What are brownfields?
A brownfield is a parcel of real property, or a portion of the parcel, that has actual or perceived contamination and an active potential for redevelopment.
Brownfields are abandoned, unused, or underused industrial and commercial properties. Brownfield properties vary in size, location, age, and past use. They can be anything from a five hundred acre closed steel mill to a small abandoned corner gas station.
How many brownfield properties are there in Illinois?
It is difficult to determine the exact number of brownfield sites in the state, however it is believed they exist in almost all Illinois communities from the smallest towns to the largest cities. While you might not be familiar with the term brownfield, you are certain to be aware of the closed gas stations and empty manufacturing plants in your own community.
Why are there so many brownfields?
For many years, brownfield properties were not redeveloped due in part to fear of environmental contamination, especially concerns about:
- High cleanup costs
- Lengthy and complicated cleanup processes
- Potential liability risks
- Government involvement
Why are brownfields a problem for my community?
Brownfields can pose a number of threats to a community's well being. Brownfield sites can:
- Potentially harm human health and the environment
- Reduce local employment opportunities and tax revenue
- Limit economic growth and development
- Attract vandals, open dumping, or other illegal activity
- Lower surrounding property values and contribute to neighborhood deterioration
- Contribute to urban sprawl as businesses relocate to farmland and open space
How can brownfield redevelopment benefit my community?
Communities around the country have realized that responsible brownfield redevelopment can transform environmentally impaired property into productive uses and can bring the following community benefits:
- Improved public health and environment
- Economic growth and increases in local employment opportunities
- Revitalized neighborhoods
- Increased local tax revenues
- Reduced public service demands
Is there a cost to not cleaning up brownfield sites?
Yes, when brownfield sites are not cleaned up and redeveloped they can have real financial impacts on a community.
A boarded up factory that sits idle can cost a local government thousands of dollars each year. In addition to the lost local tax revenues, municipal governments often need to devote their limited police, fire, and other public services to respond to vandalism, open dumping and other problems at the site. Also, city officials must spend time responding to concerns about the site.
What has been done to make it simpler for businesses, local governments, and community leaders to redevelop brownfield sites?
In the last few years, a variety of efforts have been taken at all levels of government to help overcome the barriers that have traditionally prevented brownfields from being redeveloped.
The Illinois EPA, the U.S. EPA and other government bodies have developed a number of tools, resources, and partnerships that are being used for successful redevelopment projects around Illinois. These include financial incentives, consistency among cleanup objectives, releases from liability, a flexible voluntary cleanup program, and public / private partnerships.
Unlike a private business, local governments are responsible for promoting the health and well being of their communities, and they can play a key role in redevelopment projects that the private sector would not undertake on its own. Also, because certain legal and financial tools used by local governments are not available to private parties, local governments have a unique opportunity to participate in brownfields cleanup and redevelopment. Local governments can initiate partnerships with stakeholders to share costs and other resources, in which local governments take some actions described below and private companies do others.
The basic steps communities can take to assist in cleaning up and redeveloping brownfield sites vary and the steps can occur in a different order or simultaneously depending on the circumstances. For example, site assessments may be conducted either before or after the future use for the property is determined. Also, each stage has multiple smaller steps. The complexity of the overall process depends on variables such as site ownership, extent of environmental contamination, and funding structure.
What Actions Can I Take to Cleanup and Redevelop a Brownfield Site?
Each brownfield redevelopment project is different and there is no easy "how to" formula that can be used for every site. Listed below are some general steps that communities can take for brownfield projects.
Identify a piece of property with an interested end user, high redevelopment potential, or located in an area that is part of a larger redevelopment plan.
Connect with a private business or group interested in using a particular piece of property (for example, an existing company wants help to expand onto an adjacent property, or a developer or end user wants assistance in redeveloping a brownfield property). Sometimes, cities themselves have identified a brownfield property in a key location of town and sought an interested business. Large redevelopment projects like downtown renovation efforts can also include brownfield properties.
Learn more about the property of interest
Investigate the ownership and legal status of the property. This includes reviewing tax records and any liens on the property.
