating no or very little cash flow;

Municipally owned or lead Brownfields redevelopment sites– Sites that are owned or looking to be acquired by the community or other community-based non-profit organizations; or

Developer lead Brownfields sites – Sites that have a developer looking at redeveloping the Brownfields site and is interested in using the Brownfields program to help him complete due diligence to help develop a realistic pro forma.

To solicit willing owners, the first step is to use the categories above as criteria to prioritize the Brownfields inventory. This prioritization process will clearly identify sites that have the greatest chance for entering the program, successful redevelopment, and ultimately provide benefit to the region or community.

Our approach to successfully soliciting privately owned Brownfields sites generating little or no cash flow into the Brownfields Assessment Program is to:

1) Educate the owners that by quantifying the environmental unknowns, they will reduce risk associated with the site and thus increase the property value (i.e., the owner will make more money);

2) Facilitate discussions between this potential owner and other property owners that have successfully navigated the Brownfields program;

3) Make the owners feel comfortable that the planning commission, community, state regulators and EPA will partner with them through redevelopment especially if unexpected contamination is encountered (helping them to answer the questions “What if you find something?, a topic for another blog); and

4) Show them how the Brownfields program can help them to increase the marketability of their property through quantifying the environmental unknowns as well as providing other redevelopment related services including: developer and community outreach, master planning and visioning.

A good example of this approach is the redevelopment of the North Berwick Woolen Mill in North Berwick, Maine . This abandoned woolen mill was featured as the shoe factory in the Robin Williams movie Jumanji. The owner had no tenants, no cash flow and was unsuccessfully trying to sell the mill. The mill is located in the center of downtown North Berwick , so it had high redevelopment potential, yet remained a blight to the Town. Credere worked on this project as a consultant for the Southern Maine Regional Planning Commission (SMRPC) Brownfields Program. It took combining the economic development expertise of SMRPC (to help the owner see the financial benefits of participating in the program) with the environmental expertise of Credere (presenting how to manage their environmental liabilities of the site) to have the owner agree to participate in the program.

During the project we were able to not only quantify the environmental issues at the site, but were also able to create watercolor renderings of the vision for a redeveloped site to present to prospective developers. We met directly with prospective developers to help them feel comfortable with the liabilities at the site and explain the funding options available to help finance the cleanup (SMRPC has an EPA Brownfields Revolving Loan Fund (RLF) to help finance remediation projects in the region).

As a result of participating in the Brownfields program, the environmental issues were well quantified and the owner received higher purchase offers for the site. The eventual developer subsequently received a $200,000 RLF sub-grant from SMRPC (the developer was a non-profit affordable housing developer). The North Berwick Woolen Mill redevelopment created 40 senior affordable housing units that are much needed in southern Maine . The redevelopment will be completed in September 2009. This project created a win-win-win situation for the owner, developer and community. The SMRPC Brownfields program played a critical role in this project’s successful redevelopment. See July 28, 2008 article from Mainebiz regarding the site.

http://www.crederellc.com/files/press/north_berwick/7-28_08_Cleanup_Crew_low.pdf

A few words of caution regarding these types of sites: There may be a very good reason why nobody wants to redevelop these sites. It may simply have very low redevelopment potential (I can’t emphasize enough the need for a site to have high redevelopment potential which can help overcome many other obstacles). It could be that the owner thinks the site is worth too much money. It can be that it has significant structural issues or other physical problems.

Municipally owned or lead Brownfields Redevelopment sites (or other sites owned or to be acquired by non-profit organizations) are typically the easiest sites to get into the Brownfields Assessment Program. Municipalities and non-profit organizations are typically cash poor and must rely on other public funding sources to accomplish their goals; therefore, are readily willing to use the Brownfields program.

This type of Brownfield site is generally owned and operated by a community or was acquired by the community through back taxes. In either instance a community may not have the expertise to market and sell the site, and if they do, they may not have the financial resources to perform the due diligence work necessary to maximize its redevelopment potential.

A great example of a municipally owned Brownfields site is the redevelopment of Eastern Fine Paper Mill in Brewer, Maine . On January 14, 2004 , Eastern Fine Paper ceased operation, sent its employees home, and filed for Chapter 7 bankruptcy, leaving the mill completely vacant and devastating the economy of the City. With the economic vitality of the City at stake, the City saw no other choice but to take an active role in the redevelopment of the mill. On May 10, 2004 , the City formed a nonprofit development corporation, South Brewer Redevelopment, LLC (SBR ), who obtained ownership of the mill via bankruptcy court action on May 17, 2004 .

