A very interesting article appeared in Crain’s Cleveland Business by Jay Miller discussing “jobs sprawl” and the lack of easy access to jobs.

Brad Whitehead, president of the Fund, points to a study by the Center for Neighborhood Technologies, a Chicago nonprofit that focuses on making cities work better, that found that housing costs in Greater Clevelanders are low, but people here spend more of their money on housing plus transportation — 41% of their income — than people in Boston, 38%, or New York, 39%.

Similarly, a 2015 study by the Brookings Institution, a Washington, D.C., think tank, found that between 2000 and 2012, the number of jobs near the average person in the Cleveland metropolitan area declined by 26.5%, the steepest decline among 96 metropolitan areas. The Akron metro ranked 84th. Part of that loss of job access is the result of an overall decline in jobs in the region, a 2.5% loss between 2002 and 2014, according to the U.S. Census, and part is the movement of jobs, of employers, from the central cities.

And finally, the Federal Reserve Bank of Cleveland in a 2015 study found that low-skilled and low-paying jobs are the hardest to get to. It also found that, “Millennials and baby boomers alike want more accessible communities, whether that means a workplace within reach of transit or downsizing from large suburban homes to areas where amenities important to them are just a walk away.”

I found it amazing that the Clevelanders spend more money on housing plus transportation than major cities like Boston or New York.  As long as Ohio can’t leverage the lower cost of living in the state as a true strategic advantage, Ohio will never be able to compete with major cities like Boston, New York or Chicago.

The images below have appeared before on this blog, but they dramatically show the issues with urban sprawl as well as jobs sprawl.  The graphic on the left is developed land in Cuyahoga County in 1948 and the graphic on the right is developed land in 2002.  As development spreads out, the ability of the urban population to access jobs becomes more difficult.

The link between avoiding job sprawl and brownfields is unmistakable.  The more we discourage redevelopment of our inner core cities, the more we push jobs out into greenfields which fosters jobs sprawl.  Also, without an growing population and affordable transportation to jobs, large employers face increased challenges finding qualified candidates to fill job vacancies.  If the problem persists, employers look to relocate where they can ensure vacancies will be filled.

While Ohio used to be a leader in promoting brownfield redevelopment, a combination of factors over the last several years has pushed us to the back of the pack, even when compared to neighboring states like Michigan.  The combination of factors, all which have been discussed on this blog, include:

  • Clean Ohio, a national model in brownfield redevelopment incentive programs, sunset approximately 5-6 years ago leaving behind no definitive brownfield redevelopment program.  Between 10-20 major brownfield redevelopment projects were occurring per year over the decade Clean Ohio was in place
  • A lack of tax policy that promotes brownfield redevelopment.  The most significant tax benefit, the VAP 10-year tax abatement, is too cumbersome and too limited in scope.
  • JobsOhio, while the program has some major advantages and is currently has the best incentives for brownfields, the JobsOhio Revitalization Program has steep eligibility requirements and does not focus on specifically targeting brownfields for redevelopment
  • Local brownfield programs have dwindled- For example, Cuyahoga County has basically done away with its brownfield program and forgivable loans, a key incentive to promote brownfield redevelopment
  • VAP- Controversy surrounds the VAP program and whether it still provides the legal liability protection envisioned when the program was launched more than two decades ago
  • Vapor Intrusion-  Greater federal and state scrutiny on vapor intrusion issues has increased liability concerns for property owners and redevelopers looking to reuse brownfields

As we head into an Gubernatorial election year, more voices need to be raised discussing issues like jobs sprawl, brownfields and how to get Ohio’s population growing again.  While tax policy, education and economic development are critical to Ohio’s future, making sure we are putting new jobs in locations that can easily be accessed needs to be a key strategy in Ohio.

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.

On October 22nd, Kristi Tanner, a managing director of JobsOhio presented regarding Ohio’s new brownfield redevelopment incentive program which will replace Clean Ohio.  Many in the brownfield redevelopment community have been anxiously awaiting the roll-out of the new program.

According to Ms. Tanner, JobsOhio will start discussing potential projects now, but awards under the new program are not likely to be made until March 2014.  

