Greening Concrete Jungle--final

The Potential of Brownfield Redevelopment To Green the Concrete Jungle Natalie L. Johnson, Hun Seok Han, Seok Yong Yoon, and Chung Yong Kim Community and Economic Development Program Policy Report • December 2003 Community and Economic Development Program, School for Planning, Design, and Construction Michigan State University The Potential of Brownfield Redevelopment to Green the Concrete Jungle By Natalie L. Johnson, Hun Seok Han, Seok Yong Yoon, & Chung Yong Kim TABLE OF CONTENTS I. Introduction 1 II. Definition of the Problem 1 III. Decline of Manufacturing in Detroit 2 A. Loss of Manufacturing 2 B. Environmental Impacts 2 C. Social Impacts 3 IV. Barriers to Redevelopment 4 A. Liabilities and Stakeholders 4 B. Federal Financing Initiatives 6 C. State Financing Initiatives 8 V. The Remaining Challenges: Where Industrial Reuse Fails 9 VI. Method of Analysis 10 V. Case Studies 10 A. Gas Works Park, Seattle, USA 10 B. Jeongseon Casino Resort, Korea 13 C. Don Valley Brickworks, Toronto, Canada 15 D. Duisburg North Landscape Park, Germany 19 VI. Recommendations for Michigan 21 VII. Sources 22 The Potential of Brownfield Redevelopment to Green the Concrete Jungle By Natalie L. Johnson, Hun Seok Han, Seok Yong Yoon, & Chung Yong Kim I. Introduction “Brownfields are defined by the United States Environmental Protection Agency (EPA) as ‘abandoned, idled, or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination.’”1 Michigan’s Governor Jennifer Granholm along with our policy advisor, Emily Fleury, are very interested in implementing a policy that will transform former factories into parks, or transforming inactive industrial sites into green spaces for recreational purposes. Ivy on walls or mosses on freeway bridges or concrete silos are examples. Our job is to research this industrial concept reuse and help determine if it might be applicable to abandoned sites in the State of Michigan. II. Definition of the Problem The decline in manufacturing in the United States has caused significant impacts on our central cities and first ring suburbs. It is important to recognize the problem in industrial retention. Industrial retention includes 1 Brownfield Remediation, Urban revitalization requires local groups to learn to identify brownfield sites and understand the liability and environmental concerns, Environmental Protection Magazine, By Joe Lorenz and Tom Mignery. activities that respond to the needs of local businesses, such as infrastructure improvements, safety concerns, technical assistance in modernization, and employment training. These factors strengthen the city by shaping its economic base, rather than responding to the threat of plant re-locations or closings.2 Industrial displacement has been widespread in central cities.3 Beginning in the 1940s, the level of suburban manufacturing growth exceeded that of cities. By the 1960s, both suburban and urban economies were restructuring, with continued growth of high valued- added manufacturing in the suburbs, and decline of manufacturing in the cities, where business services were expanding.4 By the late 1980s, the location measure of economic concentration for manufacturing in many suburbs was higher than their corresponding central cities.5 These patterns still exist today. The relocation of many manufacturing plants caused the abandonment of industrial sites in Michigan, which caused a cycle of deterioration in urban centers throughout Michigan. The reuse of industrial sites for recreational purposes makes sense from 2 Joan Fitzgerald & Nancy Green Leigh, Economic Revitalization: Cases and Strategies for Cities and Suburbs, 2002 3 Id. 4 Id. 5 Id. Michigan State University Community and Economic Development Program December 2003 Policy Report 1801 W. Main Street, Lansing, MI 48915 www.cedp.msu.edu 1 an aesthetic, economic and environmental standpoint. Reusing these sites will create an attractive city, where people will enjoy living, working and spending their free time. It will create a “spill over” effect, which increases the value of the land in its surrounding parameters, thus attracting further economic development. The environment will improve from the cleanup of the contamination related to the site. Redevelopment of industrial sites is a potentially appropriate strategic action for public and private partners to pursue. This may be a particularly appropriate strategy where the private sector has shown limited interest in reusing existing brownfields in highly visible community settings. III. Decline in Manufacturing in Detroit, Michigan A. Loss of Manufacturing The loss of manufacturing in Detroit and massive corporate downsizing from the 1980s to the 1990s had individuals convinced that the nation’s manufacturing era had ended. Due to major plant closings, job cuts and the change from blue collar to white collar workers caused a great change in our economy. However, manufacturing still accounts for 15.8 percent of the nation’s employment and is still an important component of many urban economies. For example, Detroit’s percentage of manufacturing employment in 1990 was 23 percent, 22.1 percent in 1992, 22.4 percent in 1994, 21.8 percent in 1996, 21.0 percent in 1998, and 20.8 percent in 2000. Compared to Los Angeles, 20.2 percent in 1990, 18.8 percent in 1992, 17.3 percent in 1994, 17.0 percent in 1996, 16.8 percent in 1998, and 15.4 percent in 2000.6 Detroit’s manufacturing employment over the last ten years are due in a large part to global corporations such as General Motors, which has a long manufacturing history in Southeastern Michigan. However, even though the manufacturing employment section of the state remains significant, the “retooling” of the industry has resulted in a number of abandoned industrial sites in Michigan. B. Environmental Impacts Contamination of brownfield sites present a number of environmental impacts through the hazardous waste remaining within the site. The United States Environment Protection Act (“EPA”) defines hazardous waste as “toxic, corrosive, ignitable, or reactive materials.”7 These materials are corrosive to the skin tissue or metals, unstable and can explode or release toxic fumes or have harmful concentrations of one or more toxic materials that can leak out.”8 Brownfield sites have the potential to pose a threat to public health and safety in two ways. Nearby residents are at risk if the sites have been affected by industrial activities or by the storage or disposal of hazardous waste; these sites usually do not have the appropriate enclosures to keep out trespassers.9 6 U.S. Department of Labor, Bureau of Labor Statistics (1990-2000a). 