Wisconsin DNR Launches Industrial and Commercial Facilities Recovery Initiative
Public Finance Law Update 03/16/10 George J. Marek, Alexander J. Gore
On March 1, 2010, the Wisconsin Department of Natural Resources ("DNR") launched a new program focused on industrial and/or commercial facilities that have recently closed. Called the Wisconsin Plant Recovery Initiative ("WPRI"), this initiative is designed to help businesses - and the municipalities in which they are located - speed up the cleanup and revitalization of plants that have shut their doors.
Elements of the Initiative
Similar to other states across the country, Wisconsin has seen a large number of recent business and plant closings. In addition to lost jobs and local business, plant closings can result in real or perceived environmental contamination that may inhibit subsequent efforts to clean up and redevelop those properties. In short, this can create new "Brownfields" sites.
The WPRI was designed with the goal of speeding up the return of shuttered industrial and other commercial facilities to productive use which will, in turn, encourage new jobs.
The WPRI is spearheaded by the DNR's Remediation and Redevelopment ("RR") program, which oversees the cleanup of contaminated properties, including Brownfields sites. Under the WPRI, RR program staff will coordinate with other programs within the DNR, as well as other state agencies, to help communities and businesses address environmental issues early on, at the front end of the facility closure process.
The DNR's RR staff will review plant closing notices, and will work on a two-pronged basis to contact both the company officials and local government officials where the closing facility is located. Separate letters will be sent to the closing facility and the municipality. The DNR letter to the municipality will focus on how the municipality may wish to become involved to expedite the return of the closing facility to productive use. It will also discuss the legal and financial resources available to assist in the assessment, cleanup and redevelopment of the property.
Among the specific cleanup and redevelopment tools offered to municipalities are the following:
- DNR staff assistance on identifying regulatory, environmental and financial issues, including Green Team meetings with RR program staff;
- Financial assistance for investigating the scope of contamination and the subsequent cleanup of that contamination; and
- Providing liability exemptions and liability clarification letters for municipalities and private parties.
Benefits to Municipalities of Acquiring a Brownfield Site
Municipal ownership of a Brownfield property opens doors to federal and state grants while protecting the municipality from liability under certain provisions. On a practical level, in many instances ownership of a Brownfield site by the municipality is considered beneficial for interested developers rather than negotiating with the private owners of those sites. Additionally, a municipality that owns a Brownfield can obtain certain grants for Brownfield investigation and cleanup, thereby making the property more attractive for redevelopment. Finally, municipalities have an interest in preventing the problems that Brownfields can cause such as harm to human health and the environment, reduced tax revenue and economic growth, blight, and attraction of illegal activity.
Liability Protection Tools Available to Municipalities
A municipality that chooses to become involved with a Brownfield site has a variety of tools to limit its environmental liability. Under Wisconsin law, a local government unit, which includes municipalities, redevelopment authorities, community development authorities and housing authorities can take control of and redevelop a Brownfield site without incurring liability for environmental investigation and cleanup if it acquires the site by tax delinquency; condemnation; bankruptcy proceedings; eminent domain; slum clearance or blight elimination, among other methods. A local government unit is not responsible for investigating or cleaning up hazardous substances, including contaminated soil and groundwater, at property acquired through one of these methods as long as it meets certain requirements, including the following: it did not cause the contamination; it restricts access to the property; it samples and analyzes unidentified substances in aboveground containers; it removes and properly disposes of, or properly stores, hazardous substances in aboveground containers that are leaking or likely to leak; it immediately reports the presence of hazardous substances to the DNR; and it takes other necessary actions to reduce substantial threats to the environment. There is no need for a local government unit to get DNR approval for this liability protection.
In addition, municipalities that acquire contaminated property "involuntarily" are exempt from the federal CERCLA (Superfund) law. See Section 101(20)(D) of CERCLA. The U.S. EPA has determined that if a municipality acquires property involuntarily through tax delinquency, foreclosure, demolition lien foreclosure, escheat, abandonment, condemnation, or eminent domain, it will not be held liable as an "owner" or "operator" under the Superfund law even though these forms of acquisition require some action by the LGU. This policy was codified in the Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996. The exemption does not apply if the municipality caused or contributed to the spill on the property.
