Available Funding Mechanisms

The Brownfields Funding Mechanisms document provides suggestions for locating and leveraging cleanup and redevelopment capital. Suggestions for Leveraging Brownfields Funding Sources provides ideas for identifying additional funding sources. Definitions of Sample Brownfields Funding Mechanisms provides definitions of several funding mechanisms commonly used for brownfields activities.

Suggestions for Leveraging Brownfields Funding Sources

• Identify as many funding resources as early as possible to leverage EPA cooperative agreement money. Some funding resources take longer to realize than others, and EPA funding will go much further if there is as much lead time as possible. Even though the following funds are not dedicated for use at Brownfields projects, potential sources of additional funding for similar types of activities within the Federal government include:
  • Department of Housing and Urban Development (HUD), such as the Empowerment Zone/Enterprise Community (EZ/EC) program
  • Department of Transportation (DOT), such as the Livable Communities program
  • Department of Commerce (DOC), such as the Economic Development Administration
  • Department of the Interior (DOI), such as the National Park Service.
  
  
• Network with other Brownfields pilots to identify national investment organizations that have experience and interest in helping convert brownfields to productive reuse.

• Network and identify supporters from the banking and development community early in your pilot project.

• Work closely with your State to develop a mutually beneficial relationship. Document brownfields successes to demonstrate to the State that the redevelopment and reuse of brownfields in your community is worth funding and supporting.

• Use a mix of public funding tools, such as tax incentives and tax increment financing, and private funding tools.

Definitions of Sample Brownfields Funding Mechanisms

Several funding mechanisms can be used to help redevelop brownfields. Some of the more commonly used mechanisms are defined here to provide an understanding of how each works. The article, "Financing Brownfields Cleanup and Redevelopment," in NE-MW Economic Review, June 1995, offers a more extensive description of the funding mechanisms available to Brownfields pilots.

Revolving Funds

A revolving fund is a source of money which provides loans to specified parties. The parties reimburse the fund for the loan amount plus interest. Through payback of principal and interest, the fund is able to maintain the same or increased levels of funding. Revolving funds are typically developed through revenue disbursement from a trust fund.

Trust Funds

Trust funds are special accounts developed to receive and disburse revenues from taxes and/or fees for dedicated purposes. These funds differ from revolving funds in that they do not maintain funding capacity through payback of loans, but through new injections of revenue through taxes and/or fees.

Real Estate Investment Trust (REIT)

Real Estate Investment Trusts (REITs) are funds comprised of revenues from private investors. REITs act as primary investors when purchasing property. When applied to brownfields, the REIT acts as the owner, thereby shielding investors from liability in excess of the investors' initial monetary input.

Tax Increment Financing

Tax increment financing is created through a local government's assessment of property values. Special assessments are made on properties that are expected to accrue particular benefits from a general improvement, or from an environmental activity, such as a cleanup. The incremental difference in tax revenues between the original assessment rate and the new, higher assessed rate is then used to finance the improvement activity. Contact the National League of Cities for case studies on tax increment financing.

Tax Incentives

Tax incentives include a wide variety of mechanisms used to encourage redevelopment of brownfields through use of public taxation tools. These often take the form of tax credits or tax deferrals. By crediting or deferring taxes to be paid on property, income, or sales, governments can provide businesses with the incentives needed to create redevelopment opportunities for brownfields.

State Grants

State grants can provide communities with the funding needed for cleanup or redevelopment incentive packages within brownfields programs. Also, grants can be made from State trust funds for local establishment of revolving funds.