Overcoming Obstacles to Brownfield and Vacant Land Redevelopment

June 22, 1998, saw an event that would have been improbable only a short while ago-developers, public officials and environmentalists gathered in Newark’s Ironbound neighborhood to announce the opening of a new $4.5 million state-of-the-art compressed gas packaging facility on an old brownfield site. The facility, owned by Welco Gases Corp., will provide industrial and specialty gases to the welding, medical and research markets in New York and New Jersey. It demonstrates how redevelopment of brownfield sites has been revolutionized, at least in some places.

With legislation passed last January, New Jersey is one of the latest states to enact environmental laws intended to bring companies and investors into the redevelopment arena by offering them new assurances, incentives and assistance. While the site on Newark’s Avenue P may seem an obvious choice for redevelopment-close to rail, air and sea facilities and in the middle of a burgeoning metropolitan region with almost 20 million inhabitants and a half trillion dollar economy-its history of abandonment demonstrates how complicated redevelopment of contaminated sites has become.

The Welco project was one of four sites highlighted during a conference on Land, Capital and Community: Elements of Brownfield and Vacant Land Redevelopment cosponsored by the Lincoln Institute and the Regional Plan Association (RPA) last May. The conference goal, to identify the critical elements to successful brownfield and vacant land redevelopment, was achieved by visiting projects in various stages of redevelopment in Newark and Elizabeth, New Jersey. By examining different strategies for attracting private investment and public involvement, the conference focused attention on the basic components needed for any state or local redevelopment initiative.

In keynote remarks New Jersey Governor Christine Todd Whitman discussed RPA’s Third Regional Plan (1) and how many aspects of its vision are incorporated in the New Jersey State Development and Redevelopment Plan, a central piece of her current legislative agenda. In particular, she mentioned the state’s role in promoting the redevelopment of brownfield and vacant urban sites through planning and expedited permitting.

Governor Whitman cited the City of Long Branch, where a private organization prepared a master plan that was pre-approved by the Department of Environmental Protection (NJ DEP) as meeting the requirements of the Coastal Areas Facility Review Act (CAFRA). This pre-approval (which took three years of negotiation with NJ DEP) ensures that any development project approved by the city automatically receives coastal area regulation approval as well. In an urban community that had seen a decade without a single real estate transaction in its downtown, developer interest in Long Branch has surged due to the promise of streamlined CAFRA applications. While other issues also contributed to the city’s success, such as the active involvement of the private sector and the quality of the master plan devised by Thompson Design Group, this example demonstrates that predictability is a vital component to any urban economic development strategy.

Another perspective was presented by Dr. Tomas Grohé who spoke about the Emscher Park International Building Exhibition, a redevelopment of brownfield and vacant sites in the heavily settled North Rhine/Westfalia region of Germany. The Emscher project is using a regional approach to identify remedies for communities and ecosystems damaged by decades of industrial activity. Through jury selection processes and extensive community involvement, the program is implementing restorative projects including housing, new industrial and commercial business parks, and river and forest restoration. This approach is different in many respects from the United States model of market-driven projects, but it also manages to include public/private partnerships, infrastructure investments, and other familiar components.

Tiers of Redevelopment Potential

For the purposes of the public policy discussions at the conference, brownfield and vacant sites were categorized into three categories:

• tier one: sites that pose some contamination issues, but are economically viable development projects.
• tier two: sites that would be attractive but have higher contamination risks or less marketability, thus requiring some incentives for redevelopment.
• tier three: sites with high environmental risks that do not hold economic potential even if cleaned, due to poor location, lack of access or unclear reuse potential.

Many of the tier one sites in the region are being developed and do not require strategic planning. However, an important policy issue regarding these sites is that since their redevelopment does not require public incentives any available subsidies should be focused on other sites. Furthermore, their remediation and redevelopment should be consistent with the surrounding community’s zoning and planning.

The tier two sites hold the potential to move forward under market conditions, if the right level of incentives-tax abatements, remediation reimbursement, public assistance-can be provided. Making these sites attractive for private investment should be the primary objective of financial incentives, essentially bringing them into the tier one category. Once in that category, remediation and redevelopment plans should again be consistent with the surrounding community’s zoning and planning.

The tier three sites require substantial public investment. To create a regional strategy for brownfield redevelopment, it is not sufficient to focus solely on sites with significant economic return. Tier three sites may, by their location in less-advantaged neighborhoods, their lack of access or other circumstances, justify considerable public or philanthropic involvement. Public policy and the majority of public investment dollars must concentrate on remediation and redevelopment of sites that pose health risks and deter economic development in lower-income communities.

