Legislative Program Review and Investigations Committee

Brownfields In Connecticut
Final Report
December, 1998

Brownfields In Connecticut

Introduction:

In recent years, growing awareness of environmental issues, paired with concern about liability for cleaning up contaminated property, has increased the attention given to the environmental condition of properties with a potential for redevelopment. A term used increasingly to describe abandoned or underutilized sites with real or perceived environmental problems is "brownfields."

Brownfields can exist anywhere, and the fear of unknown problems can be as detrimental to development of a site as heavy contamination. Although the resolution of environmental concerns cannot ensure a project will go forward, the existence of such concerns can prevent parties from even considering revitalization of a site.

In March 1998, the Legislative Program Review and Investigations Committee approved a study of Brownfields in Connecticut . The purpose of the review was to look at how environmental concerns about properties affect economic development efforts and the response the state should take to deal with the issue.

As part of the study, the committee examined the roles of governmental entities and private parties involved in the solution to problems associated with sites labeled as brownfields. Other tasks during the study included clarifying what is meant by the word "brownfields" and determining the programs and tools currently available to assist in the identification and remediation of environmentally contaminated properties.

In September, the program review committee held a public hearing on brownfield-related issues. The committee also sent a survey to all towns in the state to determine the number of brownfields and the level of awareness of existing brownfield programs. Mechanisms used by other states to deal with brownfields were also examined.

The program review committee found Connecticut already has in place many of the key tools and programs considered important for dealing with brownfields. A number of these elements are new, and additional time will be needed to fully assess their success rates. However, many appear to be working as intended. As a result, committee recommendations focus on clarification of statutory provisions and fine-tuning operating procedures for specific programs. The allocation of financial resources for brownfields is also addressed.

Report Format

This report contains four chapters. The first discusses the concept of brownfields. The second describes the roles of various governmental entities and private parties involved with brownfields. The third profiles existing brownfield-related programs and tools. The fourth chapter presents the committee's findings and recommendations. Appendix A presents the results of the survey sent to municipalities.

Agency Response

It is the policy of the Legislative Program Review and Investigations Committee to provide agencies subject to a study with an opportunity to review and comment on the recommendations prior to publication of the final report. Responses from the Department of Economic and Community Development (DECD) and the Department of Environmental Protection (DEP) are contained in Appendix B.

CHAPTER ONE

Concept of Brownfields

Scientific knowledge about the effects of chemicals increased considerably during the twentieth century. This information has enabled society to take steps to protect the environment, including the adoption of standards for handling and disposing of a variety of materials.

Property can become environmentally contaminated either willfully or unintentionally by a release of materials in a manner or to a degree that violates existing standards. The release may occur on-site or result from an off-site incident. In some cases, new information about the interaction of elements may mean a practice that was previously allowed at a site is no longer acceptable.

At some point, the residue from such releases must be evaluated to determine what, if any, cleanup is required. The time frame for making that assessment and performing any required remedial work varies, depending on the type and amount of material discharged and the use made of the property in question.

For example, a site where a large quantity of highly toxic material spilled near a source of drinking water would be dealt with rapidly. On the other hand, a site where a former business may or may not have used a material subsequently found to be of environmental concern might not be reviewed until a change in land usage or ownership is anticipated. Similarly, a site where housing is to be built must meet a higher environmental standard than a parcel where a factory is being built.

In the 1980s and 1990s, regions that previously enjoyed a large industrialized base of employment sought to create new economic opportunities. During this same period, a growing awareness of environmental concerns among lenders, developers, and potential property owners created a reticence on the part of some to become involved with land known or perceived to have environmental problems. The result was another obstacle for those interested in redevelopment.

About the same time, efforts were increasing to keep properties never exposed to environmental pollution -- sites known as "greenfields" -- from being developed for commercial purposes. As an alternative, redevelopment of properties that had already been used for commercial purposes was encouraged.

Owners of the sites with questionable environmental histories, including lenders and municipalities that inherited such properties due to abandonment or foreclosure, began to search for remedies. Seeking a shorthand reference for the problem, the term brownfields came into usage.

Definition

Generally the word brownfields is used to refer to abandoned or underutilized sites with known or perceived environmental contamination. However, written materials and conversations with people who are familiar with the issue indicate no single definition is currently in use.

Some definitions of the word are expansive, while others are quite restrictive. In practice, the meaning varies, depending on the speaker and the context of the reference. The U.S. Environmental Protection Agency (EPA) defines brownfields as:

The different elements of this description are important to note.

First, the definition places no limits on the geographical location of the site. Some assistance programs that help clean up environmental contamination limit eligibility to properties located in industrialized areas. Other programs provide aid to sites located in communities that meet specific criteria, such as high unemployment. People sometimes think of brownfields solely as an urban problem. This is not true. The history of industrialization in regions of the country such as the northeast means buildings previously used as factories might also be located in areas that are now suburban or rural. Although eligibility criteria may limit participation in a specific program, a brownfield can exist in any town.

Second, the EPA definition specifies the properties in question are not being used to their full potential. In some cases, this would mean an expansion of an existing enterprise is possible. In other cases, the use of the site, the ownership, or both would change. Properties with ongoing, fully operational businesses on a site may have environmental problems that have to be addressed. However, unless they have the potential to be more economically productive, they would not be labeled as brownfields.

Third, the reference to abandoned sites raises the issue of owner responsibility. A private lender or municipality may control a site temporarily because the owner has disappeared or defaulted on loans or taxes. Concern about how long it will take and what additional resources may be required to recoup their financial interest in a property with environmental problems may make them cautious about foreclosing on such a site.

Redevelopment can also be hindered in cases where the owner is known and still involved with the property. Eligibility for some environmental assistance programs is limited to parties that were not involved in creating the contamination. Determining responsibility for past events at a site can take time. And, when the responsible party is the owner, he or she may not have the financial ability to undertake the cleanup.

Lastly, the EPA definition acknowledges the environmental concerns related to a brownfield property may be real or perceived. In the case of known contamination, the cost and amount of time required to remediate a specific site will affect development interest in the property. However, fear of unknown problems at a site can be even more detrimental. A potential developer, faced with unknown liability and at risk for a high payout in the future, may lose interest in a site. Or, an owner, concerned that knowledge about the scope of contamination will bring liability and expenses, will avoid having the environmental condition of the property assessed.

The state of Connecticut has not established a statutory or regulatory definition of brownfields. Staff from the Department of Economic and Community Development uses the EPA definition of brownfields, while the Connecticut Development Authority (CDA) considers a site or building that is not used or is underutilized because of pollution problems to be a brownfield.

Department of Environmental Protection staff indicated they do not generally use the term brownfields in dealing with contaminated sites. The department is interested in sites being cleaned up, but the reasons vary from public health concerns to economic development efforts. If a site being designated as a brownfield makes other parties interested in cleaning it up, then the department is interested in working with them to achieve that goal.

The flexibility of Connecticut's current approach toward defining brownfields has been preferable to a statutorily specified description. Several of the state assistance programs targeted at brownfields focus on particular types of environmental problems (e.g., dry cleaning establishments) or categories of towns (e.g., distressed municipalities). At the same time, many of the environmentally related tools and programs available to deal with brownfield sites are available to other types of properties as well.

Under certain programs, the terminology connected with handling brownfield sites can also have different meanings. Words such as "identification," "investigation," and "assessment" have general dictionary definitions. The words also may have statutorily defined meanings, describing actions that must occur, for purposes of compliance with certain state programs.

In order to discuss the issues surrounding brownfields during the committee's study, it was helpful to have an operational definition of the term. Rather than create a new definition, the study used the EPA definition.

Development Factors

As the supply of undeveloped land diminishes, underused sites attract attention from people seeking to start or expand a business. The likelihood a particular piece of property will be used for economic development purposes is shaped by a number of factors. These include the acreage of the property, the dimensions and layout of any existing structures, zoning restrictions, the accessibility of transportation and other infrastructure concerns such as sewers, the characteristics of the area surrounding the property, local property taxes, and the purchase or lease price. Figure I-1 summarizes the major factors affecting development.

Depending on the potential use of a site, some factors may be more important than others. Properties being redeveloped to expand or create new manufacturing facilities require a pool of workers, while sites for distribution warehouses may need access to rail lines or airports. If the intended use is residential, proximity to schools may be more desirable.

In all cases, the environmental condition of the property must be considered. Growing awareness of environmental issues, paired with concern about liability for cleanup, has increased the attention given to this characteristic of sites with the potential for redevelopment. The most common contamination at sites labeled brownfields involves chemicals adversely affecting soil or groundwater. In addition, there may be issues such as asbestos and lead paint within structures located on a site.

Since a key characteristic of a brownfield is the potential for increased economic use, it is important to examine that factor realistically, weighing environmental problems against other features. For example, even if a site is environmentally clean, a poor geographic location could remain a barrier to new development.

