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Breakout Session VIII Streamlining the Environmentals
for SBA Review Studio F
1:30 pm – 2:30 pm
Thank you to our Alliance Partners
Speakers
• Derek Ezovski, President
Outsourced Risk Management Solutions
• Stephen Reynolds, Senior Account Executive
EBI Consulting
• Mary Mansfield, Executive Vice President
Bay Colony Development Corp.
Derek Ezovski
Former SBA Chief Environmental Engineer
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Stephen Reynolds
Senior Account Executive
EBI Consulting
President
Outsourced Risk Management Solutions
Streamlining the Environmentals for SBA Review
Session Goal: Cover changes in the environmental industry and provide ways for CDCs to minimize environmental & energy report screen outs while meeting the requirements of SBA SOP 50 10 5(H)
• SBA SOP 50 10 5(H)
• ASTM E 1527-13 Standard
• Contaminated Properties
• Gas Stations
• Special Use Properties
• Concentrated Animal Feeding Operations
• Energy Reports
• Best Practices
• Q & A
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Lenders’ Reaction to Environmental Issues…
SBA Environmental Due Diligence Policy
• 2 levels of Environmental Due Diligence for SBA
1. Phase I – for high risk properties
• If property type/use matches the list of NAICS codes for Environmentally Sensitive Conditions
2. Records Search with Risk Assessment – low risk properties
• Includes a search of the government databases (compliant with AAI);
• A search of historical use records, and;
• A risk assessment by an environmental professional determining whether
the site is “High”, “Elevated” or “Low” risk
• New Gas Station/Dry Cleaner Requirements
SBA SOP 50 10 5(H)
• The SBA Reliance Letter has been changed to reflect the
new Transaction Screen Analysis (TSA) standard:
ASTM E 1528-14
• Ensure (“Lender”) is included in the SBA Reliance Letter.
example: To: [Lender/CDC Name and Address] (“Lender”)
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ASTM E 1527-13 Standard Updated the definitions of:
• Recognized Environmental Condition (REC)
To identify conditions indicative of releases and threatened
releases of hazardous substances on, at, in, or to the property.
• Historical Recognized Environmental Condition (HREC)
Limited to include only past releases that have been
addressed to unrestricted residential use.
• Added definition:
Controlled Recognized Environmental Condition (CREC) The regulatory agency allows contaminants to remain in place
under certain restrictions or conditions.
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ASTM E 1527-13 Standard
• Added clarification to definition of de minimis condition:
A Phase 1 Environmental Site Assessment will provide
information on past corrective actions conducted and
contamination left in place.
• Revised the definition of migrate / migration to include
vapor migration:
A Phase 1 Environmental Site Assessment will provide
information on releases that migrate onto the property via a
vapor pathway.
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Contaminated Properties
• If requesting approval of funds with known
contamination, on-going remediation, monitoring, or
CRECs on the property, then
– Ensure all information is submitted in accordance
with SBA SOP 50 10 5(H), Subsection G, Approval
and Disbursement of Loans When There is
Contamination or Remediation.
• If the environmental professional concludes that no
further investigation is warranted, but the Phase I
Assessment reveals “contamination” at the property, a
response to Subsection G is required.
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Gas Stations
• For contaminated gas stations, at a minimum, the SBA
Indemnification Agreement must always be obtained and
signed by the seller.
• A Phase I Environmental Site Assessment should always
be obtained if the business sells, supplies, or dispenses
fuel, gasoline, or heating oil, even if the NAICS code for
the business is not identified on the list of
environmentally sensitive industries.
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Special Use Properties
If a property is a dry cleaning facility and has
been in operation for more than 5 years, a
Phase 1 and Phase 2 Environmental Site
Assessment are required.
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The Phase 2 Environmental Site Assessment must be conducted by a
Professional Engineer (PE) or a Registered Geologist (RG)
Special Use Properties
If a property is a daycare center, child care
center, nursery school or a residential care
facility occupied by children and the date of
construction is prior to 1980, a lead risk
assessment (for lead based paint) and testing
for lead in drinking water are required.
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Concentrated Animal Feeding Operations
(CAFO)
If a property is a CAFO, include the following with your environmental submission:
• A copy of a CAFO Environmental Questionnaire.