Under the new program, the amount of funding available will be comparable to the Clean Ohio- approximately $43 million annually.  However, the State is making a major shift away from a grant based program under Clean Ohio to a low interest loan program through JobsOhio.

Review of Ohio’s Prior Brownfield Incentive Program- Clean Ohio

Since 2002, Clean Ohio provided over $400 million in grants for brownfield redevelopment projects.  The Clean Ohio Revitalization Fund (CORF) was Ohio’s centerpiece brownfield funding program with some of the largest incentives available Under Clean Ohio the basic program consisted of the following:

Clean Ohio
Revitalization Fund Assistance Fund
Competitive Pool- awards 1 or 2 times per year Non-Competitive Selection Process
Complete Application- Phase I, Phase II and Proposed Remedy Only available in eligible areas
Up to $300k for Phase II Assessments Up to $300k for Phase II Assessments
Up to $3 million in grants for cleanup  Up to $750k for Cleanup
Eligible costs = demolition, purchase, infrastructure and cleanup costs Eligible costs = demolition, purchase, infrastrucutre and cleanup costs 
Required to complete VAP Required to complete the VAP

Many liked the openness the CORF selection process which used a competitive pool where all projects were pitted against one another for funding.  Award were made either once or twice per year.  

Projects were selected was through the Clean Ohio Council with heavy involvement from the local communities.  One major drawback of the program was that an applicant could spend approximately $30,000 just to develop the application (assuming a Phase I and Phase II was already complete) with no guarantee of being funded.

Still, as one of the best brownfield incentive programs in the country, CORF/COAF allowed many projects to move forward that may not have occurred otherwise.  As discussed in a Dispatch Article, Clean Ohio provided funding for over 70 projects in just Northeast and Central Ohio alone. 

JobsOhio Revitalization Program

Under the new JobsOhio program, the State will be making major changes to the structure and process for selection.  Here are the basic elements of the the new program:

Incentives Available

  • Up to $200k for Phase II Assessments-  JobsOhio had commented that it felt $300k for Phase II’s under CORF/COAF was excessive.  However, in order to qualify for the cleanup grant or loan, the developer is required to meet the applicable standards established by Ohio EPA’s Voluntary Action Program (VAP).  Therefore, a Phase II must generate sufficient data to be deemed VAP compliant.  With reduced funding, some projects may not be able to satisfy Ohio EPA’s rigorous Phase II VAP standards.
  • Up to $500k for Asbestos & Lead Paint-  This is a new component of the Ohio brownfield program which appears to target existing structures that may be idle due to asbestos and/or lead paint issues.  Under the proposal, the funds can be used for asbestos abatement, demolition, site preparation and disposal of universal waste.
  • $5 million cleanup loan with possibility of $1 million cleanup grant-  As the biggest change with the new program, JobsOhio has shifted from a grant cleanup funded model to a loan model.  Developers and companies looking to expand may have an opportunity to secure a $1 million cleanup grant if need is demonstrated and the grant is coupled with a loan.  Details on the requirements for securing a $1 million dollar cleanup grant were not provided.

 Selection Process

  • Open funding versus competitive pool-  JobsOhio has done away with the competitive pool process utilized by CORF.  Under the old process all grant applications were scored and the top projects were funded.  The positive aspect of this process was its transparency. The negative was that an applicant could spend a significant amount of money ($30k just for the application) without knowing whether they would receive an award.  The new process will be more flexible and less costly than Clean Ohio.  Projects can receive awards throughout the year and will not compete with one another.  Also, JobsOhio will likely notify an applicant it will receive an award before it has to put together the more detailed aspects of the application. 
  • Criteria for selection–  The JobsOhio selection process will utilize three basic criteria
    • Jobs– Retained or created with priority for projects with higher-than-average wage rate (generally must retain or create 20 jobs)
    • Investment- private versus public, capital investment in addition to site prep and priority will be given to JobsOhio targeted industry project
    • Certainty of completion-  must have an end user committed to the project, have redevelopment plans and sufficient funding to complete the project.

