JobsOhio Launches Site Selection Search Database

JobsOhio launched a new site selection tool called SiteOhio designed to provide easy access to businesses looking for locations to either develop new facilities or buy/lease existing buildings.  The easy to use web based tool allows you to search by the following parameters:

  • Available buildings of a certain size
  • Vacant land based on acreage
  • Businesses that may be for sale
  • Properties in specific communities by either city or county

The site selector tool allows you to compare filter properties by energy or broadband capability or labor force.  The tool is designed to allow businesses to more quickly identify sites that meet their needs.  

The site is also designed to certify sites as ready for development with available utilities, zoning, etc. The site hasn't yet been fully populated with available sites, but JobsOhio will ensure that happens over time. Communities will be encouraged to go through the JobsOhio site authentication process to have sites in their communities certified as ready.

The JobsOhio authentication process is designed to identify sites that are "ready to develop on day one, saving businesses time and money."  JobsOhio in its announcement described the authentication process as follows:

“Through the SiteOhio authentication process, each site undergoes a usability audit designed to vet sites with companies in mind. All due diligence studies look to ensure strict criteria are met, as well as utilities and other site assets are on site, with excess capacity and accessible for doing business,” JobsOhio said in announcing the tool.

The site doesn't include other information that may be key to determining suitability of a site, such as:

  • Taxes
  • Ease of permitting
  • Capacity of sewers
  • Availability of water

Implications for Brownfield Redevelopment

As JobsOhio stated in its announcement regarding the site selection tool, the purpose is to identify sites "ready to go on day one."  This certainly would not include brownfield properties.  A quick search of industrial properties by acreage shows a number of greenfield sites, typically industrial parks ready for development.  A quick search of available buildings identified mostly sites that would not qualify as traditional brownfield properties.  

While the tool is an excellent idea to expedite identification of readily available sites for development, the site selection tool will not encourage reuse of urban sites.  If the goal is of the site selector tool is to populate sites "ready to go on day one," then in order to encourage redevelopment of brownfield properties this would appear to encourage reconsideration of programs such as the Clean Ohio Redevelopment Ready Program.  Under this program, Clean Ohio funds were used to address environmental issues at brownfield sites upfront to facilitate reuse.

State of Ohio Pursues Recovery of Incentives

Companies expanding onto brownfield sites need public incentives to make their projects viable.  However, the days when cleanup of contamination by itself could attract public incentives are long over.  Under the new local and State brownfield programs companies must make job commitments and/or improvements to the property to attract government assistance.

When companies work with State and local officials to obtain brownfield incentives they must engage in negotiations regarding what they are willing to commit to as part of the project.  These commitments will often extend 3 or more years out into the future when it becomes more challenging to predict economic and business conditions.

The Dayton Daily News discussed the State of Ohio's pursuit to recover incentives from companies that failed to meet business expansion or development commitments.  The DDN reported:

State officials reviewed 329 economic development deals that concluded in 2015 and found that all but 50 had substantially complied with the terms, such as hitting job creation and retention numbers, training workers and generating new payroll.

If companies fail to live up to their promises, the state may demand repayment or make other changes to the deal. In the 50 cases where targets weren’t hit, the state is moving to clawback a collective $776,000. Some of the biggest take backs are being launched against well-known, big companies — Proctor & Gamble Co., U.S. Steel Corp., and The Dannon Co. — for failing to create or retain promised jobs

This is very relevant to JobsOhio brownfield grants and loans provided to companies to assist with sampling or cleanup at contaminated properties.  The grant agreements for the JobsOhio Revitalization Program include contractual commitments to increase payroll, add jobs or make capital investments to expand the business.  For example, at minimum, JobsOhio typically requires 20 new jobs over a three year period to compete for brownfield cleanup grant funding under its Revitalization Program.

The grant agreement language is somewhat vague as to what happens if the grant commitments are not met by the company.  The language does allow for companies to assert that changing economic conditions resulted in unmet commitments.  However, the contract language does leave open the possibility JobsOhio could request return of the entire brownfield grant provided.

It is important that companies pursuing brownfield incentives be aware of the consequences of not meeting commitments.  It is also important to avoid putting forward unrealistic job or capital investment commitments just to attract upfront grant money.  Companies that over commit open themselves up to clawback by the State of the funds provided as well as publicly being outed for failing to live up to their commitments.