It is also important to recognize people may mean different things when they speak of "economic development." Typically, this phrase has meant jobs. It also may be used to encompass projects that enhance quality of life. This perspective expands the range of uses for brownfields to include options such as parks and housing (although the latter requires meeting a higher standard of remediation). In general though, most brownfield efforts continue to focus on industrial and commercial development projects.

While people in a community with environmentally contaminated property might prefer all such sites be cleaned up, that is not possible when financial resources are limited. Indeed, another factor affecting the assessment, remediation, and redevelopment of brownfields is the overall condition of the economy.

The price someone is willing to pay for a site is based on its cost relative to the return the owner expects to receive from whatever activity is undertaken on the property. In the case of a brownfield, the cost of the site includes the expenses associated with the remediation of the property.

In many cases, the cost of remediating a brownfield will be greater than the cost of adding infrastructure (e.g., roads, sewers, utilities, etc.) to a comparable clean site (a "greenfield"). Although the actual costs for each can vary widely, the relative cost of the brownfield is often assumed to be higher than the greenfield.

When the economy is booming this differential is less important than when economic activity is low. In good economic times, estimated rates of return on land investment can be positive even if remediation costs are high. When the economy slows, overall competition for land declines. As a result, remediation costs can push down estimated returns on a brownfield to a negative level, causing interest in remediating brownfields to diminish.

CHAPTER TWO

Roles and Responsibilities

The activities undertaken in connection with and at brownfields will vary, depending on the condition of the sites and the immediacy of the opportunities for redevelopment. In some cases, after a site is identified as a brownfield, little further action will occur. In other cases, the brownfield label will represent the start of a process with multiple phases.

One of the first actions related to a site should be a realistic examination from an economic development perspective. The challenge is to weigh the environmental problems of the property against its other features. Although a primary characteristic of a brownfield is the potential for increased economic use, every site has a different value. Even if a site is environmentally clean, a poor geographic location, for example, will remain a barrier to development.

Once a site has been identified as a brownfield before it can be put to a new use, one or more activities have to occur. These include:

The assessment phase is crucial since the results will be used to determine what additional steps have to be taken at a site. For properties deemed brownfields because of perceived environmental problems, if no pollution is found, no other activities will be necessary. For sites with problems, the planning and the cleanup phases will become very important.

Another issue concerns when to undertake the various steps in the process. Sometimes activities are initiated in anticipation of future interest in a site. In other cases, those controlling a site might wait for declared interest. Moving forward requires access to financial resources to pay for the assessment and cleanup. Waiting carries the risk that work will not be completed in time to meet the needs of a potential buyer or developer.

Both public and private entities are involved in activities connected with brownfields. State assistance is available to help with the identification, assessment, and remediation of brownfields. On the local level, towns take varied approaches toward dealing with brownfields, while private sector involvement can cover a wide range of activities. Federal aid includes technical and financial assistance. Table II-1 summarizes the roles of the major participants involved with brownfields in Connecticut, with more detailed descriptions of their activities presented in the text below.

State Agencies

The Department of Economic and Community Development and the Department of Environmental Protection share responsibility for the state’s major programs involving brownfields. The quasi-public Connecticut Development Authority also has a role. State efforts focus on balancing the economic and environmental components of the issue. Financial and staff resources are available to assist with the identification, assessment, and remediation of brownfields.

Department of Economic and Community Development . The Department of Economic and Community Development helps individuals and businesses with plans to expand economic activity in the state identify sites that will meet their needs. Redevelopment of brownfields may result, but it is not the primary focus of the department's efforts.

DECD staff indicated they try to pull together the best package of elements for each development project they work on. Rather than starting with the parameters of a specific program and searching for projects that could be helped by it, they determine what resources are required for a specific project and try to meet those needs using a variety of programs.

As part of this effort, DECD staff meets with developers, corporate officials, municipal leaders and staff, property owners, and financial backers among others. DECD staff also may serve as brokers between parties interested in development and the state agencies whose involvement is necessary for a project to move forward successfully. DECD staff works particularly closely with the Department of Environmental Protection.

DECD staff in the Infrastructure and Real Estate Division has primary responsibility for coordinating several statutory financial assistance programs targeted at brownfields. These are the Dry Cleaning Establishment Remediation Fund, the Special Contaminated Property Remediation and Insurance Fund (SCPRIF), and the Urban Sites Remedial Action Program (USRAP). In addition, the department operates the Economic Development Initiative Sites (EDI) program in conjunction with the urban sites program. DECD staff provides technical assistance to businesses that have private funding available but need help maneuvering through the state regulatory process. (These programs are described in greater detail in Chapter Three.)

Four departmental employees spend time on one or more of these programs. None spends all of his or her time on brownfield activities. Table II-2 lists the estimated full-time equivalent (FTE) staff assigned to each brownfield program since state FY 94.

Connecticut Development Authority. In the past, the relationship of the Connecticut Development Authority to brownfields was indirect. CDA has provided assistance to many projects in recent years, some of which may have involved brownfields. However, those sites were not targeted for funding because of that label.

As a result of Public Act 98-253, CDA's involvement with brownfield issues expanded on October 1, 1998. Under that act, CDA is allowed to establish quasi-public subsidiaries to work in coordination with DEP "to stimulate, encourage and carry out the remediation, development and financing of contaminated property" in Connecticut. The authority can provide financial, developmental, and environmental expertise to businesses, municipalities, and other parties.

At least half of the members of the board of directors of such a subsidiary must be members, designees, officers, or employees of CDA. At the end of 1998, the authority was in the process of creating the new entity that will oversee the brownfield-related activities of the authority. In anticipation of its increased role, CDA is planning to hire an additional staff person and compile a preliminary inventory of brownfield sites in the state.

Department of Environmental Protection . DEP becomes involved with brownfields in a variety of ways. Indeed, many of the tools that will be described in Chapter Three come under the jurisdiction of DEP. However, like the other agencies already mentioned, some of the same tools may be used by DEP staff for sites that are not brownfields.

The primary consideration of DEP relative to brownfields is the effect that any pollution at such sites will have on the groundwater in the area. The department focuses on identification and quantification of problems at such sites with the goal of reducing contamination.

In its dealings with brownfields, DEP tries to balance the relationship between economic development and environmental priorities. For many years, DEP staff was only involved with remediation efforts in cases where the department had issued an order requiring cleanup or the property was about to be transferred. In recent years, statutory support for voluntary cleanup efforts and the availability of supplemental resources such as licensed environmental professionals have allowed the department to expand the breadth of the assistance it provides.

Statutorily mandated regulations setting standards for the remediation of polluted soil and water at hazardous waste disposal sites and other properties subject to a spill have also been adopted. The regulations include criteria for allowable levels of specified substances and formulas for calculating those concentrations.

DEP staff from the Permitting, Enforcement and Remediation Division of the Bureau of Water Management work in partnership with DECD staff on many brownfield-related activities. The tasks performed include administrative duties, site investigations, supervision of cleanup activities, and documentation reviews.

For the past six years, DEP has had between seven and eight full-time equivalent staff involved with the USRAP program, including the EDI component. The equivalent of one-quarter person currently works on the SCPRIF program. Only a small amount of staff time is spent directly on activities related to the dry cleaning program, but agency staff regularly work with dry cleaning establishments on other environmental issues.

Another seven FTE staff are directly involved with implementation of the property transfer act, which is described in Chapter Three. There are also two FTE staff involved in discovery and assessment activities related to state remediation projects.

Local Agencies

Many local and regional governmental bodies in Connecticut are active participants in efforts to deal with brownfields. Some became involved as owners of sites; others try to help local taxpayers find more productive uses for their properties. In the past four years, more than a dozen towns have received federal grants for pilot projects to identify and remediate brownfields.

Preparation of a brownfield inventory is a key task individual towns can perform. Besides identifying properties with environmental problems, the lists should include information about other characteristics of the sites that will allow interested parties to measure the development potential of the properties. In many of the state’s larger cities, economic development offices maintain lists of brownfields to use when working with individuals or businesses that might be in a position to bring increased economic activity to the area.

The need to recoup value for unpaid taxes in many cases may lead a municipality or other regional taxing authority to seek control over a site. Obtaining control over a site, whether to use it for the town's own purposes or to sell it to return it to the tax base, forces a municipality to deal directly with assessment and remediation activities.

Depending on other characteristics of a brownfield, a town may offer the owner or developer the same package of incentives it would provide to other development projects. The state's enterprise zone program is an example of an economic development tool geared to a wider audience than brownfields, but which can be used to aid brownfields. Under that program, tax incentives are available to eligible manufacturing businesses locating in certain geographic areas. Likewise, municipalities can ask CDA to issue tax incremental financing (TIF) bonds for specified projects in redevelopment areas. These projects could include brownfields.

