There are several important theoretical issues regarding brownfield redevelopment and economic development. Economic developers should keep the complexity of the brownfield issue in mind, and understand the related economic development strategies.
Brownfield development is typically discussed as an isolated strategy for urban redevelopment and environmental cleanup. But funds for cleaning, marketing, and/or redeveloping brownfield sites typically come out of economic development budgets for states and cities. Brownfields should, therefore, be viewed as one of several options for economic development. Brownfield redevelopment should be part of, not a substitute for, a comprehensive urban redevelopment strategy, in order to ensure that scarce resources are used to address the inherent competitiveness problems of inner cities and poor rural areas.
sustainable development
The relationship between environmental regulation and economic development is the
subject of much debate and analysis. Much of the literature on Superfund pits
environmental regulation against economic growth, and argues that environmental standards
must be lowered because they stymie economic growth, particularly in vulnerable areas.
There is also a rich literature on new thinking about environmental economics and
sustainable development, which is reframing the environment versus economy paradigm.
- Austin EDA - sustainable development
- Arkansas EDA - sustainable development
- EPA page on environment and economy
- Environment and jobs page at Rutgers
- Concept paper on linking environment and economic development
- Sustainable development paper
From the Economic Renewal Guide by the Rocky Mountain Institute
Federal funding and incentives for brownfield redevelopment.
Federal taxpayer
relief act
Enacted in 1995, this Act allows developers to deduct the cost of cleanup.
The cleanup costs can be deducted in the year incurred subject to some restrictions.
The site must meet one of the following criteria:
- EPA brownfields pilot designated prior to 2/97
- Census tracts where 20% or more of population lives below the poverty level
- Census tracts with population under 2,000 where 75% or more of the land is zoned for industrial use and the site is adjacent to a tract with a poverty rate of 20% or higher
- Any Enterprise Community or Empowerment Zone
Community
Reinvestment Act
As of 1995, banks can satisfy the CRA (which requires lending in low-income
neighborhoods) by financing cleanup or redevelopment "when it is part of an effort to
revitalize the low- and moderate-income community in which the site is located."
EPA's Economy and Environment department
Austin EDA
This page is excellent resource - contains lots of background information about
economic development strategies
Report on
Vacant Land Use
From Philadelphia's City Planning Commission - an excellent report (.pdf
format) about using vacant land in Philadelphia
urban (inner-city) revitalization
Because so many brownfields are in inner cities, and in particular in former manufacturing centers, the issues of inner city revitalization and urban decay are especially relevant to brownfields. Economic developers often seek to attract industries or developers to brownfield sites. Inner city developers have trouble attracting economic growth to their jurisdictions, and must face the larger reasons for the economic decline of inner cities before they can hope to attract businesses to particular sites. Of course, the presence of incentives (federal and state) for brownfield redevelopment may tip the balance, but some planners would argue that such a strategy is unsustainable. This argument is based on two ideas: (1) offering industries incentives to locate in an area that is not competitive for them will not result in a long-term relationship or benefit; and (2) if it were efficient for industries to locate in the area to begin with, then the incentive is wasted because it does not alter behavior.
For some information on inner city development, check out:
HUD's State of the Cities report
HUD's index of CED publications
includes a recent publication about brownfield redevelopment.Empowerment Zones/Enterprise Communities (EZ/EC)
EZ/EC Brownfields page
strategies to assist redevelopment
Tax increment financing
Tax increment financing is used by states to encourage brownfield redevelopment.
States will calculate the difference between the property tax payable on the
original site, and the property tax estimated for the redeveloped site, and use that
amount to fund the redevelopment.
Real Estate Investment Trust (REIT)
REIT's, like many of these strategies, are used in other areas of economic
development, but REIT's have a particular use in brownfield redevelopment. An REIT
is typically created to allow multiple investors to fund redevelopment of a project.
For a brownfield site, the REIT mechanism allows investors to limit their liability
for any discovered contamination to the amount they have invested in the REIT, because the
REIT holds title to the property while it's being assessed. This lessens (or at
least makes predictable) the liability risk that often deters brownfield redevelopment.
Environmental Insurance
There are several insurance companies catering to the needs of developers of
contaminated sites, but I have yet to find internet resources.
Property Transfer Insurance
- protects an insured against on-site cleanup costs of unknown, pre-existing or new conditions, and against third-party claims for off-site cleanup costs that result from on-site pollution.
