Brownfields Redevelopment  Toolbox

Step 3 - Transaction

Step 3 - Transaction (sub-directory)

Secure Financing and Investment

There are several sources for financing brownfield redevelopments. These include public agencies (federal, provincial, municipal and national) along with private institutes (chartered banks, credit unions and trust companies). Typical redevelopment projects obtain financing from more than one source, in particular if that project qualifies for applicable government grants, funds and loans. 

 Assess Credit Worthiness

Exposure to a customer’s environmental risks is a significant concern for lending institutions that may be held liable for substantial cleanup costs and other liabilities that exceed the risk protection and financial depth of most borrowers. Prior to securing financing, a potential stakeholder/developer must be prepared to answer a series of questions that would satisfy a potential lender’s concerns of investing in a redevelopment transaction while reducing their exposure to risks and liabilities. Please review the sub-sections of Financial Barriers found in Step 2 - Evaluation, which provides key points on:

A study by the federal minister of the environment: Assessing Credit Worthiness: Baseline Survey of Environmental Information Required by Lending Institutions in Atlantic Canada (March 1998), observed several key elements that lending institutions consider.

The purpose of the baseline survey of financial institutions in Atlantic Canada was to:
  1. Assess what mechanisms are being implemented by lending institutions in order to minimize their exposure to a potential client’s environmental risk; and
  2. Determine whether the potential exists to promote pollution prevention as an essential element in the assessment of creditworthiness by lenders.
The report described the procedures currently utilized by participating institutions in incorporating environmental information in an assessment of a potential client’s creditworthiness and outlines a generic set of best-practice tools which may be used by lending institutions to minimize their exposure to a customer’s environmental risk. These included:
  • Location and Site History;
  • Environmental Compliance and Litigation;
  • Environmental Risks,
  • Risk Assessments,
  • Contamination and Controls;
  • Environmental Management and Pollution Prevention;
  • Community Perception;
  • Clients History, and
  • Other Information.
 Public Sector Financing (Government)

Federal Government

In Budget 2004, the Government of Canada committed to putting its own house in order by providing $3.5 billion over 10 years to accelerate the ongoing cleanup of contaminated sites for which federal departments are responsible, including some urban brownfields. As well, up to $500 million was committed to support the remediation of sites for which the Government of Canada is only partly responsible, such as the tar ponds in Sydney, Nova Scotia. These funds are however not applicable to provincial, municipal or privately owned brownfield redevelopment projects.

Green Municipal Funds 

The federal government does provide funds and grants dedicated to brownfield redevelopment through the Green Municipal Funds (GMF) program run by the Federation of Canadian Municipalities (FCM). The GMF program allows municipal governments to apply for grants and loans that stimulate investments in innovative environmental infrastructure projects for Canadian municipal governments and their private or public sector partners.
The Government of Canada endowed the Federation of Canadian Municipalities with $250 million in the 2001-2002 budget (up from $125 million in the 2000 budget) to establish the Green Municipal Funds and support municipal government action to cut pollution, reduce greenhouse gas emissions and improve quality of life.  

In the 2005 Budget, the Government of Canada demonstrated its confidence and support for the Green Municipal Funds by contributing an additional $300 million to the endowment. One hundred and fifty million dollars of this enhancement will be targeted towards loans for brownfields remediation and development. 
“Putting your community on the path to sustainability” -- All municipalities, large and small, can benefit from the financial services and technical expertise of the GMF. The funds are designed to remove investment barriers to green municipal infrastructure, such as real or perceived risks and higher capital costs. 

Two complementary funds within the GMF program were available for municipalities:
  • The $50 million Green Municipal Enabling Fund (GMEF), which provides grants for cost-shared feasibility studies; and
  • The Green Municipal Investment Fund (GMIF), a $200 million permanent revolving fund, which supports the implementation of innovative environmental projects.
The GMEF supports studies to assess the technical, environmental and/or economic feasibility of innovative environmental infrastructure projects. Grants cover 50 percent of eligible costs to a maximum grant $100,000. Brownfields redevelopment feasibility proposals are eligible within this fund, under the Sustainable Community Planning Category. The GMEF program will run until March 31, 2007. GMEF applications are accepted year-round.

GMF will re-align its business development strategy and operating procedures according to new criteria established with the 2005 Budget, including an increased focus on brownfields. New “Intents to Apply” for GMF will be accepted in the autumn of 2005. Details of the new criteria and processes for GMF funding under the new funding agreement are under development and will be published as soon as they are finalized.