7 Id. 8 Id. 9 Id. Michigan State University Community and Economic Development Program December 2003 Policy Report 1801 W. Main Street, Lansing, MI 48915 www.cedp.msu.edu 2 Contamination is determined by qualified engineers that assess the site and analyze ecological and human health exposures to determine whether the concentration of chemicals on the site pose concern. Engineering assessments along with zoning restrictions dictate whether a site is suitable for a specific potential use.10 Brownfields present financial problems also. Abandoned sites, which become brownfields, fail to bring in any taxable income to the city because of the loss of employee income tax revenues and a decrease in the property value. The site inevitably will cost the owner more to remediate than what the site is worth, which is a deterrent to redevelopment of the site. The EPA describes three phases within the Environmental Site Assessment (“ESA”) conducted by qualified engineer firms, which takes place when an industrial site is purchased and sold. In Phase I, the history of the site is reviewed. This phase identifies the owners of the site for the past 30 years or more. It determines prior uses of the site, as well as the previous uses of the adjacent sites. In addition, the site’s regulatory background is investigated, which reveals the type of permits that have been issued for the site. In Phase II, samples of soil and water are collected. Potential contaminants are identified, and a formal plan for assessing the property is developed. A timeline is created for investigating the extent of contamination on the site, and a schedule is devised for the final 10 Id. completion of cleanup. Phase II ESAs cost between $20,000 and $200,000, or more. Phase III is the actual cleanup of the brownfield site. This phase offers three treatment options. First, hazardous substances and contaminated materials are excavated and disposed of in either an on-site or off-site landfill, or some can be burned. Containers, such as barrels or drums, of hazardous waste are removed from the site. Contaminated soil is treated or disposed. Second, containment is used to prevent the contamination of the site from spreading to other locations. To accomplish this the site may need a cap made of asphalt or clay. Third, is treatment. Treatment removes or remediates lingering contaminates so they no longer pose a threat to human or ecological receptors. Waters, including rivers, ponds, or an underground aquifer, are remediated, and the soil may be removed, washed, or incinerated. This may be more expensive, but more efficient. Although the correction of environmental impacts are costly and very complex, the long term result is beneficial to the community by making healthier land uses; moreover, should not be a deterrent to redevelopment. C. Social Impacts Communities that allow brownfield sites to remain inactive lose the tax revenue and employment opportunities generated by thriving operations. For some cities, this can total hundreds of jobs, millions of tax dollars, and hundreds of thousands of dollars in wages that might circulate through the area, bringing still more economic Michigan State University Community and Economic Development Program December 2003 Policy Report 1801 W. Main Street, Lansing, MI 48915 www.cedp.msu.edu 3 benefits.11 Manufacturing jobs pay larger salaries than service sector jobs available to individuals who have graduated from high school only or with less education. The decline of manufacturing jobs increased poverty levels in the city and promoted sustainable development strategies through encouraging �reenfield development. Manufacturing jobs were important to our economy because they paid higher wages overall than the service industry. In 2001, the average weekly earning for manufacturing workers was $593.03 compared to $441.94 for service workers. The difference in wages between these two sectors has remained constant since 1990.12 The number of hours worked and required specialized skills are both important factors when it comes to the differences in wages paid. Since 1988, the average weekly hours worked has grown slightly for manufacturing and fallen slightly in the service sector, which adds to the comparable difference displayed in wages.13 Existing streets and roads, water lines, rail spurs, and other infrastructure systems go unused; in jurisdictions with numerous brownfield sites, this means that billions of dollars in prior public and private investment are essentially wasted. Brownfields were strategically placed near waterfronts and 11 www.nemw.org Coming Clean, Framework of Environmental and Economic Development Concerns 12 U.S. Department of Labor, Bureau of Labor Statistics, 2000. 