PA 17-214—sHB 7229

Commerce Committee

AN ACT CONCERNING THE CREATION OF CONNECTICUT BROWNFIELD LAND BANKS, REVISIONS TO THE BROWNFIELD REMEDIATION AND REVITALIZATION PROGRAM AND AUTHORIZING BONDS OF THE STATE FOR BROWNFIELD REMEDIATION AND DEVELOPMENT PROGRAMS

SUMMARY: This act establishes a framework for local nonprofit organizations to acquire and remediate contaminated property (i.e., brownfields) and sell the remediated property for redevelopment. As part of that framework, a nonprofit may access the same tools and incentives available to municipalities for remediating and redeveloping brownfields, but first must (1) be certified by the Department of Economic and Community Development (DECD) as a Connecticut Brownfield Land Bank (CBLB) and (2) enter into a land banking agreement with one or more municipalities.

Also, the act makes it easier for developers and other eligible parties to access DECD's Brownfield Remediation and Revitalization Program and makes several other administrative and conforming changes. It allows developers to remediate a brownfield one section at a time and receive the program's liability protection for that section, instead of having to remediate the entire brownfield before receiving any protection. The act also protects lenders from liability when they hold a mortgage or other security interest in a brownfield that a developer is remediating under the program.

EFFECTIVE DATE: July 1, 2017

1-13 — CONNECTICUT BROWNFIELD LAND BANKS

Overview

The act establishes a process for certifying nonstock corporations as CBLBs. (Under Connecticut law, a corporation is nonprofit if no distribution may be made to its members, directors, or officers.) An organization seeking CBLB certification must apply to DECD, and once certified, may:

1. acquire, retain, and remediate brownfields and sell the remediated property for a municipality's benefit;

2. educate government officials, community leaders, economic development agencies, and nonprofit organizations on brownfield redevelopment best practices; and

3. engage in other activities the act authorizes.

Applying for and Maintaining Certification ( 2)

A nonprofit organization applying for CBLB certification must apply on a form DECD prescribes and provide:

1. its certificate of incorporation and bylaws,

2. a list of its current officers and directors,

3. the proposed land banking agreement with one or more municipalities,

4. proof that it has the financial and technical capacity to fulfill the purposes of a CBLB,

5. its proposed business plan, and

6. any other information the DECD commissioner deems necessary.

In deciding whether to approve or reject an application, the commissioner must consider:

1. whether the applicant has the financial and technical capability to fulfill the purposes of a CBLB,

2. the relative economic conditions of the municipalities the organization proposes to serve,

3. the degree to which these municipalities support the organization,

4. the quality of the CBLB's business plan, and

5. any other criteria the commissioner establishes to fulfill the act's purposes.

If the commissioner approves the application, she must issue a certificate granting the organization all the rights, privileges, and immunities the act grants certified CBLBs.

Certified CBLBs must submit a report to the commissioner annually, by January 31, that describes their activities for the previous year, including:

1. the CBLB's updated business plan and a list of current officers and directors,

2. the CBLB's complete operating and financial statements,

3. copies of any land banking agreements the CBLB entered into during the preceding year, and

4. any other information the commissioner deems necessary.

The commissioner must review the report to determine if it includes the required information. If it does not, she must notify the CBLB's officers by mail that she will decertify the organization 120 days after the mailing date unless the CBLB submits a revised report that she determines provides the required information. The commissioner may extend the 120-day deadline by an additional 60 days.

If the commissioner decertifies the CBLB, it cannot enter into any new land banking agreements, but continues to (1) enjoy its rights and (2) be bound by its obligations, with respect to any property it acquired under a land banking agreement it executed before it was decertified. A decertified CBLB may reapply for certification.

CBLB Directors and Officers ( 3)

A CBLB must exercise its power through a board of directors, which must consist of between five and 11 members, each with knowledge and expertise in the land bank's purposes and activities. The board must elect from its members the chairperson and any other officers it deems necessary. It must also adopt bylaws and procedures needed to perform its functions. It may establish committees and subcommittees needed to conduct its business.

Members serve without compensation, but are entitled to reimbursement for the actual and necessary expenses they incur while performing their official duties. The members are not personally liable for CBLB's loans, other financial obligations, or environmental liabilities, nor are they subject to creditors' rights, which apply only against the CBLB.

Elected and appointed state and local officers may serve on CBLB boards, and their appointment neither terminates nor impairs their public duties. State and municipal employees also may serve on a board.

Board members may organize and reorganize a CBLB's executive, administrative, clerical, and other departments, and can specify the duties, powers, and compensation of the CBLB's employees, agents, and consultants.

