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SUSTAINABLE CITY NETWORK

VOLUME 9 SEPTEMBER 2013

LESSONS FROM DETROIT: THE CITY AFTER ABANDONMENT GETTING CREATIVE WITH COMPLETE STREETS ADVOCATING FOR ADAPTIVE REUSE BROWNFIELDS: DIAMONDS IN THE ROUGH?

BEST OF

LE CITY RK O W NET

SUSTAINAB

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contents

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VOLUME 9 SEPTEMBER 2013

County Gets Creative with Complete Streets

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Madison Police Connect the Dots Between Sustainability and Public Safety

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Expert Says Climate Change Response Requires Local Behavior Change

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Architect Advocates for Adaptive Reuse

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Are Utilities Missing Out on the Benefits of Combined Heat and Power?

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Is Your Brownfield a Diamond in the Rough?

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cover story

LESSONS FROM DETROIT: THE CITY AFTER ABANDONMENT

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Crumbling Bridges, Dwindling Budgets and Other Paradigm Shifts

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Sustainable City Network Magazine

The Best of Sustainable City Network is a quarterly magazine highlighting the most popular articles posted on sCityNetwork.com, an online trade publication that serves municipal professionals and elected officials in all 50 U.S. states and the provinces of Canada. The magazine is available in print or as a digital download at www.sCityNetwork.com/bestof. The opinions expressed in the magazine are those of the authors and do not necessarily reflect the views of Sustainable City Network, Inc. SUBSCRIPTIONS Contact 563.588.4492; bestof@scitynetwork.com

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Jeffrey F. Bullock, Ph.D. President University of Dubuque

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GROUP PUBLISHER Karen Ruden

Roy Buol Mayor City of Dubuque

Prof. Philip J. Parker, Ph.D., P.E. Dept. of Civil and Environmental Engineering University of Wisconsin - Platteville

PUBLISHER & EXECUTIVE EDITOR Randy Rodgers ASSOCIATE EDITOR Michael Manning BUSINESS MANAGER Linda Flannery CONTRIBUTING WRITERS Julianne Couch Jenny Peek F. Alan Shirk Anna Chittum DESIGN Imagine That!, Dubuque, Iowa

Cori Burbach Sustainability Coordinator City of Dubuque Jeffrey L. Bruce Owner Jeffrey L. Bruce & Company, LLC Scott Knapp VP Marketing A.Y. McDonald Mfg. Co. David Lyons President The Iowa Institute

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from the editor Welcome to Sustainable City Network Magazine – the Best of sCityNetwork.com! This quarterly magazine is a compilation of the most popular articles on our web site and in our weekly e-newsletter, the InBox, which is now delivered to more than 40,000 municipal professionals and elected officials across the U.S. and Canada. Sustainable City Network, Inc. produces advertiser-supported, non-partisan articles, webinars, trade shows and white papers that provide local institutions with quality, organized and timely information about sustainability projects, plans and best practices. This magazine is another way we fulfill our mission. Randy Rodgers Publisher & Executive Editor SUSTAINABLE CITY NETWORK www.sCityNetwork.com 801 Bluff Street Dubuque, IA 52001 563.588.3853

In this issue, we explore the problem of property abandonment facing many “legacy cities” across the United States. Perhaps hardest hit has been the city of Detroit, which leads the nation with an estimated 79,000 vacant homes. Our two-part story (one printed in this issue and another online), includes interviews with Dr. June Manning Thomas and Dr. Margaret Dewar, who recently co-edited the book The City After Abandonment (The City in the 21st Century). The book brings together essays from top urban planning experts to focus on policy and planning issues related to this difficult issue.

randy@scitynetwork.com

Don’t miss these coming events: The 6th annual Growing Sustainable Communities Conference will be held in Dubuque, Iowa, Sept. 24-25. See www.GSCDubuque.com for details. OUR MIS SION “To make U.S. cities more sustainable through quality and well-organized information.”

David Gershon will present a 12-hour “Master Class in Behavior Change and Community Engagement” beginning Oct. 10. The series of six 2-hour webinars will provide the opportunity for change agents to work with the noted author to apply his proven methodology to enhance an existing or create a new behavior change and community engagement initiative. Find more information at www.sCityNetwork.com/gershon. The articles in this magazine have been selected by our readers. We’ve packaged them together in this convenient magazine format, available in print or as a digital download at sCityNetwork.com/Bestof. We hope you find value inside.

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County Gets Creative with Complete Streets Sewer Upgrade Turns in to Much More in Martin County, Fla. BY SMART GROWTH AMERICA

MARTIN COUNTY, Fla. — When envisioning ways to create jobs and revitalize business in a community, you might not put stormwater and sewer projects at the top of your list. But one county in Florida showed that with some creative thinking and a resourceful application of funds, projects that might otherwise seem one-dimensional can go a long way toward building stronger communities. Planners in Martin County, realized that a stormwater and sewer project on a neglected commercial corridor in the Golden Gate neighborhood of Stuart, Fla., was an opportunity not just to provide vital infrastructure, but to spur private investment that would create jobs and help revitalize the neighborhood. In 2012, the Martin County Redevelopment Agency completed the BCD Sewer Project referring to Bonita, Clayton and Delmar Streets that were part of the reconstruction. The aim of the project was to increase the availability of basic sewer services in the Golden Gate neighborhood, which relies heavily on septic tanks. The construction would require a near complete replacement of the area roads, so the CRA conducted extensive public outreach to find out what improvements residents would want to see incorporated into a new design. The outreach conducted by the CRA at project inception ensured local businesses and residents were included in the planning and design process. As a result, they were able to contribute to the decisions about what the project would look like at the end

of construction, how it would function, and what the benefits would be. The end result of the project was impressive. In addition to new gravity sewers and better management of stormwater runoff, the reconstructed roads featured Complete Streets design elements including wider sidewalks, pedestrian medians, landscaping featuring native plants and on-street parking. These features mean the street will better accommodate everyone who uses the road, including pedestrians of all ages and abilities, cyclists, transit users and drivers. In a short time frame, many local property owners have updated the interior and exterior of their properties to coincide with the street makeover, and enjoyed the increase in on-street parking as well as improved access for pedestrians and cyclists. “This was a great example how public investment can be a catalyst for driving private investment into the community,” said Nakeischea Smith, a community development specialist for Martin County Redevelopment Agency and manager of the project. Martin County’s innovative project was made possible by a Community Development Block Grant. This flexible program from the U.S. Department of Housing and Urban Development provides communities around the country with resources to address a wide range of unique community development needs.

