United States: Incentives to Redevelop Brownfield Properties Through Programs of the Connecticut Brownfields Redevelopment Authority

Connecticut’s legacy as the cradle of the American industrial revolution includes untold numbers of "Brownfield" properties: sites whose real or perceived environmental challenges have inhibited their full productive use. Federal law defines a Brownfield as a "real property, the expansion, redevelopment, or reuse of which may be complicated by the presence of a hazardous substance, pollutant, or contaminant." 42 U.S.C. §9601(39). From vacant lots and abandoned gas stations to currently "warehoused" properties, Brownfields include industrial, commercial, agricultural, or even residential sites. Hence, Brownfield properties include not just old manufacturing plants and closed dumps, but also old residential buildings with leaking boilers, strip malls with dry cleaning operations that used hazardous cleaning solutions, farms that stored pesticides, and numerous other such sites. Fear of environmental liability has stifled development and choked off sources of financing for these properties.

The failure to develop Brownfield properties has resulted in boarding up these properties without environmental cleanup and the abandonment of opportunities for neighborhood renewal, job growth, increasing the tax base, and making cities more livable. The State of Connecticut has recognized this problem and has created incentives for development through programs of the Connecticut Brownfields Redevelopment Authority (CBRA).

Recognizing that a developer or municipality cannot realistically propose a project until it has a handle on the extent of contamination at a property and the likely cost of cleanup, CBRA has created the Brownfield Assessment Grant (BAG) program to reimburse the developer or municipality for expenses incurred in conducting Phase I and Phase II investigations and assessments. CBRA issues BAG grants of up to $3000 for Phase I Assessments (including site reconnaissance, review of land records, interviews with owners and officials, and report preparation by an environmental professional). If a Phase I Assessment raises the likelihood that the property contains contamination a developer or municipality may then apply for a BAG grant of up to $10,000 to finance a more intrusive Phase II Assessment. A Phase II Assessment involves some combination of surface sampling, soil or ground water sampling and suspected hazardous material sampling.

CBRA also has an innovative Grants for Brownfields Redevelopment (GBR) program with money flowing directly to private developers. These grants may amount to as much as $10 million, with the proceeds available for any expenses directly related to the remediation, redevelopment and improvement of Brownfield site, including the cost of environmental insurance. Applicants may propose a wide variety of project types, including manufacturing, high technology, research, laboratory, office, mixed-use, retail, housing or any combination of proposed uses. CBRA has made the GBR process surprisingly simple and straightforward: A developer must present a municipality with a proposed project that has a likelihood of increasing the real estate tax value of the Brownfield property it has targeted. If the municipality agrees that the project is likely to increase future property tax revenues it must then quantify that projection and then dedicate up to 100% of the projected increase in tax revenues to CBRA for a period of up to ten years. The developer will then receive from CBRA a non-recourse grant of the total amount of the projected tax income that the municipality has dedicated to CBRA. As a practical example, suppose that a developer proposes a project that will create more than $200,000 in new annual municipal property taxes. If the town approves the project and dedicates 50% of the new tax revenues to CBRA for ten years, for a total of $1 million, CBRA will then issues a $1 million grant to the developer. If the project fails to garner the projected increase in tax revenues and the municipality cannot pay the projected share to CBRA the developer has no repayment obligation. Rather, CBRA will have a tax lien on the property to protect its interest.

Our extensive experience at Wiggin and Dana in the remediation and development of environmentally challenged properties enables us to provide guidance to developers and municipalities interested in pursuing these and other CBRA programs.