B. Brownfield Cleanup and Redevelopment

Between fiscal 1999 and fiscal 2001, a total of $141,321,000 was appropriated for brownfield cleanups, landfill remediation, and storage tank removal. This amount comprises about 42 percent of the $335 million authorized in total for brownfield cleanup and redevelopment under the CMI statute.

Of the more than $141 million appropriated, more than half - $77,499,000 - has been allotted for state-managed cleanups at 162 brownfield sites. Twenty-five percent of the appropriated funds ($17.1 million) went to sites located in the city of Detroit. (See Appendix B.)

To avoid judging as unsuccessful projects that were only recently initiated, we examined only the initial round of brownfield projects from 1999. Of those, we examined only projects rated as having "excellent" or "good" redevelopment prospects.

Of the 55 sites listed as essentially complete by the Department of Environmental Quality, six were rated as "excellent" redevelopment prospects.

Of those six completed projects initiated in 1999 and rated as having "excellent" potential, none has been sold or transferred by a municipality to a private investor. No redevelopment has occurred on the parcels.

Information was also collected on 10 other projects initiated in 1999 and rated as having "excellent" prospects, but which have not yet been processed as complete. The sale of one parcel reportedly is pending, but none of the other nine sites have attracted private investment.

Twelve of the 1999 projects rated as having "good" redevelopment potential are considered complete. One site now serves as a public parking lot, and a second site is privately owned. No private investment or redevelopment has occurred on the remaining 10 parcels.

In evaluating whether the funds allocated to date have achieved the intended results, it is important to note that the ratings of redevelopment potential were assigned after the Department of Environmental Quality finalized its funding priorities. In other words, the decision of which brownfield sites to clean up was made without an independent evaluation of their redevelopment potential. Future results might improve with better site selection. But it is also necessary to recognize that state government is, by its very nature, less adept than private investors at forecasting market trends.

There is obvious merit to decontaminating any site. A clean parcel of property is more valuable than a polluted one. But it is also true that some environmental cleanups are more worthwhile than others at any point in time, based on the relative threat to public health, for example, or the potential for reuse. In the case of CMI, the lack of redevelopment to date raises serious questions about whether brownfield cleanups alone can revitalize urban areas as intended. To the extent these program goals are unrealistic, initiative priorities will be skewed.

"Sprawl" indeed ranked among Michigan's most menacing environmental threats in a 1992 relative-risk assessment underwritten by the U.S. Environmental Protection Agency. [22]

Yet concern about sprawl has not appreciably changed citizens' decisions about where to live and work. Michigan cities have continued to lose population and investment despite billions of public dollars pumped into their coffers over the past four decades. In fact, the population of 13 major cities in Michigan fell 4 percent between 1990 and 2000, while statewide population increased 6.9 percent. (See Appendix C.)

Brownfields unquestionably pose a dilemma for older cities, but cleanup subsidies abound. Michigan has received nearly $50 million from the federal government in recent years for brownfield remediation. [23]

The state also offers low-interest loans for brownfield revitalization, and allows local governments to reimburse developers for brownfield cleanups by capturing property taxes generated by redevelopment. Investors may also earn Single Business Tax credits up to $30 million for brownfield rehabilitation.

Obviously, then, a multitude of factors confounds redevelopment of these sites. Chief among them is ill-conceived regulation. Both state and federal statutes govern brownfields. And for decades, unnecessarily stringent cleanup standards as well as a perverse liability regime kept developers at bay.

Much to its credit, the Engler administration in 1995 dramatically lowered the regulatory obstacles inhibiting brownfield reclamation. No longer would every brownfield development require soil antiseptic enough to ingest. Instead, state cleanup criteria are now based on the proposed use of the property - be it commercial, industrial or residential.

More important, perhaps, liability for cleanups no longer is imposed by the state on any and every landowner or tenant of the despoiled property. Only those who actually caused the pollution are liable for cleanup as long as new owners document the existing contamination with "baseline environmental assessments" (BEA) and contain the damage.

These reforms have made a difference. (See Appendix D.) The number of brownfield site assessments filed with the state rose from just 69 in 1995 to 290 in 1998 - before the CMI was enacted. [24]

And the number of such filings has remained relatively constant at 266 in the years since. In a separate survey, municipal officials credited the Engler reforms with spurring $3.5 billion in brownfield reinvestment and 9,600 new jobs. [25]

Moreover, of some 300 sites for which baseline assessments had been filed with the state, some 69 percent showed some level of economic activity, while 30 percent appear to have been fully developed.

Still, federal regulation remains a significant problem. The liability protections enacted in Michigan do not extend to federal enforcement, so developers are loathe to court liability risk by investing in brownfield sites. Nor has the U.S. Environmental Protection Agency adopted use-based cleanup standards that would contain cleanup costs. The General Accounting Office, in fact, has concluded that federal law acts as the "major disincentive" to brownfield redevelopment. [26]

A tortuous federal bureaucracy further stymies redevelopment. Of the 142 cities that received grants from EPA to capitalize loan funds for local brownfield cleanups, only four have actually cut through all the red tape to issue loans for local cleanup projects. [27]

No amount of CMI funding can reverse these congressional missteps.

Most telling, researchers at Michigan State University determined that far fewer environmental assessments were filed in depressed neighborhoods, further suggesting that factors other than site contamination dissuade investors.[28]

Citizens attribute suburban migration to a range of other factors, and largely hold cities responsible for urban ills.[29] Basic services in some cities lag those provided in suburban communities, while big-city bureaucracies challenge the patience and pocketbooks of residents. Moreover, major crime rates in Michigan's larger cities exceed the statewide average by more than 30 percent, and the dropout rate runs 60 percent higher than the statewide average - despite higher levels of per-pupil state aid and grant support. [30]

Michigan citizens do care deeply about the well-being of cities and do worry about the environmental effects of "sprawl." For example, 56 percent of respondents in a recent survey expressed "concern" about sprawl-induced pollution. [31]

However, only 19 percent believe urban redevelopment would substantially curb suburban growth.

These factors cannot be underestimated in their impact on investment. As noted by Jerry Ackerman, a brownfields expert with Vanasse Hangen Brustlin, Inc., "Some pieces of real estate are never a bargain, regardless of the price or environmental condition." [32]

"The fundamental end point," he adds, "lies in concrete intelligence to the question: Are we looking at good real estate?"

Based on the fact that myriad factors dissuade urban reinvestment and make suburban development desirable, our findings indicate that the stated objectives of the brownfield cleanup program are both unrealistic and unrealized.

One aspect of the brownfield cleanup program does have potential to produce environmental benefits. A total of $2,194,000 has been allocated for assessments and cleanup of 13 sites identified by the Department of Environmental Quality as posing "imminent and substantial threats to public health and the environment."

For example, funding has been allocated to contain the environmental damage from mercury-laden cement kiln dust piled 60-feet high on 85 acres that lay along Lake Huron and Thunder Bay shoreline. Another $335,000 was provided to clear 1,000 cubic yards of petroleum-soiled sand, 70,000 gallons of contaminated water and 3,000 tons of sludge from the site of a former refinery in Van Buren County.

Such projects are realistic in their goals and, not coincidently, produce timely and tangible results.