For Questions and Answers to the FCM’s GMF program? Ontario Government

Ministry of Finance: Brownfields Financial Tax Incentive Program

The Province of Ontario recently established a Brownfields Financial Tax Incentive Program as part of its commitment to protect and maintain safe, clean, liveable communities. The Brownfields Financial Tax Incentive Program allows municipalities to provide tax assistance to landowners as an incentive for environmental rehabilitation. The Minister of Finance can also approve matching education property tax assistance for any eligible property under the program, recognizing that cleaning up these properties has both environmental and economic benefits.

Tax assistance under the program is applied to the costs of site remediation and is available during the rehabilitation and development of eligible properties. The maximum amount of tax assistance available for an eligible property is the total cost of environmental rehabilitation. Municipal applications for eligible properties under the Brownfields Financial Tax Incentive Program will be considered on a case-by-case basis.

“The Brownfields Financial Tax Incentive Program supports the Province's implementation of the 'Places to Grow' initiative, which encourages growth through intensification and compact development in those areas that can best accommodate it and promotes more efficient use of existing infrastructure.

The development of brownfields properties also protects green spaces that would have otherwise been consumed by urban sprawl, ensuring that these spaces are preserved to enhance the quality of life for current and future generations.” 

Hon. Greg Sorbara 
Minister of Finance
  • Coming to Grips: New Incentives and New Regulations, a presentation on financial incentives in Ontario by Allan Veerman, Ontario Ministry of Finance (presented at the CUI-CBN Brownfields Workshops, Oct 22, 2004). This presentation provides information on the Ontario Brownfields Statute Law Amendment Act and its influence with Community Improvement Planning and Tax Assistance.
  • Provincial Overview and Community Improvement Plans, a presentation by Thelma Gee, Ontario Ministry of Municipal Affairs and Housing (MAH) (presented at NETC Brownfields Knowledge Workshop, Oct 29, 2004). This presentation provides further insight into the financial tools that can be implemented using the new brownfields legislation and community improvement plans.
Ontario Ministry of Finance - Brownfields Financial Tax Incentive Program Questions on the Ontario Brownfields Financial Tax Incentive Program please contact:
  • Mr. Grant Osborn, Senior Policy Advisor, Ministry of Finance at (416) 326-2680; or
  • Local Ministry of Municipal Affairs and Housing's Municipal Service
 Municipal Financial Incentives  

Municipalities have the ability under Section 28 (7) of the Planning Act to provide grants and loans to property owners to pay for the costs of rehabilitating lands within a community improvement area where there is an existing community improvement plan.  These costs can include the costs of environmental remediation and other costs such as building demolition and on-site infrastructure upgrading. Ministry of Municipal Affairs and Housing – Municipal Financial Tools for Planning and Development
  • This publication was developed to help municipalities identify a range of potential financing tools available to support planning and development activities. It describes a number of municipal financial and planning incentives that encourage redevelopment, revitalization and improvement of existing built-up areas and neighbourhoods of a municipality. A number of municipalities offer significant financial assistance in the form of grants or loans. Others provide a financial incentive through the waiving of fees and charges. Still others provide indirect incentives through more flexible planning, parking and zoning requirements.  View publication
Municipal Financial Tools for Planning and Development Series:
  • Business Improvement Areas (BIA): Municipalities across Ontario are actively engaged in community programs to encourage development that relies on existing infrastructure and provides for distinctive, attractive, walkable neighbourhoods with a strong sense of place. Street front retailing, including a range of entertainment, cultural and commercial businesses, has a key role to play in creating and sustaining livable communities. A strong Business Improvement Area (BIA) is a tool that can improve the local investment climate and help street front businesses adapt to shifting economic trends.
  • Tax Increment-Based Financing (TIF): There are dynamic planning and financing programs being developed by municipalities in Ontario. As local governments seek means to revitalize their communities in value-added ways, they are evaluating what needs to be restored and rehabilitated. Old waterfronts, former manufacturing and commercial lands, run-down main streets, underused warehousing districts and heritage structures are all up for scrutiny. The goal is to renew the built environment to capture the economic, social, environmental and cultural benefits that will drive municipal growth in the 21st century. The complexities and expense of these projects can be daunting. Municipalities need new, outward- looking financing means to harness the experience, creativity and ingenuity of both the public and private sectors and to facilitate economies that can be sustained now and in the future. View publication/fact sheet on TIF
  • Affordable Housing: These changes allow municipalities to use property tax exemptions and other incentives to encourage the construction of affordable housing. The new authority can be used as part of a Community Improvement Plan, as part of a package of other planning and development policies and municipal financial incentives, or on its own.
  • Municipal Online Property Tax Analysis (OPTA): Changes to Property Tax Assessments may also be an incentive towards revitalization of a community. Access to this site is restricted to Ontario municipalities. It contains a business application to help municipalities make decisions required under the new assessment and property tax system.
Examples of Brownfield Redevelopment Incentive Programs:

Access the Municipal Incentives feature to view examples of brownfields incentive programs implemented by Municipalities and Regions across Ontario.