Since 2004, Brewer and SBR took the role of planning the reuse of the facility, addressing the environmental contamination left behind by Eastern Fine Paper, and coordinating its redevelopment. In May 2007, they formed a public/private partnership with Cianbro Constructors, LLC to redevelop the site into a modular fabrication facility. [Modular fabrication is the process of taking unfinished materials such as steel girders, piping, and electrical wiring and fabricating large (up to 60 feet by 100 feet) industrial process components that can be readily shipped around the world by barge and then assembled into a finished product at the end users site.]

They then spent an enormous amount of energy to obtain over $5 million in public funding ($2.0 million from the EPA Brownfields program) to make the redevelopment a reality. On August 15, 2008, Cianbro Constructors celebrated the grand opening of its Eastern Manufacturing Facility, creating 500 jobs and leveraging $50 million in private investment. Please see EPA success story for more information on this site.

http://www.crederellc.com/files/press/efp/EPA%20brewer_me_ss.pdf

Again, a word of caution is to make sure you first look at the redevelopment potential of the site. Just because a site is able to enter into the Brownfields program, it does not mean that it should be a part of the program. The site may still have a low redevelopment potential and if it is never redeveloped, it will not generate the additional taxes, jobs, and/or greenspace that could result if you selected another site. Granted, municipalities are the “clients” of regional planning commissions, so if a community wants one of their sites assessed, it is a judgment call since municipalities typically need all the help they can get. A good compromise is to select a mix of different sites into the program, with different end goals (i.e., jobs, taxes, greenspace, community use, private use, etc.).

For Developer-lead Brownfields sites, once a developer understands the Brownfields program (through grantee/consultant outreach), they can incorporate the program into their due diligence process for their current or upcoming redevelopment projects. In our experience, after a developer has successfully redeveloped a site using Brownfields funding, they tend to want to continue with the Brownfields program for every site they redevelop moving forward. This is great news since the intent of the Brownfields program is to help developers evaluate opportunities that may not make good “business sense” and that they can’t justify spending money to conduct the large amount of due diligence required to properly evaluate Brownfields sites in order to make a “go” or “no go” decision.

The number of developers who are looking for Brownfields redevelopment opportunities is typically not a large group and is typically a niche market in any region. Therefore, the Public Outreach component of your Brownfields program should include outreach to and education of specific Brownfields developers in the region in an effort to have them fully utilize the program to evaluate redevelopment opportunities that they may not otherwise take a look at. Having conversations with Brownfields developers will also help you to understand the Brownfields market in the region and understand what sites have higher redevelopment potential, as well as learn of sites that a developer would not be interested in and more importantly why. This is all critical information for selecting sites into your Brownfields Program.

To us, this type of Brownfields site takes the most effort, yet results in the greatest positive benefits to the community through increased job base, generating higher property taxes, and reducing blight. A good example of this type of Brownfields site is the redevelopment of the Sanford Mill in Sanford , Maine . This mill is planned to be redeveloped into 26 residential units as well as 22,000 square feet of office space. We worked through the Town of Sanford Brownfields Program as well as Weston & Sampson Engineers to educate both the owner and the potential developer of the benefits of the Brownfields program and how it could help to increase the likelihood of successful redevelopment.

We are happy that this project is moving forward with redevelopment and the Town has partnered with the developer and acquired the property through eminent domain in order to clear title (the deeds of ownership in many mill districts are unclear). The Brownfields program played a critical role in making this redevelopment move forward. This developer has also asked us about bringing more of their redevelopment sites into the Brownfields program.

http://www.crederellc.com/files/press/sanford/Sanford%20Mill%20article%2004-23-09.pdf

Another word of caution is to be wary that a developer will likely be gung ho to keep moving forward with a project when the municipality is using only their grant funding (and none of the developer’s money) to keep the project going. It is important to find a way for the developer to “throw some skin in the game” and show that he is committed to moving forward with the redevelopment and not just kicking the tires. Once the developer throws skin in the game, you know he is serious about redeveloping the site.

Credere Associates Brownfields Blog

MAXIMIZING YOUR BROWNFIELDS POT OF GOLD