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Brownfields Financing Basics: “Show Me the Money” $$$$$$$$

Brownfields Financing Basics: “Show Me the Money” $$$$$$$$. Presentation by Charlie Bartsch October 6, 2004. What this presentation will cover. . . what financing gaps exist, and why public-sector support is needed commonly used federal programs and examples

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Brownfields Financing Basics: “Show Me the Money” $$$$$$$$

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  1. Brownfields Financing Basics:“Show Me the Money”$$$$$$$$ Presentation by Charlie Bartsch October 6, 2004

  2. What this presentation will cover. . . • what financing gaps exist, and why public-sector support is needed • commonly used federal programs and examples • recap of programs especially applicable in distressed areas

  3. The Face of Brownfields From This. . . Bend, OR Baraboo, WI Somerville, MA New London, CT

  4. The New Face of Brownfields Bend, OR Baraboo, WI New London, CT Somerville, MA

  5. Overview Keys to Building and Funding a Local Brownfields Program • Defining a community vision • Encouraging community involvement • Fostering public-private partnerships • Institutionalizing brownfield reuse strategies • Tapping into reuse incentives

  6. The Project Development Process -- Simplified! What Impact Does Contamination Have on Financing? Conceptualizing and Planning the Project Economic Analysis for Marketing the Project Dealing with Stigma $ for Site Assessment Additional Underwriting/Site Development/R.O.R. Costs $ for Preparing a Cleanup Plan and Taking It Through VCP/State/Local Regulatory Agencies $ for Cleanup The “RedZone” “Regular” Real Estate Construction/Development Costs When Site is “Shovel Ready”

  7. Goals of Public Financing Tools: What Can They Do? • Reduce lender’s risk • loan guarantees; companion loans • Reduce borrower’s costs • interest-rate reductions or subsidies; due diligence assistance • Improve the borrower’s financial situation • re-payment grace periods; tax abatements; training and technical assistance help • Provide comfort to lenders or investors • loan guarantees; performance data • Provide resources directly • grants; forgivable/performance loans

  8. Federal Programs: The“Laundry List” Federal Financial Assistance Programs That Can be Applied to Brownfield Redevelopment 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 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) • Grants (continued) • DOT (various system construction and rehabilitation programs) • DOT’s transportation and community system preservation (TCSP) pilot grants • Army Corps of Engineers (cost-shared services) • Equity capital • SBA’s Small Business Investment Companies • Tax incentives and tax-exempt financing • Targeted expensing of cleanup costs (through 12/31/03) • 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)

  9. Federal Financing Programs:EPA SITE ASSESSMENT GRANTS • Funds pre-cleanup environmental activities – for example, site assessment, inventories, planning, design, and outreach • Typically, up to $200,000 per applicant/jurisdiction • Local governments, tribes, redevelopment agencies, regional councils, land clearance agencies, and similar entities eligible

  10. Consumers Energy Headquarters – Jackson County, MI • In 1999 – Jackson proposes the city of Jackson proposed a downtown brownfield site for Consumer Energy’s new corporate headquarters • Project jump-started by $200,000 site assessment grant, which demonstrated viability for some of the 36 parcels assembled • Ultimately, Consumers invests $70 million in new construction • Consumers Energy’s relocation to downtown saves 600 Jackson jobs, brings 750 new jobs into downtown

  11. “r” Kids Family Center – New Haven, CT • New Haven used $20,000 of its EPA site assessment grant funds at the future home of the “r” Kids Family Center • Assessment found a 1,000-gallon underground storage tank containing a mixture of heating oil and water, and about 200 tons of TPH-contaminated soil. • Cleanup was completed in 2001 • Connecticut’s Department of Social Services provided two grants totaling $775,000 for building construction and site development, which was completed in the early summer of 2003. • The center now employs five full-time and nine part-time staff members, serving up to 120 families a year.

