Feature
Brownfields lead to affordable housing
When it comes to redeveloping brownfield sites, there are probably more profitable business endeavors than affordable housing. However, these projects can be important to communities, especially those in need of housing opportunities for lower income families.
Because many brownfields are in already developed and established urban areas, these sites also can provide an opportunity for cities to stem the flow of people to the urban fringe, says Clark Henry, program coordinator for the city of Portland’s brownfields program. Not developing these sites creates much unwanted displacement, he says.
As cities revitalize their communities, they are seeing a resurgence of investment in formerly unwanted properties, according to Henry. Property that once was the site of a dry cleaners, gas station or warehouse can provide a home for people when cleaned up properly. These properties provide an opportunity for people who don’t want to, or can’t, move to the urban fringe, he says.
The Rainier Court development in Seattle is an affordable housing project that won the 2005 Phoenix Award for EPA’s Region 10. A multi-use development on 7 acres in a poor neighborhood, Rainier Court will provide up to 500 housing units for seniors and families, says Pat Chemnick, economic manager for the nonprofit SouthEast Effective Development (SEED), which is heading up the project.
While affordable housing isn’t always the best use of a brownfield, in a tight housing market like Seattle, these projects are important, Chemnick says. However, they can be financially complicated too. Rainier Court is a perfect example of the complexity of partnerships and financing options required to make a project like this a reality.
Affordable housing projects often require innovative financing techniques including tax increment financing (TIF), bonds and special tax assessments from local governments, and state and federal funding. The first two phases of the Rainier Court project were paid for mostly by tax-exempt bonds and taxable bonds with help from numerous partners. King County and the City of Seattle applied for an EPA assessment on SEED’s behalf. The county also funds the Environmental Coalition of Seattle (ECOSS), which offers free technical assistance to businesses dealing with contamination. The county provided $25,500 in EPA funds to remove underground storage tanks and for groundwater sampling. Seattle’s Office of Economic Development and its Office of Housing are providing more than $7.6 million in Community Development Block Grant loans and $1.6 million in other federal grants. And Rainier Court received a $440,000 cleanup loan from the state of Washington’s brownfields revolving loan fund.
A private developer, Ed McNamara of Turtle Island Development in Portland has worked on a few affordable housing projects that utilized brownfields sites. One current project is the Sitka Apartments in the Pearl District of Portland, a 40-acre site once owned by Burlington Northern. The Sitka Apartments, which has 209 apartments and 7,200 square feet of retail space, has completely leased out its first two buildings.
When dealing with lenders, it’s important to be honest and upfront with them, McNamara says. Make them a part of the solution, he says. And make sure you have a good remediation plan and are working with the regulatory agencies, he adds.
Developers should do their environmental assessments as early as possible so they know what they’re dealing with. Then, when the assessments are complete, share the information with your financing agencies, McNamara says. “I think the last thing you want to do is surprise a lender or investor.”
In Portland, the city has established a TIF district to help developers with housing projects. In return, developers agree to help the city by building a range of affordable housing projects matching the city’s demographics.
“You can make money doing other stuff, but you wouldn’t be getting the city’s help,” McNamara says.
The Low-Income Housing Tax Credit is another tool meant to fill that financial gap. Run by the IRS, it allows companies to invest in low-income housing and receive 10 years of tax credits. The program works with state housing finance agencies to administer the program on a state level.
One issue that has come up in affordable housing is the question of whether developers are compromising people’s well being by building housing on a brownfield. “The concern unique to affordable housing is that lenders and public agencies want to make sure you’re not putting poor people on contaminated land,” McNamara says.
While this is a legitimate concern, if developers do their jobs right and clean up these properties, it could be a last chance to preserve this land and prevent people from moving out, Henry says.
“This is a great opportunity, as long as we are responsible and creative in how we clean it up,” Henry says. “If you’re not going to clean it up very well, it isn’t fair. It’s an injustice.”
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Problem Solver
Innovative approach to finding USTs
When it comes to tackling the problem of locating abandoned gas stations and their underground storage tanks (UST), the Tacoma-Pierce County Health Department is leaving no stone, or patch of dirt, unturned.
While other communities have focused on the post-1980s--when UST regulations were put in place--and preventing any leaking of known USTs, the health department is looking even further back in time, inventorying all USTs in the county, known or unknown.
And it’s doing it in a unique way: No other city or county in Washington is believed to have inventoried its historical USTs using a combination of old city directories and a geographic information system.
It would be nice if all cities and counties had the comprehensive data Tacoma has pulled together to market these brownfields properties for redevelopment, says Sharon Kophs, Washington State Community Trade and Economic Development brownfields program manager. “This is a problem that leaves no community untouched,” Kophs says. And others can learn from the success of Tacoma-Pierce County’s approach.
Inventorying the abandoned gas station sites throughout Pierce County was a long, tedious job that took a couple of years. Working with a $200,000 grant from the Washington state Department of Ecology, Ryan Kellogg began looking through old city directories. Kellogg is a former environmental health specialist for the county who has since taken a position as public health manager of the local hazardous waste program in King County. Going through five-year increments, Kellogg looked through directories from 1925 to the present. Kellogg’s job was to find every listing for a gas station that’s existed in the last 80 years. In fact, he found 746 listings. When he found an address, he scanned and digitalized it.
