CHALLENGES TO BROWNFIELD REDEVELOPMENT Wanda Ballard Repasky - - PDF document

1 CHALLENGES TO BROWNFIELD REDEVELOPMENT Wanda Ballard Repasky JOHNSON & REPASKY, PLLC 6013 Brownsboro Park Boulevard Suite B Louisville, Kentucky 40059 wrepasky@lexlaw.us (502) 749-7933 Innovative regulations and technical advancements in environmental remediation have allowed Kentucky to catch up with other states in the development of abandoned and underutilized industrial properties. Progress in brownfield1 development has also been aided by increased understanding of the liability associated with these sites. Developing an environmental site management plan (SMP) and designing an economically viable development that accommodates environmental concerns and challenges can now be the “easy” part of redeveloping a brownfield site. Unfortunately, navigating the zoning and permitting processes for a proposed development can prove a greater and more expensive hurdle, particularly if stakeholders have something else in mind. One concern, if not the primary concern, of developers when approaching any potential development are cost and the length of time between the expenditure of funds and the generation of return. Nowhere is the adage “time

1 The Louisville Metro Land Development Code (LDC) defines a brownfield as a “potential

development site that has existing public water and sewers, but has some level of environmental impediment to re-development.” LDC Ch.1, Part 2. The USEPA defines a brownfield more generally, “The term "brownfield site" means real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” Public Law 107-118 (H.R. 2869) - "Small Business Liability Relief and Brownfields Revitalization Act" signed into law January 11, 2002.

2 is money” truer than when you are financing the construction of a brownfield

• development. Land costs are often reduced to reflect the potential cost of

remediation, but that advantage can be quickly lost when opposition to a project forces long delays, repeated public meetings, design changes, and concessions to development plans result in increased costs, extended delays and loss of square footage, all of which may impact returns on the project.

• I. LOCAL GOVERNMENT REGULATION

While state environmental agencies and departments have authority over the environmental aspects of Brownfield redevelopment, all zoning is local. The nature of planning and zoning is that it is driven, in large part, by stakeholders who live or work in close proximity to the brownfield sites and who often have strong opinions as to the nature of any development in their neighborhoods. Zoning Changes Purchase agreements for brownfield properties are often made contingent upon the receipt of all necessary zoning approvals and permits required for construction and operation of the development. In such cases, the buyer and seller will not close on the property until all zoning approvals for the development are obtained. In the meantime, which is often more than a year, the owner continues to incur the expenses associated with the property and the potential buyer incurs legal, assessment, consulting and design fees, and bears the cost

• f the zoning process.

In most cases, former industrial properties must be “downzoned” in order to be redeveloped for lighter industrial, commercial or even residential purposes.

3 The process of rezoning may take months even without public input or

• pposition. Typically, downzoning of a property from heavy to a less intense use

is welcomed by neighbors; however, if the downzoning is seen as a threat to remaining properties in the area, those owners may oppose a lighter use as well. In Louisville Metro, industrially zoned properties, those designated M-1, M- 2, and M-3, can be rezoned for residential or commercial uses if the downzoning is compatible with adjoining uses, or a deviation from the adjoining uses can be

• justified. (Ch. 11, Louisville Metro Land Development Code (LDC)).

Even if the property can be developed without changes to the zoning designation or form district2, a Conditional Use Permit (CUP) must be obtained in Louisville Metro if new structures are added or if the use was not specifically approved for the facility and doesn’t clearly fit into the general categories of activities allowed on the site. Requests for modifications to CUPs are reviewed and heard by the Board of Zoning Adjustment (BOZA) if industrial uses are changed or new buildings added to the property. (LDC Ch.4, Part 2). The Zoning Process (Briefly) Zoning map and form district amendments require the approval of the Metro Planning Commission. Property owners and legislative bodies with jurisdiction may initiate zoning map and form district amendments. If the development plan is a developer’s, but the developer doesn’t yet have title to the property, then the owner and the developer must file the application jointly. (LDC 11.4.1).

2 “Form Districts” is an area with district boundaries, delineated on the Zoning District Map to

which a set of regulations governing the pattern and for of development and redevelopment

• applies. LDC Ch. 1 Part 2.

4 The application can be both lengthy and expensive. The application requires the submission of a development plan sufficient to show the character and objectives

• f the proposed development. (LDC 11.5A.4). Prior to submission of a formal

application for zoning or form district amendments, a plan must be submitted to the Planning Director for review for compliance with the LDC. The proposed use must conform to Louisville’s Comprehensive Plan or the owner/ developer must explain why the current zoning is appropriate for the property and its

• surroundings. (LDC 11.4.4).