  12. Federal Financing Programs:EPA SITE CLEANUP GRANTS • Funds cleanups (new, starting in 2003) by eligible applicants at sites that they own • Typically, up to $200,000 per site • Local governments, tribes, redevelopment agencies, regional councils, land clearance agencies, and similar entities eligible • Non-profits also eligible • 20% match (funds or in-kind services) required

  13. Federal Financing Programs:EPA BROWNFIELD CLEANUP REVOLVING LOAN FUND GRANTS (BCRLFs) • Provides capital to establish RLFs to make low/no interest loans for cleanup • Up to $1 million per recipient; 20% match required • Local governments, tribes, redevelopment agencies, regional councils, land clearance agencies, and similar entities eligible • Starting in fiscal 2003, recipients may use up to 40% of capitalization award for cleanup sub-grants at sites owned by sub-grantees • Non-profits can be sub-grantees

  14. Firebarn – St. Anthony Falls, MN • Vacant former car dealership and auto services/body work facilities • Prospective new user demanded clean site • Hennepin County Health Dept. made a $240,000 BCRLF loan for soil and groundwater cleanup • $30 million mixed-use redevelopment complex built on clean site -- 78 housing units, and 45,000 square feet of commercial/ retail/office space

  15. Federal Financing Programs:EPA CLEAN WATER STATE REVOLVING LOAN FUNDS • Funds activities (such as removal of underground tanks, contaminated soil, basic site assessments) to correct or prevent water quality problems • State program, with state-set project priorities • Offers loans, up to 20 years, to communities or private parties • Potential use at brownfield sites with water quality issues • No limit on fund amounts

  16. Grant Realty – Cleveland, OH • Ohio’s Clean Water State Revolving Loan Fund provided $1.6 million to the Grant Realty company at an interest rate of about 4 percent to finance cleanup of a 20-acre industrial site • Water connection – groundwater impacts on the Cuyahoga River • Site re-used for light industry and commercial purposes • Repayment source – revenue from a tank-cleaning operation, along with personal loan guarantees and a second position mortgage as additional collateral • With assistance from the Cuyahoga County brownfields program, owner applied to Ohio’s VAP for a covenant-not-to-sue and was issued a ‘no further action’ letter.

  17. Federal Financing Programs: HUD COMMUNITY DEVELOPMENT BLOCK GRANTS • Activities locally determined • Can include coping with contamination as part of financing for site preparation or infrastructure development • Can be lent to private companies under some circumstances

  18. How Can CDBG Funds Be Used For Brownfield Projects? Eligible activities include: • planning for redevelopment or revitalization of brownfields sites • site acquisition • environmental site assessment • site clearance • demolition and removal of buildings • rehabilitation of buildings • removal or remediation of contamination from sites or structures • construction of real estate improvements

  19. Visiting Nurses Assisted Living -- Somerville, MA • This former mattress factory, vacant for more than two years. • Assessment found contaminants including barium, lead and petroleum • The project's redeveloper, the non-profit Visiting Nurses Association, remediated the site and demolished the existing structures • VNA constructed an assisted-living facility and health center, containing 97 units for low-to-moderate income seniors. • $100,000 in CDBG was used as a cost-containment reserve.

  20. EXAL Corporation – Youngstown, OH • Plant built in distressed neighborhood area, operator pledged to consider community residents in a "1st hire" agreement • $40 million in private investment, creating 88 manufacturing jobs • CDBG used to pay for first year of loan, to allow EXAL to cover brownfield-related site preparation costs • EXAL now covers all loan costs from operations income stream

  21. Chevy Place – Rochester NY • Former downtown auto dealership and service garage • CDBG used for site assessment, partial cleanup • Now, 77 new residential units, coffee house, and restaurant

  22. Shaw’s Supermarket --Bangor, ME • Bangor acquired and cleared the six-acre Bangor Gas Works site 25 years ago, doing a partial cleanup • Site cleanup was completed at the site when the Boulos Company proposed building a 60,000-square-foot Shaw’s Supermarket • Bangor used $350,000 in CDBG and $975,000 in TIF financing for final cleanup • The Boulos Company invested $7 million in developing the building and associated site improvements, and Shaw’s spent $1.8 million on equipment and furnishings for the store.

