PA LEGISLATION PROVIDING ADDITIONAL BROWNFIELD FUNDING ADVANCES TO HOUSE
The Pennsylvania State Senate unanimously passed Senate Bill 1062, the Brownfields Redevelopment Act, which was sponsored by Senator Rob Wonderling. The bill next will be taken up by the House Environmental Resources and Energy Committee, chaired by Rep. Camille (Bud) George. There is a very real possibility that the House could approve the legislation during the fall session, which would allow it to be signed into law by Governor Rendell and start providing a new financial incentive to brownfield redevelopers by the end of this year.
In researching the legislation, I spoke with Senator Wonderling, as well as Jill Gaito, the PADEP Deputy Secretary for Community Revitalization and Local Government Support. The back story on SB 1062 is that it is modeled after a very successful program in New Jersey -- the Brownfield and Contaminated Site Remediation Act of 1998. In New Jersey, that legislation created a reimbursement program in which a developer who remediates contaminated property is eligible to receive up to 75% of the money expended in the remediation. The reimbursement comes from certain tax revenues realized from the development project. The statistics on the NJ program are very impressive -- over $21 million paid in reimbursements on 20 brownfield projects.
Senator Wonderling said the idea for the legislation came from the PA Chapter of the National Brownfields Association. Commissioner George Hartwick, III, from Dauphin County is the chair of the PA Chapter and Deputy Secretary Gaito is the Vice Chair. Apparently, the PA and NJ chapters share information concerning their respective brownfield programs, and Mr. Hartwick and Ms. Gaito identified the NJ reimbursement program as a useful tool that could be replicated in Pennsylvania. Senator Wonderling told me that he sees the legislation as "a great benefit to some of our older communities" that are feeling the effects of the downturn in the economy. He identified a number of such communities in his 24th Senate District. He noted that credit is tight and that the legislation will provide another funding stream for remediation projects. According to Senator Wonderling, it is designed to supplement existing funding programs, like the ISR program, and not take their place. Senator Wonderling said he expects to sit down with Chairman George over the summer and that he believes the legislation has a very good chance of passing the House. He said he's heard no objections to the legislation.
Deputy Secretary Gaito confirmed that the legislation is modeled after the NJ program, with one significant exception. Unlike in NJ, the PA legislation would also provide reimbursement for remediation projects of "mine scarred land", in addition to Act 2 brownfield sites. That would allow brownfield sites built on old mine sites to be covered, provided they met the other requirements of the legislation, such as building residential or non-residential units, achieving a certain occupancy rate, and generating tax revenues. According to Deputy Secretary Gaito, the reimbursement program is designed to be revenue neutral. No money comes out of the General Fund for the program, and no initial funding is necessary from the General Assembly. It is also designed to specifically include private developers, who are not currently eligible to receive any grant money for remediation work under the ISR program. Under the legislation, a developer enters into a Redevelopment Agreement with the Commonwealth. To be eligible, the developer has to be an innocent party not responsible for any of the contamination. The Redevelopment Agreement is negotiated with PADEP and PADCED. The Agreement specifies upfront the amount of money eligible for reimbursement (up to 75% of the remediation costs) by estimating the amount of state tax revenue that will be generated when the property is put back into productive use. The reimbursement comes directly from the state tax revenues as they are generated and, based on the Redevelopment Agreement, those moneys are supposed to be set aside in the state treasury and earmarked for the reimbursement. Which state taxes will be covered by the reimbursement will be a site by site determination that is determined in the Redevelopment Agreement. The thing to remember is that we are talking only about state taxes, not federal or local taxes. So, for example, if you build a car dealership on a brownfield site and spend money for site remediation, you may be able to get reimbursed out of the state taxes paid by the dealership, which could include income and sales taxes. Reimbursements paid to the developer are conditioned on meeting an agreed upon occupancy rate. Also, reimbursement is provided only after the developer demonstrates attainment of an Act 2 standard.
Deputy Secretary Gaito said she is hopeful that the legislation can be evaluated by the House and passed in the fall session. Given the success of the NJ program, one would hope that the legislation could move quickly and without amendment through the House. It passed the Senate 50 to 0, so clearly it has bipartisan support. To the extent that there are questions about the details of how the program will work, those details can be worked out by PADEP and PADCED when the program guidelines are being developed. We had similar issues come up with regard to funding under Act 2 and Act 4, and they were later resolved in discussions between the two Departments and explained in the program guidelines. Here, given the state of the economy in Pennsylvania, providing additional funding tools for site remediation is critical to creating jobs and reclaiming old industrial sites. Deputy Secretary Gaito agrees with Senator Wonderling that SB1062 will be a big help in older communities and for sites that are viewed as being on the margins for their redevelopment potential.
I can't see any reason why anyone would oppose the legislation, and apparently no one has come forward to express any concerns. It would appear that Pennsylvania is on its way to providing an additional tool that can be used by brownfield redevelopers. As someone who believes that brownfield redevelopment is critical to economic development in Pennsylvania, I thank Senator Wonderling, Commissioner Hartwick and Deputy Secretary Gaito for their efforts to enact the Brownfields Redevelopment Act.