Public Input At least one public meeting is required by the regulations prior to the submittal of the full plan to the Planning Commission. It not unusual for the review process to require many additional public meetings, charettes, and negotiations with adjacent neighbors and other interested parties, depending upon the location of the property. After the submittal of the application, a formal public hearing is required prior to presentation to the commissioners. (LDC 11.4.5). At one level or another, nearly all brownfield projects will eventually be the subject of public scrutiny. Some opportunities for public input are required by status, regulation, or ordinance. Others are voluntary and can be approached as an opportunity to sell the project. Charrettes Charrettes are not mandated under state or federal law. In land use and urban planning, the charrette has become a technique for consulting with all

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• stakeholders. Charrette ideally promotes joint ownership of solutions and

attempts to defuse typical confrontational attitudes between residents and

• developers. With Brownfields, charrettes provide an opportunity to explain and to

allay environmental concerns. Charrettes tend to involve small groups; however, the participants may not represent all the residents nor have the moral authority to represent them. Residents who do participate get early input into the planning process. For developers and municipal officials, charrettes achieving community involvement may satisfy consultation criteria, with the objective of avoiding costly legal battles; however, they can be costly in their own right. Public Hearings/Public Comment The zoning process provides repeated opportunities for public comment in an open forum. Comments can also be submitted to the Planning Commission and BOZA. In Jefferson County, local zoning regulations require the Planning Commission to hold at least one public hearing on each application for a Zoning

• r Form District Map amendment.3 The general requirements of the zoning

process, including those for public notice and input, are set by state statute in KRS Chapter 100. While the code requires one public hearing, additional hearings may be

• rdered by the either the Planning Commission or BOZA, which may be

3 Louisville Metro LDC 11.4.5.

6 pressured by interested parties to provide more opportunity for discussion and debate on the issue. The regulations governing modifications of Conditional Use Permits (CUPs) require that notice of a neighborhood meeting prior to submittal of the application for a modified CUP and at least one public hearing before Board of Zoning Adjustment (BOZA) prior to action being taken on the application. (LDC 11.5.A). Minor modifications can be acted upon in business session rather than in the open public forum of a regularly scheduled meeting. Public Records Discussions with officials in meetings and negotiations with agency personnel are generally confidential; however, development plans, zoning applications and environmental data submitted to state or local agencies for review are generally subject to open records laws. (Kentucky Open Records Act

• f 1992, KRS 61.870 to 61.884).

Agencies do have the ability to conduct preliminary reviews of environmental data, development plans and construction plans without their being subjected to public scrutiny. To assure that a proposed permit application

• r development plan isn’t unintentionally or prematurely released to members of

the public or interested parties, copies should not be distributed to agency employees, the community or others until they are thoroughly reviewed and ready for dissemination.

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• II. FEDERAL INPUT

The Federal government will become involved in a redevelopment project

• nly when federal funding is involved, or when a federal permit is required for the

proposed development. As would be expected, the addition of the federal agencies generally serves to complicate and lengthen the development process. National Environmental Policy Act (NEPA) Review It is a rare developer who can withstand long delays between the purchase of a property and the time when the property becomes profitable. Approvals related to federal funding or federal environmental permits may take months, even years to obtain.4 The National Environmental Policy Act (NEPA) review prior to the issuance of any federal permit requires an opportunity for public comment be afforded to interested parties. The NEPA became law on January 1, 1970. Ten years in making, NEPA is the controlling guidance for federal agencies for virtually any activity undertaken, funded, or permitted that affects the environment. [42 U.S.C. 4321 et seq.] All federal agencies are covered by NEPA and share some common procedures; however, each agency has different specific rules defining their NEPA process. When NEPA was enacted, Congress anticipated that the statute would apply only to federally-financed projects.5 But it wasn’t long before the courts interpreted the broad language to include privately-funded projects when

4 Any development involving streams, floodplains or wetlands requires a federal Clean Water Act

• permit. (Clean Water Act Section 404, and 33 CFR Part 26).

5 See e.g. Scientists Institute for Public Information, Inc. v. AEC, 481 F.2d 1070 (D.C. Cir. 1973).

8 they require any federal action requiring a federal permit is required to complete the project. 6 NEPA’s scope includes the granting of federal permits for the permits for rights-of-way, encroachments onto federal land or highways, private leases on federal land, projects that are dependant upon federal loan guarantees, disturbance of streams, the filling of wetlands, any of which may play a role in a brownfield redevelopment project. Essentially, NEPA gives the federal government the ability to determine if a project with a federal interest is environmentally acceptable.7 The NEPA review process can delay a project for more than a year _ longer if agency decisions are appealed by opposing parties. The analysis of environmental acceptability encompasses many subjects and many aspects of even a privately-funded project: Analysis of Alternatives8 - For instance, in the case where a stream, which would require a federal Section 404 of the Clean Water Act,9 needs to be relocated to accommodate a development, the developer must provide an analysis of reasonable alternatives to the relocation of the stream, including taking no action. Economics may be considered, but are not determinative. Rather, the analysis must include “reasonable alternatives that are practical and

6 See e.g.Dalisis v. Hill, 424 F. Supp. 784 (W.D.N.Y. 1976) and Conservation Council of North

Carolina v. Costanso, 398 F. Supp. 653 (E.D.N.C. 1975).

7 Roosevelt Campobello International Park Commission v. EPA, 684 F.2d 1041, 1046-47 (1st. Cir.

1982).

