Brownfield Redevelopment: Local Government Is Back In The Game

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On October 5th, Governor Brown signed a bill (AB 440 Gatto) restoring and expanding a powerful tool that cities and counties have used to convert polluted, under-utilized areas into vibrant mixed use neighborhoods, affordable housing sites, transit-oriented development sites, and other redevelopment success stories.  The bill represents Sacramento’s first full step toward creating what practitioners call Redevelopment 2.0.

AB 440 revives the Polanco Redevelopment Act, Section 33459 of the Health and Safety Code (a part of California’s Community Redevelopment Law since 1990).  The Polanco Act gave California’s redevelopment agencies the ability to get polluted sites cleaned up so they could be restored to productive use.  The revived version of the statute will take effect on January 1, 2014, and will be codified as Health and Safety Code Section 25403.  It is specifically identified as the “policy successor” to the original Polanco Act.

AB 440, however, does more than simply reconfirm the state’s commitment to the cleanup and redevelopment of polluted sites.  It expands the geographic scope of the Polanco Act by giving Polanco-style tools to every city and county, and certain housing authorities.  Those tools include the authority to obtain environmental assessment information, push the site remediation process forward if historic polluters do not perform in a timely fashion, trigger immunities that encourage private sector investment in blighted areas, and recover cleanup costs and attorneys’ fees. 

Previously, those tools could only be used in defined redevelopment project areas.  Cities and counties that did not have redevelopment agencies could not use the Polanco Act.  Contaminated sites located outside of redevelopment project areas could not be addressed through the Polanco Act.  Most significantly, the 2011 elimination of California’s redevelopment agencies effectively put all the Polanco Act tools on the bench.

AB 440 attempts to solve all of those problems.  It makes Polanco-style tools available for “blighted properties” within “blighted areas” throughout the state, not just in former redevelopment project areas.  AB 440 defines “blight” by reference to “vacancies, abandonment of property, or a reduction or lack of proper utilization of property,” and the presence or perceived presence of “hazardous substances” (essentially all harmful chemicals including petroleum products).  That conception of “blight” is similar to the existing definition in California’s Community Redevelopment Law.  Many jurisdictions may be able to make their existing blight determinations work under the new statute without much difficulty.

While AB 440 does not restore the tax increment financing tools that were terminated in 2011, it does enhance the self-financing mechanism known as “polluter pays.”  That mechanism has always been a mainstay of brownfield redevelopment.  AB 440 adds a clear statement of legislative intent confirming the importance of polluter pays financing.  The bill also clarifies that historic polluters cannot avoid their obligations by complaining that the local government entity failed to track down all the historic polluters.  That clarification makes the polluter pays mechanism significantly more cost efficient for local government to use.  AB 440 also retains the Polanco Act’s mechanism for recovering attorneys’ fees, an essential component of polluter pays financing.  Last but not least, AB 440 confirms that cost recovery can be used in connection with developing the Phase I/II site assessment data that can be crucial to freeing properties from fears about contamination that prove to be unwarranted or overestimated once soil, soil gas and/or groundwater data are available.

AB 440 also preserves the vitally important immunity provisions of the Polanco Act.  In sum, the public agency that drives the cleanup process, any person that enters into an agreement for the development of the remediated site, subsequent owners of such sites, and lenders to those developers and subsequent owners all enjoy the statutory immunities.  The immunities protect against additional cleanup costs once the cleanup has been approved by the relevant regulatory agency (typically a Regional Water Quality Control Board or the Department of Toxic Substances Control).

Sacramento being Sacramento, AB 440 also introduces some additional procedural steps, but they represent codification of existing practices more than stringent new hurdles.  For example, there is now a formal public participation process.  Many of its requirements were, however, well established under other state cleanup programs.  AB 440 also includes a consultation process between the local jurisdiction and any state regulatory agency already working on a particular site.  Most redevelopment agencies already had cooperative working relationships with their state regulators, so this new requirement should also be manageable.

All in all, AB 440 represents a bright new day for brownfield redevelopment in California.

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