Hire an environmental consultant to conduct initial site assessments and obtain estimates of the cleanup and redevelopment costs
Site assessments and cleanups require technical expertise; hire an environmental consultant to perform these activities. Before choosing an environmental consultant, evaluate the firm's qualifications, experience and willingness to explain site clean up options. Ideally, estimates of the cleanup costs as well as estimates of the amount of time needed for the remediation should be obtained.
Identify key players and interested parties to determine future use of the property
Form partnerships with interested parties to assign responsibilities and determine future plans for the property. Depending on the situation, this may involve working with the current and past owners of the property, the businesses interested in developing or using the redeveloped property, community members, civic organizations, and government agencies. Some of the financial and property acquisition tools described elsewhere in this document require preparation of redevelopment plans. Remember, future land use will impact cleanup objectives.
Determine funding sources
Research what sources of funding are available for the site acquisition, cleanup, and redevelopment project. Many cities establish Tax Increment Financing (TIF) districts that include the brownfield property. Other types of funding often used in conjunction with the TIF money include bonds, grants, general tax revenue, and private funds. Communities have structured projects so that they basically pay for themselves using money generated from the TIF and from the sale of the property.
Where necessary, acquire ownership of the property
If necessary, municipal governments can take over title to the property. Local governments can use the following methods to acquire property:
- Eminent Domain / Condemnation
- Tax Delinquent property acquisition
- Demolition Lien or other liens foreclosure
- Negotiated Sale
Enroll in the Site Remediation Program and clean up the property
If a city owns the property, it can enroll the site in the Illinois EPA Site Remediation Program (SRP). If the property remains in private ownership, the city can facilitate its entering into the SRP. Participants in the SRP voluntarily clean up sites and receive Illinois EPA approval and release from further responsibility. Participants are called Remediation Applicants or RAs. The RA must pay the Illinois EPA for oversight services. The city or private owners should work with an environmental consultant (sometimes the same firm that performed the initial site assessment) to make sure the reports and plans required under the SRP are properly prepared and implemented.
RAs in the SRP can use the Tiered Approach to Corrective Action Objectives (TACO), a new method in Illinois for developing cleanup objectives based on risk to human health and land use. In cases of groundwater contamination, a city may be able to pass a local groundwater ordinance that limits the use of groundwater for drinking water, thus excluding an exposure pathway to protect human health. Once the cleanup is complete, the Illinois EPA issues a No Further Remediation (NFR) letter for the property. An NFR Letter contains terms and conditions for the property and must be recorded on the property title.
Negotiate a redevelopment agreement with the end user or the developer, sell the property, and transfer ownership to the end user or the developer
Finalize a redevelopment agreement with a developer or end user for the property. In some cases, cities agree to make infrastructure improvements to the site such as improving roads and sewers. Next, transfer the title to the developer or end users so they can proceed to bring the property into productive use. It may also be necessary to pay back any bonds or loans that were issued for the project.
How can local government pay for brownfield redevelopment?
Successful brownfield projects find creative ways to use money from different sources to pay for the project.
A variety of funding sources can be used by local governments for brownfield redevelopment. These can include grants, loans, bonds, taxes and fees, and private funds. While only a few programs are specially designed for brownfields, many traditional economic development tools can be used to support brownfield projects.
How can Tax Increment Financing be used for brownfield projects?
Tax Increment Financing (TIF) is one of the most widely used tax incentive programs available to local governments in Illinois. TIFs were authorized by Illinois statute and designed to promote economic development in depressed areas that would not otherwise receive investment.
A TIF allows a community to capture the increase in various state and local taxes resulting from a redevelopment project to pay for the costs involved in the project.
While TIFs were not designed specifically for brownfield redevelopment, many cities in Illinois have used TIF to partially finance successful brownfield redevelopment projects. TIF money has been used for property acquisition, site planning, conducting environmental site assessments, cleaning up contaminated property, and infrastructure improvements such as upgrading streets.
While this tool can be useful, keep in mind that:
- There are limits on what TIF money can be used for.
- When a TIF district is first created, no money will be in the TIF for brownfield redevelopment. Brownfield redevelopment projects need money up front to acquire, assess, and cleanup brownfield properties. Cities have the ability to issue bonds for the redevelopment and then pay them back using the TIF money.
- Not all brownfields are located in areas that meet the criteria necessary to be designated a TIF redevelopment area.