Conclusion

More details should be forthcoming regarding the program this fall.  However, JobsOhio has made clear that they will discuss prospective projects now.  However, awards will likely not be made until March 2014.  

The most likely users of the program will be commercial/industrial clients looking to expand onto brownfield properties.  With $200,000 available in grants for Phase II assessments and the possibility of $1 million in grant cleanup funds, the program offers very strong incentives. 

Due to the focus on job creation, cities looking to cleanup properties in hopes of attracting future development will have to look elsewhere for incentives.  Also, residential development projects will find it harder to compete without a jobs component.  

While there are good aspects of the new program, its overall success will depend upon whether loans will will be sufficient to attract redevelopment of contaminated properties.  

This past spring, the Kasich Administration put another $15 million in grant funding into the Clean Ohio program. (See prior post).  While a public announcement has yet to be made regarding grant awards for the remaining $15 million, it is my understanding that the money is allocated. Announcements may be made next week at the Ohio Economic Development Association 2013 Summit.

After this last $15 million has been spent, what is the future in Ohio for brownfield grant funding?  The Administration has discussed a possible rollout of a new program by year’s end.  On multiple occasions, the Kasich Administration has indicated the new JobsOhio brownfield grant program will closely approximate the size of the old Clean Ohio program- roughly $43 million annually.

The changes made to the Clean Ohio program this past spring provide some indication of what a new program could look like.  

  • Streamlined application process where selection decisions are made before investing significant money in preparing detailed applications;
  • Selection criteria that will emphasis end use, job growth, job retention and enhanced tax revenue post development;
  • More involvement of local economic development organizations in the selection process; and
  • Continued use of Ohio EPA’s Voluntary Action Program as the benchmark for determining whether a property has been adequately cleaned up

With the incredible success of the Clean Ohio program there is a lot to emulate when JobsOhio launches its new program.

The uncertain rollout date for the new program has hindered getting new brownfield projects in the que.  Projects can take months before all the pieces (end use, infrastructure, financing, incentives, etc.) can be fit together.  Hopefully, an announcement can be made before the end of the year so we don’t lose any more momentum in this critically important area of economic development.

In the meantime are there other brownfield incentives available? 

Yes.  Many of the major and medium sized metropolitan areas have their own brownfield redevelopment programs.  They don’t provide the same level of grant funding, but they can be attractive.  

Both the City of Cleveland and Cuyahoga County maintain their own brownfield incentive programs. They are similar in their approach.  Here are the key aspects of the Cuyahoga County Commercial Property Reutilization Program:

  • Phase I Funding: Up to $6,500
  • Phase II Funding: Up to $35,000

 

Cleanup Loans

  • Up to $1 million- 4% over 10 years
  • 40% forgiveness
    • 15% for VAP NFA
    • 15% job creation (1% per job over $44k per year)
    • 10% for use of vendors in the County
  • Wider eligibility for types of clean up costs covered by the program (i.e. BUSTR, RCRA, etc.)
     

Brownfield Redevelopment Tax Incentives

Ohio also has on it books tax incentives for brownfield redevelopment.  The automatic abatement described below has been widely used, but is tricky to navigate.  There was considerable debate following a determination that the automatic tax incentive didn’t cover new buildings.  

Automatic Abatement (R.C. 5709.87)

  • 10 year Ohio Property Tax Abatement for Brownfield redevelopment
  • Abatement is on the increase in value of land and buildings post clean up
  • Abatement does not include new structures or fixtures after clean up (Caution: process for fixing abatement is complicated)

A more broad based tax incentive is available that does allow coverage for new structures as well as machinery.  However, do to the fact these incentives must be negotiated with local officials, the local tax abatement has not been utilized frequently.

Local Tax Abatement (R.C. 5709.88)

  • Tax abatement for real or tangible property(machinery and equipment)
  • Up to 100% abatement for increase in value in land or buildings(including new structures)
     

Ohio EPA has established its own voluntary cleanup program for addressing hazardous substances and obtaining a legal release from liability- the Voluntary Action Program (VAP).  The VAP program has been on the books since 1995. 

