Federal Financing Opportunities for Remediation and Redevelopment - - PowerPoint PPT Presentation

Federal Financing Opportunities for Remediation and Redevelopment – What Can Be Leveraged?

Charlie Bartsch Senior Program Advisor for Economic Development US Environmental Protection Agency September 16, 2015 Bartsch.charlie@EPA.gov

Federal resources that can jump-start, support “R&R” * remediation and redevelopment –

• Community/economic development

funding/programs – HUD, EDA, DOT, USDA, EPA – What $$ available in 2015?

• Key applicable federal tax incentives
• Intro to EB-5 opportunities
• Examples along the way…making the “R&R” link

* “Remediation and Redevelopment”

What t this p power p point c covers…

Fede Federal Tool Tools Can an Be e Fi Fit Toge Togethe her, Lever eraged aged in Various ious Ways to Promot mote e R&R – Remedi ediat ation

• n and Redev

evel elopment

• pment
• To provide resources directly
• Grants; forgivable/performance loans

But also to…

• Reduce lender’s risk
• loan guarantees; companion loans
• Reduce borrower’s costs
• interest-rate reductions/subsidies; due diligence assistance
• Improve the borrower’s financial situation
• re-payment grace periods; tax abatements and incentives;

technical assistance help

• Provide comfort to lenders or investors
• performance data, risk management/corroboration

• brownfield redevelopment/revitalization planning
• site acquisition
• environmental site assessment
• site clearance, demolition, and removal of buildings
• rehabilitation of buildings
• removal or remediation of contamination
• construction of infrastructure and related improvements

that enhance site value

Activities often carried out in partnerships with the private sector, or to leverage private participation

Feder ederal Progr

• gram

ams s Fundi unding ng and and Tax ax Progr

• gram

ams s Can Can Suppor upport R& R&R R in n Many any Way ays

HUD/community development programs

• CDBG – grants for economic/community development, planning,

support services, housing EDA/economic development, infrastructure programs

• Public works/economic adjustment/planning

USDA/rural development programs

• Business/industry, business development – loans, loan guarantees,

grants for all phases of project development

• Community facilities – grants and loans

DOT/transportation

• Road/transit system enhancement, construction, improvement, cleanup

EPA

• Site assessment, cleanup, RLF

Which Federal CD/ED Funding Programs Have Good Potential for R&R Application?

• Entitlement cities (50,000+ ) and urban counties

(200,000+) get formula-based annual grants

• Direct formula-based grants to states for small city

needs: Small communities (> 50,000) compete for funds distributed by states

• Projects must meet one of 3 HUD objectives:

– Benefit low- and moderate-income persons – Prevent/eliminate slums and blight – Meet an urgent community need R&R potential: Help finance all phases of preparation/ redevelopment/project implementation, consistent with HUD objectives

HUD HUD Com Communi unity y Dev Devel elop

• pmen

ent B Bloc

• ck

k Grant ants s

• Demolition and removal
• Rehabilitation of public and private buildings
• Planning
• Construction or reconstruction of infrastructure,

neighborhood centers, recreation/public works facilities

• Can include coping with contamination as part of site

preparation or infrastructure development

• Can be lent to private companies in some circumstances

For the state/small cities program –

– Each state sets it own project funding priorities,

defines its own program requirements, within CDBG

• bjectives and these activities

CDBG BG Eligible Eligible Ac Activit vities , , Wit With h Links Links t to

• Remedi

ediat ation/

• n/Redev

edevel elopm

• pment

ent Needs ds --

CDBG BG: Chevy P vy Place ce – Roch chest ster , r , NY

• 2.2 acre downtown auto

dealership, gas station, and service garage site

• Key concern -- UST and other

contamination deterred developers

• R&R Role of CDBG – Critical gap

financing; used for site assessment, partial 1st phase cleanup (including tank removal)

• Developer funded 2nd phase of

cleanup

• City $2.35 million redevelopment

loan from CDBG-capitalized pool

• Result -- 77 new residential units;

coffee house with 20 jobs

CD CDBG -- Jack ack Ev Evan ans Polic Police St Stat atio ion, Dalla allas s TX

• Jack Evans police station, on

3.2 acre former gas station/dry cleaner site

• R&R Role of CDBG -- used for

initial site preparation, including cleanup and demolition

• Construction funded with G.O.

bonds

• LEED silver certified

Revialization link: meeting critical public service component of an area-wide strategy

• Projects are locally determined
• Considerable local competition for funds
• Many long-time, repeat local recipients
• Low-mod benefit is primary HUD objective

(minimum use of 70% of CDBG funds)