- Redevelopment areas must be contiguous so communities can not easily use TIF for brownfields scattered around a city.
What sources of financial assistance are available from the State of Illinois?
Illinois EPA's new Municipal Brownfields Redevelopment Grant Program is intended to provide financial assistance to municipalities for brownfield cleanup and redevelopment activities. The grant can be used by local governments to determine where brownfield sites are located and to determine if a specific site is contaminated and to what extent. It can also be used for actual cleanup activities. The grants are worth a maximum of $240,000.
Is there any in-kind assistance available from the State of Illinois for brownfield redevelopment?
Yes, the Illinois EPA can help local governments by conducting Redevelopment Assessments at brownfield properties in their communities. Using a grant from the United States Environmental Protection Agency (U.S. EPA), Illinois EPA staff may come to your community to conduct redevelopment assessments that provide information about the environmental condition of a specific piece of property. To receive a redevelopment assessment, the local government must own the property or obtain permission from the owner and must document interest in developing the property.
What sources of financial assistance are available from the federal government for brownfield projects?
The U.S. EPA provides Brownfields Assessment Demonstration Pilot Grants to local, state, and tribal governments. These grants, up to $200,000, can be used for site investigation costs including site assessments, site identification, site characterization and development of site remediation plans. The grants can also be used to facilitate coordinated public and private partnerships and conduct outreach activities. The money can not be used for actual cleanup activities.
Can traditional economic development financing tools be used for brownfield projects?
Yes, many communities are not aware that the traditional economic development tools they have been using for years can be used for brownfield redevelopment projects. Keep in mind that restrictions on what the money can be used for depend on the type of financial instrument. Throughout the country, communities have found creative ways to use different government economic development programs such as grants, loans, loan guarantees and other programs for brownfield projects. Sometimes, the economic development money can be used to improve roads or to help finance a new business while other money can be used for the site assessment and cleanup.
What main economic development programs have been used for brownfield redevelopment projects?
A. Community Development Block Grants (CDBG). The CDBG program provides annual grants on a formula basis to be used for a wide range of community development activities directed toward neighborhood revitalization, development, and improved community facilities and services. Larger communities, called entitlement communities, receive CDBGs each year directly from the US Department of Housing and Urban Development. Smaller communities can compete for CDBG money through the Community Development Assistance Program (CDAP) administered by the Illinois Department of Commerce and Economic Opportunity. Some local governments have used portions of their CDBG money for brownfield redevelopment projects.
B. Section 108 Loan Guarantees & Economic Development Initiative (EDI) Grants. The Section 108 loan guarantees, which are coupled with EDI grants, can provide entitlement communities with a source of financing for a variety of economic development projects. Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG) program that allows local governments to, in essence, borrow against their future CDBGs. The EDI grant is coupled with the 108 authorization to lower the effective interest rate of the loan, thus making the project more viable and less risky. Some of the activities that Section 108 money can be used for include: clearance and site improvements, economic development activities eligible under CDBG, acquisition of real property, rehabilitation of property, construction, reconstruction or installation of public facilities (including street, sidewalk and other site improvements). Cities may be reluctant to use Section 108 loan guarantees because they are fearful of losing future CDBG money if their brownfield projects are not successful, so it is important that this program be limited to economically viable projects.
C. Public Works Program. The Economic Development Administration (EDA), part of the U.S. Department of Commerce, offers a number of different programs that provide financial assistance for economic development to local governments and non-profit organizations. The EDA Public Works Program can be used for brownfield projects in conjunction with other funds. The Public Works program provides grants to distressed communities that can be used for infrastructure such as roads and sewers. The Public Works program grants can not be used for site assessments and only under rare circumstances can be used for remediation.
D. Technical Assistance Grants. The Technical Assistance program, also from the EDA, is designed to benefit areas of severe economic distress to help solve specific economic development problems. In some cases, this money can be used for Phase I site assessments.
E. Community Facility Loan Program. A few programs from the U.S. Department of Agriculture Rural Development can provide financial assistance for economic development projects that involve brownfields. Specifically, the Community Facility Loan Program can be used to construct, enlarge, extend, or otherwise improve community facilities providing essential services in rural areas and towns with a population of 50,000 or less. Community facilities may include industrial sites in some circumstances. The funds are available to public entities such as municipalities, counties, special-purpose districts, and corporations not operated for profit.