The CRA also applied these funds to another neighborhood corridor revitalization project in the area, identified through a participatory planning process called the Neighborhood Opportunity Workshop or ‘NOW Vision’. Through this process residents in Golden Gate targeted an informal dirt roadway, flanked by a freight railway line on one side and commercial businesses on the other, as prime for redevelopment. Known as the Railroad Avenue Commercial Revitalization Project, the CRA used CDBG funds to create a new street and provide formalized access to business along the blighted corridor as well as adding curbing, sidewalks, landscaping, on-street parking and drainage facilities. The new features are intended to draw private reinvestment and business activity to this underutilized area, while improving local infrastructure and stormwater treatment capabilities. “Engaging local residents and businesses were really the keys to the success of both projects,” added Smith. “They were part of the process from the onset.” In addition to demonstrating the importance of community participation in the identification, planning and design of neighborhood improvements, both projects are excellent examples of how communities can move beyond the conventional application of CDBG funds; transforming vital yet basic projects into holistic development models that foster revitalization, reinvestment and smart growth.

Smart Growth America is the only national organization dedicated to researching, advocating for and leading coalitions to bring smart growth practices to more communities nationwide. From providing more sidewalks so people can walk to their town center to ensuring that more homes are built near public transit or productive farms remain a part of our communities, smart growth helps make sure that people across the nation can live in great neighborhoods. [4]


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Madison Police Connect the Dots Between Sustainability and Public Safety City Reduces Crime through Community Engagement BY JENNY PEEK

MADISON, Wis. — When asked to explain the connection between social sustainability and public safety, Madison Police Chief Nobel Wray was stumped. The unusual connection took him back to one of his first assignments, in what was at the time the most dangerous neighborhood in Wisconsin’s capital city. In 1987, Wray was assigned to the Simpson-Broadway neighborhood, an area with the city’s highest percentage of children ages 12 to 21, and about as many homicides as in the rest of Madison’s neighborhoods combined. Wray was stationed there with the task of reducing the crime rate in the neighborhood. “My responsibility was to go out there and change things. They assigned me as one individual officer to be a catalyst for change,” Chief Wray explained at a quarterly Sustainable Business Network breakfast meeting hosted last week by Sustain Dane, a regional sustainability organization based in Dane County, Wis. At the beginning of his assignment, Wray did just that: he took sole responsibility for changing the neighborhood. He organized a local computer lab, took kids fishing with the help of fellow officers, created a bike program, and more. After months of attempting to single-handedly make the neighborhood better and more sustainable, Wray questioned his progress. “One day I thought for a moment, what am I actually doing for this neighborhood? If I’m doing the computer lab, if I’m taking kids fishing, if I’m taking kids biking, is there someone else that should be doing this that isn’t? And in some respects am I doing more

harm than good in the long run?” Fearing he wasn’t using the neighborhood’s strengths to its full potential, Wray began to look at his position as a neighborhood police officer differently. He realized that a neighborhood couldn’t rely on a single police officer to make long-term improvements. He needed to work with the neighborhood as a whole, bringing interested parties together to ensure long-term sustainability. It was then that Wray and the Madison Police Department began taking a different approach to crime in habitually bad neighborhoods. Instead of focusing on single events, the Madison Police Department focused their efforts on what they refer to as community policing, a philosophy that embraces problem solving as a way to deal with crime and disorder, while focusing less on specific incidents.

Utilizing a common macro problem solving approach called SARA – scanning, analysis, response and assessment – and molding it to fit the needs of the city, the Madison PD developed a five-phase process dedicated to making Madison’s highest profile neighborhoods safer and more sustainable. The first phase, or the information and communication phase, gives the assigned neighborhood officer the time to get to know the community. They get to know the neighborhood from the neighborhood perspective, versus from an outsider’s point of view. This initial phase is how the Madison PD determines why a neighborhood has such high calls for service. It is in this phase that they find out what the problems are.

The method the Madison Police Department began using was created by Herman Goldstein, a professor at the University of Wisconsin – Madison, who in 1979, called for a shift in policing tactics, encouraging officers to identify and deal with problems at the community level, instead of focusing on reactive, incident-driven policing. “Normally what we did was say, ‘Well, there are several burglaries happening and they’re happening at a similar location, so let’s focus on those problems and deal with them,’” Wray explained. “What we did instead was we took that problem solving approach and applied it to an entire neighborhood and we called it Macro Problem Solving.”

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Nobel Wray is Chief of Police in Madison, Wis.

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“The Sustainable Business Network is a forum for business leaders in the Madison area to explore social and environmentally responsible business practices,” Jessie Lerner, Sustain Dane’s Interim Executive Director explained. “This growing membership-based network brings together a diverse group of business leaders that care deeply about people, the planet, and profit. The Madison Police Department is a great example of an organization that embeds social sustainability in its approach to make Madison a safe and healthy city,” she said.

Phase two focuses on problem analysis. Data that is collected during phase one is used to determine the root of neighborhood issues. “When I went out to my neighborhood, I was dealing with one of the highest percentages of young people in a densely populated area with nowhere to go, and no place where people could connect with each other,” Wray said. “From the outside looking in, the community was seeing this neighborhood as having gang problems, drug dealing, and those things were true, but every community meeting that I went to, there were two issues: speeding and what were we going to do with these kids – that’s what that community thought from the inside out.” Identifying the causes of disturbances within a neighborhood gives police a specific window into how to fix, or improve issues in hot-spot areas. Without identifying the root causes, phase three, the empowerment and resilience phase, would not be successful. According to Wray, phase three was where he had his “ah-ha” moment – the moment he began to realize that without engaging the community in improving their neighborhood, long-term success would be nearly impossible. “We learned right away that if [residents] didn’t believe they could have an impact in their neighborhood you would not get them involved. What happens time and time again is you’ll have a community meeting and if that meeting is not focused on [6]

something that someone can do directly, they don’t get engaged. It’s amazing,” Wray said. “We tried to structure things so that people could see that they were having an impact for the long-term. We referred to it as the strategy of ‘teaching them to fish’ – if I’m doing it and I continue to do it, then they will expect that we will continue to do it… but the goal is to teach them to fish so that they do it for themselves for long-term sustainability.” After empowering neighborhoods and showing residents that they are capable of changing the long-term quality of life in their community, the Madison PD starts phase four, the stabilization phase. Stabilizing the neighborhood is centered on identifying key stakeholders, key residents that care deeply about the future of their community. Once those people have been identified, the neighborhood officer helps connect them with community resources and support to ensure their success. By establishing the success of community stakeholders, Wray believes the Madison PD is ensuring the success and sustainability of a majority of Madison’s neighborhoods. “People in the neighborhood have to believe that they have the capacity for change. If they don’t believe that, then there’s a reliance on external forces to improve the quality of life,” Wray explained. “We have never assigned a neighborhood officer to a geographic area where we have had an active and involved neighborhood associa-

