Current Debate Regarding the Future of the Clean Ohio Program
The Kasich Administration has announced that it is re-evaluating the Clean Ohio program. The next round of the Clean Ohio Revitalization Program (Round 12) will be the last. Also, funding under the Clean Ohio Assistance Fund, which pays for sampling on brownfield properties, is likely to run out as soon as February 2012.
It appears the Administration is discussing other funding sources that may allow the program to continue. (See Clean Ohio Funding End 2012….What Next?) Last week, an article in Crain’s Cleveland discussed the potential end of the program:
Ohio Department of Development spokeswoman Katie Sabatino said the state considers these successful programs, but is evaluating its options for assisting with the redevelopment of brownfield sites. Of the Clean Ohio Fund in particular, she said, “The Ohio Department of Development is working with the (Kasich) administration to chart a path to assist with brownfield issues….."
“It was supposed to end June 2014, but word out of Columbus is it will end sooner,” said one observer who asked not to be identified because he’s shepherding brownfield projects still under review. “I’m very concerned about them pulling the rug out from under us.”
In the article, it states that the Administration may be interested in moving towards loans instead of grants.
In addition, Mark Kvamme, chief investment officer of JobsOhio, is said to prefer loans over grants, according to a half-dozen economic development professionals who work with the state’s programs. He was not available last week for comment.
A similar change is under way at the Third Frontier Commission, which runs loan and grant programs for technology companies. Crain’s reported in June that Mr. Kvamme was behind recommendations the commission is adopting to move to loans from grants.
Advocates of the change say loans not only stretch the reach of public funds, but also cause applicants to be more discerning about what they propose when they’re on the hook to pay the money back.
Loans versus Grants
The problem with loans is that the require the developer or company considering a brownfield to pay for the entire cost of investigation or clean up. Total clean up costs can range from $500,000 to $5 million or more. This is the cost just to clean up the land, not the overall development costs.
If developers and companies are required to utilize their own funding to pay for all the clean up and investigation costs, most will look to greenfield sites instead of re-utilizing urban properties that have pre-existing contamination. Heavy industrial properties will simply sit idle unless the value of their location is so great it outweighs the clean up costs. This is an unlikely scenario for the vast majority of brownfield sites.
Ohio already has a brownfield loan program that almost no one is currently utilizing- Ohio Water Development Authority’s Brownfield Loan Program. Under the OWDA program you can obtain a low interest loan for sampling (up to $500,000) or clean up ($5 million). Despite the fact more sites are eligible for OWDA’s program than Clean Ohio, OWDA has had trouble attracting interest in the program.
Under the grant program, applicants still have "skin in the game." Under the Clean Ohio program, applicants are required to provide a 25% match. Paying 1/4 of the clean up costs makes many for brownfield sites attractive to development.
Future of Clean Ohio
Funding had been available for Clean Ohio to continue until July 2013. However, as discussed in the Crain’s Article funding has been shifted to other priorities.
Word is the Kasich Administration is looking for a funding source to continue a brownfield redevelopment program. The Administration may also be overhauling the program. Let’s hope that what ever emerges provides a real opportunity for our urban core to attract development.