F. Rural Business Enterprise Grants. Also from the Rural Development of USDA, Rural Business Enterprise Grants are available to public bodies or non-profit corporations to facilitate development of small and emerging business enterprises in rural areas. Use of the grant funds may include acquisition and development of land, construction of buildings, plants, equipment, access roads, parking areas, utility extensions, and other costs.
Have local governments issued bonds for brownfield redevelopment projects?
Yes, cities can issue general obligation and general revenue bonds and then use the money for brownfield redevelopment. Bonds could be used in conjunction with a TIF project, with the intent to pay back the bonds using money generated from the tax increment over the life of the TIF.
Have cities used their own general tax revenue to redevelop brownfield sites?
Yes, some Illinois communities have set aside some general revenue for brownfield projects. If the local government feels that the community will benefit in the long run on the project, this may make sense for some communities.
A boarded up factory can cost a city thousands of dollars each year in lost taxes and resources spent responding to complaints about open dumping and vandalism.
Brownfield redevelopment can turn the property into an asset, generating tax revenues for the local government. In addition, many local governments have found that brownfield development can be much less expensive than anticipated. Some cities have special funds for economic development that can be used for brownfields.
Can private companies pay for brownfield redevelopment projects?
Yes, in many cases the prospective purchaser or the past owner has agreed to pay for all or part of brownfield redevelopment expenses. Some communities have worked out agreements where past owners who were partially responsible for the contamination have contributed money to a brownfield redevelopment project.
What sorts of government incentives are available to encourage private businesses to redevelop brownfields?
State and federal income tax incentives are designed to encourage private parties to clean up and redevelop brownfield sites. The federal Brownfields Tax Incentive was passed when President Clinton signed the Taxpayer Relief Act in August 1997. The Brownfields Tax Incentive allows for environmental cleanup costs at properties in targeted areas to be fully deducted in the year incurred, rather than having to be capitalized.
The Illinois Environmental Remediation Tax Credit allows a company or an individual to obtain an income tax credit for certain environmental cleanup costs. The tax credit is worth up to 25% of the un-reimbursed eligible remediation costs. This tax credit can not be used if the taxpayer or any related party caused the contamination at the site.
What mechanisms can local governments use to acquire brownfield property?
Brownfield properties can be acquired using many of the same mechanisms that governments use to acquire any properties, including tax foreclosure, eminent domain, lien foreclosure, and negotiated sale.
When should local government take over the ownership of property?
It depends on the circumstances and type of project. While communities usually prefer that brownfields redevelopment occur in the private sector with little government involvement, there are some brownfield sites that will never be redeveloped by the private sector.
Brownfield redevelopment is a complicated process and there are a number of financial and legal hurdles that can sometimes best be overcome when the local government takes ownership of the property. If a piece of property is tax delinquent and has a number of liens on it, the only way to clear the title may be for a local government to acquire the title. Also, there are some cases where local governments may want to enter into the chain of title for a piece of property when the perception of environmental liability is preventing development. Furthermore, cities may already own property that was used for municipal purposes or that was acquired earlier for some other reason.
Another reason cities may want to acquire title to the brownfield property is so they can assemble a number of pieces of property together for a large redevelopment project like an industrial park. Many brownfields are in older industrial areas where sites are often too small and are poorly designed for a modern industrial user. Some cities are trying to develop suburban style industrial parks in older industrial areas by assembling a number of sites, cleaning them up together, and providing updated infrastructure to attract new companies.
How can local government acquire title to property that is tax delinquent?
Illinois law (35 ILCS 200/21-90) allows counties to bid on property that has been tax delinquent for two or more years on its own behalf or on the behalf of other taxing districts, such as municipalities.
If the county bids on this tax delinquent property, it does not need to pay cash for the property or pay the back property taxes. Some Illinois counties have programs where they will put no cash bids on tax delinquent property on behalf of municipalities and then, if the property owner does not redeem their property, they will transfer the property title over to the municipality. Local governments should contact their county treasurer's office for more information about these programs. Also, local governments and private parties can bid on tax delinquent property at the annual tax sale.
When can cities use their powers of eminent domain to acquire brownfield properties?