When the VAP was created its purpose was to allow the private sector to address historical contamination at industrial or commercial properties.  The key word in the program’s title "Voluntary" means that Ohio EPA does not order companies to complete the VAP.  Rather, the program offers an opportunity to either:

  • Address historical contamination at brownfield sites that may otherwise limit or prohibit redevelopment; or
  • Allow an operating company to address its potential liability for historical contamination at a property it is still utilizing.

In the nearly twenty years of the VAP, approximately 360 properties have completed the cleanup process and obtained an legal release. (You can visit a map of VAP properties here)   In reality, 360 VAP cleanups is not that many considering there are thousands of properties in Ohio with historical contamination.  

Process

A complex set of rules and guidance documents govern VAP cleanups.  Those documents are accessible through Ohio EPA’s website.  Here is a very brief overview of the process:

  1. Hire a Certified Professional (CP)-  In order to perform a VAP cleanup and receive a legal release from the State you must retain a CP.  A CP is an environmental consultant that has been certified by Ohio EPA has being technically capable of completing a VAP cleanup.
  2. "No Further Action" (NFA) Letter–  Unlike other regulatory cleanup programs, VAP is intended to allow a CP to complete a cleanup without Ohio EPA review of sampling and cleanup plans prior to initiating work.  The CP can develop a NFA without oversight by the Agency.  However, if a company wants a legal release from the State, the NFA must be submitted to Ohio EPA. The components of an NFA would likely include: the Phase I/Phase II assessment, a Risk Management Plan, an Operation & Maintenance (O&M) Plan, an O&M agreement and an Environmental Covenant.
  3. "Covenant Not to Sue" (CNS)–  If the company decides it wants a legal release from the State upon completing a VAP cleanup, it must have its CP submit the NFA for review.  If the Ohio EPA agrees that the NFA meets VAP cleanup regulations and the property meets VAP standards, it will issue the CNS. 

Issues/Considerations with VAP Cleanups

While the VAP has been a success, there are complex issues that must be evaluated prior to initiating a cleanup under the program.  Some of those considerations include:

  • Benefits–  Companies looking to address potential liability exposure, the VAP is worth considering. Performing a VAP to address contamination will make property more marketable as most major banks are familiar with the program in Ohio.  Furthermore, the VAP is a key tool for brownfield redevelopment in order to attract new tenants or users of the property who may otherwise be concerned with environmental liability or exposures associated with old industrial or commercial properties.
  • Limits on CNS-  The CNS does not release you from liability from third party property damage or injury lawsuits, including toxic tort claims related to exposure to releases of contamination.  Furthermore, the State takes the view that the CNS is also limited to the property itself, not contamination that has left the property. Finally, the CNS does not include a release from U.S. EPA (although you can obtain certain comfort that U.S. EPA won’t pursue separate action once the VAP cleanup is complete).
  • Eligibility Issues–  Certain regulatory requirements must be addressed before a property can be deemed eligible to participate in the VAP.  Properties subject to State environmental enforcement may not be eligible.  Portions of the property required to be cleaned up under hazardous waste regulations (RCRA) are ineligible until cleanup is completed.  The presence of underground storage tank (USTs) can complicate VAP eligibility. 
  • Complex Cleanup Issues–  Each site cleanup is different.  However, it doesn’t take much for a site to present complex cleanup challenges.  Existing buildings and structures may present vapor intrusion issues.  Off-property migration of contaminated groundwater may also need to be addressed.  Impacts to surface water or other ecological features may need to be evaluated.
  • Costs-  Again, each site cleanup is different.  However, the cost of cleanup can be expensive.  State and local brownfield grant programs can help mitigate those costs.  Even the costs of preparing and submitting the documents to Ohio EPA can be costly.  Due to such cost considerations, some businesses have decided to utilize the VAP standards to address historical contamination without submitting the NFA to the Agency for review. 

Options to Address Environmental Liability in Ohio

The VAP has been a very useful tool for addressing historical contamination.  However, the costs and complexities involved in completing such cleanups make it less attractive, particular for smaller sites with very limited contamination.

