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The Impacts of Brownfield Redevelopment Both Economically and Socially

 

ABSTRACT

At an alarming number of 450,000 brownfields in the United States (as estimated by the USEPA), they have become an important part of urban redevelopment. Out of the 450,000 brownfields estimated, Detroit, Michigan is home to about 1,000 of them (MDEQ 2017). This paper will emphasize the role of brownfield redevelopment in Detroit with the national level. Brownfield sites are often contaminated with hazardous pollutants, which hinder their full potential usage. Revitalizing these sites would prove to be beneficial for the surrounding neighborhoods, positively impacting both environmentally and socially. Under the CERCLA and Brownfield Law, the redevelopment and revitalization of these brownfield sites are actively promoted through grant funding. However, the environmental remediation and redevelopment of brownfields are not easy tasks. Liability and regulation reliefs, along with economic incentives are needed to attract communities, policymakers, and public and private organizations. Though, once they are attracted, the result of the remediation is beneficial. Cleanup of brownfield sites increases nearby housing values and positively impacts the welfare of the communities nearby (Haninger 2017). It also helps provide a space that fosters community, which increases the perceived value of properties in that community (Kotoval 2016). Additionally, a case study conducted in New Jersey (Greenberg et al 2000) showed that brownfields located in neighborhoods with high crime rates and poor and unsafe living conditions, seriously impact their surrounding neighborhoods and residents’, as well as the governments’, perception of those sites. Cleaning up brownfields would have a clear positive impact socially of those who live around them.


THE ROLE OF PUBLIC SECTOR IN DETROIT BROWNFIELD REDEVELOPMENT

Henry Ford’s invention of the assembly line changed the automotive industry forever, and the identity of the state of Michigan changed along with it. The start of mass production of Ford’s Model T on Piquette Avenue in Detroit in December 1913 marked the beginning of an age of prosperity for Southeast Michigan. A century later, it has left a legacy of contamination in its place. As of 2016 Detroit was home to over 1,000 brownfield sites according to the Michigan Department of Environmental Quality (MDEQ 2017). Detroit’s abandoned factories and overgrown lots have given the city a reputation across the world as city lost to the age of manufacturing.

Those in Michigan see the future of Detroit a little differently. Public, private and community partners across Michigan see the remediation of Brownfield sites as essential for revitalizing this area blighted by industrial decay and urban sprawl. In the past decade community partners both private and public have demonstrated a strong commitment to incentivizing the cleanup of these sites. The role of the public sector in the recycling of brownfield sites in southeast Michigan is essential to the redevelopment of Detroit. However, many see this role as public money going into the pockets of private investors (Perkins 2017). The public-private partnership, as it is referred, is essential to the redevelopment of Detroit.


HISTORY OF INCENTIVIZING BROWNFIELD CLEANUP ON A NATIONAL LEVEL

The United States Environmental Protection Agency (USEPA, or commonly noted as EPA) defines a brownfield site as “a parcel of real property at which expansion, redevelopment, or reuse may be hindered by the presence, or potential presence, of hazardous substances, pollutants, or contaminants” (EPA 2017). These sites are typically areas that are contaminated by low concentrations of hazardous materials and pose a lower risk to human health than other hazardous waste sites. Brownfield sites are excluded from the National Priorities List (NPL) – “list of sites of national priority among the known releases or threatened releases of hazardous substances, pollutants, or contaminants throughout the United States and its territories” (EPA 2017) – and the Toxic Substances Control Act of 1976. The EPA estimates that there are 450,000 brownfield sites nationwide.

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) established liability of contaminated brownfield sites as those who historically created the problem and those who now own the land, regardless of their role in the original contamination (Smith 2001). This is a huge deterrent to investors as they could now be liable for any contamination on land they purchase, and is especially concerning since the extent of contamination is usually unknown. As a result, incentivizing the cleanup of Brownfield sites is a main roadblock in recycling these lands. It is become a necessity for the public sector to step in and make brownfield sites a real option for those looking to invest in land.

The Brownfield Program, initiated by the EPA in 1995, aimed to help the public and private sectors in revitalizing these brownfield sites by providing grant funding. By initiating this Program, the USEPA anticipated an improvement for the environment along with an increase social and economic investments for these sites. It was not until the Small Business Liability Relief and Brownfields Revitalization Act of 2002, known as the Brownfield Law, however, that formalized the policies set forth earlier by the EPA in addressing this issue by creating funding sources through which brownfield redevelopment could be financed.

