America’s Brownfields: Large-Scale Problem, Large-Scale Solution

The city of Gary, Indiana has come to symbolize the decline of America’s once-booming Rust Belt. Roughly the physical size of San Francisco, Gary’s population has declined by more than half since 1960, resulting in over 7,000 vacant lots. Many of those lots are considered brownfields, properties at which redevelopment has been held back by the presence of real or perceived contamination. Brownfields range from single parcel properties that housed former gas stations and dry cleaners to large-scale decommissioned factories and other industrial facilities. Almost every city has one and, like Gary, many have thousands. Across the country, an estimated 450,000 brownfields occupy at least five million acres, or enough land to cover the 60 largest cities in the US.

Brownfields create complex environmental and economic challenges. Toxins contaminate soil and groundwater on the property and can migrate to nearby communities, compromising health in already low-income neighborhoods. Developers exacerbate urban sprawl by favoring clean “greenfield” land, even though brownfields are often closer to urban areas and existing infrastructure. This leads to a number of adverse consequences: municipalities lose tax revenue, and neighboring property values are depressed. Community members suffer the negative psychological effects of living near blighted properties, which are disproportionately located in lower-income areas.

The aggregate cost to clean up these sites nationwide is an estimated $650 billion, requiring between $50,000 and $500,000 per acre for traditional cleanup methods. Moreover, current solutions lack scale – government grant opportunities are increasingly hard to come by and are slow to be deployed, while banks are reticent to make loans to brownfield redevelopment projects due to uncertainty about the environmental risks. A successful approach that overcomes these barriers in one location does not ensure similar success in a different location.

To address the brownfield problem on a large scale, we need a singular, repeatable solution. We recently rode the length of Gary with two other Kellogg classmates and a local regional planner. After the tour, the four of us looked for strategies that could make these sites attractive for investment and redevelopment. We knew that the stakes for finding a solution were high and that we were facing properties that were unlikely to secure new development any time soon.

We consulted dozens of experts and identified a solution: hybrid poplar tree farms. Hybrid poplars are what we call “nature’s detoxification system”: Their roots have the ability to clean soil and groundwater from many of the most common contaminants, including petroleum hydrocarbons, pesticides, solvents and certain metals. Hybrid poplars are also resilient and fast growing, which means they can be harvested in as little as four years for biomass energy, and within eight years for timber, pulp and paper. Profits from sales of the wood combined with the increase in valuation of the land after harvest would provide investors with competitive returns while directly improving the quality of life for citizens of communities bearing the brownfield burden.

Nicole and April

Nicole Chavas and April Mendez of Fresh Coast Capital presenting at the 2014 Morgan Stanley Sustainable Investing Challenge

We used these ideas as the basis for an investment vehicle, which we pitched on April 4 at the Morgan Stanley Sustainable Investing Challenge. Our proposal, which we call Fresh Coast Capital, won first place. The feedback we received at the Challenge gave us the momentum to make Fresh Coast a reality. We’ll be presenting Fresh Coast on April 30 at the Milken Institute Global Conference and moving quickly into securing seed funding and launching our pilot site in Gary while preparing to scale our strategy nationwide.

The economic, social, and environmental payoffs of brownfield remediation are significant: an increase in surrounding property values, billions in additional tax revenues, reduced urban sprawl, and smarter, more sustainable land use. Fresh Coast Capital seeks this triple-bottom-line impact.

– Nicole Chavas and April Mendez