As discussed in prior posts, Ohio currently does not have a less formal means of addressing historical contamination, such as Michigan’s Baseline Environmental Assessment Program.   This leaves may buyers or tenants with choosing between costly VAP cleanups or performing due diligence to try and establish the federal "Bona Fide Purchaser Defense."  

Last year the Kasich Administration announced that it was phasing out the Clean Ohio brownfield grant program.  The Clean Ohio program,which had been in existence for over a decade, had provided approximately $37.5 million per year in incentives for cleanup and redevelopment of brownfields. 

Last May, the Administration allocated a final $15 million toward traditional Clean Ohio programs for sampling and cleanup work.  JobsOhio took over administration of the program from the Ohio Department of Development.  (Click here for prior post discussing changes)

What has been somewhat unclear since the announcement regarding phase out of the Clean Ohio program is whether JobsOhio would replace it with a new brownfield incentive program.  As discussed in an article in the Crain’s Cleveland Business magazine, it appears JobsOhio does plan on a sizable brownfield redevelopment incentive program to replace Clean Ohio.

About $43 million of the $100 million JobsOhio can spend annually for economic development programs will go toward revitalization projects, Mr. Minor said.

The planned allocation to land revitalization is a big change in the Kasich approach to economic development. The Kasich administration let the former program, Clean Ohio, die last year without assurances that it would be picked up by JobsOhio…

Clean Ohio offered communities as much as $3 million in loans or grants for remediation projects — a number JobsOhio might match, Mr. Minor said. But Mr. Minor said the new program will prefer to invest with companies that will occupy the cleaned-up properties.

What is clear from the comments of JobsOhio officials is that only projects that have a committed end-users after cleanup will qualify for the new brownfield incentives.  Also, the old scoring methods utilized by Clean Ohio will not longer be used to identify good projects.  JobsOhio will heavily emphasize the following factors in selecting projects:

  • number of jobs the project retains;
  • the number of jobs created; and
  • investment in redevelopment of the property and/or equipment.

Clean Ohio Council to Meet

The Clean Ohio Council will meet tomorrow to discuss changes to its policies for awarding grants.  However, whatever changes are made will likely only govern the remaining $15 million in funding.  After that money is spent, JobsOhio will initiate its own program with its own procedures and methodologies for selecting projects. 

Regardless of whether you like some or all of the changes to the process for selecting projects, it is very good news that a strong brownfield incentive program will exist post-Clean Ohio.  In a state with a rebounding economy it is critical to attract redevelopment to properties that may have historical issues tied to Ohio’s strong industrial history. 

On Friday, the Clean Ohio Council met to discuss proposed changes to the Clean Ohio program. As discussed previously on this blog, the Kasich Administration has repeatedly discussed completely revamping brownfield funding in Ohio.  The Administration previously announced its intention to shift the program’s administration to JobsOhio along with the liquor profits that were used to payoff the bonds that created Clean Ohio.  The Administration also has indicated it wants to shift from a grant based program to loans.

JobsOhio is currently caught up in a legal challenge to the constitutionality of the semi-public organization.  As a result of the legal challenge, the Administration has not provided any details as to what brownfield funding will look like under JobsOhio.

Back in May, it was announced that $15 million in new funding would be allocated to the Clean Ohio program as a stop gap measure until the dust settled on the JobsOhio litigation.  Clean Ohio funding has previously been at $37.5 million per year. Many believed that the $15 million would be allocated using the similar Clean Ohio process and procedures that have operated for nearly a decade.

On Friday, staff from the newly created Development Services Agency presented revised policies for new procedures to be utilized in awarding the $15 million in new funding. The proposal presented represents  a seismic shift in how funding decisions will be made.