  23. Community Development Block Grant Float Loan Program The CDBG float provides short-term fixed-rate gap financing for business projects which create or retain jobs for low and moderate-income people. To obtain financing, companies must be: • willing to make jobs available to lower income people • able to obtain an irrevocable letter of credit from a bank to secure their loan States may advance floats on behalf of small cities to whom distribute CDBG funds

  24. Federal Financing Programs: HUD 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

  25. Federal Financing Programs: HUD BROWNFIELD 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

  26. Grove Hall Mecca – Roxbury, MA • Seven underground storage tanks were removed from the site, along with contaminated soil that was recycled into an environmentally acceptable product.. • The property was sold to a community-based developer • Total development cost was $13.2 million; key HUD resources included: • $3.6 million Section 108 • $3.6 million from the HUD BEDI • Current occupants of the Grove Hall Mecca mall mall include retail, food, and banking services, as well as a supermarket that opened in fall 2001. The redevelopment has created more than 250 full-time jobs.

  27. Stamping Building – Wheeling, WV • The Wheeling Stamping Building in the Wheeling National Heritage Area had been abandoned and deteriorating for more than a decade • HUD funding for site preparation and building renovation was key: • $1-million BEDI • $2.25 million in Section 108 • The City and its developer, the Ohio Valley Industrial and Business Development Corporation, created 88,000 square feet of new commercial space in Stamping Building. • 85 professional and high-tech jobs now housed there

  28. Old Montgomery Ward Distribution Center– Fort Worth, TX • Historic, 800,000-square-foot building on a 45-acre site • Damaged in March, 2000 tornado • Proposed reuse – mixed light industrial/commercial/office • HUD financing tools include: • $13 million Section 108 loan • $2 million BEDI grant • Other financing tools being used: • Historic rehab tax credits • DOT (CMAQ) for related road and sidewalk infrastructure • State tax abatements and fee waivers

  29. Federal Financing Programs: HUD HOME Investment Partnership Program • Provides grants to states for housing construction and renovation • Non-profits and for-profits eligible • Well suited for partnership with other programs

  30. Boston’s Hope Properties – Dorchester, MA • Following completion of EPA-funded site assessment, Boston Aging Concerns/ Young and Old United, Inc., bought the property • The nonprofit spent about $300,000 to clean up the properties and is currently building 41 residential units on 9 different sites for intergenerational families. • Total project cost is $8.5 million, covered by private and public funds, including HOME funds. • The groundbreaking took place in early 2004

  31. Phoenix Heights – Waukesha, WI • 69 energy-efficient homes completed, many for moderate income families • $13.5 million project, including $3.13 million in public funds, for * $1.87 million in state funds for cleanup * $415,000 in CDBG for construction * $575,000 in state and HOME funds for buyer assistance • $405,000 in annual property taxes generated

  32. Federal Financing Programs: EDA ECONOMIC DEVELOPMENT ADMINISTRATION • Two major programs – (1) public works grants finance industrial development site and infrastructure preparation, and • (2) 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

  33. University Village – Riverside, CA • Deteriorating mixed-use, economically distressed 30 acre site adjoining UC-Riverside • $950,000 in EDA funding for infrastructure improvements, part of multi-agency funding package that included HUD and DOT monies • The result – a 410,000 square-foot retail and entertainment center, which includes conference space for university use

  34. Texaco Station – Lockport, IL • Abandoned gas station converted to a retail telecommunications business • EDA funded site preparation, including cleanup

  35. Federal Financing Programs: ACE ARMY CORPS OF ENGINEERS • Can provide planning and technical support if you can make the brownfields/waterfront connection • Technical assistance on a cost-reimbursable or matched basis • Local governments eligible reicpients

  36. East St. Louis, IL – Riverfront • $250,000 in Corps funding under the Planning Assistance for States program • City providing required match • Project involves analysis of 1,100 acres of mostly abandoned, mostly industrial riverfront, planning options and costs for new public and private uses (artist’s rendering at right)

  37. Old Mill District – Bend, OR • Former sawmill operation (from 1922 to 1994) on 250 acre site on the Deschutes River that flows through downtown Bend. • Major challenges included defining sections of the site for cleanup, as part of phased development plan, and changing land use from industrial to mixed use. Oregon DEQ cleanup program facilitated this process. • Currently, 15 commercial businesses now operate on the site; future plans call for expanded retail, residential units, and a sports arena.