tion. The work that people do at the ground level when they start to believe in their area – that collective efficacy – it makes a big difference. It is the difference.” The last and final phase of Madison’s five-phase macro problem solving technique is the maintenance and monitoring phase. During the final phase, resources are reduced as the neighborhood begins to sustain itself. By going through the first four phases, crime decreases, community involvement increases, and the need for neighborhood officers is all but eliminated. That being said, these neighborhoods have a complicated history, tensions flair, and occasionally a neighborhood officer has to return to ensure that the neighborhood is stable and sustainable. Still, occasional flair-ups greatly reduce the long-term burden on the police department’s resources, as well as the burden on the livelihoods of Madison residents. Twenty-eight years after joining the Madison PD, Chief Wray can attest to the ongoing success of the model. “Vera court, SimpsonBroadway, Willy Street, Mifflin Street, Truax, Allied, Northport, Triangle Neighborhood, all of these neighborhoods are better off than they were 20 years ago because of the sustained, long-term efforts of the Madison Police Department,” he said. The Madison PD prides itself on making this connection between social sustainability and public safety, Wray said, and that has gained the attention and recognition of organizations like Sustain Dane.


Sustainable City Network Magazine

Expert Says Climate Change Response Requires Local Behavior Change Upcoming Webinar Series to Outline Engagement Program BY RANDY RODGERS, PUBLISHER & EXECUTIVE EDITOR

If cities around the world hope to mitigate or adapt to the now unfolding consequences of climate change, David Gershon says they will need to convince citizens to change their current behavior. “As President Obama stressed on Tuesday in announcing a federal response to climate change, DAVI D G ERSHON government alone can’t meet the challenge,” Gershon said. “If current trends are to be reversed, it will require deliberate efforts at the local, grassroots level.” Gershon, co-founder and CEO of Empowerment Institute, is one of the world’s foremost authorities on behavior-change and community engagement. He says cities are on the front lines of climate change because they generate 70 percent of the planet’s carbon emissions and because they have the most to lose when climate-related disasters strike. “Since citizens’ daily lifestyle choices represent 70 percent of these emissions,” Gershon says, “helping cities empower their citizens to reduce their carbon footprint provides the world with an unparalleled opportunity to address climate change. Further, he says, that engaging citizens can serve as a demand-side driver to increase the pace of renewable energy, energy efficiency and new technology adoption. “Behavior change and community engagement”, according to Gershon, “is the next frontier in addressing climate change but its success will require a transformation in thinking and skills from traditional information campaigns, which research shows at best raise awareness but do little to achieve actual behavior change.” Gershon is the author of 11 books, including award-winning Social Change 2.0: A Blueprint for Reinventing Our World, and the bestselling Low Carbon Diet: A 30 Day Program to Lose 5,000 Pounds. He co-directs Empowerment Institute’s School for Transformative Social Change, which teaches change agents to design and implement stakeholder engagement and behavior change initiatives.

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Sustainable City Network recently hosted a free one-hour webinar in which the author shared his Empowerment Institute’s two-decades of research around what is needed to create an effective behavior change and community engagement initiative to address climate change, disaster-resiliency or any other issue that requires citizens to adopt pro-social behaviors. Download a recording at http://sCityNetwork.com/webinars/. Gershon will also be leading an in-depth 12-hour “Master Class in Behavior Change and Community Engagement” beginning in October. The series of six 2-hour webinars will provide the opportunity for change agents to work with Gershon to apply his proven methodology to enhance an existing or create a new behavior change and community engagement initiative. A registration fee applies for this course. Find more information at http://sCityNetwork.com/gershon. Gershon’s program addressing carbon reduction in cities starts with local governments, civic organizations and/or business groups introducing it through events called Global Warming Cafes, at which trained facilitators engage citizens to participate in a Low Carbon Diet peer support group called an EcoTeam. The structured Low Carbon Diet behavior change program consists of a menu of 24 carbon reducing actions that are implemented over four meetings. The first meeting is to build and organize the team; the second one helps participants adopt low carbon lifestyle practices; the third one helps team members make their household systems more energy efficient; and the final meeting is to help team members replicate the program with others.


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Not only are the EcoTeams effective in creating lasting reductions in carbon and energy consumption among the participants, but Gershon identifies five significant “adjacent possibilities” that the teams have fostered in communities that implemented the program:

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Green economic development: Businesses that address household energy retrofits and renewable energy had major uptakes of new customers, as did stores that sell green products. The program became a demand side driver of green economic development and the consequent green jobs that come with it.

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Social capital: The connections, cooperation and collaboration fostered by the EcoTeams strengthened neighborhoods and the social capital generated by this process was redeployed to tackle a myriad of community social issues.

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High performance teams: The training helped residents hone powerful team-building and leadership skills that were used in other civic and business environments. Social innovation: New ideas were generated. “Almost every team would come up with one or two new ideas. It’s amazing how many social innovations resulted,” Gershon says.

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Socially engaged citizens: EcoTeam members often went on to become block leaders, program coaches, political advocates, social entrepreneurs and civic leaders. Many became environmental activists, city council members and mayors. In one example, Gershon says Ava Frisinger’s EcoTeam helped her become mayor of Issaquah, Wash., where she is now in her fourth term.

Gershon says more than 300 U.S. cities and others around the world have used these techniques to engage community members to lower their carbon footprint. He has lectured at Harvard, MIT, and Johns Hopkins and served as an advisor to the Clinton White House and the United Nations on behavior change and sustainability. Gershon is currently heading up an international climate change initiative, the Cool City Challenge, which recently won the NASA/ Sustainable Silicon Valley global competition as “the most outstanding solution addressing human impact on the planet.” To learn more about this initiative and the methodology that will be taught in the Master Class watch the Cool City Challenge video.

related youtube video: http://youtu.be/cMT87OP21mo

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Sustainable City Network Magazine

Architect Advocates for Adaptive Reuse Carroon Presses for Action to Slow Consumption BY RANDY RODGERS, PUBLISHER & EXECUTIVE EDITOR

Preservation architect Jean Carroon believes the United States – a country that accounts for five percent of the earth’s population but 30 percent of its resource consumption – must take a leadership role in reversing the trends of the past half century. And, given the fact that new construction accounts for half of that JE AN CAR ROON consumption, the best way to reverse this unsustainable trend is to start reusing and maintaining what we’ve already built, and building things that last. “The greenest thing we can do for both our buildings and our world is constant, steady maintenance,” Carroon told a group at the recent Building Energy 2013 conference hosted in Boston by the Northeast Sustainable Energy Association. “It breaks my heart to understand that the politics of our world don’t support maintenance. They don’t fund maintenance; they fund capital projects,” she said. While she appreciates the “reduce, reuse and recycle” mantra, she clearly has her favorite. “My life’s passion is about making people remember that reuse comes before recycle on that list,” she said. “Why are we recycling aluminum cans when we could and should be recycling our buildings?” Carroon, FAIA, LEED, is a principal in Goody Clancy’s preservation practice, based in Boston. She thinks adaptive reuse all too often gets overlooked in the frenzy to construct green buildings. “It is almost always better environmentally to reuse an existing building,” Carroon said. “When you’re re-using a building you’re doing that to avoid the environmental impact of all that goes into a building.” Carroon said thousands of perfectly good homes are torn down every year to make way for larger new homes. But, she said, even if those new structures are built to LEED standards, it’s still a missed opportunity. “I think our semantics are important and we need to start thinking in a different way. We’re not really asking how we can be greener. We’re asking how we can be healthier. We’re asking how we can make a [ 10 ]

healthier world; and health really is the umbrella that covers every decision we should be making.” Carroon said the green building industry has been exploding in the past 10 years with a vast array of new technologies that are making energy-efficient retrofits easier than ever. “I think the 21st century is going to be like a new industrial revolution,” she said. Boston’s historic Trinity Church, for example, was outfitted with a state-of-the-art vertical geo-exchange system in 2002. Comprised of six 1,500-foot wells drilled beneath Copley Square, the system reduced energy consumption by 25 to 50 percent and opened up 25,000 square feet of space in the basement of the church. Because most of the geothermal system is hidden below ground, it avoids the unsightly clutter of conventional HVAC units that might distract from the historic feel of the landmark. Carroon has been working on the renovation of Trinity Church for the past 13 years. The project included the installation of a sophisticated stormwater management system, she said. The improvements have not only saved money and reduced energy consumption, but they have helped keep this valuable community asset viable for future generations. “They have over 1,000 groups that use that space,” Carroon said. “It’s a very, very active urban church.” Carroon said treasured historic landmarks aren’t the only kinds of buildings that can be re-used. In fact, she said, she’s come to appreciate “mundane buildings” for adaptive reuse projects. “I have to admit, it’s because I don’t have to work with historic commissions,” she quipped. “It just makes it a different conversation. You’re allowed a little more freedom and there are fewer players involved.” The Cell and Genome Sciences Building at the University of Connecticut’s Health Center in Farmington, Conn., is a perfect example of “a big flat warehouse building, ugly as sin,” that Carroon said Goody Clancy re-designed in 2007 to 2010. The $52 million renovation earned the 117,000-square-foot building LEED silver certification and the 2011 Renovated Laboratory of the Year award by R&D Magazine. The magazine said the architects “brought daylight into interior corridors and reconfigured the floor plan to facilitate workflow and collaboration.”


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“We just had this concept that you could organize the inside of it and daylight it so you would know where you were in the building,” Carroon said, “and it would all lead you to this central place where you would have the community and all the sciences come together.” The drab 1970s-era building was transformed into a contemporary space with exposed infrastructure and minimal use of ceilings. “Ceilings are really just a waste of material,” Carroon said. Entombing pipes, conduits and ductwork inside walls and ceilings only makes renovations more difficult and discourages the reuse of older buildings, she said. “If we really want to take care of our historic buildings, we should actually be running everything exposed, knowing that in 30 years it’s all going to be replaced again. … Let’s make them easy to switch out. Let’s make these buildings future-ready so we don’t have to mess with them,” she said. Carroon argues that buildings should be constructed with a “less-ismore” mentality.

“This is not a pretty picture,” she said. “This is a moral issue if not an environmental issue. This is something we really have to take responsibility for.” Carroon acknowledged that some progress is being made. She said the U.S. Green Building Council, in its latest revisions of LEED standards, is focusing more attention on the toxicity and embodied energy inherit in building materials. The U.S. Park Service is considering revisions to its adaptive reuse policies, and many cities across the country are putting restrictions on construction and demolition waste. But, Carroon said, more needs to be done, up to and including the use of carbon taxes on new materials, the costs of which she said do not reflect the price of dealing with the environmental consequences. “We have to level the economic playing field so that it’s less expensive to have someone repair something; so we have an incentive to repair and we’re not constantly in this up-hill battle about the fact that new is almost always less expensive than repair.”

“The solutions I love are those that give us the biggest bang for the least amount of materials,” Carroon said, “not the least amount of money.” And, she’s skeptical about so-called “zero-energy” buildings because many of them use too many materials or systems that can’t be maintained or have a short lifespan. She’s also concerned about the toxicity of modern building materials. She favors double-hung windows protected by storm windows, wooden sills, awnings and other “passive” energy-saving devices. Some technologies are old, like rain barrels, and others are new, like high-efficiency faucets, but the key is to find durable, local materials that are easily cleaned and maintained for long life and functionality, she said. “I am extremely skeptical about what we’re putting into buildings,” she said. “I’m extremely skeptical that everything we say is green is really green.” Carroon sees the struggle to reduce consumption and toxicity as nothing less than a struggle to preserve humanity. “We have seven billion people on this earth,” she said, “and in the last 50 years we’ve consumed more raw materials than in all previous human history …and it’s still climbing. The EPA says that material consumption creates about 41 percent of our carbon dioxide emissions, and that new construction is the single largest source of human toxicity.”

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The Cell and Genome Sciences Building at the University of Connecticut’s Health Center in Farmington, Conn., was an adaptive reuse project designed by Goody Clancy and dedicated by Gov. Dannel Malloy in 2011. Formerly a warehouse-like industrial research building, the structure was given new life with a $52 million make-over and is now a LEED silver building with a fresh contemporary design. (Photo by Anton Grassl)

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Crumbling Bridges, Dwindling Budgets and Other Paradigm Shifts Transportation Policy Expert Analyzes MAP-21 BY JULIANNE COUCH

E M IL H. FRANKEL

Unless there has been a washout or some other dramatic event, drivers probably won’t encounter an official “Closed” sign as they drive across a bridge during their morning commutes. So even though they have heard a bridge is “deteriorating” they’ll keep driving across it to get where they need to go. They’ll also tolerate potholed highways, terrifying on-ramps, and inadequate mass transit. Although the news is filled with details about “crumbling infrastructure,” the public is reluctant to support federal gasoline tax increases to repair bridges or support any other upgrades to the nation’s transportation system. That is a reality Emil H. Frankel is trying to adjust to, and to explain to others interested in transportation policy. Frankel is a visiting scholar at the Bipartisan Policy Center (BPC) in Washington, D.C., and an independent consultant on transportation policy and public management. He previously served as BPC’s director of transportation policy. Frankel was assistant secretary for transportation policy with the [ 12 ]