Since CERCLA was passed in 1981, the EPA has provided economic incentives for brownfield remediation in various forms. From 1997 to 2011, the EPA offered a tax break to investors. Today, the EPA offers 5 different types of brownfield grants: assessment grants, revolving loan fund (RLF) grants, cleanup grants, area wide planning grants, and Environmental Workforce Development and Job Training (EWDJT) grants (EPA 2017) (Table 1). 

Table 1. Types of Brownfield Grants as defined by the USEPA

epa 5 grants table

 

Along with creating new funding opportunities, the Brownfield Law also addressed part of the issue surrounding liability of contamination. If the prospective owner did their due diligence in determining the extent of site contamination and addressed problems that needed addressing, they were no longer liable for any future contamination found after that resulted from legacy use of the site.


ROLE OF LIABILITY, REGULATION, AND ECONOMIC INCENTIVES

Promoting the environmental remediation and redevelopment of brownfield sites is not an easy task. Market-based mechanism and incentives are needed to attract communities, policymakers, and public and private organizations. Though there are already positive reasons that attract redevelopment of brownfield sites, most investors still shy away from these potentially contaminated sites due to fear of becoming liable for the cost of cleanup as established by CERCLA. Alberini et al (2005) considered the point of view of key economic agents – private real estate developers - involved in making the decisions to brownfield redevelopments, and whether economic incentives and liability or regulatory reliefs would increase these brownfields redevelopment. It is apparent that developers value liability relief and they perceive contaminated sites, however big or small, as less attractive compared to regular sites. It is not a surprise to see that developers with prior experience are much more responsive and likely to deal with brownfields redevelopment than those without, but it is interesting to note that developers without prior experience are more likely to deal with redevelopment once presented with liability relief. The main determinants of a brownfield redevelopment came down to the revenues and costs of the project. These two factors drive the decision of the real estate developers whether to invest or not to invest on these brownfield sites.


ECONOMIC IMPACT OF REDEVELOPMENT

On the surface Brownfield Redevelopment funding looks to be the subsidization of private-for-profit entities through taxpayer dollars. There are many reason where this public-private partnership serves the public good.

Most immediately, helping private developers recycle brownfields brings land back into the local tax base. This increases the money available for local government services such as schools, roads, and fire departments. It also increases the value of surrounding land parcels. One EPA study saw an increase in residential property values of 5.1% to 12.8% after a nearby brownfield was assessed or cleaned up (EPA 2014). By repurposing this land, it makes the area more appealing, which increases the land value and thus the tax rate.

For this same reason, if brownfields are converted to public lands such as parks or other community spaces, the redevelopment indirectly increases tax revenue by increasing surrounding property values (DeSousa 2009). Even if the investment by local governments is not partnered with private entities, the redevelopment can help provide a space that fosters community, which increases the perceived value of properties in that community (Kotoval 2016).

Beyond the positive economic impacts that redeveloping these brownfields would have, companies also have an inherent incentive based on Detroit’s location. Detroit has the only deep water international port in Michigan. The Ambassador Bridge is also located in Detroit, and is known as the ‘number 1 international border crossing’ in the US due to the volume of imports and exports that cross it each year. This gives companies incentive beyond what a public partnership offers, a robust infrastructure already in place and an access to international trade.


EFFECT OF CLEANUP GRANTS ON HOUSING VALUES

The cleanup grants provide up to $200,000 to address hazardous substances and/or petroleum contamination at a brownfield site (EPA 2017). Grants given by the Program are seen to provide liability relief, which provided more assurance for the public and private organizations to redevelop these brownfield sites. Since the passing of the Brownfield Law, the EPA has awarded 924 cleanup grants totaling approximately $241.5 million (up to FY2017) (EPA 2017).

Haninger (2017) show those brownfield cleanups conducted under the Brownfield Program “yield a large, statistically significant, positive but highly localized effect on housing prices.” After cleanup, property value increases between 5% to 11.5%. This range falls within the range of estimated impacts (3% to 36%) based off previous studies and literatures (Ihlanfeldt and Taylor 2004; Mihaescu and vom Hofe 2012; Linn 2013; Savchenko and Braden 2014). One thing to note, however, Haninger (2017) limited its study to houses near at most one site within a 5-kilometer buffer and included sites taken from multiple states. The study concluded that “benefits for the majority of the cleaned sites … far exceed the cost” (Haninger 2017). On average, cleanup of a brownfield sites “passed the cost-benefit analysis by an order of magnitude based on the expenditures from the Brownfield Program.” Overall, cleanup of brownfield sites increased nearby housing values and positively impacted the welfare of the communities nearby.