Over the years, the Illinois General Assembly has designated specific purposes for which municipalities can exercise their power of eminent domain to acquire property.
Various Illinois statutes authorize local government to condemn property under certain circumstances, some of which may involve brownfield property.
Also under the Illinois Constitution of 1970, "home rule" communities generally have the power to exercise their powers of eminent domain for public purposes. Specific statutory authority is found in the Blighted Area Redevelopment Act of 1947, the Blighted Vacant Areas Development Act of 1949, and the section on Commercial Renewal and Redevelopment Areas in the Illinois Municipal Code which allow local governments to use eminent domain to redevelop certain areas that meet definitions of slum and blighted. Furthermore, the Tax Increment Allocation Redevelopment Act (65 ILCS 5/11-74.4-1), which authorizes communities to create Tax Increment Financing districts, allows communities to use eminent domain to condemn property as part of a TIF redevelopment plan. In addition to redevelopment projects, local governments have in many cases condemned contaminated property for public purposes such as building a new city hall or a road.
How can a demolition lien be used to acquire property?
The Illinois Municipal Code (65 ILCS 5/11-31-1) explains the legal requirements that municipalities must follow if they choose to demolish unsafe and dangerous buildings. In general, a municipality can get a court order and then, with proper notice and warning to the owner, demolish the building.
Demolishing unsafe buildings can often reduce public health threats, improve neighborhoods, and initiate the process of bringing brownfields back into productive use.
Also, after the demolition, the city can put a demolition lien on the property for the cost of the demolition. If the owner does not pay back the city for its costs within a certain period of time, the city can foreclose on that lien and obtain the title to the property.
Can a local government use its demolition authority to clean up property with environmental contamination?
Yes, in 1997 Governor Edgar signed Public Act 90-393, which amends the Illinois Municipal Code to allow municipalities to remove or cause the removal of environmentally hazardous substances on, in, or under abandoned and unsafe property. It also allows the municipality to inspect the property and test for the presence or release of hazardous substances, if the municipality has evidence indicating such substances may be present. A municipality can also put a lien on the property for its costs of inspection, testing, or remediation and if, within a certain time period, the owner does not pay on its lien, the city can foreclose and take over title to the property.
Can a local government purchase property for brownfield redevelopment?
Yes, local governments around Illinois have negotiated with property owners to buy their property with the intent to clean it up and prepare the property for redevelopment. If a site assessment has been conducted and the city and the owner are both aware of the environmental condition of the property, the parties will usually consider the cost of cleanup in negotiating a price for the property. Sometimes as part of a negotiated sale, the city and the owner may make agreements regarding any contamination and site cleanup. The city may, for example, agree to take responsibility for the cleanup if the owner donates the property to the city for free.
What are some barriers local governments can face in land acquisition for brownfield projects?
It is not always easy for local governments to acquire brownfield property. Generally, the mechanisms described above can be time consuming, expensive, complicated, and fraught with uncertainty.
Some problems are related to the value of the property.
Before brownfield property can be redeveloped, site assessment and clean up is usually necessary. As a result, prospective purchasers often feel that the price of the property should be reduced to reflect these assessment and clean up costs. This can be a problem in negotiated sales when the owner does not want to acknowledge that their property value is decreased because of the environmental problems on the property. It can also be a problem to determine the fair market value of contaminated property acquired using eminent domain. Historically, courts did not consider environmental cleanup costs in determining the fair market value in eminent domain proceedings. This has now been changed since the Illinois Code of Civil Procedure was amended by Public Act 90-393 to allow evidence regarding any violation of environmental laws or regulations to be admissible in eminent domain proceedings. This change took effect January 1, 1998.
Another problem is land assembly. It can be difficult to acquire a number of different pieces of property and put them together for a large redevelopment project. This is often time consuming, complicated, and can run into a number of legal road blocks. Usually the city will have to acquire the different pieces of property using different mechanisms and each mechanism has different legal requirements and time frames. Furthermore, there are uncertainties with each mechanism that can delay or possibly stop property acquisition all together.
While land acquisition can be time consuming and expensive, a number of local governments have evaluated the costs and benefits and concluded that their community will be better off in the long run if they acquire brownfield sites for redevelopment. Many communities around Illinois have found ways to overcome these barriers and have successfully acquired property for redevelopment. Furthermore, if local officials do their homework and fully research all legal requirements, they will be in a better position to acquire property in an inexpensive and expedient manner.
