Brownfields Role of the Private Sector

The Role of the Private Sector

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Redeveloping a brownfield site is like any development project, in that it has the potential to turn a profit. Many brownfields occupy very valuable land and have great potential of economic return on investment. Private sector businesses have recognized this, especially as brownfield policies have become more well-defined, and have entered into the brownfield redevelopment market. Typically, the private sector's role involves conducting the Phase I and Phase II environmental assessments, creating and implementing a remediation plan, and then developing the site.

But before taking on a brownfield redevelopment project, its feasibility is determined by an economic assessment. There must be sufficient market demand and the project must provide a sufficient return on investment. An estimate of market potential is necessary in order to determine the scale of economic activity that the area can support and the anticipated rent income. Generally, developers will assess a project by comparing returns to a minimal rate of return acceptable to the developer.

There are roughly three scenarios in which brownfields become redeveloped, based on the current market conditions and amount of uncertainty within the site.

  • The conditions and market permit the private sector to redevelop the land independent of the public sector;
  • The conditions and market create an interest of the private sector but require public sector gap financing; or
  • The conditions and market require the public sector to invest in cleanup before turning the land into an economic opportunity.

According to a local environmental assessment consultant, there are a large number of sites which fall into that first category – sites with revealed contamination that are not classified as a brownfields. Because the market for redevelopment is strong, these sites are cleaned up privately, without any need for US EPA, IEPA, or municipal involvement (Deigan conversation, 2008). It is debatable whether it is appropriate to classify land as a brownfield if it requires environmental remediation as part of the development process. The types of brownfields identified in this analysis are likely to require public sector involvement.

The SRP program and most IEPA and US EPA brownfield grant and loan programs are heavily reliant on private sector involvement (Colantino conversation, 2008). Although targeted to municipalities, these programs and their funding are usually insufficient for complete redevelopment, but serve instead as seed money to promote further investment from the private sector. In addition, private sector businesses offer technical expertise needed by municipalities when it comes to complicated remediation issues.

Have you found a high level of private sector involvement needed in brownfield redevelopment in your community?