About the Portfolio: From Brownfields to Development Opportunities

Photo courtesy of the Ohio Office of Redevelopment under a Creative Commons License: https://creativecommons.org/licenses/by/2.0/legalcode

A brownfield site in Sandusky, Ohio. Photo from the Ohio Office of Redevelopment, Creative Commons License

Today’s topic is one that is very important in the world of economic development and urban planning, but not well understood outside of those realms.  When I worked for the Local Initiatives Support Corporation (LISC) in Indianapolis last year, one of our primary concerns as a community development organization was the the decline of the urban core of the city.  The heart of downtown remains flush with business headquarters, government buildings, sports complexes and tourist destinations, but the areas immediately surrounding this central district have been in various states of decline for awhile. Indianapolis is like other Midwestern cities in that the many of its properties that used to be the focal points of manufacturing and business prosperity lie as vacant eyesores in areas adjacent to the downtown area. While population migration is perhaps the biggest cause of today’s vacancies, brownfield properties are both a driver of that population migration and an obstacle to economic prosperity for the residents who remain.

What are Brownfields?

Perhaps brownfield properties are little-known because they’re largely invisible.  A brownfield, by the EPA’s definition, is any property for which expansion, redevelopment, or reuse may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. These properties could be former industrial facilities, laundromats, car dealerships, or many other things, and chances are that you’ve passed quite a few without even knowing it.  In fact, according to Government Accountability Office estimates, there is one brownfield for approximately every 745 people in the United States:

The Government Accountability Office (GAO) estimates that there are as many as 425,000 Brownfields throughout the U.S. Some estimates show that there are 5 million acres of abandoned industrial sites in our nation’s cities – roughly the same amount of land occupied by 60 of our largest cities. Some estimate that as much as $2 trillion of real estate is undervalued due to the presence of contamination.

To put this statistic in perspective, the number of fast food restaurants in the United States is estimated at between 264,000 and 232,000, depending on who you ask. So there are nearly twice as many brownfields in the United States as fast food locations. Just imagine if each time you passed by a fast food restaurant it was accompanied by two old rotting industrial facilities or weed-filled parking lots with a few rusted out cars in the back.  The fact is that these places exist, and wherever they do they act as dampers on the local economy and eyesores for the residents or workers who have to deal with them.  In an age when density is being flaunted as a cure for both our economic ails and our environmental ones, these brownfield properties act as unusable space in the heart of the city, disrupting density, degrading the value of neighboring properties, and pushing developers to the outskirts of the city where greenfield (undeveloped) properties are readily available.

What Can We Do About Them?

Because of the significance of these properties, LISC felt that property owners and prospective entrepreneurs needed to be made aware of how brownfield properties can be approached, cleaned up, and eventually, redeveloped. I created a brochure which explains the applicable laws and procedures for these properties.  Here’s what you need to know:

  1. Congress established CERCLA (the Comprehensive Environmental Response, Compensation, and Liability Act) in 1980 as a response to the problem of hazardous waste.
    • The goal of the Act was to hold polluters responsible for the contamination of their properties and to set up a protocol for remediating (cleaning) each site. It also created a “Superfund” to pay for remediation if a responsible party couldn’t be found.
    • The liability conditions in CERCLA however, mean that present owners can be held responsible to pay for pollution on their property even if they did not cause the pollution themselves.
  2. As this creates an incentive for prospective owners not to buy and redevelop any environmentally damaged sites, Congress created the Small Business Liability Relief and Brownfields Revitalization Act to help provide some remedies.
    • This Act provides funds for brownfield remediation and steps for prospective property owners to take to avoid liability. The steps, to be taken before the property is secured, are as follows:
      1. All Appropriate Inquries (AAI): A Phase I Environmental Site Assessment from a qualified environmental professional must be carried out to record the property’s prior uses and any indications of pollution.  Even if a Phase I indicates that hazardous pollution has occurred, the property can still be purchased as long as the owner meets continuing obligations.
      2. Continuing Obligations: If the purchasers are not associated with the pollution in any way, they are free from liability as long as they continue to comply with EPA regulations and requests and prevent any further releases of hazardous substances.
  3. Cost Recovery: An owner who has complied with all of these previous steps is eligible to pursue those who are responsible for the property’s contamination to pay for its remediation.  This can be done in two ways:
    • Traditional Cost Recovery: Current owners can sue the responsible party directly to pay for the costs of cleanup.
    • Insurance Cost Recovery: If the responsible party is no longer a viable business entity but had insurance coverage from a still operating company, the current owners can sue that insurance company to cover the costs of cleanup based on the original insurance plan.*

*This is may be possible in other states, but it is particularly feasible in the state of Indiana due to the common law established by prior court cases in that state.

All told, this can be an arduous, messy process. It is understandable that developers and businesses often choose to pursue properties with less environmental baggage, but for cities to truly thrive these properties must be addressed and utilized.  These issues represent a failure of private property owners to either understand or care about the impacts their pollution can have on themselves and others; they illustrate that it can be mighty difficult to privatize and wall off the ground beneath our feet and the water that flows through it.

(As a public service announcement, if anyone is considering burying hazardous chemicals on their property in an effort to save some easy money, please read up on the Love Canal Tragedy that prompted CERCLA and think twice about your actions.)

Despite these issues, however, federal policies have been set up that counteract the difficulties inherent in purchasing a brownfield property.  As a new generation of residents considers moving back to the center of cities, these locations are poised to become huge assets if properly utilized. If Indianapolis and other industrial cities in the US are going to become places of productivity and density again, these properties must and will be invested in and put back to use. I just hope this coming wave of innovators will have the foresight to treat land as an investment as much as the businesses they build upon it.

LISC continues to work for remediation and revitalization of brownfield properties in Indianapolis. If you are located in the Circle City, I encourage you to attend the event they are hosting on December 11th in cooperation with Reconnecting to Our Waterways and the City of Indianapolis: Development on Tap: Brownfield Redevelopment.  You can find more details on this event on LISC’s website.


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