Under state law, towns can offer special tax treatments to properties with pollution problems being cleaned up. A municipality can abate property taxes on an environmentally impacted site for up to seven years while it is being redeveloped and remediated. Although the process, eligibility, and notification provisions changed on October 1, 1998, abatements continue to be allowed. As of that date, for certain properties, towns are also allowed to forgive delinquent property taxes for the benefit of prospective purchasers who undertake remediation-related activities.

Towns have access to a variety of other sources to provide financial assistance to brownfields. These include issuing local bonds and awarding community development block grants or federal transportation funds. In some cases, recipients must reimburse the town for this money.

Federal Government

On the federal level, the U. S. Environmental Protection Agency is the lead department for brownfields. It has designated teams of employees in each of its regional offices to deal with brownfield-related activities. It also offers an electronic information service to parties interested in the topic of brownfields and maintains an extensive brownfields web page on the Internet.

Since 1994, EPA has been seeking to identify solutions to the problems of brownfields by funding pilot projects that use a variety of approaches to handle different aspects of the issue. It has provided financial support to more than 120 cities and towns throughout the country, including more than a dozen in Connecticut. Indeed, one of the first projects ever funded was in Bridgeport.

In early 1997, the federal government announced a Brownfields National Partnership aimed at bringing together 15 federal agencies in a coordinated approach to brownfields. This effort includes financial support for 16 "Brownfields Showcase Communities," one of which is Stamford. Table II-3 lists the towns in Connecticut that have received federal brownfield assistance. It also includes information about the nature of each project and the amount of each award.

Private Parties

Individuals and businesses from the private sector play important roles in brownfield-related efforts. They may have a direct interest in a brownfield site, or they may provide services needed to bring about the re-use of a brownfield. Some provide financial assistance, others provide technical assistance, others carry out cleanup tasks, and still others are the catalysts for redevelopment. Among the most commonly involved participants are:

The amount of information available about brownfields continues to increase. A growing number of associations and individual businesses have created web sites devoted to the issue. In addition, a number of local and national groups interested in general environmental issues have begun paying more attention to brownfields as an area of concern.

CHAPTER THREE

State Programs and Tools

The availability of money to clean up and redevelop brownfields is always an issue. Two other factors that may also be obstacles are concerns about long-term liability for contamination found at a site and the amount of time required to obtain governmental approval of a cleanup effort.

In recent years, state legislatures throughout the country have created a number of tools and programs to help with these problems. The mechanisms adopted in Connecticut can be divided into those involving nonfinancial and financial assistance. The significant programs in each category are described below.

Nonfinancial

In 1991, the Connecticut legislature indicated it is the state's policy to encourage pollution prevention in order to reduce risks to the environment and the health of individuals. Prevention activities include changes within a plant that reduce, avoid, or eliminate the generation of hazardous by-products. In 1998, P.A. 98-253 expanded this definition to include encouragement of remediation activities.

In the mid-90s, several new tools were created to assist those who were responsible for properties with environmental problems. Among the most important to the brownfields issue were the Licensed Environmental Professional (LEP), two voluntary remediation programs, and the Covenant Not To Sue (CNTS) system. In addition, the property transfer law, originally adopted in 1985, was modified to complement these new tools. The major nonfinancial programs are summarized in Table III-1. More detailed descriptions of each program are also presented below.

Licensed environmental professionals. One of the problems threatening to delay efforts to remediate properties in Connecticut was the ability of DEP to respond to requests for technical assistance and reviews in a timely manner. In 1995, the legislature established a new statutorily recognized profession -- the licensed environmental professional -- to provide an alternative mechanism to handle some of these tasks.

LEPs must be knowledgeable in activities associated with the investigation and remediation of pollution and its sources. They also must be able to render professional services in those areas. They offer the public an alternative way of obtaining assistance. As implemented under several of the brownfield-related programs, LEPs allow DEP to focus its efforts on situations that involve a higher degree of contamination, while ensuring properties continue to be investigated and remediated in accord with specified standards.

Licensees pay an annual fee of $225. In order to become an LEP, an individual must meet specific criteria and pass an exam. In order to qualify for the exam, an applicant must have:

The exam, which can be written or a combination of written and oral questions, is prescribed by the State Board of Examiners of Environmental Professionals and approved by commissioner of environmental protection. The exam tests knowledge of physical and environmental sciences applicable to investigating a polluted site and remediating it. There is a $125 exam fee.

The state board of examiners has 11 members appointed by the governor. The chairperson is the commissioner of environmental protection or his designee. The other members are:

Voluntary remediation programs. Although some brownfield problems are the result of owners abandoning their property, in many cases owners are known. In the past, even when they were willing to clean up a site, they were hindered by questions about what level of activity would be sufficient. This uncertainty reduced the chances an owner would proceed with cleaning up a site.

In the mid-1990s, two voluntary remediation programs were established to clarify what steps owners had to follow to ensure their cleanup would meet state standards. The program most commonly used is controlled by C.G.S. Sec. 22a-133x. It is summarized in Figure III-1.

As currently structured, eligibility for that program is limited. The parties include: municipalities; owners of establishments; owners of property on the state's inventory of hazardous waste disposal sites on October 1, 1995; and owners of contaminated property located in an area with a groundwater classification of GA or GAA.

Cleanup efforts are initiated by submitting an environmental condition assessment form (ECAF) and a review fee of $2,000 to the commissioner of environmental protection. The commissioner must notify them within 30 days whether or not review and approval of any remedial action will be required.

If no review is necessary, within 90 days the owner submits a statement of proposed actions for investigating and remediating the parcel and a schedule of implementation. Related technical plans and reports may be required, and they must be provided if a written request for such information is received. Upon verification by an LEP that the parcel has been remediated, the owner submits a copy of that verification to DEP.

If a review is required, within 30 days, the owner submits a proposed schedule for investigating and remediating the parcel and related technical plans and reports. Upon approval of the schedule by DEP, technical plans and reports are submitted for review and approval. Modifications are allowed, if approved by DEP. At any time, DEP can discontinue formal review and approval, if the commissioner determines doing so is appropriate.

This program can be used by property owners to clean up their site before they sell it. For those subject to the state’s property transfer act, which is described below, completion of this process makes them eligible to transfer the property to another party without the need for DEP review at the time of the transfer.

The other voluntary remediation program is controlled by C.G.S. Sec. 22a-133y. Available to sites with less severe environmental problems, this program simplifies the process outlined in Figure III-1. It allows LEPs to perform a number of tasks in lieu of DEP staff, and it minimizes the need for DEP to review and approve interim actions taken by LEPs. Specifically, LEPs can:

LEPs are required to act with reasonable care in the performance of their services under this program, and they are forbidden from making their fee contingent on certain outcomes. Failure to comply with either of those provisions can result in a civil penalty of up to $25,000.

Property transfer act. In an effort to clarify responsibility for pollution or contamination that may have occurred at a site, the legislature developed a process to ensure that even when ownership is transferred, accountability is not lost. The Connecticut Transfer of Hazardous Waste Establishment Act (also known as the property transfer act) specifies the conditions under which an owner can transfer real property where hazardous waste was present.

The law requires parties that transfer properties where hazardous waste was generated, recycled, reclaimed, stored, or treated or certain types of processes were conducted to file one of four forms with DEP regarding the environmental status of the site. The forms cover situations ranging from sites where no pollution has occurred to those that need to be cleaned up to those already remediated. The fees for filing these forms are specified in statute, with the amounts based on the type of form and the date of filing. Table III-2 indicates the purpose and fee for each form.

Before filing one of these forms, a site assessment to determine the condition of the property must be performed. The degree of review required will depend on what is found at the site. There are three commonly referenced levels or phases of investigation, which may also be performed for properties not being transferred.

A Phase I investigation includes gathering historical, published, and regulatory information about the site and a walk-around survey of the property. If this activity suggests a discharge may have occurred, then a Phase II investigation should be initiated. That investigation involves on-site environmental testing and laboratory analysis, guided by the information obtained during Phase I. A Phase III investigation is undertaken to quantify the degree, extent, and rate of migration of any on-site releases and evaluate their potential impact on human health and the environment. This phase may require extensive field activity, including site sampling.

Depending on the level of contamination found through the investigatory process, the party seeking to transfer the property may be required to undertake remedial action. Alternatively, another party may agree to assume responsibility for cleaning up the site. Based on these decisions, the appropriate form is prepared. The transferee receives a copy of the form prior to the transfer; DEP must receive a copy within 10 days of the transfer.

Figure III-2 outlines the major steps in the property transfer process. If a Form III or Form IV has to be submitted, the follow-up process may involve a number of additional steps. In cases where remediation work still has to be done, it also can involve a lengthy period of time.

A key step is whether the commissioner of environmental protection decides DEP will have to review and approve remediation or whether an LEP can verify the remediation has occurred in accord with remediation standards. That decision is to be based on:

Even after that decision is made initially, it can be changed from DEP to an LEP or vice versa at a number of points in the process. According to DEP staff, such a change is most likely to be made if DEP initially retains review authority because little is known about the condition of a property. After the site has been investigated, the department may relinquish oversight to an LEP, particularly if the level of contamination is not severe.