CBLB's Purposes ( 4)

The act gives CBLBs broad contractual, financial, and development powers, but not the power to take property by eminent domain. A CBLB may:

1. enter into land banking agreements with municipalities to acquire, retain, remediate, and sell land and buildings in those municipalities on their behalf;

2. enter into contracts and agreements with a municipality under which the municipality provides staff services to the CBLB or the CBLB provides such services to the municipality;

3. obtain grants or borrow money from private lenders, municipalities, and state and federal agencies to fund its operations;

4. secure the payment of some or all of its debt by procuring insurance or state and federal guarantees and making the necessary premium payments;

5. acquire property by purchase contracts, lease purchase agreements, installment sales contracts, land contracts, and through foreclosure of municipal tax liens; and

6. do all things necessary to fulfill its purposes and comply with applicable laws.

The act complements the CBLB's property acquisition powers by allowing municipalities to transfer or convey land and buildings and interests in them to a CBLB. A municipality may set the terms and conditions for transferring or conveying the property or property interests and conduct the transfer or conveyance according to its procedures. The municipality may do these things regardless of any conflicting statute, special act, charter, or home rule ordinance.

Tax Exemption ( 5)

Since CBLBs must exercise their powers to benefit state residents, specifically to increase their commerce, wealth, and prosperity, the act deems the exercise of these powers an essential public function. Consequently, it exempts CBLBs from paying state and local taxes and assessments on (1) the revenue or property they receive, acquire, transfer, or use and (2) any income derived from these sources.

Specified Land Acquisition and Disposition Powers ( 6)

A CBLB may acquire only brownfields and adjacent or nearby property identified in the land banking agreement between it and the municipality where the property is located. It must hold this property in its own name regardless of the entity that transferred it. The CBLB must also maintain an inventory of all the real property it acquires and allow the public to review and inspect it.

The CBLB must adopt policies and procedures specifying the terms and conditions for acquiring real property or property interests. Those terms and conditions may allow for different types of compensation, including: (1) monetary payments; (2) secured financial obligations, covenants, or conditions related to the property's current or future use; (3) contractual commitments imposed on the party the property is transferred to; and (4) other forms the CBLB's directors determine are in the CBLB's best interest.

The CBLB may also dispose of property it acquires as its land banking agreements allow. It can convey, exchange, sell, transfer, lease as lessee, grant, release and demise, and pledge as collateral any and all interests in, on, or to the property as long as the municipality where the property is located approves the transaction, as specified in the land banking agreement.

7-13 — CBLB ACCESS TO BROWNFIELD REMEDIATION TOOLS AND INCENTIVES

The act allows CBLBs to access the same brownfield remediation tools and incentives that are available to municipalities.

Local Option Property Tax Abatement ( 7)

The act allows a municipality to forgive all or a portion of the principal and interest due on delinquent property taxes for a property a CBLB acquires or plans to acquire in the municipality. The law already allows municipalities to forgive the delinquent taxes on a property for a party that intends to acquire, investigate, and remediate it according to state standards. (The law also allows municipalities to (1) abate the property taxes for up to seven years on a property whose owner agrees to remediate it according to state standards and (2) tax a remediated property for up to seven years based on its pre-remediation fair market value.)

Conducting Environmental Site Assessments ( 8)

The law sets conditions under which a municipality, or a licensed environmental professional (LEP) it employs, may enter a property, without liability, to assess or investigate it. The act allows a CBLB or an LEP it employs to assess or investigate a property under the same conditions as a municipality if:

1. the land banking agreement requires the property to be investigated and assessed or

2. the property's owner and the municipality or CBLB enter into a voluntary agreement allowing the property's environmental condition to be investigated or assessed.

As with municipalities, the CBLB or its LEP is not protected from liability for gross negligence or intentional misconduct. The CBLB or the LEP must, like a municipality, give the property owner 45 days' notice before entering the property.

Department of Energy and Environmental Protection (DEEP) Liability Relief Program ( 9)

The act allows CBLBs to participate in DEEP's liability relief program, which protects certain entities that remediate a brownfield from liability for contamination that occurred before they acquired the property. Under prior law, the program was open only to municipalities, economic development agencies, municipally formed nonprofit economic development corporations, and nonstock or limited liability companies that municipalities or these corporations form and control.

Transfer Act Exemptions ( 10 & 11)

Under the act, properties municipalities convey to CBLBs are exempt from the transfer act. The transfer act requires parties to a real estate transaction involving contaminated property to notify DEEP about the contamination and identify the party that will investigate and remediate it. The law already exempted property that municipalities (1) foreclosed on and subsequently conveyed, (2) remediated under DECD's municipal brownfield grant program (CGS 32-376), or (3) acquired by eminent domain.