 Regional Financial Incentives

Under the Municipal Act (Part III, Section 107), regional governments may offer financial incentives to property owners and developers to assist them with offsetting the financial barriers and potential impediments to redevelopment. These regional grants and loans would be offered to municipalities and could be used in conjunction with their own municipal financial incentives. 

The region may work with the local municipality in this manner for the purpose of promoting brownfields redevelopment. Specifically, subject to Section 106, the council of every municipality may make grants (and loans) to “any person, group, body, including a fund…for any purpose that council considers to be in the interests of the municipality”. Regions are prohibited from providing the grants or loans directly to individuals but may offer grants and loans to the lower tier municipality for purposes that are of interest to the Region. 

Regional incentive to lower tier municipalities can include grants for: 
  • Brownfield Tax Assistance Programs
  • Tax Arrears Credits
  • Environmental Assessment Grant Programs
  • Municipal Brownfields Leadership Programs
The municipality will be required develop a Community Improvement Plans that will incorporate these new programs. A collaborative effort between the region and the local municipality is required for the successful implementation of incentive programs.


 Private Sector

Traditional Private Financing Institutes

The major banks of Canada have always been recognized as the traditional sources for financing large developments. Concerns regarding lenders’ liability have led to the need and development of other private funding sources. Private lending institutions that are involved in brownfield transactions include: chartered banks, credit unions and trust companies. Innovative Private Financing Institutes

Cherokee Investment Funds

Cherokee acquires environmentally impaired assets, or brownfields, and protects sellers from the associated risks and liabilities. Based on the number of brownfields acquired and the amount spent on remediation and committed capital, Cherokee is considered one of the largest and most active brownfield investment firms in North America.

In conjunction with placing capital and generating returns for investors, Cherokee provides solutions for sellers and the communities affected by their contaminated sites. Typically, Cherokee acquires an asset or portfolio of assets for cash and indemnifies the seller from environmental liability through the use of insurance policies and other customized risk transfer methods. Portfolios can contain both clean and environmentally impaired properties. After acquisition, Cherokee remediates and repositions the properties for reuse. Cherokee states that none of their indemnified sellers has ever incurred a future environmental liability. 

Cherokee Canada has been created to address the increase in Canadian brownfield projects.

Brownfields Capital

Brownfields Capital plays a unique role as a specialty finance/investment management firm bringing investors and financing institutes together by:
  • Financing all stages of remediation and redevelopment of brownfields through one instrument;
  • Unlocking great value from brownfields through a patented business process and financial instrument called a Brownfields Value Contract (BVC);
  • Aggregating investment capital and providing it to the market more efficiently; and
  • Using the investment process to transfer risks to a party best suited to shoulder them.
The Brownfields Capital investment process and patented financial instrument are innovative methods for large-scale, efficient, institutional and private equity investment in the restoration of brownfield properties to productive use. This opportunity is possible because its financial product, the Brownfields Value Contract (BVC), shields investors from environmental liability and uses the financial process to redistribute risks to the parties that can best shoulder them. The efficiency of the process generates greater profits for all parties involved, including the existing owners of brownfields. It offers a way for investors to capitalize on disequilibrium in pricing created by environmental law rather than on a temporary undersupply or oversupply in the real estate market. 

Brownfields Capital's unique business model puts investors in the role of capital provider alone. It relies on developers with solid track records, remediation firms with the best expertise and real estate and insurance firms to provide expert services. These parties form a separate company, or partnership, to own and re-develop each site. Investors invest in the financial security, or instrument (BVC), which finances this entity. This debt instrument has very consistent, measurable performance characteristics. 

The financial product will provide capital to large-scale projects (minimum investment of $25 million in total project costs) while the investment process brings owners of brownfields, developers, remediators, and in some cases, insurers together with lower cost financing.

The Brownfields Capital investment product has been used in several projects across the United States.

Information sources for this section: