The redevelopment of contaminated properties is vital to the economic growth and development of the nation’s urban and industrialized areas. For developers, the process of preparing a brownfield property for reuse can be expensive and complicated. As prime brownfield properties are redeveloped, developers are forced to turn to less desirable properties, usually those with higher levels of contamination and other regulatory hurdles. Over the past several years, federal and state lawmakers have recognized the difficulties facing developers of brownfield properties and have created numerous programs and policies, such as liability protections and financial incentives, to encourage redevelopment. In some instances, legislators and agency rulemakers have designed laws that create an unanticipated adverse effect on brownfield redevelopment.

When the U.S. Congress passed the Small Business Liability Relief and Brownfields Revitalization Act in 2001, legislators insisted that developers who receive financing from the Brownfields Cleanup Revolving Loan Fund for brownfield redevelopment projects should pay prevailing wages to project workers. While this provision advances the laudable goal of maintaining high wages, it also burdens developers of brownfields with significant additional costs if they want to take advantage of federal financial incentives. Based on our experience, the prevailing wage law typically increases labor costs by 20 to 25 percent.

There are also examples at the state level which suggest that regulatory agencies were not cognizant of the impact they would have on brownfield redevelopment while drafting environmental rules.

This past October, New Jersey proposed new Flood Hazard Area Control Act (FHACA) rules that will have a significant adverse effect on brownfield redevelopment statewide. This new rule proposal underscores the fact that federal and state lawmakers, when developing new laws, must contemplate whether they will impede the progress of brownfield redevelopment.

The purpose of the FHACA is to control development in flood plains in order to maintain flood storage capacity. With the new rule proposal, the state is seeking to significantly expand the areas regulated under the FHACA, resulting in severe constraints on many otherwise attractive brownfield redevelopment projects.

Although the new FHACA rules were proposed for the important purpose of curtailing the exacerbation of flooding, their possible impact on brownfield redevelopment does not appear to have been a factor. Among the key provisions that will have a detrimental impact on most brownfield projects is the expansion of the riparian zone, the buffer area that runs parallel to those bodies of water regulated under the FHACA. Any development activities within the riparian zone must adhere to strict limits on the amount of vegetation that can be disturbed.

Under the current FHACA rules, the riparian zone varies in width from 25 to 50 feet; but under the proposed rules, the range would increase the zone to 50 to 300 feet, depending upon the characteristics of the body of water being regulated. These significantly expanded riparian zones will reduce the developable area of many properties, resulting in a decrease in size and density of developments, making them less desirable to developers because of the reduced internal rate of return on their investment.

Despite the severe impact that the new FHACA rules will have on redevelopment projects, only limited grandfathering provisions are provided. Only projects approved under a state land use permit or a municipal building permit will be grandfathered. And there are no such provisions for projects with preliminary site plan approval or approval under a municipal or county redevelopment plan. These are the types of approvals that multi-phase brownfield redevelopment projects are likely to possess.

So, while maintaining flood storage capacity, a high priority environmental issue, is the desired outcome of the proposed FHACA rules, there appears to have been little regard for the impact on brownfield redevelopment, another high priority of the state.

The federal prevailing wage issue mentioned above indicates that the lack of regulatory foresight is both a federal and a state problem. And yet, it is symptomatic of a more widespread problem. If federal and state lawmakers and regulators are going to honor their commitment to promote brownfield redevelopment, then they must recognize and do everything possible to avoid creating laws that impede the progress of redeveloping contaminated properties.