• Activities must be incorporated into CDBG

Consolidated Plan and annual actin plan

FY 2015 funding –

• Community Development Block Grants

– $2.942 billion in formula grants

• 70% to entitlements ($2.06 billion)
• 30% to states for small cities (883 million)

CDB CDBG – Fundi ding w ng wrink inkle les & rea reality c chec heck

• Public works grants

– Finance industrial site re-development, building reuse, and infrastructure preparation

• Economic dislocation program

– capitalizes economic adjustment RLFs for distressed areas

• Planning to support revitalization, through

Economic Development Districts (EDDs) R&R potential: can finance business-based, job promoting projects, support necessary redevelopment planning activities

Economic Development Administration

• Revitalize, upgrade, and expand infrastructure

needed to retain/attract jobs

• Attract new business and industry
• Site preparation, including demolition and

removal

• Construction and rehabilitation of public and

private facilities (such as industrial parks)

• Planning

EDA DA Eligi gible A Activities es, Wi With Links t to Re Reme medi diation/ n/Redevelopmen ment Ne Needs ds

EDA DA/planni ning g --

• - Ci

Cimar marron Ce n Cent nter – San and d Springs, O OK

• Former zinc smelter, abandoned rail

spur in small Oklahoma town

• Key challenge: making brownfield

site viable relative to nearby greenfield sites

• R&R role of EDA planning funds –

structured a cleanup plan that made the site economically competitive with nearby greenfield for big-box retail, supported TIF application

• Result -- Cimarron Center, with

Wal-Mart Supercenter as anchor, has created 350 new jobs, added $3.5 million in annual city sales tax revenues

• Limited funding, significant competition
• Applications accepted on a quarterly basis

– Pre-approval at regional office level – Regional offices, EDRs, can discuss/advise on proposals

• Projects driven by job-generating potential, minimum

$/job requirements

• Unemployment a key eligibility/selection factor
• Often, a focus on smaller towns, rural areas

FY 2015 funding –

• Public works -- $109 million in grants
• Planning -- $31 million in grants
• Economic adjustment assistance -- $60 million in grants

ED EDA A – Fundi ding w ng wrink inkle les and d rea reality c chec heck

USDA rural development funds must meet broadly defined program objectives – key programs can do this within an R&R context:

• Community facility loans and grants – for a range of

development and community benefit projects

• Business and industry (B&I) loan guarantees – to public
• r private organizations, for activities such as industrial

park site development/rehabilitation or access ways

• Intermediary re-lending program – intermediaries such as

local governments are loaned money to re-lend to companies, in order to finance business facilities

• Rural development loans and grants (REDLG) – given to

provide operating capital and finance emerging private business and industry; operated thru local utilities

US USDA DA Ru Rural al Dev Developmen ment Prog

• grams

ms

• Planning for redevelopment or revitalization – for

businesses and community facilities

• Site clearance/preparation, including demolition
• Rehabilitation/improvement of sites or structures
• Construction of real estate improvements
• Installation of amenities to enhance development

R&R potential: could all be used to meet brownfield cleanup and redevelopment needs, finance complementary activities to reuse effort

Rur Rural al Dev Devel elop

• pmen

ent Eligi gibl ble Activi vities, s, wi with h Li Links t nks to Rem Remedi ediat ation

• n/Red

Redeve velopment Needs Needs

USDA/B&I guarantee: Potosi Brewery, Potosi, WI

• Brewery built 1852 in Potosi (pop. 700),

abandoned 1972

• R&R role of USDA – $3.3 million B&I

guaranteed loan key to securing additional $4.2 million in financing to cover range of development needs

• Strong state partnerships, t.a.
• Transformed Potosi’s main street;

community involvement key

• Result: Refurbished site

transformed into micro-brewery, brewing museum and library

• 50 new jobs, 4 new beers

• Applications are made to state USDA state
• ffices on a rolling basis; these offices have

significant influence on funding decisions

• Population a key determining factor; typically,

the smaller the community, the more competitive it is

• Private entities eligible for B&I, non-profits for all assistance

FY 2015 funding –

• Business and Industry (B&I) development

– $1.14 billion in loan guarantee authority

• Community facilities

– $1.8 billion for direct loans (includes rural housing) – $135 million for guaranteed loans

• Community development

– $54 million for grants (REDLG, business development )

USD USDA – Fundi Funding w g wrinkles and and reality c y check k

• Surface transportation formula grants

– Finance roads, highways – Can also finance congestion mitigation (CMAQ), transportation enhancement projects (such as bicycle and pedestrian facilities, bridges)