If I want to clean up and redevelop a contaminated piece of property, do I need to be concerned about potential liability?
Yes. Before getting involved with a development project that includes property with possible environmental contamination, municipalities should familiarize themselves with the relevant state and federal liability laws and regulations. Liability for a contaminated piece of property can be a serious concern in some circumstances.
In general practice, many brownfield properties have low levels of contamination and are not usually the target of federal or state enforcement actions.
If someone proceeds voluntarily to clean up a property in accordance with Illinois' voluntary cleanup regulations, the state and the federal governments generally do not pursue legal action to force the party to clean up or pay for a clean up at that site.
What federal and Illinois laws apply to the potential liability for a contaminated brownfield site?
The two most important federal laws that govern contaminated sites are The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) and the Resource Conservation and Recovery Act (RCRA). The main Illinois law that applies to contaminated sites is the Environmental Protection Act. This area of law is quickly changing, so it is important to know the latest laws and regulations.
How do the federal and Illinois environmental agencies work together on liability for contaminated sites? Do I need to worry about the U.S. EPA and the Illinois EPA if I want to clean up a brownfield site?
The U.S. EPA and the Illinois EPA both encourage communities and private companies to voluntarily clean up and redevelop brownfield sites. Over the last several years, the two agencies have worked together to reduce the barriers that have, in the past, discouraged brownfield redevelopment. As part of this effort, Illinois was the first state in the nation to enter into a Superfund Memorandum of Agreement with U.S. EPA Region V. Also, the U.S. EPA and the Illinois EPA have recently signed a RCRA Memorandum of Understanding. These agreements demonstrate that the U.S. EPA does not generally pursue legal actions at sites that are being cleaned up voluntarily under the Illinois Site Remediation Program (SRP).
Under federal law, who is potentially liable for contamination at a brownfield site?
Federal law categorizes parties who are potentially liable for cleanup costs at contaminated sites. These include owners and operators of the property, generators of the hazardous substances, and transporters of the hazardous substances. These parties are often referred to as "potentially responsible parties" or "PRPs". Under the federal liability system, someone could be held liable for all the costs of cleanup, even if they only contributed a small portion of the waste. Also, a party who recently purchased a piece of property could, in theory, be held liable for all the costs of cleanup at a site. The federal liability system has been described as strict, joint, several and retroactive.
While federal liability can extend to a broad range of parties, there have been a number of recent reforms aimed at changing and clarifying the federal liability system to encourage parties to clean up and redevelop brownfields. These efforts have taken the form of new legislation, policy statements, and guidance documents that have helped to reduce fears and clarify under what circumstances local governments, private parties, and lenders should be concerned about federal Superfund liability.
Under State of Illinois law, who is potentially liable for contamination at a brownfield site?
The liability laws in Illinois were first drafted using the same structure as the federal liability system established under CERCLA described above. Beginning in 1993 however, a number of changes to the state statutes related to liability for contaminated sites were put into effect. Most notably, Title XVII of the Environmental Protection Act, passed in 1995, included changes to the environmental cleanup liability scheme in Illinois. These changes to the liability system are found in 415 ILCS 5/58.9.
Title XVII lists a number of defenses from environmental liability that parties may invoke under which the state can not require them to perform remedial actions at a site.
Title XVII also created proportionate share liability in Illinois. Proportionate share liability is a system where each party's liability is limited to the extent of responsibility or fault of that party in causing or contributing to the release of regulated substances. Although this section of the Environmental Protection Act is currently in effect, the Pollution Control Board is required by January 1, 1999 to adopt rules and procedures for determining proportionate share; it is now in the process of adopting these rules.
What do I do if I want to redevelop property where the U.S. EPA or the Illinois EPA has already conducted a site assessment or conducted an emergency removal?
The first thing you should do is to find out as much as you can about the actions that have been taken at the site you are interested in. You should find out if any removal actions (disposal of drums of hazardous materials, soil excavation, etc.) were taken by the U.S. EPA or the Illinois EPA. If actions were taken, you should find out the status of any enforcement and cost recovery efforts by the agencies against responsible parties. The U.S. EPA or the Illinois EPA is often willing to talk with you about what they have done at the property and what needs to be done if you want to bring the property back into productive use. Contact the Illinois EPA if you have concerns about a specific piece of property.