Covenants not to sue. A major issue affecting development of property that may have environmental problems is liability for past occurrences at the site. One way governments have been able to help owners and developers with this problem is to explicitly specify the scope of the person's responsibility for pollution or contamination at a particular piece of property prior to a specific date. A mechanism that accomplishes this is a covenant not to sue .

In order to obtain a covenant in Connecticut, the party seeking protection must undertake certain remediation-related steps and provide the commissioner of environmental protection with sufficient information to ensure existing cleanup standards have been met. There are two types of covenants not to sue. They differ in terms of scope, cost, and availability.

In the past, one type was reserved for prospective purchasers; the other was for current owners of contaminated property. Since October 1, 1998, both purchasers and owners can acquire either type of covenant. Lending institutions with a security interest in a property also can obtain a covenant not to sue. Table III-3 compares the major provisions of the two types of covenants.

Under C.G.S. Sec. 22a-133aa , DEP may enter into a covenant not to sue, if a written remediation plan or final remedial action report has been approved for the property by the environmental protection commissioner. The party seeking the covenant cannot have caused or be connected with those who caused the pollution, and must agree to redevelop or continue productive use of the property. The commissioner also must determine the covenant "is in the public interest."

This covenant only covers pollution prior to the agreement. It does not apply if the purchaser fails to carry out agreed upon remediation, the plan does not meet standards in place on the effective date of the covenant, a required environmental land use restriction has not been filed,

or the provisions of the restriction have not been complied with. Continued monitoring of a property in accord with the remediation standards can be required. Finally, the covenant does not preclude DEP action if the covenant was based on information the party knew or had reason to know was false or misleading.

The prospective purchaser must pay a fee equal to 3 percent of the value of property appraised as if uncontaminated. (This money is deposited in the SCPRIF account.) No fee is charged parties who are successors in interest to the property.

Under C.G.S. Sec. 22a-133bb , the commissioner of environmental protection must issue a covenant not to sue to eligible parties within 45 days after receiving required certifications and documents. This type of covenant requires a detailed written remediation plan or final remedial action report be approved by the commissioner. Approved plans must be incorporated by reference, while approved reports require the person requesting the covenant to certify no discharge has occurred since the approval. Alternatively, a covenant must be issued if a licensed environmental professional approves a detailed written remediation plan that is incorporated by reference into the covenant or the LEP verifies the property has been remediated in accord with state standards and the party requesting the covenant certifies there was no subsequent discharge.

An applicant for this covenant cannot have caused or been affiliated with anyone responsible for the pollution at the site, and he or she must agree to redevelop or continue productive use of the property. There is no fee for this type of covenant.

Like the other type of covenant, continued monitoring can be required, and only pollution prior to the agreement is covered. The covenant does not apply if the property is not remediated in accord with the plan, the plan does not meet standards in place on the effective date of the covenant, or a required environmental use restriction was not filed or complied with. The covenant does not preclude DEP action if the covenant was based on information the owner knew or had reason to know was false or misleading.

In addition, and a key difference from the other type, this covenant does not preclude action by DEP if new information confirms previously unknown contamination occurred prior to the effective date of the covenant. The department also can take action if human health or the environment are threatened beyond acceptable levels due to a substantial change in exposure conditions at the site (e.g., a change in usage from nonresidential to residential). The other difference between this covenant and the one granted under Sec. 22a-133aa is that the latter covenant is transferable, while a Sec. 22a-133bb covenant is not.

Flexible standards and environmental use restrictions. Under state law, the Department of Environmental Protection has adopted regulations specifying maximum exposure levels in the soil for a variety of organic, semivolatile, and inorganic substances as well as pesticides, PCBs, and petroleum hydrocarbons. Higher standards apply to properties being used for residential purposes as opposed to industrial or commercial purposes.

Another statutory mechanism available to property owners is an environmental use restriction (EUR). Placed in the land records of a municipality where a site is located, they can be used to prevent the use of a property for certain purposes or to prohibit certain activities on the property. The purpose of EURs is to minimize the risk of human exposure to pollutants and hazards to the environment by limiting the uses of properties with environmental problems.

In order for an owner to be able to file an environmental use restriction, the commissioner of environmental protection or a licensed environmental professional must determine the restriction is consistent with state standards and regulations and that it effectively protects the public health and environment from pollution. EURs bind the owner of the land and his successors and also survive foreclosure. Release from a restriction in whole or part requires remediation of the property and written approval from the commissioner.

Funding Opportunities

The Department of Environmental Protection and the Department of Economic and Community Development oversee several financial programs to help brownfields. In conjunction with those activities, the two agencies also provide technical assistance to various parties regarding brownfield-related requirements. The major programs are listed in Table III-4, which is followed by more detailed descriptions of the programs.

On the federal level, recent tax code revisions also aid brownfield redevelopment. In certain cases, funds spent to clean up polluted sites can now be deducted on federal tax returns the year the expenditures are made rather than being depreciated over a number of years as previously required.

Urban Sites Remedial Action Program. The first major program to include state financial assistance for brownfields was the Urban Sites Remedial Action Program. In 1992, the legislature created USRAP to identify, evaluate, plan for, and undertake remediation of polluted real property deemed vital to the economic development needs of the state. In 1998, participation was expanded to include a broader range of urban community sites.

DECD coordinates this program in consultation with DEP. Eligibility is limited. Under the statutes, a site can receive financial assistance for evaluation and remediation, only if:

A variety of sources are used to identify potential sites for inclusion in the program. DECD staff responsible for the program are in frequent contact with local officials, businesses, developers, and property owners in conjunction with other programs they oversee. Internal agency mechanisms enable others in the department who become aware of sites as a result of their work to bring that information to the attention of the USRAP staff. The Industrial Parks Program, begun in the late 1960s, is an important source of identifying sites that municipalities believe have economic feasibility. Casual conversations with people are another source of leads on potential sites.

Sites targeted for evaluation and remediation are prioritized on the basis of estimated cost, anticipated complexity, estimated schedule, potential economic development benefits, and any other factors the commissioners of economic development and environmental protection deem relevant. Figure III-3 outlines the major provisions of the program.

The Department of Economic and Community Development coordinates USRAP efforts in conjunction with other technical assistance activities it provides to businesses in Connecticut. DEP handles oversight of the activities at the sites undergoing investigation and remediation.

P.A. 93-428 established the Urban Site Remediation Fund. Money in this nonlapsing account is available to pay assessment and remediation costs for properties acquired by the state under certain statutorily specified circumstances.

Between 1989 and 1995, $30 million in bond funds was allocated to the program. Through June of 1998, the state has provided $20 million in financial assistance to 11 sites. The amounts distributed per site ranged from $21,000 to $8 million. Nearly all of the remaining money is reserved for specific projects. Table III-5 lists the projects funded through FY 98, the dollars allocated, and the uses of the funding.

In a complementary effort, DECD and DEP have also assisted a number of businesses through the Economic Development Initiative Sites program. Eligibility for this program is open to those that have the resources to begin an environmental investigation and cleanup. This includes firms that occupy sites that may have environmental problems, developers interested in such sites, or anyone working with DEP to evaluate sites.

Under this program, DECD reviews the sites and ranks them according to their potential for economic benefit and community need. Subsequently, DEP staff oversees remediation activities for the company. The goal is to expedite the time frame for state review of environmental assessment reports and remedial action plans.

Special Contaminated Property Remediation and Insurance Fund. SCPRIF was created in 1995 as a separate, nonlapsing account held by the treasurer. Revenue is obtained from multiple sources, including:

The statutory provisions of the program allow the commissioner of environmental protection to use the fund to pay for removal or mitigation of a spill on land or waters in Connecticut, if the property owner is an innocent landowner as defined in the statutes. (Generally, this is someone whose property is polluted due to the acts of others.) DEP can also receive up to $5,000 in administrative costs for remediation of property that receives a loan under the program.

To date, DEP has not received any funds under the SCPRIF program. In February 1998, the department did receive approval from the state Bond Commission for $1 million. However, this money is for the loan program being administered by DECD.

The commissioner of economic and community development, with approval of the SCPRIF Advisory Board, can use money from the fund for loans to municipalities, individuals, and firms for Phase II environmental site assessments, Phase III investigations of real property, and demolition costs to prepare contaminated property for development subsequent to Phase III assessment. DECD can receive up to $125,000 per year in administrative expenses for this program. Figure III-4 summarizes the statutory provisions of this portion of the SCPRIF program.

The SCPRIF Advisory Board has seven members, who are appointed by the governor and legislative leaders. They include three representatives from municipalities, two from banks, and two with experience in contaminated property remediation. The chairperson is selected annually by the members. The board met for the first time in September 1997 with six appointees. As of December 1998, only five seats were filled.