Two panel discussions explored incentives to encourage redevelopment projects. The first focused on incentives that can make tier two sites attractive for private investment, such as tax abatements, infrastructure investments or remediation reimbursement. These techniques are essential to bring private market forces into the brownfield redevelopment arena. Panelists talked about the kinds of regulatory and financial mechanisms required to make marginal sites attractive to private investors who would be willing to remediate and redevelop contaminated or vacant land.

The second panel discussed tier three sites that would require greater public or community involvement. Just because some brownfield or vacant land sites may be risky investments does not mean they should be left out of regional redevelopment strategies. Techniques to focus on these sites include involvement of a community development corporation, a broader regional approach, environmental justice advocacy, and public investment on a federal, state or local level. Panelists shared examples of successful brownfield redevelopment as a community revitalization technique and outlined the actions necessary to spur these transformations.

Incentives and Planning Strategies

Tax Abatements. Tax abatements can be an important technique to help cover the cost of redeveloping a vacant site, but their implementation raises issues of planning and prioritization. New Jersey has a recently amended tax abatement law that creates Environmental Opportunity Zones (EOZs) where developers pay a reduced property tax rate for 10 to 15 years to help them recover the costs of remediation. While no communities are yet implementing the EOZ, participants discussed the particular types of projects that would most benefit from the incentive, and how municipalities should focus the program only to projects that really need such significant advantages.

Tax Increment Financing. Infrastructure may pose significant impediments to redevelopment projects, particularly when an entire neighborhood has been in decline for many years. For example, the Chicago metropolitan area has successfully implemented tax increment financing mechanisms to provide infrastructure for brownfield and vacant land redevelopment sites.

Site Valuation. Many brownfield sites become public property through involuntary tax foreclosure or other processes. To return these sites to productive use, municipalities often try to encourage private investment and economic development. However, real estate appraisers have difficulty quantifying the value of property where the cost of cleanup remains unknown, thus complicating the process of returning land to private hands.

Insurance Policies. Insurance packages can provide broad benefits to encourage the redevelopment of brownfield sites, but they need to become better understood and more widely used. Provided by the private sector, these tools are readily available to sellers, buyers and lenders involved in the redevelopment of brownfields. Participants discussed the new products now available for indemnification and cited examples where these products could reduce the need for public assistance.

Community Participation. In many instances, a community-based organization can play an important role in identifying sites and implementing a community-driven remediation and redevelopment proposal. A case example in Trenton, New Jersey, showed how community advocacy and working with local government helped identify funding and develop innovative techniques to remediate a vacant lot in a residential neighborhood.

Advocacy Planning. Issues of advocacy planning such as environmental justice can change the entire dynamic of a site redevelopment program. In the case of brownfield sites, a community may feel it has been taken advantage of once already, by the polluter, and may approach new proposals with some hesitancy. How can environmental justice advocacy be targeted to promote redevelopment projects that are beneficial to communities? What types of projects can combine the effectiveness of community development corporation models, and yet emulate the scope and ambition of the European example?

Conclusions

Following the panel discussions, participants debated the merits of different approaches to brownfield redevelopment and identified five critical components: sureness of the process; flexibility of public agencies; effective local planning; political leadership and support; and involvement of the entire community.

Some participants felt that many of the case examples did not take advantage of the full range of state or local assistance packages. They suggested that public policy analysis should consider ways to incorporate environmental laws, community development and business interests into an understanding of why brownfield redevelopment leaders do not seem to be more aware of existing programs and incentives.

What is the final or crucial element that pushes a redevelopment project such as the Welco Gases site over apparent obstacles to success? While the participants, representing real estate interests, community organizations and local governments, surely benefited from discussing and learning about the programs and incentives used in various case examples, in the end no one could identify a magic bullet to brownfield redevelopment.

Thomas K. Wright, director of the New Jersey office of the Regional Plan Association, organized the conference described above and heads up RPA’s brownfield redevelopment programs. Ann M. Davlin, RPA program analyst, provided research assistance.

1. In February 1996 Regional Plan Association released A REGION AT RISK, RPA’s Third Regional Plan for the New York-New Jersey-Connecticut Metropolitan Region. The plan, its policy and investment recommendations are based on an in-depth analysis of the rapid changes affecting the region’s economy, environmental systems and social equity: the 3 E’s.

Lincoln Institute Publications on Brownfields and Vacant Land

J. Thomas Black, Model Solutions to Revitalize Urban Industrial Areas, Land Lines, September 1997.

Donald T. Iannone, Redeveloping Urban Brownfields, Land Lines, November 1995.

Barry Wood, Vacant Land in Europe, 1998. Working Paper.

James G. Wright, Risks and Rewards of Brownfield Redevelopment, 1997. Policy Focus Report.