FEATURE ARTICLE, OCTOBER 2004

CALIFORNIA'S IMPERATIVE: REUSE OR LOSE
The Golden State’s propensity for density places added importance on redeveloping brownfields.
Morris Newman

The project in Hawthorne, California, known as The Exchange, shows the potential of brownfield development. Originally owned and operated by Northrup Grumman and companies, the 105-acre site was used for making aircraft parts. After closing in the 1960s, the campus and its enormous buildings sat vacant for years — an eyesore detracting from the image of the community, while contributing little or nothing to property tax rolls. In the 1990s, developer Lowe Enterprises acquired the site from Northrup Grumman. After negotiating with the former owner, the California Department of Toxic Substances Control and federal agencies, Lowe began decontaminating both the soil and groundwater. In 2001, the first phase of remediation was complete and Lowe opened a 260,000-square-foot Lowe’s Home Improvement Warehouse store. By the end of this year, Lowe expects to complete six commercial complexes on the site, totaling $195 million in value, according to the state agency. As for the city of Hawthorne, it expects to receive up to $3 million in tax revenues annually.

The Exchange is one example of how brownfield development has become a big business in California. Brownfields — defined as sites that are variously abandoned or falling short of their commercial and tax-generating potential due to real or feared contamination — are abundant in this heavily industrialized state. The state has identified at least 459 contaminated sites on the so-called “Cortese” list, which includes many major refineries, chemical plants, former military bases and other repositories of hazardous-material “hot spots.” Given the many manufacturing sites, dry-cleaning operations and present and former gas stations in the state, the actual number is much higher, estimated at 67,000 to 119,000 statewide according to the recent study known as the California Performance Review Report.

In an era of soaring land prices, real estate developers are increasingly receptive to the notion that brownfields are a plentiful resource that, in many if not all cases, can be profitably redeveloped. The developer who understands the risks of brownfield redevelopment stands a good chance of a profitable investment, while the public gets rid of an idle area that is, at once, a public health hazard, an eyesore and an under-performing property.

The most popular types of brownfield redevelopment have been industrial and retail uses, because the regulatory standards are less stringent for those uses than for housing and schools. Among the high-profile brownfield developments in California have been the transformations of the Basic Vegetable Products plant into the Vacaville Skating Center; the Oakland Gas Facility into the Jack London 9 multiplex theater in downtown Oakland; and the Lockheed property in Burbank into the Burbank Empire Center, a highly successful retail power center.

Despite the success stories, there has been a “rub” in brownfield redevelopment in California. That rub is a regulatory system that brownfield developers describe as inefficient and unfriendly. Developers find themselves confronted by a bureaucratic tangle of 16 state boards and commissions plus local agencies, many of which have overlapping responsibilities and oversights as well as differing standards. “Each agency prefers to apply its own standards and does not like having the extra work of giving due regard to the standards of other agencies for unified site closure,” says environmental lawyer Donald Nanney, a partner in Gilchrist & Rutter Professional Corporation of Santa Monica. Given this tangle, it is surprising that any brownfield work has been completed at all.

For brownfield developers in California, the most positive news in a long time is the California Performance Review Report that was commissioned by Governor Arnold Schwarzenegger. The report recommends a widespread overhauling of state government, including the ways that it oversees brownfield cleanups to facilitate development. The report, according to Nanney, is an “astonishing display of rational thought and ability to learn from the mistakes of the past.”

The report has pinpointed four problem areas with the current structure of the California Environmental Protection Agency. Specifically, problem areas include a lack of accountability of some 16 independent boards and commissions; a lack of integrated decision-making; overlapping jurisdictions; and the dispersal of environmental programs among state agencies, making it difficult to develop and implement a coherent environmental policy. The report proposes to reorganize environmental regulatory agencies and to change California’s EPA “from a collection of separate boards and commissions into an integrated Department of Environmental Protection.”

The new Department of Environmental Protection would include the Office of the Secretary of Environmental Protection, which would manage air quality, water quality, pollution prevention, recycling and waste management, site cleanup and emergency response, and pesticide regulation.

The potential gains for brownfield development are clear: by consolidating brownfield functions into the Division of Site Cleanup and Emergency Response, a more coherent and efficient system should develop. The best case result could be what Nanney calls “one-stop shopping” for developers seeking cleanup requirements and site closure from state regulators.

Change rarely comes easily, and nowhere is that adage more true than in government. Controversies and complications aside, the entire state, not just developers, would benefit from the proposed change. Making brownfield redevelopment easier to pursue would translate into increased property values, higher tax revenues and environmental health.

Morris Newman is a Los Angeles-based writer specializing in real estate planning and architecture.


©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.