Local Governments (LGUs) and Contaminated Property: Frequently Asked Questions

• Acquisition
• Funding
• Redevelopment

Acquisition

Q1. Does the way in which an LGU acquires property affect environmental liability exemptions under state or federal law?

A1. Yes. The liability exemption from the Wisconsin Spill Law applies for LGUs that acquire property through tax delinquency, bankruptcy proceedings, condemnation, eminent domain, escheat, for slum clearance or blight elimination, by using Stewardship funds, or from another exempt LGU.

If an LGU acquires property "involuntarily" through tax delinquency, foreclosure, demolition lien foreclosure, escheat, abandonment, condemnation, or eminent domain, the LGU cannot be held liable under federal law for contamination.

Q2. What issues should LGUs consider before acquiring contaminated properties through condemnation, or for purposes of slum clearance or blight elimination?

A2. These property acquisition methods are complex, and require an LGU to understand the proposed method before proceeding. Generally, these methods require the LGU to make a slum clearance or blight elimination finding as part of a documented, legal process.

Here are suggestions an LGU should consider before acquiring property through condemnation, or for purposes of slum clearance or blight elimination.

1. The LGU should work with the DNR to determine, in advance, whether the proposed method of acquiring the property satisfies the LGU exemption conditions.
2. The LGU should work closely with the municipal attorney to address options, legal issues and questions.
3. For condemnation or any other proceeding under Ch. 32, Wis Stats., (Eminent Domain), document in writing the steps taken in accordance with the statutory requirements, and the "necessity of taking" for slum and blight elmination.
4. S. 66.1331, Wis. Stats., (Blighted Area Law), describes the planning and acquisition procedures that a city must follow for slum clearance or blight elimination purposes.
5. S. 66.1333, Wis. Stats., (Blight Elimination and Slum Clearance), describes the planning and acquisition procedures that a Redevelopment Authority must follow for slum clearance or blight elimination purposes.
6. For any Chapter 66 procedure used to acquire property for purposes of slum clearance or blight elimination, document in writing the steps taken in accordance with statutory requirements. Address procedures used for the slum and blight designation of the property, public input and hearings, and the approval of a resolution for slum clearance and blight elimination.
7. Any request for a liability clarification letter from the DNR should be accompanied by the written documentation of all steps followed by the LGU in acquiring the property through condemnation, or for purposes of slum clearance or blight elimination.

Specific examples of past slum clearance/blight elimination acquisitions approved by the DNR include:

• Approval of a community purchasing a property in a Tax Incremental Financing District (TID), created for the purpose of slum clearance or blight elimination.
• Approval of a community purchasing a property using funds from a Housing and Urban Development Department grant, where the purpose of the acquisition grant, as stated in the application, was slum clearance and blight elimination.
• Through documented and approved ch.32 or ch. 66, Wis. Stats., proceedings that deal with specific slum clearance or blight elimination determinations.

Q3. Can an LGU acquire a property through one of the eligible means stated above and not do any of the investigation or cleanup if they don't intend to resell the property?

A3. Yes. As long as the LGU does not cause or exacerbate a discharge of a hazardous substance, the LGU is exempt under the Spill Law. The LGU needs to consider possible contamination on the property and whether or not the contamination would preclude the specific planned use of the property. The LGU should work with local and state health departments as well as the DNR to ensure that the use of this property is protective of public health, safety, and welfare.

Q4. What if the LGU wants to reuse the property?

A4. An LGU may retain possession of a property and develop or use that property as long as the LGU makes sure the reuse of the property poses no substantial threat to public health or safety. If the DNR determines that there is a substantial threat to public health or safety, the DNR may direct the LGU to take action to reduce that threat, and if the LGU does not take that action as directed, the LGU liability exemption does not apply.

Q5. What are some of the issues LGUs might consider before acquiring contaminated properties?

A5. Local officials should consider risks associated with leaving the property unattended rather than acquiring the property:

• injury to trespassers;
• unpaid taxes accumulate;
• neighboring property values reduced; and
• visual eyesore.

Officials should also consider the way in which a property is acquired since it affects liability issues (see questions #1-2), whether liability issues exist under environmental laws other than the Spill Law and whether liability exists for harm to persons or property.