Rethinking Brownfield Redevelopment in Ohio- Part 2 of 4

This second post in the series discussing brownfield redevelopment in Ohio will provide an overview of the extent and nature of Ohio's brownfield problem.  First, the post will discuss Ohio's progress in spurring brownfield versus greenfield redevelopment.  Second, the post will provide an overview of public information regarding the number of brownfields in Ohio  

Urban Sprawl in Ohio

One issue discussed in Part 1 of this series was how failure to re-utilize urban core properties significantly contributes to the issue of urban sprawl.  The negatives of urban sprawl are well documented:  decay of inner urban areas, increase infrastructure costs, more traffic (and associated air pollution) and greater impact to wetlands and streams as development moves to greenfields.

How is Ohio doing with regard to urban sprawl?  Not well based upon an analysis performed in 2014 by Smart Growth America.  Here are the rankings of some of Ohio's largest cities:

  • Cleveland 153
  • Cleveland 138
  • Toledo 117
  • Dayton 116
  • Canton 93
  • Akron 111
  • Cincinnati 166

Cincinnati Urban Sprawl Trends

A study performed by Smart Growth America of the Cincinnati region showed that during the time period of 1196-2005 the trends on brownfield versus greenfield redevelopment were as follows:

  • Thirty (30) businesses that expanded operations moved from transit accessible areas to areas without transit (i.e. out of the urban core);
  • Eight (8) business expanded within the urban core

This is a clear demonstration of the trends that the costs to redevelop brownfields pushes many businesses to expand or relocate to the suburbs contributing to Ohio's urban sprawl issues.

Cleveland Urban Sprawl Trends

Some times a picture (or in this case a graphic) is worth a thousand words.  Here is a graphic that shows developed land in Cuyahoga County from 1948 to 2002:

 

 

 

 

 

 

 

 

 

It is worth noting that there may be a major shift in these trends due to the millennials preference for downtown living.  A recent study showed that 7 city centers outperformed their surrounding metros in the 2002-07 period, 21 outperformed the periphery in 2007-2011.  Certainly, that trend is evident right here in Cleveland where residential occupancy is above 97.8% with major new downtown residential developments planned.  

The major shift in living preferences creates a golden opportunity to accelerate brownfield redevelopment.  

How many Brownfields are in Ohio?

Ohio does not maintain a registry that provides a good inventory of all brownfield sites.  The most extensive registry maintained by Ohio EPA was referred to as the "Master's Site List."  However, after a property owner challenged its listing on the MSL, it was determined Ohio EPA did not have the legal authority to maintain the list.  Ohio EPA stopped maintaining the list in 1999.

Currently, Ohio EPA maintains the Ohio Brownfield Inventory, but listing of properties is voluntary. Typically, properties are listed in order to qualify for some brownfield redevelopment incentives. Therefore, the registry does not provide a good estimate of the actual number of brownfields.

Public information is limited on brownfields.  A review of local studies and information from local officials and U.S. EPA reveal the following statistics which provide some insight into the extent of the brownfield problem in Ohio:  

  • 119 brownfields in Lucas County (1996 estimate);
  • An estimated 62% of real estate transactions in Lucas County are encumbered by environmental issues;
  • An estimated 25% of transactions in Toledo were abandoned due to environmental issues with an average job lost of 20 jobs per lost transaction;
  • An estimated 4,623 acres of brownfields are in Cuyahoga County;
  • 350 brownfields in Cleveland with an estimated 1,000 to 2,000 condemned structures
  • 40,000 acres or 14% of Cuyahoga County's land was industrial at some point (Estimate by the Cuyahoga Planning Commission)

Statewide estimates on brownfields:

  • 417 Ohio sites are currently identified on CERCLIS (sites on or being evaluated for Superfund Listing)
  • Over 5,000 RCRA sites listed on US EPA RCRAInfo data base
  • 4,000 to 6,000 brownfield sites in Ohio (as estimated by the Government Accounting Office)
  • U.S. EPA has a higher estimate- Over 10,000 brownfield sites have been inventoried by local governments according to testimony from Joe Dufficy (U.S. EPA) before Congress in 2005

Importance of Better Information on Brownfields

A strong case can be made that Ohio needs tools to create a better inventory of brownfields.  It's current system of waiting for volunteers looking for incentives to list sites results in very limited information.  

A better inventory helps to inform public policy as well as better track progress in addressing brownfields.  Also, better information provides more public information regarding sites that have issues.

Some may argue that there should be a mandatory law requiring all brownfield sites to be listed. However, there are many issues with this concept.  Such mandatory laws discourage brownfield redevelopment or even gathering data regarding contamination on property.  This is the exact opposite of what Ohio needs to do if it wants to encourage more brownfield redevelopment.

A mandatory law exists in New Jersey and my colleagues familiar with the New Jersey market state it acts as a strong deterrent to gathering data regarding contamination as well as transactions.

