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By Mark Gregor |
EPA’s notion of creating a financial incentive for private sector brownfield cleanup was on target back in 1997, and it continues to be a worthy and necessary goal. But, as they say, “The devil is in the details.”
For the city of Rochester, New York, the viability of a brownfield cleanup revolving loan fund (BCRLF) is still an open question, although a successful loan now appears more likely. The opportunity to transition the Rochester BCRLF to the new program created by the 2002 federal legislation, together with attractive new private sector incentives created in the long-awaited 2003 New York State brownfield cleanup statute, may work this time around.
A number of significant obstacles to the program’s success remain. Tough fiscal times are diminishing the city’s capacity to adequately staff the BCRLF, and a tepid economy continues to challenge brownfield redevelopment. And like most cities, we are very concerned about the budgetary challenges facing the community development block grant that funds many of the city’s economic and community development initiatives and positions.
The initial BCRLF administrative and procedural burdens were difficult to navigate and a hard sell to applicants. Developers on the city’s original brownfield working group recommended against pursuing the BCRLF grant because the underlying time and costs of complying with loan requirements would exceed the benefits of a below-market-rate loan.
The only potential applicants interested in the Rochester BCRLF during the first few years were responsible parties that were either under order or agreement with the DEC to perform the cleanup anyway. The responsible party status, of course, made them ineligible for BCRLF loans.
Familiar Problems
BCRLF cleanup oversight requirements were problematic in New York State, where
a brownfield cleanup statute was not signed into law until October 2003. The
city’s attempts to negotiate a memorandum of understanding with the New
York DEC were ultimately unsuccessful.
The state agency was cautious about assuming on-scene coordinator roles under its administrative voluntary program of the 1990s and was especially concerned about the perceived additional burdens of documenting conformance with CERCLA procedural requirements.
Some of the internal problems Rochester encountered would be familiar to other BCRLF grant recipients. At times staffing and scheduling priorities shifted to brownfield projects that were under way or demanded immediate attention. The development of a new revolving loan program for an undetermined applicant would then take a back seat and lose momentum.
Rochester was very experienced at loaning money, and the focus of the BCRLF was on the city’s traditional loan customers — small to mid-sized businesses — in part because such organizations typically were unable to finance cleanups. The inherent difficulties in trying to marry traditional lending functions for such businesses with the CERCLA-based cleanup requirements proved to be daunting.
The local industrial economy and the commercial-industrial real estate market in the urban centers of upstate New York were especially hard hit by the economic downturn of 2001–2003 and have been slow to recover. Demand for urban brownfield property slowed during this time period and efforts to make a loan stumbled. Early in 2001, after several attempts at jump-starting its BCRLF, Rochester contacted EPA to “regrettably” initiate the process of deobligating its $500,000 grant.
A Second Chance for Rochester
But it appears there will be a second chance. Rochester is working with EPA
Region 2 to transition its BCRLF. Progress has been slower than both parties
would like, but change is under way.
For cities like Rochester that are attempting to revive the BCRLF concept, it is important that EPA shares the structure and details of successful loan programs. Model loan documents that have already met with EPA approval can save both cities and EPA significant time and effort.
As Rochester transitions its program, we remain interested in combining our economic development and business lending requirements with EPA’s requirements without unduly burdening the small- or middle-market business customer. Staffing for the Rochester BCRLF is being reorganized, and the project director will now be located in the Economic Development Department, which accepts loan applications, performs underwriting and executes loan documents.
The opportunity to transition to the new BCRLF program, with its potential to sub-grant 40 percent of the loan pool, has renewed interest in the program. The benefit of closing out the loan program after it has revolved and reusing the funds for local brownfield purposes may be even more attractive than the initial loan. Additionally, the rise in general interest rates should also help increase the attractiveness of the low-interest BCRLF loans.
Private sector interest in New York State brownfields is on the rise as well. The new state brownfield cleanup program created income tax credits, ranging from 10 to 22 percent of brownfield cleanup and redevelopment costs, and the New York DEC reports that private sector interest in the program is increasing. Rochester hopes to capture some of this interest with its BCRLF. BFN
Mark Gregor is the manager of the city of Rochester’s Division of Environmental Quality. He has served as Rochester’s brownfield coordinator since 1995. Any opinions expressed in this article are the views of the author and do not necessarily represent the views of the city of Rochester, New York.
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