This is the first installment of a multi-part blog series on Brownsfields sites and programs.
Many people have heard of, or may even be familiar with, US Environmental Protection Agency (EPA) Brownfields sites. To some, the name often brings about nebulous thoughts of vacant industrial properties or chemical plants, buried drums or perhaps individuals walking around in suits similar to what our astronauts wear in outer space. However, lesser known are the many state-level Brownfields redevelopment programs. For example, the State of North Carolina has such a program called the North Carolina Brownfields Program, sometimes referred to as the “NCBP.” This program, very similar to other State Brownfields’ Programs, was enacted by statute as part of the Brownfields Property Reuse Act of 1997.
While the NC Brownfields Program utilizes some of the North Carolina Inactive Hazardous Sites Branch (IHSB) guidelines, much like other State Brownfields Programs, it is more of a “pro-development” rather than a regulatory program.
In short, the NCBP enters into an agreement with a Prospective Developer (PD) where the developer agrees not to sue and will develop the site in a manner that makes it safe for its intended use. The beauty of the program is the site does not have to be cleaned up to pristine conditions − rather contamination is “safely” managed on-site in a manner that protects occupants of the site and the environment. In addition to saving the expense of a costly clean-up that could take years, many of these “impaired” properties are purchased at a reduced rate because of their perceived condition and associated liabilities.
So What is a Brownfields Property?
A brownfields property is a property that is abandoned, vacant or underutilized and is contaminated in a manner that hinders redevelopment. This includes properties than may not even be contaminated, however by location, are “perceived” to be contaminated or otherwise impaired. The hindrance comes from the fact that it is often difficult to obtain financing because of the potential regulatory liabilities and unknown cleanup costs. The purpose of the NC Brownfields Program is to help facilitate economic growth by easing the burden of liability for prospective developers of these “impaired” properties.
Not Everyone Is Eligible for the NC Brownfields Program
Those that caused or contributed to the contamination on the property are excluded from the NC Brownfields Program. Current property owners are also ineligible for the program; however, the NCBP is beginning to reconsider those property owners that can adequately demonstrate that they did not cause or contribute to the contamination on their property. Perhaps you are an owner of a contaminated property looking to enhance its marketability? The NC Brownfields Program has the “Ready for Reuse” option in which all the environmental assessment and eligibility work is performed up-front by the current property owner. Once the property is sold, the new owner (Prospective Developer) simply is required to finalize the Brownfields Agreement. The only property types that are excluded from the NC Brownfields Program are the EPA National Priority List (NPL) sites. Fortunately, there are only about 50 NPL sites in North Carolina. Consideration of properties that are proposed for the NPL are handled on a case by case basis.
Are There Any Other Financial Considerations to Getting Involved?
While the Federal Brownfields program has assessment and clean-up grants available to municipalities, the NC Brownfields Program has no funding for private parties. However, a brownfields agreement obtained from the NCBP entitles the developer to a property “tax exclusion” on the improvements made to the property for a period of five years. This tax benefit can more than pay for assessment and cleanup activities on many projects. In the first year following redevelopment, 90% of the appraised value is excluded which is adjusted each year to finally 10% in year five. This tax benefit is transferable to future owners of the property.
Do I Have To “Clean-Up” or Remove Contamination As Part of Redevelopment Activities?
Sometimes, but not always − stay tuned for the next installment of this blog series!