FEATURE ARTICLE, OCTOBER 2006

FINDING THE GREEN IN FLORIDA BROWNFIELDS
New Florida legislation creates enhanced incentives for developing the states Brownfield sites.
Teri L. Donaldson

Donaldson

Throughout the state, there are many thousands of properties that were once a thriving part of Florida’s communities but have since been abandoned or underused due to possible environmental contamination. These properties, known as brownfields, have enormous economic potential. Such properties are often located near water and other major transportation corridors.

Yet, these properties remain dormant because businesses fear that redevelopment will mean a lengthy and expensive regulatory process and exposure to litigation from neighboring landowners, environmental activists, and others. As a result, developers typically overlook these properties and instead locate elsewhere, pushing development and jobs away from inner city areas, while leaving behind urban blight and diminished tax rolls.

To overcome these problems, Florida adopted the Brownfields Redevelopment Act in 1997. Under the Act, communities, developers, and other entities obtain financial incentives to redevelop brownfields, and certain immunity from legal action.

Since the enactment of Florida’s original legislation, Florida has designated more than 130 areas as brownfields. From those areas alone, brownfields redevelopment in Florida has generated more than 12,000 new jobs and approximately $547 million of capital investment. Although the results are impressive, many states have witnessed far greater gains. Moreover, there are still thousands of properties in Florida — some of which span hundreds of acres — that could benefit from brownfields redevelopment.

To take advantage of the enormous potential of brownfields, Florida Governor Jeb Bush, on June 22, 2006, signed legislation overhauling Florida’s brownfields program and, in doing so, creating enhanced incentives for the clean-up and redevelopment of brownfields. The new legislation makes Florida the only state in the nation to provide specific incentives for redeveloping brownfields into affordable housing, and places Florida first in the nation in terms of the amount of corporate income tax credits available for the redevelopment of brownfields. Under the new program, developers who incur costs cleaning up a site can recover as much as $1 million in tax credits in the final year of cleanup, with additional perks for redevelopment that results in affordable housing. With housing costs on the rise and land increasingly scarce in metropolitan areas, the new legislation could mean much needed relief for many communities throughout Florida. 

With the new legislation in place, Florida’s communities and developers can take advantage of a variety of improved financial incentives. The most significant enhancement in the program is in the amount of tax credits available to cover the costs of cleanup. A developer can now recover up to 50 percent of its cleanup costs per year subject to a maximum of $500,000, or 75 percent if the project involves the development of affordable housing. In the final year of cleanup, a developer may also recover 25 percent of its total cleanup costs for all years of the project, up to a maximum of $500,000.

In other words, if a developer spends $1 million per year in cleaning up a contaminated site and completes the project in the second year, the developer could recover $500,000 the first year, and $1 million the second — or 75 percent of its total costs. No other state offers a tax credit program with those percentages and available amounts of recovery.

Another key improvement is that lenders will now be more willing to fund cleanup activities because the Legislature increased the amount of the existing loan guarantee from 10 percent to 50 percent on loans for cleanup activities. The loan guarantee is further increased by an additional 25 percent where redevelopment results in the creation of affordable housing.

The new legislation also features several other improvements. For example, the legislation improves local property tax credit incentives, addresses the cleanup of sites impacted by solid waste, allows applicants to recover initial assessment costs, and allows incentives for a greater number of projects. These enhanced incentives are in addition to a variety of already existing benefits, such as job refund bonuses, sales tax refunds on building materials, and others.

The regulatory process for joining the brownfields program is straightforward. To be eligible for the brownfield program’s benefits, a community or developer seeking to develop a property with possible environmental contamination obtains local government approval to designate the property as a brownfield and then enters into a regulatory agreement with the Florida Department of Environmental Protection. The entire process takes approximately 3 to 6 months, and work can begin immediately even before the initial regulatory process is complete.

Florida communities and developers are beginning to recognize the potential of brownfields programs, and many are excited about the opportunities the new legislation presents. Miami-based Cornerstone Group is one of the developers who has participated in Florida’s brownfields program to the benefit of Florida’s environment and communities.

In particular, Cornerstone’s Harbor Cove development — a $20 million, 212 unit residential complex in Broward County — was originally an auto body shop with environmental concerns. Through Florida’s brownfields program, Cornerstone remediated the site, and intends to open the complex by year-end 2007. The transformation of the site will revitalize the surrounding community and provide affordable housing for Broward County residents.

In addition to Florida’s brownfields program, the United States Environmental Protection Agency (EPA) manages a national brownfields program, which was created in 1995 to empower states, communities, and other stakeholders to work together to cleanup and reuse brownfields. Just this year, the federal EPA is providing $70 million nationally for brownfields redevelopment. It is estimated that there may be as many as 500,000 to a million brownfields properties nationally.

With the new Florida legislation in place, the only real obstacle to brownfields redevelopment is making sure that businesses and communities are aware of the program and know how to take advantage of the valuable opportunities it creates.

Teri L. Donaldson is the lead partner for Tew Cardenas LLP’s Environment, Energy & Resources practice group, and formerly served as a federal environmental crimes prosecutor and as the General Counsel for the Florida Department of Environmental Protection. Donaldson worked closely with members of the Florida Legislature and key stakeholders to successfully advocate for the passage of the new legislation.

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