Publications
Brownfields and Connecticut’s New Legislation to Spur Redevelopment
Many states have enacted legislation aimed at creating incentives for the redevelopment of brownfields. The State of Connecticut first addressed the issue of brownfields in 1992 with the Urban Sites Remedial Action Program (the “Urban Sites Program”). The Urban Sites Program is a program of somewhat limited scope in which the Connecticut Department of Economic and Community Development (“DECD”) can acquire polluted property in order to facilitate the redevelopment of the sites. Only sites located in distressed communities or in an “enterprise zone” with economic and development potential as determined by the DECD are eligible for the program.
In 1995, Connecticut created a voluntary cleanup program with wide applicability (the “Voluntary Remediation Program”). Under the Voluntary Remediation Program, owners or prospective purchasers may remediate certain contaminated sites and receive a covenant not to sue from the Connecticut Department of Environmental Protection (“DEP”).
Together, the Urban Sites Program and the Voluntary Remediation Program have not sparked the redevelopment of a significant number of brownfield sites. Therefore, the Connecticut General Assembly passed, at the end of the 1997 legislative session, a brownfields bill: H.B. 5430 “An Act Concerning Brownfields Redevelopment and Recycling.” On June 8, 1998, H.B. 5430 became Public Act 98-253 (the “Act”). The Act, which became effective on October 1, 1998, creates a comprehensive set of inducements to owners and potential purchasers of brownfields to remediate and redevelop brownfield properties. Through the Act, the State hopes to turn the potential of its various brownfield initiatives into redeveloped properties. The following describes the significant sections of the Act.
Abatement of Municipal Real Estate Taxes
The Act provides that municipalities may allow owners of “environmentally impacted sites” to abate property taxes due during the period in which the property is remediated and redeveloped and that municipalities may forgive delinquent taxes and interest for the benefit of anyone, including a prospective purchaser of the property, who agrees to undertake an investigation and remediation of the property.
Hiring of Professionals Hired by Municipalities
The Act provides that municipalities may hire professionals to undertake environmental site assessments on property within the municipality in the following circumstances: the owner of the property cannot be located; the property is encumbered by a lien for taxes due the municipality; the property is part of the municipality’s redevelopment plan; the property is abandoned property; or the municipality determines that the property presents an imminent and substantial endangerment. The Act indicates that professionals hired under these circumstances are protected from liability, but the Act does not define or describe the type or extent of liability from which the professionals are to be protected.
Amendment of Definition of Transfer of Establishment
The Act exempts from the Connecticut Transfer Act:
- (i) transfers of certain residential properties;
(ii) transfers of property to an Urban Rehabilitation Agency;
(iii) transfers to a municipality; and
(iv) transfers to the Connecticut Development Authority or any subsidiary of the authority.
Freeing these transfers from the burden of Transfer Act compliance will not insulate owners and purchasers from potential liability for remediation of the transferred sites, but will possibly allow owners and purchasers more flexibility in controlling the timing and scope of the remediation process.
Lender Liability
The Act exempts lenders from liability for contamination they did not cause. Generally, the act provides that lenders whose interest in contaminated property is primarily to protect a security interest in the property will not be held liable by the State for the remediation of the property, either before or after foreclosure, if the lender does not participate in the management of the property.
Expansion of Urban Sites Program
The Act expands the Urban Sites Program so that it covers not only those sites “deemed vital to the economic development needs of the state,” but also smaller, less strategic sites to be known as “urban community sites” defined as “property that is abandoned, vacant or underutilized but is suitable for development for community-oriented uses, including, but not limited to, commercial, retail or medical establishments, small industrial or manufacturing facilities, neighborhood services or public uses including parks or open space.”
Expansion of Right to Perform Voluntary Remediation
Before the Act, voluntary remediations were permitted only for sites listed on the State inventory of hazardous waste sites. The Act expands the right to perform voluntary remediations to include, in addition to listed sites, any site where groundwater is classified as GA or GAA, groundwater classifications for supplies of water that is suitable for drinking without treatment.
Expansion of Covenants Not to Sue
The Act amends provisions concerning the covenants not to sue that DEP is authorized to enter into with certain owners and prospective purchasers of contaminated property. Prior to the Act, the DEP could enter into:
- (i) a transferable covenant not to sue with prospective purchasers of contaminated property (at a fee consisting of 3 percent of the value of the property); and
(ii) a non-transferable covenant not to sue with an owner of a contaminated property (at a fee of $5,000).
Both covenants required the submittal of a DEP approved remedial action plan. The Act provides that owners and prospective purchasers are to be eligible for both the transferable and non-transferable covenants currently available. Further, the Act provides that DEP must enter into non-transferable covenants in appropriate circumstances, whereas current law provides that the DEP may enter into non-transferable covenants. Also, the Act provides that in addition to DEP, LEPs may approve remediations that form the basis of a non-transferable covenant. The Act allows owners and prospective purchasers to choose between the less expensive and easier to obtain non-transferable covenant and the potentially more expensive but more valuable transferable covenant.
Connecticut Development Authority Subsidiaries and Revolving Funds
The Act provides that the Connecticut Development Authority may establish subsidiaries “to stimulate, encourage and carry out the remediation, development and financing of contaminated property… in coordination with [DEP], and to provide financial, development and environmental expertise to others including, municipalities, interested in or undertaking such remediation, development or financing which are determined to be public purposes for which public funds may be expended.”
The Act also amends the statute that provides for the creation of the Environmental Assistance Revolving Loan Fund (the “Revolving Fund”). Before the act, the Revolving Fund, administered by the Connecticut Development Authority, allowed the Authority to provide loans, lines of credit or loan guarantees to businesses for certain enumerated environmental projects. The Act provides that the Connecticut Development Authority or any subsidiary (such as a subsidiary created pursuant to the Act as discussed above) may also provide grants as well as loans, lines of credit or loan guarantees, and expands the scope of permissible uses of Revolving Fund monies to include the remediation of contaminated property, as well as the other environmental projects as set forth in the original statute.
The Act also establishes a “Regional Economic Development Assistance Revolving Fund.” From this fund, the Department of Economic and Community Development may provide loans or grants to regional entities, who in turn may provide loans to nonprofit businesses or communities, not to exceed $250,000 per loan for regional economic development activities.