By the end of 1998, the board had met 13 times. It spent many of the early meetings establishing a process for soliciting, reviewing, and approving loan applications. It set up a two-part system. Applicants initially submit a limited amount of information that is used to screen eligibility. Those successfully passing that evaluation are notified they are eligible to submit a full application.

The deadline for the pilot round of pre-applications was May 1998. DECD received 22 pre-applications. The amount of money requested ranged from $15,000 to $565,000 for a total of $3.7 million. Based on a preliminary review, the board eliminated 10 of the applicants for administrative or programmatic reasons, including incomplete information and ineligible activities.

The other requests were reviewed in detail. In June, the board selected six applicants to invite to submit full applications. Those applications were due in mid-August, and loan recipients were selected in September and October. The next round of pre-applications was due at the end of June. A similar time frame was used for those reviews. Some of the pre-applicants not selected to submit full applications during the pilot round may be invited to participate in future rounds.

Repayment of the loans can be handled several different ways. Funds may be paid to DECD according to a specified schedule, including upon the sale or lease of the property. Under the statutes, no repayment is required, other than loan interest, if remediation of the property or its sale or lease is "economically infeasible due to the cost of remediation."

The terms of a loan cannot include interest costs to the borrower that exceed the interest cost to the state. Funds received by parties other than municipalities require a lien in an amount equal to the loan. However, for the lien to be effective, it must be filed in the land records of the town where the property is located.

Dry Cleaning Establishment Remediation Fund. Since January 1, 1995, dry cleaning establishments have been required to pay a 1 percent surcharge on the gross receipts they receive for dry cleaning services they perform. This money is sent to the commissioner of revenue services quarterly for deposit in the Dry Cleaning Establishment Remediation Fund, which is a nonlapsing account within the General Fund.

The money in the fund is to be used primarily for grants to owners and operators of dry cleaning establishments for containment, removal, mitigation, or prevention of environmental pollution on or at their establishment. In order to qualify for a grant, the dry cleaning establishment must satisfy the commissioner of economic and community development that it has used certain products, been in business at least one year, and was unable to obtain financing from conventional sources on reasonable terms or in reasonable amounts. Figure III-5 summarizes the statutory provisions of the program.

The maximum grant is $50,000 per year. Currently, DECD limits program participants to three years of funding. The dry cleaning establishment must bear $10,000 in costs (or $20,000 if a release was reported to DEP prior to December 31, 1990). In addition, no business that unlawfully or intentionally discharged or spilled materials can receive funds.

Staff in the Infrastructure and Real Estate Division of DECD handles day-to-day administration of the program. Staff also evaluates all grant applications. That process involves:

The first grants were awarded in 1996. Since then, 14 businesses have applied for grants. One application was denied, four were put on hold pending receipt of additional information, and nine were given grants worth $1.1 million. Actual disbursements through October 1998 totaled $619,100.

Table III-6 indicates the number of applicants and the amount of funding awarded by program year. The balance available for grants in October 1998 was $1.7 million.

The statutory provisions of the program also allow DECD to receive 5 percent of the account balance or $100,000 per year, whichever is greater, for administrative costs. Through October 1998, the department has received $316,716 for administrative expenses. As of that date, it had expended $57,185.

Emergency Spill Response Fund. Another program that has provided financial assistance to brownfields as well as other environmentally contaminated properties is the Emergency Spill Response Fund. The account is within the General Fund. It is to be used for specified purposes, including activities and staff for the property transfer law.

Environmental Assistance Revolving Loan Fund. In an effort to provide assistance to businesses that want or need to take actions to prevent pollution or comply with the Clean Air Act Amendments of 1990, the legislature created the Environmental Assistance Revolving Loan Fund (EARLF). Money in the fund was available through the Connecticut Development Authority to businesses with gross revenues of less than $25 million in the fiscal year prior to application or less than 150 employees.

Money was provided in the form of a loan, line of credit, or loan guarantee for prevention activities as defined in the statute. The scope of the program expanded considerably on October 1, 1998. Since then, CDA or its subsidiaries can also use money from the fund for grants. (A separate subfund for grants was added to the existing loan and guarantee subfunds.)

Eligibility for all types of funding has been extended to municipalities, and the allowable uses now include remediation of contaminated real property. The term remediation activities is defined as "any activity to stimulate, encourage and carry out the identification, assessment, evaluation, acquisition, remediation, development or financing of contaminated property in this state." While not specifically a brownfields program, this state financial assistance effort can be of use to some parties interested in brownfield remediation.

CHAPTER FOUR

Findings and Recommendations

In the mid-1980s, the federal government took steps to give states more flexibility to deal with brownfields. Focusing on issues such as lender liability, prospective purchaser agreements, municipal acquisition liability, and a process for removing sites from the federal super fund list, the U. S. Environmental Protection Agency laid out a variety of options for states to copy or modify.

In the 1990s, the states most likely to be successful in dealing with brownfields are those that offer a range of assistance for dealing with both the environmental and economic development sides of the issue. These cafeteria style approaches provide a menu of services from which owners, developers, and municipalities can select the tools they need. Among the most common types of program elements are:

Connecticut was among the earliest of the states to begin addressing brownfield issues statutorily. As such, it implemented the broad range of tools and programs described in Chapter Three. The program review committee believes the challenge in the next few years is to improve existing programs by clarifying procedures and increasing financial resources as outlined in this chapter.

Specifying a Definition

Connecticut has not established a statutory or regulatory definition of brownfields. The state Department of Environmental Protection does not generally use the term, while the Department of Economic and Community Development uses the federal EPA definition. The Connecticut Development Authority considers any site or building with economic potential that is unused or underutilized because of pollution problems to be a brownfield.

Generally during the course of this study, the EPA definition was used to facilitate discussion of the issues surrounding brownfields. The program review committee believes the flexibility of Connecticut's current approach toward defining brownfields is preferable to imposing a statutory description .

In the long-run, the absence of a statutory definition gives DECD and DEP the flexibility to assist a wide variety of properties including brownfield sites. Although clear recognition of properties as brownfields could result in a more targeted focus, the proliferation of tools and programs to assist brownfields in Connecticut suggests lack of attention has not been a problem.

Number of Brownfields

A recurring question during the program review study was "How many brownfields does Connecticut have?" No listing of known or suspected brownfields currently exists in the state. In an effort to quantify the problem brownfields collectively represent in terms of geographic size and number of sites, the committee sought information from a variety of sources. These included a program review committee survey of municipalities, the DEP Inventory of Hazardous Waste Sites, the DEP Property Transfer Act Database, and a survey conducted by the Connecticut Conference of Municipalities.

LPR&IC town survey . The first source was a survey sent to all 169 towns asking whether they had any brownfields, and if so, how many and what acreage they cover. The committee received 112 responses, covering all sizes of towns.

Two-thirds of the responding municipalities indicated they had brownfields. Of the 73 towns that quantified the number of sites, 56 percent had only one or two brownfields. In total, the towns reported 513 sites. Figure IV-1 presents the breakdown of towns by the number of estimated brownfields.

Three towns own or control all of the brownfields located within each, while 18 other towns own or control a portion of the sites within their boundaries. The state owns or controls some of the sites in seven towns, and the federal government owns or controls brownfields in three Connecticut towns. In 47 towns, all of the brownfields are privately owned or controlled.

Sixty-five towns provided data on the approximate acreage covered by the brownfields within their boundaries. The total brownfield acreage per town ranged from one to 328 acres. Almost half of the towns had 11 acres or less, with nearly one-quarter having five acres or less. Thirty-two percent of the towns had between 12 and 55 acres, and 19 percent had between 60 and 170 acres. Figure IV-2 approximates the distribution of total acreage of brownfields per town.

Thirty-eight towns indicated other sites within their boundaries not included in the numbers presented above are suspected of being brownfields. The numbers ranged from one to 11 sites, with three-quarters of the towns answering the question estimating one to three sites were suspected brownfields. In total, there were 109 additional properties in this category.

Combining the two estimates produces a count of 622 brownfields. This represents data from 66 percent of the towns in the state. Based on a simple projection of the survey data using sites per town, an estimate of the number of brownfields statewide would be 942.

Hazardous waste sites inventory. Another possible source of information about brownfields is the Inventory of Hazardous Waste Sites compiled by the Department of Environmental Protection. Information about the inventory is contained in the department’s Site Discovery and Assessment Database.

Sites on the inventory have been identified as potential hazardous waste disposal sites or sites posing a threat to the environment or public health. Inclusion on the list does not confirm the existence of environmental problems; the actual extent of any contamination can only be determined by a professional site assessment. However, placement on the list indicates someone perceived the site might be contaminated.