  38. Center of Hope – Dallas, TX • The Center of Hope was developed on a 1.8-acre brownfield site including a 40,000 square foot building, previously used by USACE. • USACE conducted an environmental investigation of the property and identified asbestos-containing materials and lead-based paint. • Demolition was done in February 2001; construction began in April 2001. The Center of Hope was opened on February 26, 2002. • Valued at $1 million, the property was conveyed through GSA to Union Gospel Mission at no cost. Labor and materials, including construction management services, building components and furniture, were donated.

  39. Federal Financing Programs: DOT TRANSPORTATION PROGRAMS (DOT) • DOT highway and transit construction programs can support brownfields by – • (1) helping upgrade existing facilities • (2) offer transportation amenities that improve access to – and marketability of – sites • (3) fund facilities and structures that serve as part of the remedial solution

  40. Tank Facility to Train Station -- Emeryville, CA • The City and developers constructed an Amtrak station on a parcel that was once a Chevron tank facility • . The Emery Station 1 (ES1), 247,000 square feet of office, was completed in 1999. ES3 consists of a parking structure under 100 residential units, completed in 2002. The city worked with EPA to develop this site into a transit center • A pedestrian bridge was built with ISTEA funds and an access road to the project was partially funded from an EPA BCRLF loan.

  41. Marsh Island Carry – Old Town, ME • Transformation of an under-used contaminated site to a revitalized waterfront park and commercial property • Funding included a $400,000 Enhancement Grant from Maine DOT for the park and walkways • Other sources included: • $400,000 CDBG for infrastructure around the commercial building • $24,500 from the National Trails Recreation Act for trails, walkways, and river stabilization • $8,000 from ME Forest Service for tree planting.

  42. 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 12/31/03; Congress re-renewed to 12/31/05, retroactive to the first of this year

  43. Inryco and Babcock & Wilcox – Milwaukee, WI

  44. 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

  45. Sherman Perk -- Milwaukee, WI Before After Tank Removal

  46. 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

  47. American Can Company – New Orleans, LA • Developer Historic Restoration Inc. transformed this abandoned warehouse into new apartments with retail and parking space • Total project cost -- $42 million • The project’s Welfare to Work program targeted low/middle income workers for the 250 construction jobs, and 20 percent of homes are set as “affordable units.” • Louisiana allocated a $29 million in Low Income Housing tax credits that provided access to low-interest financing with a requirement to provide 20 percent of the total units for affordable income community. • Other financing included: • $5-million HUD Section 108 loan, • $1-million BEDI loan • $1-million city economic development loan. • Kimberly-Clark Corporation, through its subsidiary Housing Horizons, provided $8.5 million in tax-credit equity for approximately $7.8 million in historic tax credits.

  48. Albina Corner – Portland, Oregon • The Albina Corner is located on a three-quarter-acre site adjacent to a bus line and near a major light rail station. The area is a main street to several inner-city neighborhoods, where for several years small scale contaminants have deterred reuse. • Today, the Albina Corner is being redeveloped into a mixed-use area that includes 48 units of low-income housing built over 12,000 square feet of commercial space. Some of the features include a child care center and a second floor courtyard and play lot • LIHTCs one of 14 funding sources.

  49. Selected USDA Rural Development Programs – Possible Brownfield Links • Community facility loans and grants – can support development activities that include industrial park sites or access ways • Business and industry loans – are available to public or private organizations to improve the “economic and environmental climate in rural communities.” • Intermediary Re-Lending Program – intermediaries such as local governments are loaned money to re-lend to companies, in order to finance business facilities • Rural development grants – given to provide operating capital and finance emerging private business and industry, including “conversion, enlargement, or modernization of buildings, plant, and equipment.”

  50. East Coast Steel – Greenfield, NH • The New Hampshire Department of Environmental Services (NHDES) used $88,964 in funding from EPA New England to conduct state-led Targeted Brownfield Assessment at the 2.54-acre East Coast Steel site in Greenfield, NH, beginning in fall 2000. Cleanup was completed in late 2003 • In 2004, the town redeveloped the site as a community septic system and open space park • USDA Community Facilities Loan was a critical part of the project funding, along with G.O. bond proceeds

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