8 See NEPA §102(2)(C)(iii), 42 U.S.C.§4332(2)(C)(iii). 9 33 C.F.R. 26.1344

9 feasible from the technical and economic standpoint” and using common sense, rather than simply desirable to the developer.10 Environmental Impact Statements - NEPA requires federal agencies to prepare environmental impact statements (EISs) for major federal actions that significantly affect the quality of the human environment. An EIS is a full disclosure document that details the process through which a transportation project was developed, includes consideration of a range of reasonable alternatives, analyzes the potential impacts resulting from the alternatives, and demonstrates compliance with other applicable environmental laws and executive orders. Issues reviewed include endangered species, potential impacts to air and water, noise, aesthetic views, and historic properties. The EIS process in completed in the following ordered steps: Notice of Intent (NOI), draft EIS, final EIS, and record of decision (ROD). Privately funded actions can be afforded an abbreviated EIS process if the environmental impacts are determined not to be significant; however, that decision can be appealed by interested parties. Section 106 Historic Preservation Act (NHPA)11 Reviews – NHPA Section 106 mandates federal agencies undergo a review process for all federally-funded and permitted projects that will impact sites listed on, or eligible for listing on, the National Register of Historic Places. Applicants must "take into account" the effect a project may have on historic properties. The review provides another

• pportunity for interested parties to comment on the potential impact projects

10 46 Fed. Reg. 18027 (March 23, 1981). 11 National Historic Preservation Act (NHPA) of 1966 as Amended 1992, 16 U.S.C. 470 et seq.

10 may have on significant archaeological or historic sites and to minimize potential harm and damage to historic properties. The Section 106 review requires an inventory of historic properties in the project area and an analysis of adverse impacts on those properties from the proposed project. That document is then submitted to the state historic preservation officer (SHPO) for a Determination of Effect/Finding of Effect (DOE/FOE) outlining to the SHPO the project, the efforts taken to identify historic properties, and what effects, if any, the project may have on historic properties. If the project is believed to have no adverse effect on eligible historic resources and the SHPO and other consulting parties agree, then the Section 106 process is effectively closed and the project may proceed. Alternatively, if an adverse effect is expected, the agency is required to work with the local State Historic Preservation Office to ensure that all interested parties are given an

• pportunity to review the proposed work and provide comments. This step seeks

ways for the project to avoid having an adverse effect on historic properties. Ideally, a Memorandum of Agreement is reached between all consulting parties

• utlining agreed-to mitigation or avoidance of historic properties, but this is not

always the case. Without this process historical properties would lose a significant protection. This process helps decide different approaches and solutions to the project, but does not prevent any site from demolition or alteration.

11 Challenges By Interested Parties Perhaps even more so than the zoning process, the NEPA provides

• pportunities for lengthy delays and challenges by interested parties opposing a
• project. While traditional standing principles apply, case law can loosely define

an “interested party.” The party must show 1) injury in fact and 2) that the interest injured is arguably within the zone of interests protected by the statute.12 Standing for a challenge based upon NEPA requires a showing that a plaintiff suffered, or is suffering an environmental “injury in fact” to establish standing.13 It is also clear that the threat of potential economic losses aren’t covered by NEPA.14 Parties seeking relief under NEPA cannot base a claim on the legal rights

• r interests of third parties. A narrow exception exists if the entity or person

attempting to sue can show that the third party would have standing in his or her

• wn right, that the third party’s interests are germane to the organization’s

purpose, and that neither the claims asserted nor the relief requested requires the participation of the individual third parties in the lawsuit. 15

• III. FINANCIAL INSTITUTIONS

12 Sierra Club v. U.S. Dept. of Energy, 287 F.3d 1256 (10th Cir. 2002). 13 Students Challenging Regulatory Agency Procedures (S.C.R.A.P.) v. U.S., 412 U.S. 669, 686

(1973).

14 Friends of the Boundary Waters Wilderness v. Dombeck, 164 F.3d 1115 (8th Cir. 1999). Rafter

• perators had no standing under NEPA for economic losses.

15 Lujuan v. Defenders of Wildlife, 504 U.S. 555 (1992).

12 Prior to the Banking Crisis of 2007/2008, financial institutions had become more comfortable with lending for brownfields development. Provisions in environmental laws had reduced lender liability for cleanup16, but lenders remain concerned, perhaps more now than ever, about the viability of the collateral. Typically, the risk for lenders with regard to brownfields, isn’t the details of the cost or complexity of the cleanup, except to the extent that those impact the return on the project. (Lender liability provisions in both state and federal law have lessened those concerns). The bottom line remains the bottom line, brownfield or green. Therefore, if the length of time required to secure the necessary approvals to complete the project exceeds the time allowed by the banks, the project will fail. For that reason, a project team, including environmental consultants, engineers, attorneys and designers with experience in brownfield redevelopment can analyze the risks at the outset, and develop an exist strategy in the event that the project reaches the point of diminishing returns.17

16 Public Law 107-118 (H.R. 2869): "Small Business Liability Relief and Brownfields Revitalization

Act of 2002” amending CERCLA.

17 Brightfields Development, Identifying, Financing and Developing Renewable Energy Projects

• n Brownfield Sites, 2011 Brownfield Conference, EFG Brownfield Partners. April 5, 2011.