Given that brownfields are sites with perceived or actual contamination, the program review committee believes it is useful to look at the contents of the inventory. Indeed, the Naugatuck Valley Redevelopment Agency's application for a federal EPA brownfield grant used the inventory as the basis for estimating the number of brownfields in its region.

As of August 1998, the inventory contained 672 properties. Most (556 sites) were placed on the inventory prior to 1987 when the statutory requirements for an inventory were revised. The properties on the inventory are located in 131 towns. The number of addresses per town ranges from one to 27.

Transfer act database. Another source of information about possible brownfields is the Property Transfer Act Database, which is also maintained by DEP. Under the property transfer act, certain types of properties must file paperwork with the Department of Environmental Protection whenever ownership of the property is transferred from one party to another. The specific form to be filed depends on the condition of the property at the time of the sale.

There are four types of forms, covering a range of sites from those never contaminated to those already cleaned up. The form relevant to this discussion is a Form III, which is used when a discharge of some type has occurred or conditions are unknown, and a specified party is taking responsibility for investigating the site and remediating it if necessary. While not all Form III properties will have economic development potential, they do meet the test of real or perceived environmental contamination.

As of October 1998, nearly 1,100 Form IIIs have been filed with DEP. Since a form must be filed every time a property changes hands, some of these filings represent the same address. An unduplicated count of filings shows a total of 850 address in 127 towns.

Connecticut Conference of Municipalities survey. Early in 1995, the Connecticut Conference of Municipalities surveyed towns regarding the existence of polluted sites. Fifty-six percent of the 73 respondents indicated they had: (1) vacant or abandoned sites not being developed due to actual or potential pollution problems; or (2) abandoned or polluted properties for which taxes were delinquent. The towns did not quantify the number or amount of acreage covered by these sites. Although these categorizations may encompass sites other than those typically thought of as brownfields, the figures provide another indicator of the distribution of brownfields in Connecticut.

Summary . Based on the information presented above about brownfields in Connecticut:

The reason these numbers are not more precise is due to several factors.

First, although the definition used in the committee survey referenced real or perceived contamination, some towns are reluctant to label any site not confirmed to be polluted as a brownfield. This is due to concern about stigmatizing a property still in private hands. It may also be a result of secretiveness on the part of property owners.

Another reason for the differences could involve the characterization of adjacent parcels of property as a single site for redevelopment purposes. While there may be multiple addresses and more than one owner involved in such a situation, the location is referred to as a single brownfield.

The program review committee believes individual towns can facilitate the redevelopment of brownfields by compiling information about the environmental issues and other characteristics (e.g., highway access, on-site utilities, etc.) of the brownfield sites in their communities. These data can be used by interested parties to measure the development potential of the properties.

In many larger cities, economic development offices already maintain lists of brownfields in order to have information available for individuals or businesses in a position to bring increased economic activity to the area. Thirty-four of the towns responding to the program review survey indicated they maintain some type of inventory or list of brownfield properties.

The Connecticut Development Authority recently issued a request for proposals to hire a consultant to work with towns to develop an inventory of sites with the greatest potential for redevelopment. This list will be used by the state in the future to identify potential brownfield projects for financial assistance.

Brownfield Trends

The number of brownfields may in fact be leveling off. Unless parties are willfully violating environmental laws, information available about working with and disposing of known contaminants should preclude the creation of many new sites with the types of problems that have to be dealt with at old factories and waste disposal sites. Barring a major tightening of remediation standards or new scientific findings about substances now in common use, there should be limited increases in the amount of new contamination to be dealt with in the future.

As the number of sites successfully redeveloped increases, the number of brownfields will stabilize or decline. In addition, as more sites are investigated, a number will be found to be uncontaminated, thereby removing the brownfields stigma from them. Although fewer sites may then remain to be cleaned up, the level of contamination among those sites may be quite high. These sites may also have the worst prospects for redevelopment. Therefore, brownfields will remain a problem warranting continued attention and resources for a number of years into the future.

Timing of Cleanup

Another dilemma for those working with brownfields concerns the timing of cleanup activities. There is ongoing debate whether future uses of a site should be determined before it is remediated.

Proponents of creating a roster of clean sites believe this approach is necessary to attract potential developers because many businesses do not want to wait for lengthy remediation work. They argue that for financial reasons many businesses looking to expand will seek properties allowing operations to commence in six to 12 months, or at most 18 months. (One notable exception is large-scale retail projects, which may have a multi-year timetable.) Proponents of this point of view fear any site not ready for the work needed to construct the buildings and other components required by the new business will not be given consideration for the project. Thus, the economic benefits of that project will be lost.

Municipalities responding to the program review committee survey about brownfields had mixed results from cleanups. Asked whether any had been cleaned up in the last five years, one-quarter reported at least one such site. In total, 29 towns reported 60 brownfields were cleaned up. Of those remediated, 32 have been redeveloped for new or existing businesses. One was used for a residential project.

Those advocating targeted cleanups believe the logistics of a brownfield project can be handled more advantageously when specific uses are identified first. This is because the cost and duration of a remediation process may be more expeditious when it is undertaken in conjunction with other construction activities at the site. Economies of scale exist, if equipment and personnel can be used for both remediation and new construction work.

Equally important, the parties involved will be able to ensure the level of cleanup undertaken satisfies the specific requirements of the planned use. Waiting for a specific project can reduce expenditures by avoiding unnecessary work (i.e., cleaning up a site to a higher level than necessary) or repetitious work (i.e., bringing back equipment to re-excavate a site).

In an ideal world with unlimited financial resources available for cleanup tasks, it would be desirable to remediate all contaminated properties in the state. However, in the real world with its limited resources, choices have to be made about prioritizing sites for cleanup.

Given this restriction, the program review committee believes identifying what, if any, specific problems exist at a site should be a key focus of state efforts to deal with brownfields. Under this approach, a site thought to be contaminated but found to conform with existing state remediation standards will no longer be labeled a brownfield. As a result, the expense of redeveloping the site immediately declines.

Equally important, for sites found to have problems, it will be possible to put a price tag and a time frame on the cleanup. This removes two elements of uncertainty for potential investors. Clarifying the options for a site can expand the development prospects and expedite the re-use process, which ultimately benefits the owner and the community-at-large.

The program review committee recommends state financial assistance for brownfields in the short-term be focused more heavily on site assessments. Providing financial resources at the front-end of the process will help quantify the scope of the problem facing Connecticut and clarify future resource requirements.

The vehicle to accomplish this approach already exists in the Special Contaminated Property Remediation and Insurance Fund. By clarifying that program as described below and monitoring funding, the state can make considerable progress toward categorizing brownfield sites and targeting the best candidates for redevelopment.

SCPRIF

The Special Contaminated Property Remediation and Insurance Fund was created in 1995. As currently structured, it provides loans to municipalities, individuals, and firms for specific types of environmental site assessments or the cost of demolition undertaken to prepare a site for development subsequent to assessment. Funds cannot be used for actual cleanup tasks.

In 1996, a seven-member Special Contaminated Property Remediation and Insurance Fund Advisory Board was established. Under C.G.S. Sec. 22a-133u, the board is "to review applications for loans from said fund" and "make a recommendation" to the commissioner of economic and community development regarding loans. The same statute specifies the commissioner may use funds deposited in SCPRIF "with the approval of the advisory board."

Board membership. The statute specifies the appointing authority of and perspective represented by each board member. Six seats were filled when the board held its inaugural meeting in September 1997. By the time it began reviewing applications in May 1998, only four members remained. Since then another member has resigned, and two new members have been appointed. Figure IV-3 shows attendance at each of the 12 board meetings held through October 1998.

The program review committee finds the SCPRIF Advisory Board has never functioned with a full complement of members. It appears all of the seats have been filled at least once, but never all at the same time.

The program review committee had a difficult time finding out who had appointed the past and present board members. Multiple requests to DECD, the agency responsible for staffing the SCPRIF program, produced incomplete and inaccurate data.

Therefore, the program review committee recommends the Department of Economic and Community Development fulfill its administrative responsibility and maintain an up-to-date list of SCPRIF Advisory Board members, their appointing authority, and the perspective each member represents. In addition, the commissioner should notify the appropriate appointing authority whenever a vacancy occurs .

Program requirements. The SCPRIF Advisory Board is statutorily required to establish disbursement and loan cancellation criteria. Certain factors must be included, but others can be added by the board. The board spent its first eight meetings developing application procedures and documents. Ultimately, the board set up a multi-stage loan process. The key steps are:

Due to the newness of the SCPRIF program, committee staff was able to observe a major portion of the activity related to reviewing the initial rounds of applications for loans. Table IV-1 summarizes statistics for the three rounds of pre-applications received through September 1998.

In May 1998, the board received 22 pre-applications for the pilot round. At the end of June, the board invited six entities to submit full applications.

In August, the board recommended two projects be approved with conditions, and it sought additional information from DEP regarding the other four. In October, two additional applications were approved, but an earlier approval was rescinded because the work had already been completed.