• Transit construction and operations grants

– Finances transit system construction and maintenance

• Metropolitan planning organization formula grants

– Assists metro areas plan for the development and management or multimodal transportation systems

DOT Highway and Transit Programs

• In March 2009, DOT re-affirmed its brownfield policy –

still in place…

 Transportation funding can be used for cleanup at sites integral to transportation system development/upgrades

• DOT highway/transit construction/modernization/rehab

programs can support related revitalization by:

• helping upgrade existing facilities
• offering transportation amenities that improve access to –

and marketability of – sites

• funding facilities and structures that serve as part of the

remedial solution – i.e., ICs and caps

Transportation Program Activities -- Remediation/Redevelopment Context

• Traffic flow improvements
• Bus and rail system modernization and rehabilitation
• Transit facility construction
• Pedestrian and bicycle programs, facilities
• Historic preservation/rehabilitation/operation of historic

transportation buildings or facilities

• Preservation of abandoned rail corridors
• Planning

R&R potential – creative integration of a range of transportation/related projects into area-wide revitalization efforts at abandoned/underused sites

DO DOT/Transp spor

• rtation A

Activi vities W s With h Li Link nks t s to

• Rem

Remedi ediation/ n/ Redev Redevelopment Needs Needs

DOT: Former Conoco Tower – Shamrock, TX

• Opened in 1936 to serve the new Route 66

cutting thru the city; combined gas station and “U-Drop Inn Café” ; closed in mid-1990s

• Purchased by First National Bank of

Shamrock in 1997 and donated to city

• Restored by city of Shamrock for use as

Chamber of Commerce

• R&R role of DOT – $1.7 million

enhancement grant paid for most of the station restoration, supplemented by local fundraising

• Café is being restored as a revenue-generating

enterprise to help cover maintenance costs

• Fun fact: Inspired “Ramone’s Body Shop”

in Disney movie “Cars”

• Must be linked to transportation system/facility siting, cleanup

linked to construction/development

• Communities must work thru states, MPOs, local transportation

agencies; projects must fit MPO plan

• Long lead time for planning, project integration
• Can be difficult to get an alternative transportation-related use into

local system – old line “highway mentality” often exists

• Future funding levels uncertain – no long-term “fix” in place

FY 2015 funding –

• Roads/highways/transit

– $40.26 billion in road/highway/street grants – $6.1 billion in transit formula grants – $91 million for planning

• CMAQ – $1.35 billion
• TIGER grants – $500 million

DOT OT – Funding nding wrink inkles es a and d reali ality c chec eck

• New Markets Tax Credits
• Rehabilitation tax credits

Two k

• key

ey f fede ederal t tax ax inc ncentives t that hat can an be link nked t d to redev develop lopment ent t trans nsac actio ions ns with r h remedi ediat ation ion n need eds – at at l little or no

• r no

cos

• st t

to

• the

he pro project….

• Gives investors federal tax credits (39% over 7

years) for equity investments in designated Community Development Entities (CDEs), for use in low-income communities

• CDEs use their allocations to make loans or investments

in “qualified businesses” and development activities –

• Historically, most common investments -- in for-

profit, non-profit businesses and real estate

• Other eligible activities include -- charter schools,

homeownership projects, community facilities

• All investments at preferential rates/terms
• Brownfield cleanup and site preparation can be

factored into NMTC project

New M Markets Tax Tax C Cre redits

• $3.42 billion authorized to 87 CDEs in 32 states
• Allocatees anticipate making investments in 44 states
• Distribution by area type:
• $2.01 billion (60%) in major urban areas
• $680 million (20%) in minor urban areas
• $742 million (20%) in rural areas
• Planned loans to or equity investments in include:
• $2.75 billion (75%) to finance/support business loans
• $831 million (24%) to finance real estate projects

New ew Mark Markets T Tax ax Cre redits --

• high

ghlig light hts o

• f

2013 f 13 funding nding round und (anno nnounc unced 6 d 6/5/14) 14)

• Challenging CDE designation, application

process requires significant capacity, technical expertise – Time consuming and complex

• Cannot be combined with LIHTCs, tax-exempt bonds
• Costly – legal, other fees
• Matchmaking a good strategy – find a CDE with allocation!

– Recipients must allocate credits within 5 years

• Historically, 50% + of all allocations have supported for-

profit and non-profit business development – Significant capital investment in distressed areas – often synonomus with brownfields/contaminated properties!