Cleanup Cost Cap/Stop Loss Insurance
- protects an insured against a cleanup project that runs substantially over budget
Owner-Controlled Insurance
- allows an owner or prime contractor undertaking cleanup to determine the desired scope of insurance protection against the acts or omissions of other parties involved in the cleanup.
States and municipalities can also set up tax incentive structures, such as permitting deferment of capital gains tax for a developer who improves a contaminated property.
Federal Funding Sources
Department of Commerce (DOC)
Department of Transportation (DOT)
ISTEA funds can be used for brownfield-related activity
Department of the Interior
(see the National Park Service also)
Department of Energy
Department of Defense
These agencies provide both technical assistance and funding (particularly since a
substantial portion of brownfield sites are former military bases).
Department of Housing and Urban Development
Community Development Block Grant funds can be earmarked for brownfield
activities (in fact, HUD is required to earmark a certain amount of CDBG money - $155
million - for brownfield redevelopment)
Department of Health and Human Services
Will provide $500,000 to Community Development Corporations for brownfield pilot
activities.
EPA resources:
Brownfield redevelopment is only one aspect of a strategic economic development strategy. Economic developers must also explore other strategies for improving the competitiveness of inner city land in the development market, as well as strategies for increasing the economic opportunities available to inner city residents.
As the issues surrounding liability are clarified and the private sector finds ways to develop properties without risking expensive lawsuits, the economically desirable brownfield sites will be bought up and developed. Economic developers will then face the decision of how to deal with those brownfields that remain vacant not simply because of environmental regulation, but because of the additional barriers to development.
resources for economic developers
Small Business Association (SBA)
Federal government resources for small businesses
Urban Land Institute (ULI)
Reports on issues facing urban areas
National League of Cities
Resource for city officials
Council for Urban Economic Development
Good resource for economic development professionals looking for data sources and
information on techniques
Area Development Online
Contains information on state and federal economic incentives, links to economic
development agencies, and economic profiles of states
Economic Development Network
Good (and improving) guide for ED professionals to the field
US Business Advisor
Government page to provide businesses with information on transactions,
regulations, etc.
Urban Economic Development
Group
A UK page with information on sustainable urban development
hinkley@email.unc.edu
this page updated april 15, 1998
Why is brownfield redevelopment an economic development strategy?
(1)
There are far too many sites for environmental agencies to clean up or attempt to
litigate, so the only hope for cleanup is that a developer will buy the site and clean it
before redeveloping it.
(2)
Brownfields cause problems for economic developers because they lower the property values
of the area, harming the economy and making it difficult to attract businesses or
developers to the area.
Sustainable Development
Brownfield redevelopment is often
viewed as a sustainable development strategy. Sustainable development emphasizes
wise resource use and reuse, and holistic solutions to economic and environmental
problems.
Brownfields and government intervention
The issue of government involvement in brownfields shouldn't go unquestioned. The federal government seems to be involved in brownfield issues because of the outcry after Superfund - regulation spawned criticism which spawned a policy to ameliorate the affects of the regulation. Economic developers typically justify their involvement in revitalization as information dissemination and marketing. But who decides what areas to target for development? What if brownfields aren't the best place to target economic development resources?
The reaction to Superfund may have overshadowed the justification for involvement in brownfields. Some people argue that the government needs to intervene because industries are making uninformed and inefficient location decisions. Others argue for government intervention on equity grounds.
Many authors also point to the market failure of pricing brownfields and greenfields. The assets of inner cities are often undervalued, and the costs of developing in greenfields are also undervalued. Government incentives for suburban development may also be contributing to inefficient industry location decisions. Government can act to redress an incentive imbalance, and/or to adjust pricing of land to reflect social costs of development.
Inner City Development
The debate about inner city development has focused in recent years around the issue of inner city competitiveness, which was brought to the forefront by Michael Porter's 1995 article in the Harvard Business Review.
Porter's article suggested reframing federal urban policy to focus on increasing the competitiveness of inner cities, rather than offering incentives to firms or writing off inner cities altogether. His ideas are not new - people have been discussing for years both the advantages and disadvantages for industries thinking about locating in inner cities - but it has generated a new flurry of literature on the future of urban policy. Check out the dialogue in the Review of Black Political Economy (see bibliography).
Economic Development Tools
Communities trying to redevelop brownfield sites can take advantage of the same economic development tools used to encourage development of any kind. Industry targeting, tax incentives to attract businesses to the area, job training to improve the work force, and financing for infrastructure improvement are only some examples of strategies available to economic developers working on brownfields. Be sure to check out the topics page for details on some of these policies.