In November, the commissioner of economic development accepted the board’s recommendations to fund three requests totaling $250,000. As of December 1998, the paperwork for the loans was being worked out.

Pre-application requirements are described in a "New Program Announcement" available from DECD. The full application requirements are contained in the "Application Package." The board has created pre-application and application evaluation forms for use by individual members when they review applications. The pre-application review addresses:

The full application form rates projects on a scale of one (low), two (moderate), or three (high) regarding feasibility, benefits, and risk.

Despite the existence of these materials, the committee is concerned about several aspects of the application review process. First, while there is no requirement the board adopt regulations, the process to date has offered the public little or no input regarding program procedures.

Second, while the policies the board is using to guide decisions on eligibility and the prioritization of project goals are still evolving, a project that meets stated eligibility criteria should not be eliminated solely because it fails to meet some unspecified requirement. Such a situation deprives applicants of advance notice about the grounds for disqualification.

For example, when the SCPRIF program began, the pre-application form asked whether a "Phase I Site Investigation" was in progress or had been completed. The form did not explicitly indicate one was necessary in order to be eligible for a loan. Yet three pre-applicants in the pilot round were eliminated from consideration in part because they did not have Phase I assessments.

A copy of the pre-application currently being used includes a note indicating: "A Phase I Environmental Site Assessment must have been completed or in process at the time of pre-application." It is dated August 3, 1998, more than a month after the second group of pre-applications had to be submitted.

The level of detail needed to suggest the possibility of environmental contamination varies. Sites with a well-known history of industrial activity can acquire a brownfield label and be burdened with concerns about the potential scope of problems simply on the basis of general knowledge in the community. A Phase I investigation is not necessary to confirm the site has at least a perceived problem. Therefore, the committee does not believe the absence of a Phase I assessment should automatically preclude an entity from being eligible to apply for the types of in-depth assessment fundable by SCPRIF.

In another example, board members have expressed preferences for a certain level of clarity regarding the future use of project sites. Yet, the program materials do not indicate specific re-use plans are required.

The original pre-application requested a summary of redevelopment goals and information about the mechanism to be used to secure private developer interest. The revised pre-application materials (dated August 3) now carry the statement: "Applicants should discuss specific redevelopment goals and plans , including any discussion with potential developers." At the same time, the program description in the document continues to include the statement: "The completion of these program activities will encourage private sector reuse of such sites by identifying obstacles to redevelopment."

While the legislature gave the advisory board the right to establish loan criteria, the program review committee believes the advisory board should not lose sight of the intent of the program. SCPRIF was established to help municipalities and others obtain information needed to define the environmental problems facing their brownfield sites in order to facilitate redevelopment efforts. Imposing the types of requirements described above unduly limits the program to brownfields where the future use of a site has been determined already. Yet discovering a site meets state remediation standards, which eliminates the stigma of the word "brownfield" as a description, can open up the options for that site. Conversely, learning a parcel of land has more far-reaching problems than expected can significantly change development plans for the site, especially in the short-term.

Language in the statutes shows the legislature clearly anticipated the possibility some projects receiving assistance under this program might never be redeveloped. Specifically, C.G.S. Sec. 22a-133u(c) allows forgiveness of a SCPRIF loan, if remediation or the sale of the property is "economically infeasible" due to the cost of remediation.

A factor contributing to the conservative approach toward applications initially taken by the advisory board was uncertainty about funding for the program. During its review of the first group of pre-applications, the board expressed concern it would run out of money before all of the rounds of applications for 1998 were submitted. With 22 requests seeking a total of $3.7 million and only $1 million in the fund, the board used the limitations described above to narrow the projects selected. In the end, however, this cautious approach by the board resulted in only three projects being awarded a total of $250,000. (One city will get $200,000; the other two will get $30,000 and $20,000 respectively.)

In order to ensure participation in the SCPRIF program is not unduly restricted, the program review committee recommends program materials and procedures be revised to eliminate requirements that Phase I assessments must already be underway when entities submit a pre-application for a SCPRIF loan and that specific re-use plans must exist for a site.

In addition, the committee recommends the Department of Economic and Community Development and the SCPRIF Advisory Board be required to promulgate regulations for the operation of the Special Contaminated Property Remediation and Insurance Fund established under C.G.S. Sections 22a-133t and 22a-133u. At a minimum, the regulations should specify any eligibility criteria the board is requiring beyond those already statutorily specified as well as the process being used to evaluate projects.

The availability of this information will also be useful to new board members. Counting the two seats still to be filled, a majority of the board was not part of the initial program discussions or the reviews of the early applications. Without written guidance for them, it will be difficult to ensure a consistent approach in the future.

Funding. When SCPRIF was originally created, it was anticipated the program would be paid for with $30 million in revenue bonds. In 1996, the statute was changed to allow the state Bond Commission to issue general obligation bonds totaling up to $5 million. The first allocation for SCPRIF was finally made in February 1998, when the bond commission approved $1 million.

Other sources of revenue include loan repayments and interest earned on money in the fund. Under C.G.S. Sec. 12-63f, the fund also is to receive 20 percent of the increased revenue municipalities receive as a result of increased assessments on certain contaminated properties that have been remediated. (This provision expires January 1, 2003.) To date, no loan repayments or municipal revenues have been generated.

In addition to being a source of loan funds, SCPRIF can be used by DEP for certain activities related to removal or mitigation of a spill. To date, no money has been used for that purpose. In addition, the commissioner of economic and community development is allowed to use up to $125,000 per year for administration of the program. As of November 1998, no funds had been transferred to the department.

The advisory board and the commissioner are required to report annually to the Environment Committee on the number and the amount of the loans made under the SCPRIF program. By February 1, 2000, the board also has to recommend to the committee whether the municipal payments under C.G.S. Sec. 12-63f should continue. As part of that process, the legislature will have an opportunity to assess the continued appropriateness of the program and its funding.

Urban Sites Remedial Action Program

The Urban Sites Remedial Action Program was created in 1992 to provide financial assistance for evaluating and remediating polluted properties "deemed vital to the economic development needs of the state." The program, which is operated jointly by DECD and DEP is often used in conjunction with other state, local, and private funding mechanisms.

The program has received $30 million in bond authorizations from four special acts. To date, the state has provided $20 million to nine cities to rehabilitate 11 sites. Most of the remaining money ($9 million) is reserved for a major project in New London, which includes an area previously assisted as well as adjacent parcels of property. Another site in New Haven will also be receiving funds for remediation work. Table IV-2 summarizes the allocation of funds.

USRAP produces direct and indirect benefits to participating communities and adjacent regions. In addition to investigating and cleaning up environmental contamination, the selected projects enhance the economic well-being of their respective communities by stabilizing neighborhoods and creating jobs.

In 1998, participation in USRAP was expanded to include a broader range of sites. However, opportunities for new projects are limited until additional financial resources are directed to the program. Although USRAP will receive some money from cost recovery actions and scheduled paybacks, these amounts are likely to be small and will not occur for some time.

Given the benefits of USRAP beyond the immediate economic development results, the program is extremely important to many former industrial areas in the state. Until the recent expansion of CDA's involvement with brownfields, the program also was one of the few sources available to help pay for the remediation of sites.

Neither DECD nor DEP has developed a waiting list of sites to be assisted if additional dollars become available under USRAP. However, the discussion about the number of brownfields presented earlier in this report suggests there clearly are candidates for assistance. In order to provide some resources to aid the communities recently deemed eligible for this program and to supplement the increased identification of specific remediation needs proposed earlier, the program review committee recommends an additional $3 million be authorized for the Urban Sites Remedial Action Program. This amount represents a 10 percent increase in funding for the program.

A companion effort aimed at assisting brownfields in targeted investment communities and distressed municipalities is called Economic Development Initiative Sites. This program provides the same types of technical assistance as USRAP, such as help from DECD navigating the government regulatory system and obtaining expedited reviews by DEP of environmental assessment reports and remedial action plans. However, it does not provide any financial assistance. Through the fall of 1998, the EDI program has helped 58 businesses in 31 towns.

The program review committee believes EDI is a beneficial effort. However, the committee is concerned materials distributed by DECD and DEP describing the USRAP and EDI programs do not clearly distinguish between the two. To prevent misunderstandings about the services and the results of the two programs, the committee recommends the Department of Economic and Community Development rewrite the program materials to clarify the differences between the USRAP and EDI programs. Future presentations of data for the two programs should distinguish between the participants in each.

Dry Cleaning Establishment Remediation Program

Since January 1995, a 1 percent surcharge has been levied on gross receipts from dry cleaning services. The money is deposited in a nonlapsing fund to provide grants to owners and operators of dry cleaning establishments for remediation and prevention of environmental pollution at their places of business.

The surcharge generates about three-quarters of a million dollars annually. As of October 1998, deposits in the fund totaled $2.6 million, with a balance of $1.9 million. Table IV-3 shows the revenue for each fiscal year since the start of the program.