U.S. Department of Transportation from 2002 to 2005. Appointed by President George W. Bush, Frankel was part of the coordination and development of the administration’s proposal to reauthorize the federal highway, transit, and highway safety programs. He also provided policy leadership in such areas as intermodal freight transportation, reform of the nation’s intercity passenger rail system, transportation project financing, and the application of information technologies to transportation systems operations. Frankel spoke June 27 to a group at the Volpe Center in Cambridge, Mass., and via webinar, about “new paradigms” for federal transportation programs during a time of scarce resources. The premise of his address was that the nation’s ongoing fiscal challenges and persistent budget deficits have led to stagnating levels of federal surface transportation spending and new questions about federal policies and values. All this is occurring as transportation facilities age, deteriorate, and, in urban areas, suffer continuing conditions of congestion and unreliability. The situation of scarce government resources with which we are all familiar did not occur overnight but has become “progressive over a period of time,” Frankel said. “Fiscal constraints are driving changes in policy. Some of these changes are good, some are bad, some are spoken, and some are unspoken by the authorizing environment, but are creating trends in policy direction.” According to the Federal Highway Administration (FHA) prior to 1956 roads were

financed from the U.S. Treasury’s general fund. Then in 1956, the Highway Revenue Act established the United States Highway Trust Fund. Part of that fund included the Highway Account, which funds road construction. A federal fuel tax was put in place, to be used exclusively for highway construction and maintenance. The amount of tax at that time was three cents per gallon, which was soon upped to four cents. The 1982 Surface Transportation Assistance Act increased the tax to nine cents, with one cent going to deficit reduction. In 1990 the gas tax was raised to 14 cents, with 2.5 cents of the increase going to the Highway Fund and the other 2.5 cents going towards federal deficit reduction. Then in 1993 the gas tax rose to 18.4 cents, with all of the increase going towards deficit reduction. According the FHA, the federal fuel tax is still 18.4 cents per gallon on gasoline and 24.4 cents per gallon of diesel fuel and related excise taxes. The American Petroleum Institute notes that on average as of January 2013, state and local taxes add 30.4 cents to gasoline and 30 cents to diesel. On July 6, 2012, President Obama signed into law MAP-21, the Moving Ahead for Progress in the 21st Century Act. The act will fund surface transportation programs at over $105 billion for fiscal years 2013 and 2014. It is the first long-term highway authorization enacted since 2005. Frankel referred to this as “stagnant funding,” saying it is really a temporary measure since it expires soon, but that people concerned about transportation policy were “thrilled” that at least funding levels had been maintained. Basically, the new law moves existing money around.


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According to the FHA, MAP-21 creates a “streamlined, performance-based, multimodal program. It will help address challenges like improving safety, maintaining infrastructure, reducing traffic congestion, improving efficiency of the system and freight movement, protecting the environment, and reducing delays in project delivery.” Further, MAP-21 “authorizes $82 billion in federal funding for 2013 and 2014 for road, bridge, bicycling, and walking improvements. In addition, MAP-21 enhances innovative financing and encourages private sector investment through a substantial increase in funding for projects under the the Transportation Infrastructure Finance and Innovation Act.” The FHA says that under MAP-21, a “complex array of existing programs is simplified, substantially consolidating the program structure into a smaller number of broader core programs. Many smaller programs are eliminated, including most discretionary programs, with the eligibilities generally continuing under core programs.”

and lack of faith that funding increases will result in improvement. So, there has been more success at state and local levels in revenue increases than at the federal level because their revenue increases are tied to specific projects where people can see the connection.” California voters, he noted as an example, have approved three increases in sales taxes to support specific transportation projects. The threshold for passage was two-thirds approval. “People can see it and believe government will carry through. That is hard to do at the federal level: we haven’t found the magic formula.” Frankel believes the MAP-21 reforms are “effective and accountable.” He said that new program consolidation places “increased emphasis on asset management, performance management principles, performance measurement, and outcome accountability.”

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These changes bring a popular phrase to mind: “financing instead of funding,” which Frankel said is an important distinction. “Since 1956, federal gas taxes meant a pay-as-you-go program.” That’s the definition of funding. Financing, however, means finding alternative public/private funding sources, he said. In spite of the signing of MAP-21, challenges remain, Frankel said. First, the public must “re-engage” with these issues. There must be a clearer, more narrowly defined answer to what the federal role in surface transportation should be. “Achieving wide acceptance for funding for transportation is a form of investment, by its nature different from other investments in long-term economic growth,” Frankel said. “States can do long-term borrowing because these are long-term assets. The payoff for investing is not the construction and related jobs, even though those are

In 1956, when the highway fund was established, people’s attitudes about spending were different than they are today, Frankel said. “People saw a map that showed where highways would be built. They were willing to adopt and pass an increase in taxes dedicated to specific improvements, converting those lines on the map into highways.” Frankel believes the public is now less likely to support federal government efforts to raise funds and expend them for a particular purpose. People tend to be skeptical that the promised project will actually be completed. However, they are more willing to support state and local funding requests. “The public is not interested in funding restoration of crumbling infrastructure, crumbling bridges, aging and deteriorating congested infrastructure. The public seems to accept these conditions, not supporting higher taxes or user fees, for reasons from a resistance to federal funding due to distrust in government, beyond just transportation,

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Transportation policy consultant Emil H. Frankel says national politics play a role in stagnating federal spending on local bridge and highway projects. A new paradigm in Washington is shifting more of the responsibility on to local governments. On the local front, Frankel said officials are reluctant to close dangerous bridges and viaducts when funding shortfalls prevent necessary repairs. (Photo by Timothy R. Wildey)

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important. Instead the payoff is how it changes our society and economy. People don’t remember how many construction jobs were created during federal highway construction, although that number is not insignificant. Instead, they talk about how it changed the American economy and society.” Funding instruments have to be “sustainable,” Frankel added, “whether user based or something else, because these are longterm assets. It takes a long time to deliver infrastructure projects. Therefore, sources of investment need to be long term.” Finally, we need to make better, wiser choices about transportation projects and programs in which we invest, he said. “There must be a fundamental reform of transportation planning processes at the institutional level.” Frankel suggested that we should not be making lists, but instead broad strategic plans that consider economics, the environment, and society.

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Back to those potholed highways and crumbling bridges. It is hard to discuss construction infrastructure when we can’t agree on terminology, like “crumbling” which might mean it shows signs of wear or might mean it’s ready to collapse. Frankel gave an example of a viaduct in Hartford., Conn., which had visibly crumbling concrete. It needed restoration or replacement but the state’s Department of Transportation was not willing to put up a closed sign, Frankel recounted. “We were caught in a bind. It is hard to make the case to people about why we need to make investment. We need to shift, to get people to understand. The ‘need’ argument is not working, but maybe the economic benefits argument would work.” In another example, Frankel mentioned the 2008 Interstate 35W bridge collapse in Minneapolis. He said Minnesota got a gas tax increase after the bridge went down. The governor vetoed the bill but the legislature overturned his veto. Politics can make getting things done “somewhere between difficult and impossible.”