SOCIAL IMPACT OF REDEVELOPMENT

The most obvious benefit of investing in brownfield redevelopment is environmental, but there are more social benefits to increasing the number of brownfields that are recycled than increasing habitat.

Brownfields have a real and adverse impact on the health of those who live by them (Lit 2002). Legacy contamination on brownfield sites impacts those who live around them. Wayne County ranks least healthy among Michigan’s 82 counties, and is home to the most brownfields. Though no concrete study was done to make a definitive connection between these two statistics, based on the known impact contaminants like heavy metals and petroleum byproducts, as well as definitive connections between health problems and brownfields elsewhere (Lit 2002), it is safe to say that cleaning up brownfields would have a clear positive impact on the health of those who live around them. A case study conducted in New Jersey (Greenberg et al 2000) highlighted the findings of the negative impacts of brownfields on social issues in the surrounding neighborhoods.

When the public sector invests in the cleanup of brownfield sites, they can ensure that the community has a say in how the land is to be used. Local agencies like the Detroit-Wayne County Brownfield Redevelopment Authority Coalition make sure the social needs of communities surrounding brownfield sites that are to be redeveloped are addressed. Public funding of brownfield sites ensures that public interests are considered. On a national level, EPA grants have requirements for community outreach built into them. These stipulations help ensure that communities have a long-term plan and infrastructure for making decisions regarding redevelopment. This is especially clear in the RLF Grant program. These grants give capital to an entity that loans money locally, and require that a board is in place to ensure projects align with the community’s future.


CASE STUDY: STRUGGLE FOR NEIGHBORHOOD REDEVELOPMENT IN THE STATE OF NEW JERSEY

Almost every municipality in New Jersey contain at least one contaminated sites as provided by the New Jersey Department of Environmental Protection (DEP), who maintains a list of potential brownfield sites. The study conducted by Greenberg et al (2000) included landfills and agricultural sites, but removed single gasoline stations to capture the serious neighborhood impacts due to these sites. The study also focused on a special type of brownfield site – temporary obsolete abandoned derelict site (TOADS). These sites are known to complicate brownfield redevelopments because they include contaminated buildings and land that can potentially ruin the surrounding neighborhood through pollution of the local environment. These sites also influence government and local residents that these are not livable and dangerous. Additionally, TOADS are not regulated nor secured, which lead to the existence of illegal activities, including dumping and illegal drug sales, driving the already negative perception of the site even lower. “TOADS … can destroy neighborhoods, lowering property values in the surrounding community, affecting property transactions, and requiring local government to change zoning in the surrounding neighborhoods” (Greenberg et al 2000). Some cases of TOADS include partially abandoned neighborhoods populated with the poorest and most vulnerable people with limited access to services and opportunities. Additional financial resources are needed to reestablish these TOADS and keep them from ruining a neighborhood.

Demographic characteristics of the 450 municipalities, divided into four sets: (1) without brownfields, (2) with brownfields but no off-site impacts, (3) with limited off-site impacts, and (4) with major off-site impacts, are compared in Table 2 below.

Table 2. Demographic Characteristics of New Jersey Municipalities with and without Brownfields (Greenberg et al 2000)

case study new jersey table 1

 

Table 2 shows the striking differences due to socioeconomic status and race. Out of the 46 municipalities with TOADS, 15 municipalities (dubbed as major-impacts brownfields) consisted of the “poorest populations, the least expensive housing, and the lowest proportion of white residents” (Greenberg et al 2000). These 15 municipalities also are the most populated jurisdictions. On the other hand, the 303 municipalities without TOADS, are those with the “most affluent residents, the most expensive housing, and the highest proportion of white residents” (Greenberg et al 2000).

The study showed that major barriers to brownfields redevelopment are indeed fear of liability and lack of capital investment. Stigmatization of the site also negatively impact the investment of these brownfield sites. “Brownfield sites associated with the most serious neighborhood impacts are disproportionately located in neighborhoods where the neighborhood has crime and other unsafe conditions, suffers from an erosion of its industrial employment base, and lacks services” (Greenberg et al 2000).