Eligibility. The major statutory provisions of the program require grant recipients to:

In addition, no business that unlawfully or intentionally discharges or spills materials can receive funds, and annual grants cannot exceed $50,000. DECD is required to "establish procedures for distribution of the grants," and it may adopt regulations. DECD has not promulgated any regulations, but it has set forth program rules in the "Guidelines and Eligibility Requirements" attached to the "Instructions and Application."

The program review committee finds the rules adopted by the Department of Economic and Community Development have placed limitations on the dry cleaning program that exceed those spelled out by the General Assembly.

The most troubling of the department's restrictions is a three-year limit on the receipt of grants (i.e., a maximum of $50,000 per year for three years). Other procedural requirements established by the department include multi-year projects must be proposed at the time of an initial application and at least two financing denial letters must be submitted. In addition, DECD will only accept applications once a year.

Department staff indicated the rationale for the time-related restrictions is to provide opportunities for more dry cleaners to participate in the program and to limit the length of the cleanup projects undertaken. While concerns about resources are reasonable, the committee believes the appropriate way to make this type of program change is through a process allowing for public comment, such as by promulgating regulations or changing the statutes.

At the same time, the program review committee believes the department has not developed clear guidance about the factors that make an applicant ineligible for a grant. DECD staff evaluates each application -- confirming eligibility, visiting the site, and contacting other state agencies to verify required forms have been filed and taxes paid. If the applicant meets the statutory criteria but there are other deficiencies, the department places the request on "hold."

The types of issues triggering a "hold" cover a wide range. They include unpaid taxes, failure to identify the party legally responsible for the site, insufficient project information, ineligible cost requests, an unresolved Notice of Violation from DEP, and ongoing litigation.

According to DECD staff, "hold" designations are supposed to expire after one year, but an extension can be requested. On that basis, four applications from 1997 are still considered to be on "hold." Table IV-4 summarizes the number of applications received, placed on hold, and awarded grants during the first three years of the program.

The committee agrees applicants should be allowed to clarify cost data and project descriptions. However, it is troubling that an establishment not paying the surcharge, which funds the program, was placed on hold, pending payment of the tax and resolution of other issues, rather than being disallowed and told to re-apply later. DECD staff indicated there was concern a denial would be challenged because the applicant met the statutory criteria.

There are also several issues related to awarding grants to dry cleaners who lease rather than own sites to be cleaned up. Among the questions are how to: calculate length of time in business; determine whether establishments on short-term leases will still be in business at the end of the grant award; and ensure cleanup projects will be completed if a dry cleaner ceases operations.

To address these problems and ensure program requirements are clear, the program review committee recommends C.G.S. Sec. 12-263m be amended to specify limits on the number of years an establishment can receive grants and the circumstances under which an applicant will be ineligible for consideration, including nonpayment of taxes and pending lawsuits.

In addition, the Department of Economic and Community Development shall be required to promulgate regulations for the operation of the dry cleaning remediation program. At a minimum, the regulations should specify:

Program participation. The dry cleaning remediation program was originally proposed to help long-standing dry cleaners with environmental problems caused by historic approaches to handling solvents and other chemicals. The goal was to help these small businesses clean up their sites and remain competitive. Money was also made available for prevention measures.

The program review committee is surprised by the small number of program applicants. Department of Revenue Services staff estimates approximately 400 establishments currently pay the dry cleaning surcharge. Yet, only 17 dry cleaners have ever applied to DECD for a grant. Through 1998, 12 establishments have received a total of 22 grants worth $1.1 million. A majority sought the money to help pay for cleaning up spills.

DECD has used several mechanisms to promote awareness of the program. These efforts include informational sessions with groups at locations around the state, translation of descriptive documents into foreign languages, and advertising in a trade newspaper. However, the committee believes a direct approach that would reach all potential grantees has been overlooked.

The program review committee recommends the Department of Economic and Community Development prepare an informational mailing for the April 1999 grant cycle to be sent out by the Department of Revenue Services with the quarterly surcharge payment forms. DRS has indicated such a mailing would be feasible as long as DECD covers any additional mailing costs resulting from the effort.

Paying for a mailing to the dry cleaning establishments will not be a hardship for DECD. By statute, the department receives at least $100,000 per year from the dry cleaning fund for administrative expenses. When the program began, these expenses were paid out of the overall fund balance. However, since October 1996, money for administration has been segregated from the money available for grants.

As of October 1998, the balance in the administration category was $260,000. A total of $57,185 has been spent on expenses such as staff, printing, postage, and advertising. DECD staff time spent on the program is tracked, and the cost is deducted from the fund periodically. The 1998 allocation from the fund is expected to be transferred during November. The normal $100,000 amount is supposed to be reduced by $16,716 to reflect administrative expenses DECD acknowledges were paid out of the grant category rather than the administrative category between October 1996 and June 1997.

Another way DECD might increase participation in the program would be by accepting applications more than once a year. DECD developed projections showing two rounds of funding per year would cause the fund to run out of money by the end of 2000. This is based on every grant recipient receiving $50,000 per year for three years, with several new establishments applying during each round. The program review committee believes this projection may be unduly pessimistic.

First, it presumes everyone who applies will request three years of funding. This has not been the case so far. Two recipients of 1996 awards sought additional funds in 1997, but not in 1998. Second, it assumes a nearly equal number of applications will be received during each of the two cycles every year. Since grantees can only receive one award per calendar year, the total number of establishments applying would have to double immediately for that to occur.

The program review committee recommends the Department of Economic and Community Development sponsor a second cycle of grants in the fall of 1999, if the dry cleaning remediation program does not attract at least seven new applicants for the April 1999 grant cycle. This goal represents slightly more than twice the number of new applicants received in 1998, but it is still lower than the number of new applicants in 1997. (Table IV-4 contained a breakdown of applicant data.)

Using the money in the fund as quickly as it is received is not necessarily a negative, especially when one of the goals of the program is to clean up contamination. In fact, the main beneficiary of a long-term fund is DECD, with its annual allotment for administrative expenses. The program review committee believes repeal of the program and the surcharge should be considered, if the number of applicants to the fund does not increase.

The program review committee recommends the Department of Economic and Community Development be required to submit a report on the Dry Cleaning Establishment Remediation Fund to the joint standing committee of the General Assembly having cognizance of matters relating to the environment on February 1, 2000. The report shall indicate the number of applications received and the number and amount of the grants awarded annually since the start of the program. It shall also include a recommendation as to whether the grant program and the gross receipts tax under C.G.S. Sec. 12-263m should continue. This reporting requirement is similar to one the legislature has already placed on the Special Contaminated Property Remediation and Insurance Fund.

Public Information Efforts

Connecticut has an array of tools and programs to assist brownfields. However, unless private and public entities take advantage of them, the problems of brownfields will not diminish. Because representatives of municipalities are often a source of information for developers seeking property and land owners seeking purchasers, the program review survey on brownfields asked questions about knowledge of specific brownfield-related programs. Figure IV-4 presents the responses for key programs discussed previously in this report.

Towns were asked to respond to the questions even if they had no brownfields. The best known of these programs is the Urban Sites Remedial Action Program (57 percent of the respondents) and its companion program EDI (51 percent).

Fewer than half of the respondents had any awareness of the Environmental Assistance Revolving Loan Fund operated by the Connecticut Development Authority. Similarly, less than half of the respondents knew about the state’s voluntary remediation programs, which can be used by property owners to obtain verification a site voluntarily cleaned up meets state standards.

In November 1998, DEP hosted a one-day conference "Cleaning-up and Redeveloping Connecticut," which attracted attendees from the public and private sector throughout the state. The department also has prepared a brochure called "The Site Remediation Program," which describes a variety of the programs and tools available to facilitate the clean up of contaminated property. These efforts are good steps at increasing awareness.

Another useful tool for those working with brownfields would be a guidance document on the conduct of site investigations, which DEP has been working on. The program review committee recommends the Department of Environmental Protection complete the planned guidance document for environmental professionals regarding the conduct of site investigations by March 15, 1999.

Additional steps should also be taken to promote awareness of existing brownfield tools and programs. The committee recommends the Department of Economic and Community Development prepare and distribute written summaries of the major brownfield-related programs, including SCPRIF, USRAP, EARLF, voluntary remediation, and the dry cleaning fund to relevant professional organizations, lending institutions, libraries, and higher education institutions. Although DECD staff already provides technical advice to participants in its various economic development programs, the proposed documents would expand the range of parties who will learn about brownfield efforts before they make formal contact with the state.

Technical Change

C.G.S. Sec. 22a-134e enumerates the fees for filing forms for the property transfer act. It has been revised eight times, contains 16 subsections, and includes several fee schedules that vary depending on the filing date of the form. As currently written, the cross-references in two of the subsections are incorrect. The program review committee recommends:

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