If a bridge goes down, government officials say it is an aberration; it was not the fault of those responsible for maintaining it. Yet, Frankel said, “If you are at an agency you do everything you can to make sure your bridge doesn’t collapse. That’s what you are supposed to do, but you don’t want to put up a sign saying a bridge might collapse.” Frankel believes citizens who are asked to support funding will understand and take action under the right circumstances. “Everybody’s an expert on the transportation system. At least for the pieces that they use, they are the expert. The problem is understandable to them, because it makes a difference in their lives.”

Julianne Couch is the author of “Traveling the Power Line: From the Mojave Desert to the Bay of Fundy” (University of Nebraska Press).


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Lessons from Detroit: The City After Abandonment Vacant Properties Cost Cities in More Ways than One BY F. ALAN SHIRK


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“Why these outcomes? By analyzing post-hurricane policy in New Orleans, the acceptance of becoming a smaller city in Youngstown, Ohio, and targeted assistance to small areas of Baltimore, Cleveland, and Detroit, this book assesses how varied institutions and policies affect the process of change in cities where demand for property is very weak,” Dewar said.

DR . JUNE MANNI NG T H OM AS

D R. MA R GA RE T D EWA R

Dr. June Manning Thomas remembered her most frustrating moment as an urban planner happened early in her career. It was during the 1980s when she was an economic development planner and a member of a Michigan Department of Commerce team that had just found a developer for the 18-story Central Michigan Railroad Station in downtown Detroit. “We thought we had one. We were all gathered for a big press conference and learned he could not get the money. It was embarrassing. (The building) is still empty. I have to look at it every time I drive into downtown Detroit. It looms over the West side neighborhoods, a symbol of the emptiness of the city.” Fortunately, that experience was not enough to discourage her. Today, she and her longtime colleague, Dr. Margaret Dewar at the University of Michigan’s Taubman College of Architecture and Urban Planning, continue to work together, exploring ways for Detroit and other cities to deal with their worsening slate of problems. Thomas is centennial professor of urban and regional planning at Taubman and author of many books, including Planning Progress: Lessons from Shoghi Effendi and Redevelopment and Race: Planning a Finer City in Postwar Detroit. Dewar is also professor of urban and regional planning and author of numerous articles about cities in decline. Together, they have edited and published an important book, The City After Abandonment (The City in the 21st Century) (University of Pennsylvania Press. 2012. 400 pages. Cloth: ISBN 978-0-8122-4446-5 Ebook: ISBN 978-0-8122-0730-9). It brings together essays from top urban planning experts to focus on policy and planning issues related to three questions, according to Dewar. “What are cities becoming after abandonment? The rise of community gardens and artists’ installations in Detroit and St. Louis reveal numerous unexamined impacts of population decline on the development of these cities.

“What should abandoned areas of cities become? Assuming growth is not a choice, this book assesses widely cited formulas for addressing vacancy; analyzes the sustainability plans of Cleveland, Buffalo, Philadelphia, and Baltimore; suggests an urban design scheme for shrinking cities; and lays out ways policymakers and planners can approach the future through processes and ideas that differ from those in growing cities.” Dewar stressed that a number of U.S. cities, former manufacturing centers of the Northeast and Midwest, have suffered such dramatic losses in population and employment that urban experts have put them in a class by themselves, calling them “rustbelt cities,” “shrinking cities,” and more recently “legacy cities.” This decline has led to property disinvestment, extensive demolition, and abandonment. While much policy and planning have focused on growth and redevelopment, little research has investigated the conditions of disinvested places and why some improvement efforts have greater impact than others. The pair gave a presentation about their book at the American Planning Association’s national conference in Chicago in April. Neither is a native of Detroit. Dewar said she grew up in many places in the U.S. because her father was in the U.S. Navy. She went to Michigan for a job at the university. “The job was attractive because I wanted to work on the issues facing cities like Detroit.” Thomas married a native Detroiter a few decades ago, and has quite a few nieces and nephews, as well as in-laws who live in the city. “I grew up in the Jim Crow South, in South Carolina and came to Michigan to escape the South and to attend Michigan State University as an undergrad and where I also taught before moving to UM. “I’ve spent a good portion of my adult life thinking about, researching, and writing about Detroit. I live in Ann Arbor. Lately people have been speaking of Ann Arbor as part of the greater Detroit metro area, and it’s about time they did. The Census considers all parts of the Detroit Combined Statistical Area. With more regional thinking, we wouldn’t be in the shape we are now,” said Thomas. Both agreed that one of the issues is how we define vacant properties.

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The National Vacant Properties Campaign (NVPC) defines vacant properties as residential, commercial, and industrial buildings and vacant lots that exhibit one of two traits: – The site poses a threat to public safety (meeting the definition of a public nuisance), or – The owners or managers neglect the fundamental duties of property ownership (e.g., they fail to pay taxes or utility bills, default on mortgages, or carry liens against the property.) NVPC says vacant properties can include abandoned, boarded-up buildings; unused lots that attract trash and debris; vacant or underperforming commercial properties known as greyfields (such as under-leased shopping malls and strip commercial properties); and neglected industrial properties with environmental contamination known as brownfields. The NVPC also monitors deteriorating single-family homes, apartments with significant housing code violations, and housing that remains vacant for long periods of time, as these are indicators of future vacancy and abandonment. State laws and uniform building codes further refine what constitutes an abandoned building, but these vary from jurisdiction to jurisdiction. Often these structures have been unoccupied for over a year, are beyond repair, and pose serious danger to public safety.

Added to this is the housing crash and subsequent foreclosure crisis that has saddled the U.S. with an extraordinary level of vacant properties, inflicting heavy costs on many American communities reported Federal Reserve Board Governor Elizabeth A. Duke. As of the first quarter of 2013, there are just over 133 million housing units in America and 10.7 percent of them—more than 14.2 million—are vacant all year round for some reason or another, according to the U.S. Census Bureau. According to NVPC, the most common reason a property is abandoned is that the cost of maintenance and operation exceeds the apparent value of the property. This occurs regardless of “whether the market is intrinsically capable of supporting continued use of the property, or whether market inefficiencies, or inadequate and inaccurate information, lead property owners to that conclusion.” Obviously, the longer a property remains abandoned, the higher the cost of renovation, which leads to continued abandonment even when market conditions have dramatically improved. “Cities must address the increasing number of vacant properties, not only because of the negative impact they have on the surrounding community, but because of the numerous costs they impose. They strain the resources of local police, fire, building, and health departments, depreciate property values, reduce property tax revenue, attract crime, and degrade the quality of life of remaining residents. In summary, vacant and abandoned properties “act as a significant fiscal drain on already strapped municipalities, requiring disproportionate municipal resources, while providing little or no tax revenue to municipal coffers,” noted NVPC in its Vacant Properties: True Costs to Communities booklet. The National Housing Institute reminded those involved to remember three things about abandoned properties: – Owner identification is the key before doing anything. – Reach out to all available resources. – Think about building pride. (“Whatever faces the street needs to look good.”) Read Part 2 of this article at http://tinyurl.com/ll2t8k3.