Here is a quick synopsis of the major changes:

  1. Major Reduction in Funding Available Per Project- The maximum available in funding for assessment grants was reduced from $300,000 down to $200,000.   The maximum available in clean up funding was reduced from $3 million to  $1 million;
  2. Overhaul to the Grant Selection Process-  Previously, there were two grant rounds per year.  Grant applications received during a round competed against one another for funding.  The Clean Ohio Council utilized a scoring process to evaluate each grant application.  The scoring criteria was a mix of points based upon the proposed development, amount of clean up occurring and importance to the local community.  The new proposal would do away with grant rounds and the scoring process entirely.  Under the new system, the Director of Development Services would make awards on a rolling basis utilizing Agency discretion.
  3. Premium on Job Creation-  While the application process is still somewhat murky because the forms have not been released, it appears from documents released Friday that the intention is to evaluate applications based on jobs almost exclusively.  The old scoring system provided placed higher value on clean up of highly contaminated sites as well as their importance to the local community. 
  4. More Funding for Infrastructure–  The new proposal increases the percentage of the grant that can be spent on infrastructure versus environmental clean up from a maximum of 10% up to 25%.
  5. Loans- While the policy changes incorporate the concept of loans, as it stands the new policy would retain the limitation that no more than 15% of funding shall be used for loans. (See, Section 6.02).  Therefore, the Administration, at least for now, wants to see the vast majority of funding in the form of grants versus loans

Concerns were expressed during the Clean Ohio Council meeting on Friday that there had not been any opportunity for the public to comment on the major restructuring of the program. In response, it was decided to allow a thirty day (30) public comment period on the policy changes. 

Click here to access the proposed changes to the Clean Ohio Fund Policies.  Instructions for submitting comments are also available on the web page.

Implications of the Policy Changes

It is pretty easy to acknowledge the Clean Ohio as we know will no longer exist if the proposed changes are adopted following the public comment period. The old program had two grant processes:

a) Clean Ohio Assistance Fund (COAF)-  Allowed for up to $300,000 for assessment and $700,000 for clean up.  COAF applications could be submitted on a rolling basis and decisions were made exclusively by the Director of Development.

b) Clean Ohio Revitalization Fund (CORF)-  Allowed for up to $3 million in clean up funding.  There were typically two rounds per year.  Applications were submitted and competed against one another in each round.  The project applications were scored using a mix of points for development, environmental clean up and importance to the local community.

The proposal presented Friday essentially does away with CORF and moves exclusively to a COAF like approach.  The advantage of the new approach is the speed as to which funding decisions will be made.  However, the disadvantages to this approach are as follows:

  • $1 Million Dollar Cap on Clean Up Grant Funding will mean Only Smaller Clean Up Projects will Get Funded-  The vast majority of the larger development projects involved $2 to $3 million in funding under the old CORF program.  By capping the available cap at $1 million, the larger brownfield redevelopment projects are far less likely to occur.  What could happen is that the only projects getting funded in future will be for asbestos abatement & demolition.  There simply won’t be enough funds to deal with sites that have significant soil or groundwater contamination.
  • No Competition Makes it More Difficult to Ensure the Limited Funds Go to the Best Projects-  Because all grant awards will be made on a rolling basis it will be much more difficult to compare and contrast projects.  No objective scoring criteria will be implemented and the public involvement in selecting projects will be greatly reduced.

 

The picture is still very murky with regard to what brownfield funding will look like in Ohio.   The program is being transferred from the Ohio Department of Development to JobsOhio.  The Kasich Administration has stated it believes the program needs to be overhauled.  (Click here for prior post regarding transfer to JobsOhio

Only sketchy details have emerged as to what brownfield funding may look like after the transfer.  Comments from JobsOhio officials have suggested the grant model will be tossed in favor of loans.  This has local officials from around the state voicing concerns regarding such a radical change to what has been viewed as a very successful program.

Articles have appeared in newspapers around the State discussing local official concerns over changes to the Clean Ohio program.  Below is a synopsis of recent articles.

Middletown

On Monday, the Middletown Journal had a lengthy story discussing the potential impact on the City’s efforts to address multiple brownfields.  The title of the article captures the concern among City officials "Middletown Clean Up Efforts May Reduce with State Change."  The concern expressed, which I have echoed in prior posts as wells, is that JobsOhio will be moving away from grants and more toward loans.

Middletown’s acting Economic Development Director Denise Hamet said there will be fewer applications in a year to clean up brownfields — which are defined as industrial properties that are either vacant or underutilized with environmental contamination to prevent reuse or redevelopment — if a loan policy is in place.