CONCLUSION

On the surface, brownfield remediation in the context of engineering practice seems like a relatively straight forward scientific issue. In practice, scientists and engineers who work in this field must have a strong handle on the far reaching social and economic impact these sites have on the surrounding community. To effectively help private and public interest groups work together to navigate the landscape of brownfield remediation, both environmental scientists and engineers must work in the framework of local and national brownfield policy. They are required to consider the cost of cleaning up brownfield sites, while also looking out for the interest of the communities as required by funding sources. This paper aimed to lay out the basics behind brownfield policy using Detroit, Michigan as a backdrop. This paper looked at how public-sector involvement in brownfield remediation can help communities grow economically and socially. The complex impact brownfield sites have on communities are demonstrated by looking at case studies. Without understanding the context of how these sites came to be, the often disadvantaged communities in which these sites are located, and the plans local communities have for their future, both environmental scientists and engineers cannot advise private-public partnerships effectively on how to go about recycling these lands.


REFERENCES

Alberini, A., Longo, A., Tonin, S., Trombetta, F., & Turvani, M. (2005). The Role of Liability, Regulation and Economic Incentives in Brownfield Remediation and Redevelopment: Evidence from Surveys of Developers. Regional Science and Urban Economics, 35(4)(4), 327-351.

Greenberg, M., Lowrie, K., Solitare, L., & Duncan, L. (2000). Brownfields, TOADS, and the Struggle for Neighborhood Redevelopment: A Case Study of the State of New Jersey. Urban Affairs Review, 35(5), 717-733.

Haninger, K., Ma, L., & Timmins, C. (2017). The Value of Brownfield Remediation. Journal of the Association of Environmental and Resource Economists, 4(1), 197-241.

Ihlanfeldt, K. R. & Taylor, L.O. (2004). Externality Effects of Small-Scale Hazardous Waste Sites: Evidence from Urban Commercial Property Markets. Journal of Environmental Economics and Management, 47(1), 117–139.

Kotval-K, Z. (2016). Brownfield Redevelopment: Why Public Investments Can Pay Off. Economic Development Quarterly, 30(3), 275-282.

Linn, J. (2013). The Effect of Voluntary Brownfields Programs on Nearby Property Values: Evidence from Illinois. Journal of Urban Economics, 78, 1–18.

Litt, J., Tran, N., & Burke, T. (2002). Examining Urban Brownfields through the Public Health “Macroscope”. Environmental Health Perspectives, 110(2), 183-193.

MDEQ. (2017). Environmental Mapper. Retrieved from http://www.mcgi.state.mi.us/environmentalmapper/.

Mihaescu, O. & vom Hofe, R. (2012). The Impact of Brownfields on Residential Property Values in Cincinnati, Ohio: A Spatial Hedonic Approach. Journal of Regional Analysis and Policy 42(3), 223–236.

Perkins, T. (2017). Detroit City Council approves $250M in taxpayer money for Dan Gilbert. Detroit Metro Times. Retrieved November 2017, from https://m.metrotimes.com/news-hits/archives/2017/11/21/detroit-city-council-approves-250m-in-taxpayer-money-for-dan-gilbert.

Savchenko, O. & Braden, J. B. (2014). Economic Value of Sustainable Brownfield Redevelopment. Working paper, University of Illinois at Urbana-Champaign.

Smith. (2001). Brownfields Revitalization and Environmental Restoration Act of 2001. United States Senate, 107(1). Retrieved November 2017, from https://archive.epa.gov/region1/brownfields/web/pdf/legislativehistory.pdf.

Sousa, C. A., Wu, C., & Westphal, L. M. (2009). Assessing the Effect of Publicly Assisted Brownfield Redevelopment on Surrounding Property Values. Economic Development Quarterly, 23(2), 95-110.

USEPA. (2015, July). The EPA Brownfields Program Produces Widespread Environmental and Economic Benefits. Retrieved November 2017, from www.epa.gov/sites/production/files/2015-09/documents/brownfields-benefits-postcard.pdf.

(2017, September). FY18 Guidelines for Brownfields Cleanup Grants. Retrieved November 2017, from https://www.epa.gov/sites/production/files/2017-09/documents/17-09.pdf

(2017, November). Fact Sheets for Brownfields Grant Awardees Guidelines and Resources. Retrieved November 2017, from https://cfpub.epa.gov/bf_factsheets/.

(2017, November). Overview of the Brownfields Program. Retrieved November 2017, from https://www.epa.gov/brownfields/overview-brownfields-program.

(2017, November). Superfund: National Priorities List (NPL). Retrieved November 2017, from https://www.epa.gov/superfund/superfund-national-priorities-list-npl.


 

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