On October 5, 2013 Governor Brown signed AB 440 (Gatto),1 giving cities, counties, and some housing authorities the authority to compel cleanup of contaminated properties. Like the effectively obsolete Polanco Redevelopment Act that preceded it, this new law provides municipalities with a much needed tool to address blighted properties. The law gives municipalities the right to obtain environmental information from property owners, the authority to compel cleanup of properties blighted by contamination, and the right to recover the full costs of cleanup. The law also provides immunity for any release or releases addressed in an approved cleanup plan. AB 440, also known as Polanco Act “2.0,” is a much more nimble and convenient means of handling blighted properties than the Polanco Act.
Polanco Act “1.0.” The original Polanco Act permitted only a redevelopment agency to initiate the assessment and cleanup of a blighted property located within a designated redevelopment project area. A redevelopment agency could either clean up the contaminated property itself and sue responsible parties or bring an action for an injunction to require any responsible party to conduct the cleanup. The Polanco Act also allowed for the recovery of attorneys’ fees. Cleanups undertaken pursuant to the Polanco Act had to be approved by either the Department of Toxic Substances Control (DTSC) or a Regional Water Quality Control Board (RWQCB) for purchasers of the property to be able to obtain immunity for contamination addressed by the approved plan. However, with the California legislature’s decision to dissolve redevelopment agencies, effective February 2012, the Polanco Act lost the only entity it had empowered to address urban blight.
Enter AB 440. AB 440 provides municipalities with expanded latitude to target any property found to be blighted within their jurisdiction. A blighted property is defined broadly as “one with the presence or perceived presence of a release or releases of hazardous material that contributes to the vacancies, abandonment of property, or reduction or lack of property utilization of property.” Once a blighted property is identified, the municipality may then order the property owner to produce all existing environmental information on the site including the results of any phase I or subsequent environmental assessments. If no phase I assessment exists, the property owner can be ordered to prepare--at its own expense--a phase I or phase II environmental assessment. In coordination with DTSC and/or a RWQCB, the municipality then develops an approved cleanup plan that will be used to clean up a release at the blighted property. A property owner can also be ordered to create the plan and/or conduct the cleanup. The municipality can recover the full costs of cleanup including staff time and attorneys’ fees, from the owner. AB 440 also provides immunity for any release or releases addressed in the cleanup plan. This immunity protects the municipality and extends to any developer of the property, its lenders and subsequent purchasers. In contrast to immunities provided by other Brownfield tools, this immunity runs with the land.
Commentary. AB 440 is a useful tool for municipalities to address blighted properties in their jurisdictions, particularly properties left to sit contaminated--indefinitely--by owners unwilling to cleanup, sell or redevelop the property themselves. Facilities from antiquated industrial facilities to former dry cleaners and service stations can now be targeted for cleanup and redevelopment rather than left to remain fallow. Municipalities will have greater control over their redevelopment and revitalization projects, and municipalities and Brownfield developers alike will benefit from AB 440’s expanded immunity provisions as they should encourage investment in urban areas.
Owners of contaminated properties, however, should be concerned about the potential repercussions of Polanco Act “2.0.” The new law’s expanded disclosure requirements for environmental assessments will complicate decisions about whether to conduct environmental investigations of the property in the first instance if later they will have to be turned over upon a municipality’s request. Yet, ignoring potential contamination provides owners with little protection now that municipalities can compel them to conduct or pay for property cleanup. Ultimately, AB 440 will increase the cost of ownership of any property that could be considered a blight, defined so broadly--and vaguely--as to encompass a property that has even a “perceived” presence of contamination.
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This article was originally published by Bingham McCutchen LLP.