Indiana finds a creative way to finance brownfields redevelopment

Indiana SEP
Straughter Body Shop prior to demolition and remediation (left) and after (right). The project was made possible by SEP funding. Photos via Meredith Gramelspacher.

The following is a guest post from Meredith Gramelspacher, Director and General Counsel of the
Indiana Brownfields Program

Indiana’s toolbox for creative brownfields financing includes one source that is seldom used outside of Indiana: Supplemental Environmental Projects.

Supplemental Environmental Projects (SEPs) are used by the Indiana Department of Environmental Management (IDEM) Office of Enforcement in negotiating settlements of enforcement cases. These environmentally-beneficial projects improve, protect, or reduce risks to public health or the environment. A regulated entity agrees to undertake the project in further settlement of an enforcement action, but which the regulated entity is not otherwise legally required to perform. In certain cases, IDEM agrees to allow a respondent to make a cash payment of an agreed-upon dollar amount directly to the Indiana Finance Authority in lieu of an assessed civil penalty for use on a brownfield project in the city, town or county in which the violation underlying the enforcement action occurred. The Indiana Brownfields Program then coordinates with the beneficiary community to select a brownfield property at which to utilize the SEP Funds consistent with Brownfield SEP guidelines.

In 2007, the Indiana Brownfields Program and IDEM Office of Enforcement staff developed this unique process to directly divert enforcement penalties that would otherwise be received by IDEM to communities needing financial assistance to address their brownfields. The goal of the Brownfield SEP program is to develop an easy way for respondents to pay enforcement penalties into a fund to be made available to the community directly affected by the respondent’s environmental infraction to address contamination issues on a brownfield. When IDEM agrees to allow a respondent to settle a case with a brownfield SEP, an agreed-upon amount from a civil penalty owed to IDEM is paid directly by the respondent to the IFA for use on a brownfield project. As part of IDEM’s underlying enforcement order, the Program establishes a site or community-specific account within the Environmental Remediation Revolving Loan Fund managed by the Authority, into which the respondent’s payment of SEP Funds is deposited. The Authority then executes a financial assistance agreement with the SEP Recipient and the consultant(s) it retains to undertake site work, through which eligible SEP project activities are reimbursed by the Authority following Program approval of project activities and expenditures.

In order to administer this form of financial assistance, Program staff developed brownfield SEP guidelines for those communities that are the beneficiaries of a brownfield SEP to explain the eligible uses of the funding, administrative procedures for accepting and utilizing the funding, etc. The Brownfield SEP Guidelines were developed to permit use of SEP funds on activities that are not typically eligible activities under traditional brownfield grants, including demolition, habitat restoration, and land acquisition, and as such, often serve as key gap funding for a brownfield project. Under the guidelines, once a municipality is awarded a SEP, it can contract with a consultant it selects to complete the work or the Program can provide a contracting vehicle for selecting consultants. Any shortfall of funding to complete environmental assessment, remediation, or redevelopment efforts on the selected brownfield may be supplemented by other financial assistance awarded by the Program or a site/project-specific determination by the Program under the guidelines to provide funding to supplement the SEP Funds in order to facilitate completion of the work needed to allow site’s beneficial reuse.

To date approximately $800,000 has been collected to address brownfields in 19 municipalities across the State of Indiana. Available SEP awards have ranged from as little as $1,000, allowing a municipality to secure a Phase I Site Assessment, to as high as $270,000. The City of Gary was designated as a SEP recipient and received $270,000 to address a brownfield in the area of the underlying violation. In coordination with the City of Gary, the enforcement respondent and the Program selected the former Straughter Body Shop to benefit from the SEP funds.

The Straughter Body Shop, pictured above, was an active business (even as the building in which it operated was collapsing) that had become delinquent in paying its taxes. The City of Gary took title to the property through the tax sale process and the Program leveraged American Recovery and Reinvestment Act of 2009 (ARRA) funding to help pay for underground storage tank removal and remediation. Using the combination of SEP and ARRA funds, the on-site buildings were demolished, subsurface investigation was completed, USTs were removed and remediation was conducted to transform a blighted and contaminated corner lot in a residential neighborhood into a park. In addition to contributing to cleanup of the former Straughter Body Shop, the City of Gary was able to use the SEP funding on five additional sites to remove neighborhood blight, assess potential contamination, and conduct remediation.

In a time of scarce brownfield grant funding, Indiana’s Brownfield SEP Program has proven a highly successful way to make funding available for brownfield redevelopment activities. By making enforcement penalties available as brownfield SEPs, Indiana is creating environmental benefit in communities directly affected by an underlying environmental violation. For more information regarding brownfield SEPs in Indiana, please contact Andrea Robertson, Senior Environmental Manager, Indiana Brownfields Program, at (317) 234-0968 or aroberts [at] ifa.in [dot] gov.

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