Colgate Selden

April 22, 2001

Vermont is known as a state whose citizens are concerned about the location and expanse of future development.  Brownfields redevelopment programs can help alleviate these concerns.

Most states, after witnessing numerous properties become vacant, enacted brownfields legislation to induce brownfields redevelopment by prospective purchasers.[1]  Brownfields are generally defined as "abandoned or underutilized, and possibly contaminated, industrial and commercial properties."[2]  These properties are usually recognized as blights on the landscape and are normally located in downtowns and other traditional settlement areas.[3]  Because of their proximity to these locations, the redevelopment of brownfields can revitalize older towns or neighborhoods and slow the rate of sprawl.[4]

But, redevelopment accomplishes much more.  Besides revitalization, redevelopment puts a property back on the tax rolls.[5]  This is very important for Vermont because a utilized improved property fetching its full market value helps to boost education funding.[6]  Second, when developers reuse or recycle land, construction of new infrastructure such as sewer, water, streets, electricity, telecommunications, and sometimes schools can be avoided.[7]  Third, the contamination located on the property is cleaned up or contained, reducing or eliminating the risk of harm to human health or the environment.[8]  Lastly, many of these properties are historic landmarks displaying architecture from bygone eras.[9]  Putting these properties back into service and maintaining them helps to preserve a community's cultural heritage while improving aesthetics.[10]

Vermont's current brownfields legislation is the "Redevelopment of Contaminated Properties Program."[11]  The keystone of this legislation provides liability protection from state action once a developer completes cleanup according to a plan approved by the Agency of Natural Resources, Department of Environmental Conservation.[12]  However, certain significant issues such as funding and liability to third parties are glossed over by this legislation.[13]  Since 1995, only six properties in Vermont entered or completed the program.[14]  Many believe that this lack of enthusiasm during a booming economy is most likely the result of the program's incomplete development.

Vermont needs to find a way to encourage development in existing settlements by making brownfields redevelopment attractive.  One thing is certain; although the State has a ready supply of greenfields, public policy on land use development has become more averse to sprawl and supportive of open space preservation.  There is already pressure against the development of greenfields in the form of permitting requirements.[15]  But, greenfields are still probably the least costly and most predictable properties to develop.[16]  In highly populated states where the price of greenfields is high, developers are willing to buy highly valued contaminated properties and assume the associated risks in the belief that the transaction will be more beneficial in the long run.[17]  It is no surprise that the two most often indicated impediments to successful brownfields redevelopment across the U.S. are the availability of funds and liability issues.[18]

Other states address costs and liability concerns associated with brownfields redevelopment in sometimes new and innovative ways.  Minnesota for instance, developed an environmental database program managed by the Minnesota Pollution Control Agency.[19]  The database retains files of environmental information related to a particular property.[20]  This allows prospective purchasers to determine known environmental liabilities pertaining to a specific site.

Another Minnesota program involves a contamination tax, which provides incentives for owners to remediate a site.[21]  When owners begin remediation according to an approved plan, the site's property tax is reduced via a reduction in assessed property value.[22]  This "contamination value" is based on the property's level of contamination, status of cleanup, and whether the owner is a potentially responsible party.[23]  However, the allowable reduction in valuation is limited to the fair market value minus the expected cleanup cost.[24]

A Wisconsin program provides funds to local governments for site assessments.[25]  The funds are available provided that the governmental unit did not cause the contamination.[26]  The party causing the contamination "must be unknown, unable to be located, or financially unable to pay the cost" of the preliminary assessment.[27]  Another interesting program in Wisconsin cancels all delinquent property taxes owed by an owner or potential owner of contaminated sites once cleanup begins.[28]

Massachusetts on the other hand, takes a different approach.  This State, too, has developed a fund for site assessments,[29] but the State's most interesting development involves a partnership with the privately owned Massachusetts Small Business Development Corporation (MSBDC) to offer loans for the redevelopment of contaminated properties via the Brownfields Redevelopment Access to Capital Program (BRAC).[30]  A board of advisors consisting of a diverse cross section of parties such as bankers, developers, government, environmentalists, and private attorneys makes recommendations to MSBDC for the implementation of the program and for making lending decisions involving the cleanup of the contaminated properties.[31]  The loans are market based and written by a consortium of lenders but administered through the MSBDC.[32]