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The formerly majestic Michigan Central Train Station in Detroit is of the Beaux-Arts Classical style of architecture, designed by the Warren & Wetmore and Reed and Stem firms who also designed New York City’s Grand Central Terminal. The price tag for this 500,000-square-foot building was $15 million when it was built. Detroit’s Roosevelt Park creates a grand entryway for the station. (Photo by Jean-Pierre Lavoie)

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Are Utilities Missing Out on the Benefits of Combined Heat and Power? ACEEE Releases Report and White Papers to Educate Policymakers BY ANNA CHITTUM, COURTESY OF ACEEE When a power plant generates power, it also generates massive amounts of heat. Though that heat is a valuable resource, it is typically rejected as waste and dumped into rivers or lakes or vented into the air. In other words, it’s lost.

Reduced costs of energy resources, as seen in Massachusetts where utilities recently saw dramatically reduced lifetime costs of their energy efficiency resources — from $0.022 per kWh to $0.016 per kWh — due largely to new CHP.

Instead of wasting that heat, combined heat and power (CHP) systems use it: as steam in industrial processes; as hot water for domestic needs; as space heating in the winter. In capturing more of a fuel’s energy content, these systems generate energy that is far more costeffective and far cleaner than non-CHP systems. And since CHP systems are located near the point of consumption (instead of hundreds of miles away), they increase the reliability of the electricity system while reducing the amount of energy lost piping it to distant customers.

The opportunity for utilities to invest in CHP is tremendous. Today the technical potential for CHP in existing facilities is 130 gigawatts – the equivalent of over one-third of the installed operable coal generating capacity in the United States, or more than the entire net summer electric generating capacity of California and Florida combined. So why has CHP growth been anemic in recent years? Why does it represent only 8% of installed electric generating capacity when it could be so much higher? Why are utilities building all sorts of other assets instead of CHP?

CHP is the most efficient way to generate electricity today. It offers tremendous benefits to the utility systems in which it is located. These include: Avoided or deferred investments in distribution and transmission systems, as seen in a strategically sited CHP system in New York City that helped Con Edison defer a major distribution system upgrade; Increased system resiliency, as seen in the tremendous benefits CHP systems provided during recent storms and hurricanes; and

The answer: economics and inertia. The benefits of CHP are most often considered in terms of direct benefits to the individual facility hosting the system, like a manufacturing facility or a hospital. And while these benefits are important, they are likely less compelling than those that accrue to the utility system at large and all of its users. If utilities could better understand and value the benefits of CHP to their systems as a whole, they could stimulate tremendous growth in CHP, offering their customers lower cost energy and improved system resiliency, all while reducing harmful emissions.

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However, utilities’ business and regulatory structures tend to discourage investments in CHP and encourage them instead to pursue investments in other types of assets, such as new centralized generation resources or distribution infrastructure. Additionally, utilities’ investment decisions are tied to cost-benefit analyses that usually ignore or deeply discount CHP’s system-wide benefits. The few utilities that have actively worked to deploy CHP in their service territories understand the benefits of this technology, but still find their programs to be small compared to other investments. Even at utilities with a strong interest in CHP, staff often find their hands are tied by internal disinterest in it, reflecting the lack of economic incentive to pursue it. Recently, ACEEE released three products designed to help utilities, policymakers, regulators, and end-users better appreciate and understand the immense value CHP can offer to an energy system: a detailed externally reviewed report describing the myriad benefits of CHP and the manner in which utilities are currently valuing them; a white paper for electric utilities interested in better understanding how their peers are valuing CHP; and a white paper for natural gas distribution utilities exploring how CHP can be a strategic business opportunity.

Electric and natural gas utilities are very well positioned to make significant investments in CHP. With an appetite for long-term investments and strong relationships with the facilities best positioned to host these systems, utilities could make a major impact on the CHP market. Regulators and policymakers should understand how increased CHP deployment – hastened by utilities – could offer all system users cleaner, cheaper, and more reliable power. By better valuing the many benefits of this technology and working with utilities to address their disincentives to pursuing it, policymakers and regulators could help everyone better enjoy the tremendous economic and environmental benefits of CHP.

related youtube video: http://youtu.be/uXLUoqzlT2k

Editor’s Note: Anna Chittum is senior policy analyst at the American Council for an Energy-Efficient Economy. This article originally appeared on the ACEEE Blog.

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Is Your Brownfield a Diamond in the Rough? It’s All About Managing the Risk BY RANDY RODGERS, PUBLISHER & EXECUTIVE EDITOR Market risk – the possibility that no one will want to buy or lease the site at the right price once the site has been cleaned; and Construction risk – the uncertainty about how much construction and/or demolition will ultimately cost. GE OR GE VALL ONE

MA RY H A SH E M

If your community is sick of watching more weeds grow on that unsightly brownfield, you first need a vision, then an environmental assessment, and then a willing tenant. Only then, will you be ready to attract a developer and court the financing partners you’ll need to turn that diamond in the rough into a gem the whole town will admire. So said a trio of redevelopers at the recent Brownfield 2013 conference in Atlanta. The National Brownfields Conference is the largest event in the nation that focuses on environmental revitalization and economic redevelopment. It is hosted every 18 months by the U.S. Environmental Protection Agency (EPA) and the International City/ County Management Association (ICMA). George Vallone, president of the Hoboken Brownstone Company in Hoboken, N.J., co-founded his real estate development company 30 years ago. “Our business evolved into a brownfields redevelopment company because we couldn’t assemble large enough spaces,” Vallone said. “In these urban areas, you’re lucky if you can find two or three brownstones in a row, and we realized the aspirin factor: Every deal gives you headaches, so you might as well work on big deals,” he quipped. “Real estate finance is really about risk management,” he said. The major types of risk associated with a redevelopment project include: Environmental risk – liability related to the health hazards associated with the site; Entitlement risk – the possibility that governing bodies regulating the site might not provide the necessary permits for redevelopment; [ 22 ]

R AN D AL L J OS TE S

All these risks equate to financial risk, Vallone said, and that’s why mitigating these risks is the first step in a successful brownfield redevelopment project.