Other environmental laws to consider include but are not limited to hazardous waste laws. For instance, if a barrel containing hazardous waste is found on the site, it must be properly disposed. Also, consider all costs associated with cleaning up the property versus leaving it contaminated. LGU's are also responsible for removal of abandoned underground storage tanks left on the properties they acquire.

Q6. Is the LGU exemption transferable to a private party?

A6. No. The local government exemption is not transferable. However, Wisconsin law offers incentives to attract future private party development. When a private party acquires such a property from an LGU, the party can work through the DNR's Remediation and Redevelopment (RR) Program and enter the Voluntary Party Liability Exemption (VPLE) process.

The voluntary party can then conduct the necessary investigation and remediation of the discharged hazardous substances to receive a Certificate of Completion. A COC exempts the voluntary party from future liability under most provisions of the Spill Law as well as certain hazardous and solid waste laws. The COC is also transferable to any eligible future owner of the property.

Q7. Is the LGU exemption transferable between LGUs?

A7. Yes. If an LGU acquires property from another exempt LGU, they are not responsible to investigate or clean up a hazardous substance discharge at the property. This exemption from liability protects a municipality unless the spill is caused by an action taken by the municipality or failure of the municipality to take "limited actions' to prevent further spills.

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Funding

Q8. If an LGU acquires property and decides to clean it up, what funds could they use?

A8. There are a range of grants, loans and tax incentives that an LGU can use to help pay for brownfield redevelopment. Our Financial Resource Guide for Cleanup and Redevelopment (RR-539) [PDF 2,219KB], is available to help you identify resources for funding a cleanup or redevelopment.

Q9. Can a county forgive back taxes to encourage a developer to purchase contaminated, tax delinquent property?

A9. Yes. Counties and the City of Milwaukee have statutory authority to forgive either a portion or all back taxes owed on a property, plus interest and penalties, when an environmental investigation indicates that the property is contaminated. Before the taxes can be forgiven, the developer must present the county or the City of Milwaukee with an agreement they have entered into with the DNR to clean up the property.

Q10. If an LGU wants to acquire property and there are DNR or EPA environmental liens on the property, what should the LGU do about these liens?

A10. The DNR and the EPA are encouraging LGUs to acquire tax delinquent, contaminated properties and return them to productive uses. Both agencies understand the costs and stigmas associated with environmental liens and intend to support communities that are interested in redeveloping contaminated properties.

On a case-by-case basis, LGUs should contact the DNR and the EPA to discuss liens or past costs that either agency may have spent at a site. The DNR is willing to assist an LGU that wants to work with EPA or other federal agencies to discuss such costs.

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Redevelopment

Q11. We have acquired contaminated property and want to demolish a building on the property. What precautions do we need to take during the demolition of this building to prevent or minimize any new or increased liability?

A11. During building demolition, contamination that was previously covered by the building or buried just below the ground surface may be exposed. The LGU would have a responsibility to notify the DNR immediately of any previously undetected hazardous substance discharge.

Also, the LGU would be responsible to take appropriate action to restrict access to the property in order to minimize costs or damages that may result from unauthorized persons entering the property, such as exposure to the newly discovered hazardous substance discharge. Any substances found in above ground containers must be disposed of according to solid and hazardous waste laws.

If the LGU's act of demolishing the building causes a discharge of a hazardous substance, then the exemption from liability would not apply to that discharge. Further, if contaminated soil is uncovered, it may have to be properly stored or disposed of in accordance with Wisconsin law.

Q12. If an LGU acquires a contaminated property through tax delinquency, bankruptcy proceedings, condemnation, eminent domain, escheat, for slum clearance or blight elimination, using Stewardship funds, or from another exempt LGU, and leases to another LGU or to a private party, does the LGU lessee have any liability?

A12. On a case-by-case basis, DNR staff will review the terms of a lease and provide liability clarifications for such contaminated properties.

As a general matter, if the lessee does not operate in a way that could cause a new discharge or exacerbate a prior discharge, the lessee will not be considered responsible for contamination on the property.

If the terms of the lease allow the lessee to operate in a way that could cause a discharge, such as using an underground storage tank (UST), the lessee would be responsible for any liability associated with operating the UST. Please see Fact Sheet 12 - Lease Letters: Clarifying Environmental Liability When Leasing Property (RR-620) [PDF 143KB], for more detailed information.

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