• A copy of the Comprehensive Nutrient Management Plan (CNMP).
• A copy of the CAFO permit.
• A statement from the borrower setting forth how the animal waste and deceased animals will be disposed.
• A copy of the NPDES Permit
(if treated waste is discharged into a water source)
• A copy of the Land Based Discharge Permit
(if the waste will be disposed of on land)
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Need a CAFO Environmental Questionnaire?
Then e-mail me at: [email protected]
and I’ll send one to you!!
Energy Reports
• All energy reports submitted to meet the Energy Public
Policy Goals are currently being reviewed by SBA
environmental engineers. Energy goals include: a)
reduction of existing energy use, b) use of sustainable
designs, and c) use of renewable energy sources.
• The energy report must include the qualifications of
the party performing the energy audit, engineering
report, or other professional evaluation, each of which
must be performed by an independent third party (an
entity other than the applicant, the interim lender, the
third party lender or any of their respective affiliates).
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Energy Reports Energy Reduction Goal – $5.5 million eligibility
• The energy report must demonstrate 10% energy reduction. If the project involves the construction or acquisition of a facility (the “new facility”), the new facility must replace an existing facility and the new facility must use 10% less energy than the existing facility.
• The new facility must be located in the same local area (e.g. the same city, town, county, zip code, metropolitan statistical area or as otherwise deemed appropriate by SBA).
• If the project involves the retrofit of an applicant’s existing facility, the retrofit must reduce energy consumption of that facility by at least 10%, regardless of the energy usage of any other facilities that the applicant may operate.
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Energy Reports
Sustainable Design Policy Goal - $5.0 million
eligibility
Per SBA SOP 50 10 5(H), “sustainable building design”
has the meanings given those terms under the
Leadership in Energy and Environmental Design (LEED)
standards for green building certifications. An energy
report by an independent third party is required that
demonstrates use of “sustainable building design”.
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Energy Reports
Renewable Energy Policy Goal - $5.5 million eligibility
• The energy report must demonstrate that renewable energy
sources generate more than a de minimus amount (SBA
interprets “more than a de minimus amount” to mean at
least 10%) of the energy used by the applicant at the project
facility.
• All improvements or equipment required to generate the
renewable energy or renewable fuels must be included in the
project costs.
• Energy reports prepared by the vendor who will supply the
renewable energy system are not acceptable; a report from
an independent consultant is needed.
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Environmental Best Practices
• Have as much control of the process as possible
• Train your lending partners
• Make the submission “look” good
– Make it easy for the reviewer to review the information
• Make sure things are correct prior to submitting
– Correct any mistakes prior to submitting
– Stay off the “radar screen”
Closing Thoughts
• Don’t go it alone if you don’t have to
• Help the SBA say “yes” whenever possible
• Environmental is the “tail” on the dog…don’t give it more attention than it needs by waiting until the end… – #17 of 24 items on the CDC Checklist…
• SBA vs. Traditional Lending Hurdles
• Work with Experts
• Use the appeals process…wisely.
Sample SBA Policy Matrix
Page 22
Minimum Due Diligence Requirements
Real Estate Loan
Type
<$150K $150K < $2M
Low Risk Loans Questionnaire RSRA/TSA
High Risk* Loans – NAICS
Codes
Phase I Phase I
Gas Station Phase I + Evidence of UST
Compliance
Phase I + Evidence of UST
Compliance
Dry Cleaners Phase I Phase I
Dry Cleaner (older than 5
years old)
Phase I and Phase II Phase I and Phase II
Special Use Facilities (i.e.
Daycare)
More specific requirements (i.e.
Lead Paint Testing, Lead in
Drinking Water, etc)
More specific requirements (i.e.
Lead Paint Testing, Lead in
Drinking Water, etc)
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Below are web links to assist you! Just click on the name
NAICS Codes
SBA SOP 50 10 5 (H)
EPA All Appropriate Inquiries (AAI)
Questions??
Derek Ezovski
877.407.ORMS
860.838.5388
Stephen Reynolds
530.320.5489
What’s Up Next? 2:45 PM – 3:45 PM • General Session II Community Advantage and Economic Development Models for Success Grand Ballroom Salons 1-4
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