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By Greg Hart |
The Massachusetts Brownfields Redevelopment Access to Capital (MassBRAC) program is a first-of-its-kind program that brings together the resources necessary to successfully clean up and redevelop brownfields and create solid business opportunities for developers and lenders in the commonwealth of Massachusetts.
The MassBRAC program offers a unique structure that utilizes environmental insurance to safeguard parties from the risk of excess cleanup costs and environmental liabilities associated with brownfield redevelopment. The affordable and effective protection helps to ensure:
The program provides environmental insurance at pre-negotiated premiums that are discounted from standard market pricing and combined with a 25 percent premium subsidy (up to $25,000) from the commonwealth. Administration of the program is handled by the Massachusetts Business Development Corporation (MassBusiness). AIG Environmental underwrites the insurance coverage.
The success of the MassBRAC program can be traced to its ability to provide valuable cost-effective environmental insurance coverage as a tool to stimulate the redevelopment of brownfields. As a result, the property owner wins by gaining access to a vital environmental risk management tool and the commonwealth wins through the creation of jobs and the generation of tax revenue on a previously unoccupied property.
A Success Story
There is no better way to illustrate the value of the MassBRAC program than
by example. Recently, a small, growing livery business was looking for a centrally
located property that could serve as a hub for vehicle storage and minor maintenance
and repairs.
The good news was that they found a property that met these criteria and was affordable. The bad news was that the property had previously been used as an auto repair business and, as a result, the property had a known pollution condition that resulted from a leaking underground storage tank.
The pollution condition had been characterized and it was estimated that the cleanup cost would be approximately $100,000. The buyer was going to realize a significant discount in the purchase price of this property because he would be assuming the cleanup cost associated with the known condition, so this was a strong deal and the buyer had nothing to lose, right? Wrong.
The buyer was comfortable retaining the risk associated with the cost of the cleanup of the known pollution condition, but he was uncomfortable with the risk of unknown pollution conditions being discovered during the remediation or during redevelopment activities. The buyer knew that he needed to protect his long-term investment, and that the way to do that would be to purchase a pollution legal liability (PLL) policy through the MassBRAC program.
So, with a MassBRAC PLL policy in-hand, the buyer successfully closed on the property and looked forward to getting the cleanup complete and putting the property to good use. That’s when things became interesting.
As the contaminated soil was being excavated, elevated concentrations of polychlorinated biphenyls (PCBs) were discovered. Further investigation and sampling found that PCB exceedances in soil and groundwater existed and that the contamination had come from former hydraulic lifts located in the on-site building, a condition that had gone undiscovered during the site characterization process.
Because this was a separate release that was not associated with the known pollution condition, a claim was filed for the additional cleanup costs. Coverage was accepted for the PCB cleanup and the property buyer, a wise small-business owner who couldn’t afford to retain the risk of not buying environmental insurance, had peace of mind knowing that this previously unknown pollution condition was not going to financially cripple his business.
Before long, his business would be up and running on this property, creating jobs and generating tax revenue for the community.
Case studies like this exemplify the benefits and value of the MassBRAC program. Business owners and others involved in the redevelopment of brownfields can enter into the transaction knowing that their environmental risks are properly managed, allowing them to focus on growing their business. BFN
Greg Hart is an environmental scientist at The Spofford Group Insurance Brokerage Ltd.
Read about MassBRACs results.
Read about what’s being done to ensure
the future of MassBRACm.