“I think you wouldn’t have a lot of projects penciled out if you have to repay remedial work because that’s above and beyond doing the normal work,” Hamet said. “It’s hard to get projects to pencil out beyond normal construction costs.”

Hamilton Economic Development Director Jody Gunderson agreed and said grants reduce risks.

“That’s why the grant system has worked so well,” he said. “You’re mitigating risk for property owners and the city when you bring in grant dollars.”

Cleveland

In an article from February 13th in Crain’s Cleveland Business, titled Leaders fear stalled brownfield clean up cash, local official expressed concern regarding the lack of assessment money as well as a shift to loans from grants.

Tracey Nichols, Cleveland’s director of economic development, fears the state under new rules will reject applications that can’t identify a specific new property owner with plans to clean up and redevelop a property. The city often has used Clean Ohio money to clean up properties without committed end users so that the properties would be ready for use when prospective buyers or developers come along.

“Most companies aren’t going to say, "I love that site and I’ll wait two or three years until you’re done cleaning it up,’” Ms. Nichols said.

Akron

On March 28th, the Akron Beacon Journal also had an article discussing the uncertainty around future brownfield funding.  I was interviewed for the story and discussed that the uncertainty means potential projects are in limbo until details emerge. 

The article was titled Future of Ohio Clean Up Program is Uncertain. The ABJ pointed out the tremendous benefit the City of Akron has received from the program. 

Over the years, the city of Akron got about $16 million in brownfield money from the Clean Ohio Fund. That includes grants for the Goodyear redevelopment, Bridgestone America headquarters, Canal Place, the Middlebury grocery store, the old Beech Street power plant and the Landmark Building.

The brownfield program has been in limbo for some time in Columbus with the change. The state earlier stopped accepting applications. The program is to be reactivated July 1.

Dayton

On March 5th, the Dayton Daily News ran a story titled "Fund Change May Hurt Ohio Development."  The lengthy article detailed the number of projects in the Dayton area that would not have moved forward without Clean Ohio brownfield funding.  Local officials and developers also expressed serious concern with moving from a grant to a loan based program.

Downs said the cost of evaluating and rehabilitating old industrial sites would be too high for the city and most developers if Clean Ohio were a loan program.

“A loan program is certainly less attractive to us than what exists right now,” he said. “We couldn’t take advantage of it like we have the existing program.”
 

Toledo

A series of letters to the Editor in the Toledo Blade have pointed out the strong benefit the Clean Ohio program has had in the Toledo area. 

  • Since its creation in 2000, public and not-for-profit conservation groups across the state have used the program to protect more than 26,000 acres of natural areas and 20,000 acres of farmland from development.- Steve Madewell is executive director of Metroparks of the Toledo Area. (click here for April 22nd letter)
  • Black Swamp Conservancy has been a regular participant in the farmland preservation program. Our land trust has helped farm families bring millions of dollars to our region’s economy. The conservancy has helped protect more than 7,000 acres of northwest Ohio farm ground — prime soil that always will be used for agriculture.-Kevin Joyce, Executive Director Black Swamp Conservancy Perrysburg (Click here for April 26th letter)

 

Details were released this week by the Kasich Administration on the establishment of its privatized economic development agency known as JobsOhio.  Many of the traditional job creation duties that fell to the Ohio Department of Development will be shifted to JobsOhio. 

Along with the restructuring of development duties, the Administration is shifting the State’s liquor profits to help fund the Agency.  Last year the liquor profits took in around $700 million in revenue to the State.  In return for a 25 year agreement to fund JobsOhio with liquor profits, JobsOhio will make a one-time $1.4 billion dollar payment back to the State.  Details of how those funds would be utilized were discussed in the Plain Dealer:

The $1.4 billion agreement calls for Ohio to collect $500 million for its general revenue fund, money already factored into the current state biennial budget, $750 million to pay off existing liquor revenue backed bonds, and $150 million to continue "Clean Ohio" environmental programs for the next three years.