“Understanding the risk management process in the context of the capital stack is the key to understanding what you have to do to get the deal done,” he said. Vallone explained that a “capital stack” is made up of three layers. The investment layer has the highest risk and the highest potential return. The middle layer is the mezzanine deck, containing some aspects of equity and some aspects of debt; and the lower layer is conventional bank debt, which usually accounts for 75 to 80 percent of the capitalization for a brownfield redevelopment.

Environmental Risks Regardless of which layer the money is coming from, the key to finding willing investors and lenders is reducing the risk, said Mary Hashem, executive vice president of Envirofinance Group, LLC, a land development company that acquires, remediates and repositions environmentally impaired real estate throughout the United States. Hashem said insurance plays a big part in risk management and the insurance landscape has changed a lot in the past 20 years. “Initially, insurance products made brownfield redevelopment, as an industry, possible in many ways,” Hashem said, “by providing surety against environmental risks that banks and other sources of finance like to have to protect their investments. Insurance products have morphed; some have become much better; some have gone away and are re-emerging,” she said. Another way to mitigate environmental risk is to transfer that risk to someone else.


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Randall Jostes is CEO of Environmental Liability Transfer, Inc., (ELT) based in St. Louis, Mo. His firm is a member of the Commercial Development Company, Inc. (CDC) family of businesses. CDC is a real estate development firm specializing in the development, acquisition and redevelopment of major commercial and industrial sites and has acquired, indemnified and alleviated more than a billion dollars of environmental liabilities.

Entitlement Risks Jostes said that, while his company takes the environmental risks away from developers, many brownfield projects depend on municipalities and government agencies to take away or reduce the entitlement risks. As an example, he cited a vacant 116,000-square-foot Viacom/Westinghouse facility in Atlanta that sat on 16.5 acres of contaminated land. If the site could be cleaned up enough to meet the environmental standards for a residential development, it would be worth three times as much as it would be if zoned industrial. But, there was no certainty that it would achieve even the industrial standard, so Viacom/Westinghouse was afraid to move forward, Jostes said. To help facilitate the deal, the Georgia Environmental Protection Division agreed to work with ELT to bring the property into compliance with residential standards. Should they fail to do so, the site would be assured a restricted industrial permit at a minimum. That, said Jostes, calmed the fears of Viacom/Westinghouse and made the deal possible. After ELT removed asbestos, demolished the building and remediated soil and groundwater contamination, the site was cleared for residential use and is now ready for a housing development, Jostes said. “Brownfield opportunities are actually, in our opinion, more viable, more profitable and more productive than a greenfield opportunity, so it’s a misnomer to say it can’t be done,” Jostes said. “It can be done, and we’re doing it coast to coast,” he said.

Market Risks Vallone said market risks are in a good place now that the recession has bottomed out and property values are primed for a long, slow recovery. “So, I think this is a good time to convince property owners and municipalities that if we get to work quickly and we work smart, we can get it done in this cycle,” he said. “The lesson to be learned (from the recession) is to prepare and partner with people. Identify what you don’t know and then bring people in who know it, and get to work on the property.” Vallone said developers should be given time to go through the risk management process before being asked to purchase a property. “The idea of a public/private partnership is the way to go. There are a lot of developers that will bring a lot of expertise to the table if they know that once the property is teed up and you’re ready to transfer it over to them, you’ve allowed them to reduce the risk,” Vallone said. “You can’t finance the deal if it’s perceived to be too risky. While you’re in the risk-management process the cost of capital is astronomically high,” he said. Jostes said the bottom of a market is the best time to invest in brownfields. A property that might be worth $15 million could hypothetically be purchased, because of the environmental uncertainties, for $5 million, he said. “If you do your due diligence and you can clean up that site for $3 million, you’re into a $15 million site for $8 million,” he said. If you’re looking for investment capital, Hashem said it’s best to look locally unless you’re in one of the country’s top metro markets where national investors focus their attention. Local investors usually have close ties to the community and are more willing to take risks to make development happen.

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Jostes said local banks usually charge a premium for financing brownfield projects. Interest rates are usually 15 percent or more. “But, so what? You could be looking at a 500 percent return on your total investment for a brownfield redevelopment,” he said. Vallone and Jostes both said they use formula pricing in many of their brownfield deals. By starting with the value of the final development – depending on the land’s envisioned use – the costs of clean-up and financing can then be backed out to determine what the value of the undeveloped brownfield property should be. Then, formulas can be created to calculate the sale price based on whether certain milestones are reached or not.

“You have to be able to reduce some of the risk. If a municipality comes to me and says, ‘Look, we’ve done most of that work. We’ve gone through the federal and state programs, we have done a risk characterization, we’ve done a market study, we are in great need of this end use and here’s why. We can demonstrate it. Are you willing to bid?’ Well, that goes straight to the front of our bid package,” Jostes said. “We’ll respond to that kind of request.”

Getting Your Ducks in a Row Jostes said finding an end user for the property is more important than finding a developer, since developers will be attracted by a high-quality end user. He encouraged municipalities to look at their needs and find an end user who will satisfy those needs.

“If you have a deal where there’s a buyer and a seller and they come together and transact in one instance of time, there’s a guaranteed loser,” Vallone said. “Either the seller sold too low and he lost, or the buyer paid too much and he lost. So formula pricing is the ultimate win-win strategy,” he said.

“If your goal is jobs, then you’re going to want to put incentives in place to attract a manufacturer, because if they come, then the developer will follow,” Jostes said.

Construction Risks

“Everybody’s following the money, and the money really is with the end user. It does me no good to clean up and develop a site if nobody’s ever going to use it,” he said.

Vallone said municipalities should issue a Request for Qualifications rather than a Request for Proposals when looking for a developer to take on a brownfield project. Proposals, hastily done, will rarely result in a successful project. Instead, municipalities should select a developer they trust and then give them time to understand and mitigate the risks and come up with a plan, and a price, for completing the project. Jostes said municipalities in small markets have to take extra steps to attract developers. Bidding on projects is a big expense, so the more work that a municipality does up front, the more attention they’ll get from quality developers.

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“So, if I were you, I would first characterize the site well to take the uncertainty out of the question. And, second, don’t chase the developer; chase the user. Because once you have the user, either the user will know a developer or the developers will come flocking to your door.”

related youtube video: http://youtu.be/4pTFMrClMwQ


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Sustainable City Network Magazine - Vol. 9 - Sept. 2013  

Welcome to Sustainable City Network Magazine – the Best of sCityNetwork.com! This quarterly magazine is a compilation of the most popular ar...