Other liability protection and clarification tools are available in Wisconsin, both to municipalities and future private redevelopers, to manage and limit the scope of environmental liability associated with a Brownfield site. One such tool is the Voluntary Party Liability Exemption ("VPLE") program. Under the VPLE program, a private party who acquires a Brownfield site from a municipality can conduct the necessary investigation and remediation of any discharged hazardous substances to receive a certificate of completion. The certificate exempts the private party from most future liability under the Hazardous Substance Discharge Law and certain other hazardous and solid waste laws. The certificate can be transferred to a future owner of the property as long as the future owner continues any required maintenance or monitoring of the property.
Some of the other liability tools available include General Liability Clarification ("GLC") letters and the Wisconsin Brownfields Insurance Program ("WBIP"), designed to help protect against unknown environmental liability at sites.
Financial Incentives for Municipalities Acquiring Brownfields
There are numerous state and federal financial tools and incentives available to municipalities acquiring Brownfields.
State grant and loan programs include:
- WPRI Assessment Monies ("WAM"). Funds are available to municipalities to hire environmental consultants for investigating environmental contamination, including Phase I and II site assessments. Grants can be up to a maximum of $200,000. The WPRI has $1,000,000 total funding available under the program. Ninety percent of the funds will be devoted to sites with real or perceived hazardous substance contamination, with the rest available for sites with real or perceived petroleum contamination. The municipality does not have to own the brownfield site but must have access to it. Applications are currently being accepted by the Wisconsin DNR.
- Blight Elimination & Brownfield Redevelopment ("BEBR") Grants. Cities, villages, towns, counties, tribes, non-profit organizations, individuals and business are eligible for BEBR grants for property acquisition, Phase I and II environmental site assessments, investigation, cleanup, removal, demolition, rehabilitation of buildings and redevelopment. Grants can be up to a maximum of $1,250,000 and require a 20 to 50 percent match depending on the size of the grant. Applications may be submitted to the Wisconsin Department of Commerce at any time.
- Brownfield Site Assessment Grants ("SAG"). Brownfield SAGs fund the preliminary steps of site assessment which lead to eventual cleanup, including Phase I and II site assessments, environmental investigation, demolition, removal of underground storage tanks and removal of abandoned containers. Cities, villages, towns, counties, tribes, redevelopment authorities, community development authorities and housing authorities are eligible for the grants for industrial or commercial facilities that are abandoned, idle or underused, and that are adversely affected by actual or perceived environmental contamination. Grants can range from $2,000 to $100,000 and are awarded on a competitive scoring system administered by the Wisconsin DNR.
- Brownfield Green Space and Public Facilities Grants. These grants are available to cities, villages, towns, counties, tribes, redevelopment authorities, community development authorities and housing authorities that have already completed Phase I and II Environmental Site Assessments for cleanup of sites that will be used by the public in the future. Grants can be used for preparation of a remedial action plan and environmental cleanup and can reach a maximum of $200,000 with up to a 50 percent match required. Recipients of grants must keep the property in public ownership or control for at least 20 years. Applications can be made to the Wisconsin DNR.
- Ready for Reuse Loan & Grant Program. The Ready for Reuse program is administered by the Wisconsin DNR and funded through the EPA Revolving Loan Fund. Funds are available to cities, villages, towns, counties, tribes, town sanitary districts, county utility districts, redevelopment authorities, community development authorities, housing authorities and non-profits that own sites that meet the federal Brownfield definition, which is "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." Funds can be used to pay the cost of cleanup, finalization of a remedial action plan, demolition or site preparation if necessary to implement a remedial action plan, asbestos abatement, short-term site monitoring, environmental consulting fees, public participation costs and Wisconsin DNR fees. The maximum grant size is $200,000, although zero-interest loans may be larger, and require a 22 percent match.
- Other programs include: Coastal Management Grants; Local Transportation Enhancements Program; Stewardship Grants; Transportation Economic Assistance Grants; Agricultural Chemical Cleanup Program; Petroleum Environmental Cleanup Fund Awards; and State Trust Fund Loans.