With the information he had, Kellogg made a map. He then ran the information up against more information he found among records from the county and the Department of Ecology. He was looking to find which sites had gone through extensive redevelopment, or were identified as having been cleaned up.
Kellogg found no indication of cleanup orders or redevelopment for about 350 of the 746 sites. Kellogg visited each of them. Again putting the information on a map, he found most are clustered around intersections. Many are along historical travel routes, in wellhead protection zones and on corner lots at what used to be major arterials. Many are in older, blighted neighborhoods. Still, many are good properties in urban areas where existing infrastructure is in place for redevelopment.
Kellogg then took information from the county assessor’s office, adding in names of current owners and the lots’ current uses. He also got information from census tracks and added the location of these wellhead protection zones. Created was a valuable resource for Pierce County that could be used to prioritize sites for future clean up and redevelopment.
Because of this inventory, Pierce County now has a chance to improve its environmental and community health, build upon economic development and provide better urban planning.
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Groundwork
Is that gifted property really a gift?
When a prime piece of property was offered to the city of Newberg, Ore., there was little doubt the city needed to accept the gift, says David Beam, the city’s economic development coordinator.
Not accepting could mean that the corner property, the site of an auto dealership and service center, would be abandoned and left to be a community eyesore in the heart of its historic downtown. As it deteriorated, the downtown could follow, Beam says.
However, accepting the property wasn’t that simple. The city needed to protect itself, because with the lot came concerns of contamination. In 1987, a leaking waste oil underground storage tank was removed from the property. The extent of the contamination wasn’t known. Still, the fear of having an abandoned lot in the downtown weighed heavy on the city, Beam says.
With a Phase I assessment already completed, the city requested a Phase II, completed by Oregon’s Department of Environmental Quality (DEQ) through its Targeted Brownfield Assessment program. The city also asked DEQ to give it three scenarios: best, most likely and worst case. The results? At best, the cleanup project would cost only $10,000. More realistically, it was expected to cost around $25,000. Or, worst case, it could cost $120,000. A large contingency fund was set up to protect the city. Feeling good about the due diligence put into the project, Newberg bought the land for $1.
“It was only at that time did we feel, yeah, this is a risk we can take on,” Beam says.
The saying “don’t look a gift horse in the mouth” goes a long way for brownfields. When public or nonprofit entities are approached with a potential gifted property, there are steps needed to protect the prospective new owner.
The biggest question new owners should be asking is why a property owner wants to get rid of the land, says Rick Wells, city councilman in Caldwell, Idaho. Then, do your homework, he advises.
“We’re dealing with public funds,” he says. “We have to do our due diligence before we take (gifted property).”
In Caldwell, a property owner wanted to gift land adjacent to the city’s police station. It would have been a good location for a much-needed parking lot. A church already had been offered the property where a dry cleaners sat many years ago, but turned it down after some testing showed low levels of tetrachloroethylene (perc or PCE). However, it was believed the contamination was coming from a different source.
For Wells, who owns a local environmental company, this brought up warning flags. While a minimum of a Phase I assessment should be done on a gifted site, if there’s any hint of contamination, samples must be taken, he says.
And that’s what the city did, finding the contamination did stem from the drycleaners and was four blocks long, incorporating a significant portion of the downtown. The property has the highest perc concentrations in Idaho. The plume stretches under numerous buildings, creating millions of dollars of potential liability. EPA and Idaho’s Department of Environmental Quality (DEQ) brought enforcement actions against the current property owners. EPA conducted a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) removal action to the cost of more than $700,000.
“We would have been sitting there, holding millions of dollars of liability,” Wells says. The city still could buy the property at a good price; however the third-party liability law, for the most part, would go away, he explains.
The Small Business Liability Relief and Brownfields Revitalization Act, enacted in 2002, provides important liability limitations for landowners who qualify as bona fide prospective purchasers. It limits EPA’s recourse for unrecovered response costs to a lien on property for the increase in fair market value attributable to EPA’s response action.
Potential owners may purchase property knowing there’s contamination after performing an all-appropriate inquiry and still qualify for landowner liability protection under the federal law, provided they meet criteria established by CERCLA. The all-appropriate inquiry must be done before the property is acquired. Bona fide prospective purchasers also must demonstrate they aren’t potentially liable or affiliated with any other person who’s liable for response costs at the property. Other continuing obligations are:
- Complying with any land use restrictions made and not impeding the effectiveness or integrity of institutional controls
- Taking “reasonable steps” with respect to hazardous substances affecting a landowner’s property
- Providing cooperation, assistance and access necessary for the installation, operation and maintenance of a response action
- Complying with information requests and administrative subpoenas
- Providing legally required notices
For more information about how to qualify as a bona fide prospective purchaser, visit http://www.epa.gov/compliance/. Liability under state law may differ from the federal law; so, you need to check both.
In the case of Newberg, while the city’s worst-case scenario came true, the community still got a good deal. A $300,000 Community Development Block Grant paid for demolition and contamination removal. Oregon’s DEQ is expected to close the project within the month. For now, the city has a nice green space that in the future could be sold or even developed into a business complex with apartments on top.
In this case, the property owner was a good community member looking to do the right thing, Beam says. His gift to the community will bring economic dollars into the downtown for many years to come.
In May, Building on Brownfields will include a story about tools that protect yourself from environmental liability when acquiring property.
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