The reference in the Plain Dealer Article regarding Clean Ohio is a bit confusing.  Based upon an article in Columbus Business First, the $150 million is set aside to pay for the grants that were awarded or will be awarded by July 1, 2012.  In the future, funding will be set at $43 million per year.

The agreement, which will be reviewed and possibly voted on Jan. 30 by the state Controlling Board, includes a provision for the $43 million for economic revitalization projects as well as $150 million to cover Clean Ohio Fund projects approved by the state before July 1, 2012.

Impact on Clean Ohio

The transformation of the Ohio Department of Development and creation of JobsOhio has resulted in tremendous uncertainty regarding  the State’s $50 million dollar per year brownfield redevelopment program. 

This fall, when the Administration made the announcement that liquor profits would be shifted, the Administration said it would look for a new revenue source to support Clean Ohio.  It now appears that the same revenue-a portion of liquor profits- will be used to support the program for the next three years. 

What remains uncertain is when that money will be available.  Currently, the Ohio Department of Development announced the end of funding for the Clean Ohio Assistance Fund (COAF) which pays for Phase II environmental assessment on brownfields.  Also, the Department announced the current round of the Clean Ohio Revitalization Fund (CORF) would be its last. Now that the funding source has been announced, the question is when will the State start accepting grant applications again?

Due to the fact the $150 million is being allocated pay for COAF and CORF grants in the pipeline and the last round of CORF, it appears no new funding will be available for Phase II work prior to July 1st.

Who Will Administer Clean Ohio in the Future?

What also remains uncertain is whether the current process for grant selection and administration will remain.  During yesterday’s announcement, the Administration indicated that the current process will remain in place through the summer.  However, the Kasich Administration also suggested that legislation could be introduced this Spring to modify the program. 

What the Administration did make clear is that they want to see more direct economic development benefits for use of Clean Ohio funds in the future.  This means it is unlikely grants such as the Redevelopment Ready track of the Clean Ohio program will continue. 

The Redevelopment Ready track provided grants up to $2 million to clean brownfields that were primed for development based on their location but lacked a specific end use (i.e. development project).  Some argued that the Redevelopment Ready Track allowed areas outside Cleveland, Columbus and Cincinnati to better compete for the grant money. 

While this week’s announcement seemed to answer the question as to whether funding will remain in place for Clean Ohio in the near future, there remains three major questions:

  1. When will the grant process open up again:
  2. Who will administer the program- the newly created Ohio Development Services Agency or JobsOhio; and
  3. What will the grant application and selection process look like in the future?

 

Yesterday, the Ohio Department of Develop put the following notice on the Clean Ohio Fund webpage:

NOTICE

Effective immediately: The Clean Ohio Assistance Fund is no longer accepting applications. If you have a project and would like to discuss other funding opportunities please contact us.

Back in October, Governor Kasich announced that he was redirecting the funding for the Clean Ohio program to his JobsOhio economic development program.  Funding would remain for one additional round of the Clean Ohio Revitalization Fund which provides up to $3 million in clean up grants for brownfield redevelopment.. 

In addition, funding for the Clean Ohio Assistance Fund (COAF) was thought to last through June 2012.  However when the announcement was made that funding was shifted to JobsOhio it cast doubt on the future of the Clean Ohio program.  As a result, the Department of Development was flooded with COAF applications in December.  No one wanted to risk missing what could the last of the Clean Ohio funding. 

Due to the rush of applications, all available funding was already allocated in December for the COAF program.  Several projects that were also seeking funding were told they were too late.

With the last round of CORF this month and the announcement ODOD is no longer accepting applications for the COAF program, the Clean Ohio program in Ohio is effectively closed.  This announcement is disappointing since the program was one of the most successful in the country in spurring revitalization of brownfield properties. 

In November, the Governor’s spokesperson indicated the Administration was looking to find new revenue to continue the program.  No such funding has been identified to date.  The prospects for finding new revenue must be very uncertain because the Department is not even allowing developers to submit applications to form a line when funding does come available. 

Signs point that the Country and State’s economy may slowly be turning the corner. If that is indeed the case, It would be nice to have the tools in place to direct new development to abandoned sites and contaminated properties which populate Ohio’s urban core.