Available Funding Mechanisms
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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
Definitions of Sample Brownfields Funding MechanismsSeveral 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. |