New New Mar arkets s Tax ax Cr Credi edits s – fine pr ne print nt and and cavea aveats i s impact pacting g br brownf

• wnfield appl

d applica cation

NMTCs : s : Artsp space ce Commo mmons N s Nort rth – Sal alt Lak Lake C City, UT

• Former metal scrap yard
• Redeveloped into 102 rent-to-own

units

• Includes 53,000 sq. ft. of retail
• Key concern – financing gaps

stemming from rehab of brownfield into affordable housing

• R&R impact of NMTCs – $27.1

million instrumental in attracting private capital from US Bancorp Community Development Corp., American Express Centurion Bank

• Significant additional private

investment in surrounding area

• Taken the year renovated, income-producing building is put into

service

• 20% credit for work done on historic structures, with rehab work

certified by state

• 10% credit for work on “non-historic” structures built before 1936;

no certification required In 2013 – 1,155 projects, $1.35 billion in credits

• Leveraged $4.02 billion in private investment
• 25% of projects less than $250,000 in size; 39% less than $½

million

• 21% of projects for office, 20% for commercial
• Created 55,458 jobs
• Generated $5 billion in state tax revenues, $4.9 billion in local tax

revenues

Hi Historic Re Rehab abilitation Ta Tax Cr Credi dits

• Rehabilitation costs must be “substantial” –

i.e., exceed minimum of $5,000 or the building’s adjusted basis

• Property must be “income-producing” – multi-family

rental housing can claim the 20% credit, but not the 10% credit

• Rehab work must conform to state historic preservation

standards – deter integration of “green” technologies

• Credit is recaptured on a sliding scale (20% annually) if
• wner disposes of the building within five years of

completing renovation

Rehabilitation T Tax Credits s – cav avea eats and and “fine pr e print nt” i impa pacting ng brownfield a applica cation

Rehab hab tax c credit edits: Ford M d Motor

• r A

Assem embl bly Plant ant --

• - Richm

hmon

• nd C

d CA

• Built in 1930, 520,000 sq.ft. ; closed 1953
• Original Albert Kahn “ daylight factory”
• Rehabilitation work began in 2004

– Included seismic retrofits, green performance measures, including solar panels on roof

• $11 million in rehab tax credits
• Today – houses several

manufacturers of sustainable products, plus 45,000 sq ft meeting and entertainment venue

• EB-5, created in 1990, allows foreign investors in US businesses

to obtain US residence status – 10,667 visas alloted annual; demand in 2014 exceeded supply for the first time (85% from China)

• Immigrants must invest $500,000/$1 million in a US business

– $500,000 level in rural or high unemployment areas

• Investment must generate at least 10 US jobs within 2 years
• USCIS designates regional centers to pool EB-5 capital from

multiple foreign investors for approved economic development projects – often large scale ($100 million+) – In 2014, 95% of all EB-5 capital raised and invested by centers

Tappi

apping int nto

• unc

unconven ventional al r res esour

• urce

ces s – ex expl ploring ng E EB-5 5 visa sa inv nvest stment nt r requi equirements

• Investors willing to accept low returns, as little

as 1% – the green card is their reward

• 95% of most recent year’s visa capital

bundled by regional centers; small scale/ independent projects often at a disadvantage

• Immigrants, especially Chinese, have shown a penchant for big,

flashy real-estate projects – small size may be at a disadvantage

• EB-5 capital well suited for packaging with other incentives –

NMTCs, historic tax credits, and TIF

• 2-year requirement for creating jobs may deter investment in

contaminated properties; concern over potential delays in redevelopment due to remedial issues

EB EB-5 V 5 Visa i a inv nvest stment– fine pr ne print nt and and cavea aveats i s impact pacting g R& R&R appl R applica cation

EB EB-5 inve vest stme ments: s: Bake kery ry Squar uare e – Pi Pittsburgh PA PA

• Former Nabisco manufacturing complex;

built 1981, closed 2006

• Now, open air office/retail development

– 495,000 sq feet, about half in renovated buildings

• Total project cost = $110 million
• Project packaged by Pittsburgh

Regional Investment Center

• $35 million/70 EB-5 investors
• Syndicated historic rehab tax

credits for $7.5 million

Tak ake e aw away ay message on message on financi nancing t ng tran ansact saction

• ns

s

• n
• n cont
• ntam

aminat nated s ed sites w s with R h R&R needs needs…from

• m

War arren en Zeev eevon

• n”

“…I took a little risk. Send lawyers, guns, and money, Get me out of this….”

Take away message on financing site remediation and reuse…from me

• Creatively use a mix of development and environmental

programs to meet the full range of site redevelopment needs, attract private financing for every aspect of a transaction involving contaminated

• Blend cash, process incentives, and cash offsets to make a

project work – it’s all about partnerships!

• Focus on creative strategies, ideas, program applications
• Integrate R&R and view as economic development projects,

rather than only environmental challenges