"We should restore contaminated urban land and buildings to productive use." With these words President Clinton initiated significant opportunities for local governments to finance the prevention or rehabilitation and reuse of brownfields sites.
The Brownfields Economic Development Initiative ("BEDI") is a program developed by the U.S. Department of Housing and Urban Development ("HUD") to spur economic development through brownfields redevelopment. For the year 2000, $25 million has been appropriated to fund BEDI grants. BEDI will issue grants of up to $2 million each to eligible local governments and communities. BEDI grants are to be used in conjunction with financing obtained through the loan guarantee provisions of HUD's Community Developmental Block Grant ("CDBG") program ("Section 108 Loan Guarantee"). BEDI grants will provide additional security for Section 108 Loan Guarantees and thereby reduce the risk of loss of CDBG funds. HUD is currently accepting applications for BEDI grants, which must be accompanied by a new request for Section 108 Loan Guarantee assistance. The deadline for BEDI applications is June 13, 2000.
Brownfields are described as abandoned, idled, or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination. Traditionally, brownfields redevelopment has been hampered by unreasonably high standards of cleanup, perpetual liability and expensive rehabilitation costs. Without this redevelopment, local governments and communities are left with areas of wasted real estate that could otherwise be used to create jobs for low and moderate income individuals or prevent the growth of urban blight.
BEDI grants can be used to enhance the security or improve the viability of projects financed through the Section 108 Loan Guarantee. Acceptable BEDI grant use includes:
- site acquisition, demolition or remediation costs;
- funding reserves;
- over-collateralizing Section 108 Loan Guarantee;
- direct enhancement of the security of Section 108 Loan Guarantee;
- infrastructure construction or reconstruction;
- public facility construction or reconstruction;
- providing financing to for-profit businesses at below market interest rates; and
- increasing local tax bases.
There are certain limitations on the use of BEDI grants. Besides being used in conjunction with a Section 108 Loan Guarantee, the ratio for BEDI grant to Section 108 Loan Guarantee must, at a minimum, be 1:1. BEDI grants may not be used to immediately retire the principal of a loan secured through a Section 108 Loan Guarantee. BEDI grants cannot be used to provide funding for a public or private entity whose actions caused the contamination. Proposed projects should not be located on sites currently subject to litigation, environmental enforcement action or where environmental contamination has not been specifically quantified.
Entities eligible for BEDI grants includes CDBG entitled local governments or communities as well as those local governments or communities not entitled to CDBGs. Local governments or communities not entitled to CDBGs may receive BEDI grants if, upon requesting a Section 108 Loan Guarantee, the applicable state entity pledges its CDBG funding as partial security for the Section 108 Loan Guarantee. BEDI grants and the accompanying Section 108 Loan Guarantee assistance must be used on the same project. Factors that will be considered in determining which applicants receive BEDI grants include:
- capacity of the applicant and relevant organizational experience;
- level of distress or extent of the problem;
- soundness of the project;
- leveraging resources/ financial need; and
- comprehensives and coordination.
HUD encourages interested local governments and communities to integrate projects proposed for BEDI and Section 108 Loan Guarantee assistance with other federal, state and local brownfields redevelopment efforts. At the federal level, an additional $24.1 million in funding has been made available by HUD for an Economic Development Initiative with respect to brownfields redevelopment. The deadline to apply for these funds is May 24, 2000. Within Pennsylvania, interested parties should consider Pennsylvania's Land Recycling and Environmental Remediation Standards Act as well as the Land Recycling Program.
For additional information on BEDI grant applications, including a BEDI grant application, contact HUD at 1-800-HUD-8929 or visit the website at www.hud.gov/bedifact.html. For information on the brownfields redevelopment Economic Development Initiative, visit the website at www.epa.gov/swerosps/bf/pilot.htm. For information regarding brownfields redevelopment efforts in Pennsylvania, contact Ms. Barbara Musco of Pennsylvania's Department of Community and Economic Development at 717-787-7120.
These materials are intended to furnish general information and should not be relied upon as advice in specific situations.
Saul Ewing LLP
Centre Square West
1500 Market Street, 38th Floor
Philadelphia, PA 19102
Kevin L. Valentine
215-972-7548 fax: 215-972-2287
e-mail: kvalentine@saul.com
web: www.saul.com