Financing brownfields: EPA state program highlights


Courtesy of US EPA - Environmental Protection Agency

Public financing is often essential for encouraging the assessment and cleanup of brownfields. Without public financing or government-backed financial incentives, many brownfields would remain idle and potentially contaminated. The costs associated with the redevelopment of brownfields include costs associated with demolition, site preparation, and construction. In addition to these costs, capital is required for specific assessment and cleanup activities such as conducting environmental site assessments, developing a property remediation plan (which the owner needs to take the site through a state voluntary cleanup program to get finality on liability concerns), and conducting cleanup.

Because of these costs, public financing or financial incentives are often needed to jump-start a brownfield reuse project. Public financing may help balance the economic scale between greenfields and brownfields. Increasingly, states are stepping in to assist communities and the private sector in bridging the financing gap associated with brownfields redevelopment. States offer a variety of incentive programs, often to meet one of several objectives:

  • Reduce the lender’s risk by providing off-setting incentives such as loan guarantees, insurance, or property-specific legal clarifications, in order to make capital more readily available;
  • Reduce the borrower’s cost of financing by subsidizing loan carrying costs or by providing assistance that reduces loan underwriting and documentation expenses. Such assistance may increase the economic viability of smaller projects;
  • Ease a purchaser’s financial risk by providing incentives that can help improve the project’s cashflow, such as tax credits or abatements; and
  • Provide direct financial assistance, including loans or grants to help pay for site assessment or cleanup activities and support broader redevelopment needs.

States offer an array of financial tools and incentives that focus on various aspects of the brownfield redevelopment process, including site assessment, cleanup, site preparation (including demolition), and redevelopment. State brownfield financing programs are becoming more common, as well as more diverse.

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