A better system is one that offers strong incentives to voluntarily disclose information regarding conditions of property.  The final post in this series will discuss Michigan's Baseline Environmental Assessment program which has been highly successful in gathering public information regarding the condition of contaminated property in the state while at the same time spurring brownfield redevelopment.

Applications Released for $20 Million Dollar Abandoned Gas Station Grant Fund

The Ohio Development Services Agency has announced that it is now accepting application for the Abandoned Gas Station Cleanup Grant Program.  Eligible activities include $100,000 for assessment and up to $500,000 for cleanup.  

The program targets abandoned gas stations and cleanup of underground storage tanks (UST).  To be eligible, the tank must be certified as a Class C BUSTR tank (i.e. abandoned).  

The first round of application are due by April 1, 2016.  A total of $3.5 million of the $20 million will be available in this round of funding.  

A review of the scoring matrix released with the application provides insight into which types of projects will score the best.  There are a total of 100 point available.  The points are awarded based on the following categories:

  1. Environmental Impact (extent of contamination, proximity to waterways or residences, etc) 15 points
  2. Community Impact (land use after cleanup and benefits to the community) 15 points
  3. Economic Impact (job creation, increase in land value) 15 points
  4. Previous planning efforts 10 points
  5. Cost to address sold waste removal- if over $5,000 get 10 points
  6. Prior recipient of a BUSTR loan 5 points
  7. Private funds invested in the property in the past 5 years -  Less than $10,000 5 points; More than $10,000 gets 10 points
  8. Previous Assessment or Fast Track grantee 20 points

The scoring matrix does look like a balance of environmental, community and economic benefit. Unlike JobsOhio Revitalization Program, projects involving heavily contaminated sites will get higher priority.  JobsOhio's program is almost entirely focused on economic redevelopment.  

Projects that have had prior planning efforts or investment in funds will also do better in this competitive grant cycle.

Potential applicants now have less than a month to get their applications in for this first round of funding. 

 

Ohio Attorney General Releases Economic Development Manual

Attorney General Mike DeWine should be commended for putting together a comprehensive manual regarding legal issues, resources and incentives available to assist with economic development. The manual is called the 2015 Ohio Economic Development Manual.  

The Attorney General collaborated with a number of state agencies and local economic development organizations in putting together the manual.  These collaborators helped summarize a number of highly complex issues and programs.  

To my knowledge, no other state official has attempted to compile such a manual.  For those like myself who are engaged in economic redevelopment projects, in particular brownfield redevelopment, it can take a significant amount of time to stay up on the latest issues, programs and incentives.  

While the manual is an excellent resource, there is no way it can provide anything other than a basic level of understanding regarding complex issues such as brownfield redevelopment.  The purpose of this post is to raise awareness of the various layers of complexities related to brownfield redevelopment that are not discussed or oversimplified in the manual.

Overview of Brownfield Section of the Manual

The manual provides an overview of the stages of brownfield redevelopment as well as a quick summary of possible incentives.

Stages of Brownfield Redevelopment

The manual states the following as the stages for brownfield redevelopment:

  • Identify Site
  • Develop remediation Plan
    • Due Diligence
      • Phase I (paperwork, database review and site visit)
      • Phase II (sampling)
    • Cleanup- Under Ohio EPA's Voluntary Action Program (VAP). Once cleanup complete a Covenant-Not-to-Sue (CNS) will be issued by the State

The manual provides an overly simplistic view of brownfield redevelopment.  Here are just some of the issues with this summary:

  1. Review of Phase I and Phase II Reports-  As discussed numerous times on this blog, it is very important to closely review any Phase I report received on a property to make sure it was done correctly (ASTM or VAP standards).  Also, it is not uncommon for different consultants to reach different conclusions as to whether something constitutes an issue to be identified in a Phase I report.  Finally, formulating the purpose and scope of Phase II testing is a critical component to the due diligence process. Phase II costs can range from $10,000 to $300,000 depending on the site and risk mitigation strategy to be employed.
  2. Alternatives to Full Cleanup-  There are alternatives available to property owners to mitigate environmental risk other than full cleanup of the property.  A very common approach discussed at length in prior blog posts is the Bona Fide Purchaser Defense (BFPD) under CERCLA. Depending on the Client's risk tolerance and the issues presented at the site, BFPD can be a much faster and less expensive option to the VAP to mitigate risk and address the more serious threats a property may present.
  3. Eligibility Issues in the VAP-  There are different types of contamination and sites that are not eligible for remediation under the VAP.  These include, but are not limited to: underground storage tanks (USTs), hazardous waste management units (RCRA closure), PCBs, (TSCA) and sites under federal or state enforcement.
  4. Environmental Insurance-  No where does the manual discuss the possibility of environmental insurance to address risks presented by a site.  Such insurance is commonly used in business transactions as well as brownfield redevelopment projects.
  5. Cleanup Design-  The manual suggests that a party can consult with Ohio EPA's VAP Technical Assistance program in developing its cleanup plan for a project.  While Ohio EPA's Technical Assistance program is an extremely useful tool, the manual does not indicate that a private party has a great deal of control over designing a cleanup to meet applicable standards.  Since the cleanup is the most expensive component, it is critical to evaluate the options available to meet standards (i.e. engineering controls, institutional controls and addressing exposure pathways).