13 U.S. Department of Labor, Bureau of Labor Statistics, 2000. downtowns.14 Their dilapidated structures negatively affect their surrounding sites and discourage revitalization. As manufacturing moves further out, the suburbs will have to turn their attention to industrial retention also. Suburbs are threatened by manufacturers moving overseas for cheaper labor. It is in the cities best interest to make use of the abandoned sites. Redeveloping brownfields requires solutions designed to attract new business, retain jobs, build a stronger tax base, and make communities attractive places to live and work. The challenge facing community members, developers, and government officials in urban and industrial areas is to design a process to facilitate brownfield redevelopment while ensuring that the interests of all key stakeholders, including local residents, are met and development is sustainable.15 IV. Barriers to Redevelopment A. Liabilities & Stakeholders A major impediment to the redevelopment of abandoned, potentially contaminated industrial sites is the direct cost of cleanup of hazardous materials and the potential liability associated with environmental contamination. The regulations and legal actions that surround brownfield redevelopment, in many ways may have increased the 14 www.nemw.org Coming Clean Framework of Environmental and Economic Development Concerns 15 A. Donati C. Rossi and C.A. Brebbia, Brownfields Sites II, 2004. Michigan State University Community and Economic Development Program December 2003 Policy Report 1801 W. Main Street, Lansing, MI 48915 www.cedp.msu.edu 4 barriers to redevelopment. This has resulted in several federal and state initiating innovative policies to overcome these barriers.16 There are state programs that offer limited liability relief for innocent owners and purchasers, Letters of No Further Action, Covenants Not to Sue, or Certificates of Completion. These forms are provided by the state to potential liable parties after remediation of the site to state specific standards. The problem with the liability relief is that it does not provided complete exoneration of liability when the property changes hand, which subjects landowners to liability after transfer of title has taken place. “[T]he federal government has been working with the states to create memorandums of agreement (MOAs). “A Superfund Memorandum Agreement (SMOA) or Memorandum of Agreement (MOA) can be negotiated between a state and the EPA, making the state and EPA partners in the redevelopment process.” 17 The legal issues surrounding brownfields are complicated and manifold. Multiple parties, such as past and present owners, can be held liable for any legal liability associated with contamination. However, the government can interject itself to assess and resolve liability. The primary federal law affecting brownfield redevelopment is the Comprehensive Environmental Response, Compensation, and liability Act (“CERCLA” or Superfund). CERCLA is the most significant federal statute 16 Id. 17 Id. guiding public officials and private parties through the process of buying and purchasing properties that with site contamination. The Superfund deals with past dumping of hazardous materials and the toxic legacy of sites that pose grave threats to public health and the environment. CERCLA is perhaps the most influential environmental law affecting whether and how contaminated sites are cleaned and redeveloped. These aspects of the law should be of particular interest to local economic development practitioner. The initial intent of CERCLA was to promote cleanup of contaminated properties and to provide opportunities for the EPA to recover cleanup costs from all potentially responsible parties. The CERCLA classified potential responsible parties as past and present property owners, lending institutions, and developers even if they did not contribute to the contamination.18 Due to fear of liability, potential responsible parties do are vigilant of taking title, and financial institutions are disinclined to lend on properties that might have previously been contaminated. The concept of liability applied in CERCLA under its common law meaning of “strict” liability (i.e. not requiring any demonstration of wrong-doing on the part of the polluter, showing evidence of pollution only) was created by lawmakers to offer several advantages to the government as it sought ways to control and reduce discharges of hazardous substances into the 18 Joan Fitzgerald and Nancy Green Leigh, Economic Revitalization: Cases and Strategies for City and Suburbs, 2002 Michigan State University Community and Economic Development Program December 2003 Policy Report 1801 W. Main Street, Lansing, MI 48915 www.cedp.msu.edu 5 environment.19 Bankers and insurers were drafted into the Superfund’s liability scheme, receiving protection from liability when companies “operate according to environmental laws and avoid enforcement and liability expenses.”20 However, there are two exceptions to CERCLA. First, is the “innocent landowners defense,” which releases property owners from liability, as long as certain requirements are met. These property owners must not have known or had any reason to know of any contamination present on the site.21 The second exception, the “secured creditor exception,” covers lending institutions. Lending institutions have very limited involvement in the operation of a property. This exception was put in place to accommodate financiers’ conventional underwriting and lending practices. The key here is that lending institutions will not be liable if they maintain a security interest in the property only. The theory behind this is lenders’ participation is encouraged to help further the public interest to address the problem of pollution and clean up site contamination.22 Lenders and developers tend to avoid getting involved in projects with companies and properties with environmental risks. “The size and financial resources of the current owner now influence a site’s marketability and reuse potential. For example, 19 www.nemw.org Coming Clean, Framework of Environment and Economic Development Concerns 20 Id. 21 Id. 22 Id. prospective purchasers may buy an industrial site from a large, thriving corporation that can afford necessary site remediation. Therefore, if the EPA sues for cleanup, the new owner can go after the seller to recover remediation costs, or the EPA can go after them directly.23 It can be inferred from this that small business owners are challenged when seeking to secure credit. Allocation of responsibility and clean up cost should be clear in the closing agreement. Michigan has implemented a liability reform. Unlike the federal law, Michigan does not impose liability on a property owner merely because of property ownership. Liability is imposed upon those causing the release of contamination. Liability for remediation is imposed generally only on those who own or operate a facility, which is or was responsible for an activity causing the con