Sources of MoneyFeedback

As the legislative, technical, and financial environment for cleanup and revitalization continues to improve, private developers are completing projects without public assistance in increasing numbers. Private companies and individuals are finding the revitalization of potentially contaminated sites profitable, and are currently enjoying a surge in demand for property in formerly neglected urban areas. While some public sector programs fund municipal efforts to clean up contaminated land, most cleanup resources come from private-sector investors who are looking for sound investments that promise returns above the market value. Private companies and joint ventures between developers, environmental consultants, insurers, and financiers that specialize in revitalization fill this unique market area.

Some revitalization projects may require a combination of lenders to obtain the full financing needed.

A revolving fund is a source of money that provides loans for specific purposes including financing revitalization projects. 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. Private revolving funds are typically developed through the revenue disbursement from a trust fund. More information on revolving loan funds can be found under SMARTe Public Financing under EPA Revolving Loan Fund Grant Program.

Trust funds are special accounts developed to receive and disburse revenues from taxes or fees for dedicated purposes including revitalization projects. 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 or fees.

Real estate investment trusts (REITs) are sources of revenues from private investors. REITs are holding companies that act as primary investors when purchasing property. For revitalization of potentially contaminated sites, the REIT acts as the owner, thereby shielding investors from liability in excess of the investor’s initial investment.

A REIT is essentially a mutual fund that specializes in pooled investments in real estate. REITs are fully integrated companies with professional management and staff that put real estate planning, acquisition, revitalization, management, and sales under one roof. With their investment focus, REITs can assemble diverse portfolios of real estate properties to spread and reduce financial risks. REIT dividend earnings can be tax-exempt for tax-exempt investors such as pension funds. Most REITs have a particular real estate investment focus, such as residential housing, industrial properties, general commercial properties, or shopping centers.

Hundreds of REITs throughout the country provide investment vehicles for billions of dollars in real estate properties located in thousands of communities. REITs are a major force in the development of apartment housing and shopping centers. As an industry, REITs have been in existence for more than 30 years and are vehicles for billions of dollars in real estate investments each year ($6.5 billion in 1992).

REITs that focus on industrial and commercial real estate are beginning to include select potentially contaminated sites in their portfolios. New REITs are being established that focus on buying, assessing, cleaning up, revitalizing, or selling contaminated properties. Such REITs can be structured to focus investments on real estate properties located in Empowerment Zone and Enterprise Communities (EZ/EC). An EZ or EC is a distressed community that the Federal government has targeted to receive substantial investment of federal technical resources to encourage private sector development, job growth, and entrepreneurship.

Private nonprofit organizations and corporations can also be a source of grant funds for revitalization projects, especially for revitalization and job creation activities. Publications (some for a fee) can direct states and localities to organizations and corporations that are likely to provide grants, as well as information about criteria, amounts available, and application procedures. Partnering with non-profits can provide access to funds available only to non-profits. The non-profit can in turn act as an important asset in community participation.