Incentives Available

The manual discusses the following incentives available to assist with brownfield redevelopment:

  • Ohio EPA Targeted Brownfield Assessment- Ohio EPA program to pay for Phase I assessments and potentially Phase II activities using its Site Investigation Field Unit (SIFU).
  • EPA VAP Technical Assistance- Ohio EPA provides technical assistance on how to complete a VAP cleanup on the property.
  • Ohio Brownfield Fund- Loans up to $500,000 for Phase II activities and $5 million for cleanup
  • JobsOhio Revitalization Loan and Grant Fund-  Up to $200,000 for Phase II, $1 million in grant funds and $5 million in loan funds for cleanup activities.
  • Abandoned Service Station Fund Program-  Class C underground storage tank (USTs) cleanup fund for abandoned tanks.  Up to $100,000 for assessment and $500,000 for cleanup activities.

This list of available incentives provided in the manual is a good basic overview of the major state programs in Ohio.  However, the manual does not mention the fact there are a number of local brownfield incentive programs that will provide grant funds for Phase Is, Phase IIs and cleanup activities. In many instances, these local programs can be a better fit for a particular project.

Furthermore, each of the programs listed above have important eligibility criteria, limits on reimbursable costs as well as development or job creation requirements in order to secure funding.  It is critical for a party to understand these commitments prior to accepting grant or loan funding.

Conclusion

This post is not meant as a criticism of the Attorney General's efforts in putting together the manual.  The manual is a good place to start to get a basic understanding of various issues and programs that can impact economic development.  However, with complex issues like brownfield redevelopment, the redevelopment process is more of an art than exact science.  An over simplified view can result in failed projects or unnecessary costs.  

Review of Compliance with Job Commitments in State Incentive Packages

The Attorney General's Office completed its review of compliance with job commitments the state received in exchange for various incentives.  Here is the summary of its findings:

  • Workforce Compliance Rate: 100% (49 of 49 awards in substantial compliance)
  • Grant Compliance Rate: 74.4% (29 of 39)
  • Tax Credit Compliance Rate: 62.4% (78 of 125)
  • Loan Compliance Rate: 57.1% (24 of 42)

The chart and figures show the break down of compliance by type of incentive.  The report also contains an appendix which identifies all of the specific incentive packages by company and the status of compliance.  

The report really doesn't provide much insight as to why some incentives have a greater level of compliance than others. One explanation for the 100% compliance with workforce development is that the commitment is really just a training commitment, not a job creation commitment.

The state not only reviews compliance with the job commitments in state incentive agreements, it takes enforcement against those companies that it deems are not in substantial compliance.  This from the Columbus Dispatch Article discussing the Attorney General's Report:

The state has taken action against many of the companies behind the 75 projects that were not in compliance. It demanded the return of some grant money, modified terms on loans and shortened periods in which the companies were able to collect the tax credits. In other instances, the state found the companies were mostly in compliance despite coming up short and ordered no remedial action.

Incentive agreements also contain an out clause in the event there is an economic slowdown which prevents the company from meeting its commitments.  

Brownfields

One type of grant not covered in the report are brownfield grants.  This is because under the Clean Ohio Program, the grant agreement required a commitment to cleanup the property to Ohio EPA's Voluntary Action Program standards, not a specific job creation commitment.  While job creation was a metric evaluated when projects competed for Clean Ohio funding, the pledges did not make it into the grant agreements.  

That has changed under the JobsOhio Revitalization Program.  Under the new grant template being used by JobsOhio, companies are required to make specific commitments in terms of job creation, job retention and/or capital investment.  The JobsOhio agreement contains a specific deadline for meeting that commitment and the ability to require repayment of the grant in the event those commitments are not met.  

The JobsOhio agreement focus on job creation and investment  is similar to other State economic incentives.  It is an example of the shift in philosophy behind brownfield redevelopment in Ohio. Clean Ohio was focused on cleanup and redevelopment of contaminated property.  The JobsOhio Revitalization Program is focused on economic redevelopment.