The loans enable cleanup and environmental insurance.[33]  One of the major problems confronting lenders occurs when a buyer of contaminated property defaults on a loan.  Subsequently, lenders typically refuse loans to contaminated property buyers due to possibly becoming stuck with "impaired collateral" that has continuing cleanup costs or environmental liability associated with it.[34]  Under the BRAC program, environmental insurance subsidized partially by the state provides funding to finish the cleanup in the event of default and provides coverage of environmental liability.[35]  Furthermore, if the insurance coverage falls short, BRAC loan guarantees cover the remaining outstanding debt.[36]

Another unique feature of the Massachusetts program involves liability.  Currently, the law of most states, including Vermont, liability is strict.[37]  Causation does not matter; the party only needs to be one of the statutorily identified responsible parties, such as an owner or operator of the property.[38]  Under the Massachusetts plan, once a site assessment is complete and the parties know what happened on the property, liability switches from strict to causative for the innocent owner performing the cleanup.[39]

Vermont should incorporate similar ideas into a comprehensive package so that full advantage can be taken of every opportunity to strengthen its existing brownfields program.  The Massachusetts programs are highly successful because of innovative funding and reduced liability concerns.  Other state programs provide creative solutions that can also be used to induce cleanup and reuse property.  Together, programs such as these will provide strong support for Vermont's goals of properly managed land and sustainable growth.

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[1]See Charles Bartsch and Christine Anderson, State Financing Program Initiatives, in FINANCING BROWNFIELDS REUSE 37, 38 (Charles Bartsch ed., 1999).

[2]ANN EBERHART GOODE ET AL., NORTHEAST-MIDWEST INSTITUTE, GUIDE TO FEDERAL BROWNFIELD PROGRAMS 1 (1999).

[3]See William Fulton & Paul Shigley, The Greening of the Brown, GOVERNING, Dec. 2000, at 31, 32.

[4]See id. at 34.

[5]See id.

[6]See VT. STAT. ANN. tit. 32, § 5404 (1999) (Determination of education property tax grand list).

[7]See Fulton & Shigley, supra note 3, at 34.

[8]See id. at 32.

[9]Whitney Gould, Menomonee Valley Needs a Broader Vision, MILWAUKEE J. SENTINEL, Oct. 9, 2000, at 15B.

[10]See id.

[11]VT. STAT. ANN. tit. 10, § 6615a (1999).

[12]See id.

[13]See id.

[14]GEORGE DESCH, VT DEP'T OF ENVTL. CONSERVATION, VT REDEVELOPMENT OF CONTAMINATED PROPERTIES PROGRAM 1 (Feb. 1, 2001).

[15]See generally VT. STAT. ANN. tit. 10, chap. 151 (1999) (State land use and development plans).

[16]See Fulton & Shigley, supra note 3, at 33.

[17]See id. at 34 (In many larger cities, brownfields are usually closer to markets and come with more transportation availability).

[18]See id. at 32 (other impediments listed in descending order of significance are: environmental assessments, environmental regulations, market conditions, demolition moneys, land assembly, standards for cleanup, community concerns, neighborhood conditions, infrastructure inadequate, and insufficient time).

[19]MINN. POLLUTION CONTROL AGENCY ET AL., MINN. BROWNFIELDS RESOURCE GUIDE 21 (Oct. 2000).

[20]See id.

[21]See id. at 15.

[22]See id.

[23]See id.

[24]See id.

[25]WIS. DEP'T OF NATURAL RESOURCES & WIS. DEP'T OF COM., THE FINANCIAL RESOURCE GUIDE FOR CLEANUP AND REDEVELOPMENT 14 (Mar. 2000).

[26]See id.

[27]Id.

[28]See id. at 36.

[29]THE GOVERNOR'S OFFICE ON BROWNFIELDS REVITALIZATION ET AL., A STUDY OF THE RESULTS AND FINANCIAL REQUIREMENTS OF THE BROWNFIELDS ACT 21 (June 2000) (Massachusetts).

[30]See id. at 24.

[31]See id. at 14-16.

[32]See id. at 24.

[33]See id. at 13.

[34]See id.

[35]See id.

[36]See id.

[37]See VT. STAT. ANN. tit. 10, § 6615 (1999).

[38]See id.

[39]MASS. DEP'T OF ENVTL. PROTECTION, SUMMARY OF BROWNFIELDS ACT: CHAPT. 206 OF THE ACTS OF 1998 1-2 (1998).