Brownfield Redevelopment and Urban Economies
Allardice, David R., Mattoon, Richard H., Testa, William A., Chicago Fed Letter
Economic development policymakers are energetically devising strategies to return idle or abandoned industrial sites -- so-called brownfields -- to productive use. The most ardent proponents expect the benefits to be twofold. First, they believe brownfield redevelopment can help attract jobs back to the central cities, where unemployment runs high and where some popular notions of justice suggest that the wealth-generating activities of the past should not be a costly legacy to the nation's urban poor. Second, many argue that urban-oriented brownfield redevelopment policies are needed to offset the current biases toward greenfield development that tend to produce urban sprawl. Pristine greenfields are often cheaper to develop, but the regionwide effects of such development may be less beneficial as congestion, environmental degradation, and other growth-related problems can accompany spurts of development on the urban fringe.(1)
While the potential benefits of brownfield redevelopment are substantial, unfortunately so are the barriers. These sites are popularly referred to as brownfields because they often are contaminated with pollutants and environmental hazards that require extensive remediation before new construction or redevelopment is possible. The challenges to redeveloping urban brownfields extend well beyond the difficulties of cleaning them up. Urban development that aims to restore bustling factories employing semi-skilled workers at high wages may be particularly hard to achieve given changes in transportation practices and modes of production. In many cases, because of the changing industrial base of cities, non-industrial development is more likely on brownfield locations, but such development often requires more stringent and therefore more costly cleanup. Successful brownfield redevelopment strategies will require creativity and must address both economic and environmental constraints.
The environmental issue and CERCLA
The backdrop to brownfield redevelopment is the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).(2) This federal legislation established the Superfund Program for identifying and cleaning up contaminated sites throughout the U.S. Superfund has been criticized because it potentially assigns responsibility for site cleanup to current or prospective property owners (and perhaps lenders), even if they never contributed to the contamination. This responsibility can have the effect of freezing redevelopment rather than accelerating it. Current owners may choose to fence in or disguise currently contaminated sites rather than expose their liability to cleanup during the sales transaction process. At the same time, prospective buyers may be reluctant to purchase sites with uncertain but potentially steep cleanup costs. The U.S. Environmental Protection Agency estimates that a survey of an industrial site can cost from $1,000 to $10,000; drilling and testing soil core samples can cost as much as $70,000.(3) These efforts only establish the extent of the environmental problem; if a cleanup is required, costs can rapidly escalate.
Several states have enacted measures to address the "who pays?" problem of CERCLA. One of the most popular has been to issue a liability release to the owner of a brownfield site once the site has been cleaned up and certified for redevelopment. Minnesota has been a leader in this area, providing financial assistance to the prospective purchaser to conduct assessments of the site's condition.(4) The prospective purchaser then submits a cleanup plan to the state. Once it is approved, the purchaser undertakes the cleanup and is thereupon released from further liability. While this plan frees the owner from state liability, federal liability stays in effect. If similar cleanup standards and release from liability could be extended to federal rules and regulations, then these state programs would become even more effective. …