Additionally, the act also sets conditions that exempt from the transfer act a property that a CBLB remediates and subsequently transfers. The transfer is exempt if the property was remediated under a DEEP or DECD liability relief program, is compliant with that program when the transfer occurred, and was not used to generate hazardous waste after entering the program.

Remedial Action and Redevelopment Municipal Grant Program ( 12)

The act makes CBLBs eligible for DECD remedial action and redevelopment grants, which were previously available only to municipalities and local economic development agencies. The grants are for investigating, assessing, and cleaning up contaminated properties.

Abandoned Brownfield Cleanup (ABC) Program ( 13)

The ABC program exempts participants from investigating and remediating contamination that emanated from the property before they acquired it and limits their liability to the state or third parties for the contamination in such cases provided they did not cause or contribute to the contamination or negligently or recklessly exacerbate it.

The act allows CBLBs to ask the DECD commissioner to determine if a property is eligible for the program's benefits regardless of the property's current owner. CBLBs can therefore recommend property regardless of whether they own it. The act also exempts CBLBs and municipal economic development agencies from having to meet the program's responsible party criteria (i.e., the party that contaminated the property cannot be determined, no longer exists, or is unable to remediate it).

14 — BROWNFIELD REMEDIATION AND REVITALIZATION PROGRAM

Liability Protection for Remediated Portions of a Property

The act makes it easier for developers to remediate and develop a brownfield in sections by allowing them to investigate and remediate one section of the brownfield at a time and receive the program's liability protection for that section instead of waiting until they remediate the entire brownfield, as prior law required.

To receive liability protection for a remediated section, a developer must submit to the DECD and DEEP commissioners the same documents they would submit if they had investigated and remediated the entire brownfield. That is, the developer must submit a report indicating that the section was (1) investigated and remediated according to state standards (i.e., verification) or (2) investigated and remediated according to those standards except for contaminated groundwater, which is being remediated under a long-term remedy (i.e., interim verification). In both cases, the remediation must address hazardous substances that extend out from the remediated section to the brownfield's boundaries.

Furthermore, the developer must have complied with the requirements for preparing, submitting, and implementing the statutorily required investigation plan and remediation schedule. Specifically, the developer must notify the DEEP commissioner that the following tasks were completed on time:

1. the entire property was investigated according to the prevailing standards and guidelines for conducting such investigations within two years after the developer paid the first installment of the program's application fee,

2. the remediation plan for the entire brownfield was submitted to the commissioner, and

3. remediation began within three years after paying the first installment.

Lastly, the developer must demonstrate to the commissioners' satisfaction that the entire property will be remediated on time.

Liability Protection for Lenders

The act extends the program's liability protections to lenders to whom a developer conveys or has conveyed a security interest in a property the developer is remediating or has remediated. A lender receives these protections if the lender:

1. was not cited for polluting the state's waters;

2. did not contaminate the property or create the source that did; and

3. is not (a) affiliated with any person that contaminated the property or (b) responsible for the contamination source through any direct or indirect familial relationship or any contractual, corporate, or financial relationship other than holding the security interest.

Off-Site Releases

The act specifies that developers remediating brownfields do not have to investigate and remediate any hazardous substance, including plumes, beyond the boundaries of the brownfield. Prior law only exempted them from investigating and remediating plumes, which are flows of contaminated groundwater that extend outward from a source.

Fee Changes

The act changes the fees that must be paid before the program's liability protections can be extended to a party that acquires a property (i.e., transferee) while it is being remediated. Under prior law, the transferee had to pay the same fee as the property's initial owner. Under the act, the transferee must pay a $10,000 fee or the balance of any unpaid fee, whichever is greater.

LEP Verification

The act requires that the LEP a developer retains to supervise the brownfield's remediation state in the remedial action report that he or she supervised the remediation and prepared the verification or interim verification report in compliance with the professional ethics and code of conduct for LEPs, as specified in DEEP regulations (CGS 22a-133v(c)).

DEEP Audit Deadline

The act adjusts the deadline for the DEEP commissioner to audit a verification or interim verification report. If the commissioner decides to audit the verification, the law gives him up to 180 days to complete it. But if the commissioner requests additional information and the developer fails to provide it within 14 days of the commissioner's request, the 180-day period stops until the developer provides the information. If the developer fails to provide the requested information within 60 days of the commissioner's request, the commissioner may restart the audit. In these cases, the act extends the 180-day deadline by the number of days during which the audit was suspended.

Application Requirement

By law, a person who wants to have another person or property designated as eligible for the program's liability protections must apply to the DECD commissioner and provide various documents, including a title search, an environmental site assessment, and a current property inspection report. The act requires the applicant to provide the property inspection report only if the commissioner requests it.