Client Alert

State of California Provides Low-Interest Loans for Redevelopment of Brownfields and Underutilized Properties

4/1/2001

By Alexis M. Pelosi

In the fall of 2000, a new law was enacted that establishes financial incentives for the redevelopment of abandoned and underutilized properties in California. Known as the Cleanup Loans and Environmental Assistance to Neighborhoods (CLEAN) Program, it makes available $85 million for loans to investigate and clean up contaminated properties. On January 19, 2001, the Department of Toxic Substances Control ("DTSC") adopted emergency implementing regulations for the CLEAN Program that outline the criteria for eligibility and the application requirements. Applications for these loans are currently being accepted.

How Does the Program Work?

The CLEAN Program is run by DTSC and has two main parts. The first part is a site contamination investigation program that provides low-interest loans of up to $100,000 for preliminary endangerment assessments ("PEAs") of eligible properties. PEAs include sampling and preliminary determinations of the type and extent of, and risks associated with, contamination of a property. These loans have a two-year repayment schedule, but up to 75 percent can be deferred if after conducting a PEA it is determined that redevelopment of the property is economically infeasible.

The second part of the program involves the clean-up or remediation of contamination of eligible properties. Under this part of the program, low-interest loans of up to $2.5 million are available for response costs. These loans have a five-year repayment schedule, and funds are distributed incrementally. In addition, to access these funds, applicants must agree to several funding conditions, including, but not limited to, entering into a CLEAN Program Response Action Agreement with DTSC that authorizes its oversight of any response or clean-up action.

What Properties Are Eligible?

Eligible properties include Brownfields and underutilized properties, which consist of urban properties where redevelopment is likely to have a beneficial impact on the property values, economic viability, and quality of life of a community. Underutilized properties specifically include vehicle parking sites or other sites with marginal economic services.
Ineligible properties include properties currently listed or proposed for listing on the National Priorities List, properties owned at any time by the United States, and properties that are part of a contiguous expansion or improvement of an operating industrial or commercial facility.

How Are Funding Decisions Made?

DTSC is required to categorize all eligible properties. These categories provide information to the public on potential health hazards, as well as offer guidance on funding priorities. Properties designated "Priority Tier One" have a high funding priority because they are a known or probable threat to human health, safety, or the environment. On the other hand, properties designated "Priority Tier Two" have a lower funding priority because they pose a substantial, but less immediate, threat to public health, safety, or the environment. DTSC funding decisions will likely be made based on priority tiering; however, other factors are also considered.

Who Can Apply?

Redevelopment agencies, private businesses, individuals, and non-profit organizations are all potentially eligible for CLEAN Program funds. The primary criterion is that applicants have an interest in, or an economic activity within the boundaries of, an eligible property. In fact, an applicant does not need to own the property, it only needs to provide documentation of an option to purchase or a right to enter the property to conduct environmental testing or clean-up.

What Can the Funds Be Used for?

CLEAN Program Loan funds are intended for property investigations and remediations. Therefore, they can be used to determine the extent of contamination as well as for its clean-up. Funds cannot be used for Phase I Environmental site assessments or for operation and maintenance costs following the completion of response actions. Funds also cannot be used for costs associated with government oversight.

How Do You Apply?

An application for CLEAN Loans can be found on DTSC's web site at www.dtsc.ca.gov. If you or your company would like assistance applying for CLEAN Program funds or is interested in additional information on this important new legislation or other contaminated site issues, please contact Peter Hsiao in our Los Angeles office at (213) 892-5731.

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