Federal grant and loan programs include:
- Brownfields Assessment Grants. These grants are available to cities, villages, towns, counties, tribes, redevelopment authorities, housing authorities and regional planning commissions. They can be used for planning, Phase I and II site assessments, investigation, removal of petroleum tanks and remediation planning and design. Applications can be site-specific and/or community-wide, and the applicant does not need to own the property.
Site-specific grants can be up to a maximum of $350,000 while community-wide grants are capped at $200,000 each for petroleum and hazardous substances assessments. However, a coalition of governments can apply for up to $1 million in funding. Applications are made to the U.S. EPA and must include a letter of support from the Wisconsin DNR.
- Brownfields Site Cleanup Grants. These grants are for specific Brownfield sites designated by the applicant and are available to the same entities as Brownfields Assessment Grants as well as to non-profit organizations. Applicants must own the property and need to have completed a Phase I site assessment. Grants up to $200,000 can be used for cleanup, demolition and removal, if removal is not a major component of the expenses. There is a 20 percent cost share requirement that can be satisfied with either money or services but may be waived for hardship. Additionally, there are specific requirements for community involvement, including public notice and consideration of public input. Applications are made to the U.S. EPA and must include a letter of support from the Wisconsin DNR.
- Brownfields Revolving Loan Fund ("RLF") Grants. RLF grants are available to the same entities as Brownfields Assessment Grants. Grants can reach a maximum of $1 million and include a 20 percent cost share requirement. Eligible costs are cleanup, removal of underground tanks and containers, and demolition. Applications are made to the U.S. EPA and must include a letter of support from the Wisconsin DNR, a statement of legal authority to manage a revolving loan fund, and a statement of legal authority to obtain access to contaminated properties.
- Other federal grant programs include Brownfield Economic Development Initiative ("BEDI") Grants and Community Development Block Grants ("CDBG"), both administered by the U.S. Department of Housing and Urban Development.
In addition to grant and loan programs, tax incentives for municipalities acquiring Brownfields include:
- Cancellation of delinquent county property taxes for property owners or potential purchasers of Brownfield sites. The property owner or purchaser must have completed a Phase II site assessment that demonstrated contamination of the property. Counties can elect to cancel all or a portion of the delinquent property taxes. Additionally, the owner or purchaser must have entered into an agreement with the Wisconsin DNR to clean up the property. Counties can elect to cancel all or a portion of the Creation of Environmental Remediation Tax Incremental Financing ("ER TIF") Districts. Cities and villages can create ER TIF districts that function similar to regular TIF districts, except that ER TIF districts are created specifically to address Brownfields. Key differences include the elimination of the 12 percent limit on the municipality's equalized value, a 15-year project expenditure period instead of 5 years and an eligible base value of $0. Planning, property acquisition, Phase I and II site assessments, investigation, removal of storage tanks, cleanup and demolition are all eligible project costs.
- Creation of Environmental Remediation Tax Incremental Financing ("ER TIF") Districts. Cities and villages can create ER TIF districts that function similar to regular TIF districts, except that ER TIF districts are created specifically to address Brownfields. Key differences include the elimination of the 12 percent limit on the municipality's equalized value, a 15-year project expenditure period instead of 5 years and an eligible base value of $0. Planning, property acquisition, Phase I and II site assessments, investigation, removal of storage tanks, cleanup and demolition are all eligible project costs.
In conclusion, the WPRI is the Wisconsin DNR's attempt to clarify and spotlight environmental responsibilities and municipal opportunities at closing industrial and commercial facilities.
However, municipalities should not rely solely upon the information and guidelines provided by the DNR. There are multiple legal responsibilities and practical considerations surrounding the acquisition and redevelopment of a Brownfield site. To fully understand those obligations and opportunities, one must address technical, legal and business factors. If you have any questions, please contact George Marek at firstname.lastname@example.org / 414-277-5537, Alex Gore at email@example.com / 414-277-5719 or your Quarles & Brady attorney.