Why are lenders often reluctant to finance brownfield cleanup and redevelopment projects? Can lenders be held liable for cleanup costs at contaminated sites?
Historically, lenders have been reluctant to finance real estate transactions that involved environmentally risky sites. Lenders have two main concerns with respect to lending on contaminated property. First, they are concerned that uncertain cleanup costs and the borrower's possible liability could impact the borrower's ability to pay back the loan. If the borrower has difficulty paying back the loan, banks are concerned that the value of their collateral could be impaired and that it would be difficult for the bank to foreclose on the property. Second, lenders are concerned that they could be held liable for cleanup costs at the sites on which they lend. Recent legislation, The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996, clarified the situations when lenders can be protected from federal liability at contaminated sites. Basically, a lender can not be held liable under CERCLA if it does not participate in the management of the site. In the last few years, a number of banks have increased their willingness to finance environmentally impaired property.
The more certainty that banks have regarding the expected cleanup costs and possible liability at a brownfield site, the more likely they will finance a project.
Can local governments be held liable for cleanup costs at a contaminated site?
Yes, however it would be rare for a local government to be held liable if the local government simply acquires a brownfield property for purposes of cleaning it up. The Illinois EPA is not aware of any site in Illinois where liability has been imposed on local government by state or federal government in such circumstances. There have been some cases where local governments have been held liable for cleanup costs at contaminated sites, however most of these were cases where the local government caused or contributed to the contamination.
For More Information
On the Illinois Brownfield Initiative:
Illinois Environmental Protection Agency
1021 N. Grand Ave. E.
PO Box 19276
Springfield, IL 62794-9276
On Tax Increment Financing:
Read "Tax Increment Financing" 1990, published by the Illinois Department of Commerce and Community Affairs Thomas Henderson
Illinois Department of Commerce and Economic Opportunity (DCEO)
620 East Adams Street
Springfield, IL 62701
On the USEPA Brownfields Assessment Demonstration Pilot Grants:
Applications and information about this grant can be obtained by calling the USEPA Region 5 office at 312-886-7596 or the Washington D.C. office at 202-260-4610. Information can also be obtained on the Internet at http://www.epa.gov/brownfields.
On the use of CDBG or the Section 108 Loan guarantees for brownfields contact:
US Dept. of Housing and Urban Development
77 West Jackson, 24 th Floor
Chicago, IL 60604
On the Community Development Assistance Programs:
Illinois Department of Commerce and Economic Opportunity
620 East Adams Street
Springfield, IL 62701
On the Illinois Redevelopment Assessments:
Illinois Environmental Protection Agency
1021 N. Grand Ave. E.
PO Box 19276
Springfield, IL 62794-9276
On EDA programs:
Economic Development Administration
111 N. Canal Street, Suite 855
Chicago, IL 60606
USDA, Rural Development:
Illini Plaza, Suite 103
1817 South Neil Street
Champaign, IL 61820
TEL: 217-398-5412 Ex:247
On the Illinois Environmental Remediation Tax Credit:
Read the "Environmental Remediation Tax Credit - Financial Assistance for the Cleanup of Brownfield Sites" brochure.
Illinois Environmental Protection Agency
1021 N. Grand Ave. E.
Springfield, IL 62794-9276
To learn more about the liability-related federal administrative and legislative reforms:
Visit the USEPA web site at http://www.epa.gov/brownfields or contact:
Jim Van Der Kloot
USEPA Region 5
77 West Jackson
Chicago, IL 60604
These reforms are found in the following documents available from the U.S.EPA:
- EPA Policy Toward Owners of Property Containing Contaminated Aquifers
- Policy on the Issuance of Comfort/Status Letters
- Model Comfort Letter Clarifying NPL Listing, Uncontaminated Parcel Identifications, and CERCLA Liability Issues Involving Transfers of Federally Owned Property
- Guidance on Deferral on NPL Listing Determinations While States Oversee Response Actions
- CERCLA Enforcement Against Lenders and Government Entities that Acquire Property Involuntarily
- The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996
- Land Use in the CERCLA Remedy Selection Process