LEED Remains the Standard in Green Building

The following article was written by Alex Jones, a summer associate with Kohrman Jackson and Krantz.

Green building has been a growing industry for the past few decades, and the Leadership in Energy and Environmental Design, also known as LEED, remains a dominant force. As of the beginning of 2015, there were more than 3.6 billion square feet of building space that were LEED certified and more than 69,000 LEED building projects in 150 countries. All federal buildings are required to be LEED certified, and LEED is referenced in project specifications for 71% of projects valued at $50 million and over.  Even with its dominance though, many in the industry are questioning LEED’s efficacy and eager for an alternative.

Builders and contractors are, at times, frustrated with LEED’s rigid standards. For example, LEED emphasizes air tight buildings to enhance energy efficiency, but achieving that when building a new warehouse, for example, does not make much sense when most such facilities have dock doors that are open all day.  Critics of LEED also complain it does not take into consideration innovative building designs, but instead, awards points for minor low-cost steps that have little environmental impact, such as adding a bike rack. LEED projects also require highly specialized consultants that increase the upfront costs of new building projects. It is estimated LEED consulting fees can increase the price of a project by 4-13%.

These pitfalls have led many in the construction industry to look for an alternative, such as Green Globes. Green Globes is a relatively newer green building certification, and the U.S. General Services Administration recently approved the Green Globes’ certification as an alternative to LEED. Green Globes bills itself as a more streamlined and affordable alternative to LEED. It uses an online system that purports to be cheaper, faster, and much more user-friendly as compared to LEED, which is notorious for being overly complicated. A significant advantage of Green Globes is it automatically sends out an assessor to each Green Globes building site to work with the project teams and owners, which allows for a fluid and efficient building process.  LEED requires builders to actually seek out a LEED consultant in order to get certified.

However, Green Globes is not without its critics. Environmentalists disfavor Green Globes because they consider its standards to be less stringent and disapprove of its greater leniency when it comes to building materials. LEED only gives credit for wood products certified by the Forest Stewardship Council, while Green Globes gives equal credit to the timber industry’s Sustainable Forest Initiative, which permits larger clear cuts, as well as the use of herbicides.  Generally speaking, Green Globes is considered to be more industry friendly. Many of its members and board of directors are connected with the plastic, chemical, and timber industry, which has given rise to accusations that some standards are meant to benefit those industries rather than the environment.

Furthermore, Green Globes suffers from the same problem as LEED by focusing on a pre-set list of designs that earn points, while awarding no points for innovative designs that could be just as, if not more, environmentally friendly.

There is also some dispute as to whether Green Globes truly is cheaper than LEED. A 2011 study by Drexel University ran a hypothetical implementation of both LEED and Green Globes and found that attaining a Green Globes certification would be less expensive and faster. However, a different study looked at attaining LEED’s and Green Globes’ minimum certifications, and it found that Green Globes’ certification would cost almost twice as much as LEED’s.

As it stands, LEED remains the main player in green building certification. There are 37 times more LEED certified project than Green Globes, and LEED has 200,000 accredited professionals compared to Green Globes’ 1,000. Nevertheless, Green Globes is growing and offering an alternative to LEED in green building. Whether you should choose LEED or Green Globes for your project is a fact specific question. While LEED is still the industry leader, for certain projects Green Globes might offer a more user friendly and less expensive alternative.
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Grain Storage Bins as Property Tax-Exempt

A Legal Update

By: Luther L. Liggett, Jr., Kohrman Jackson & Krantz PLL

Introduction
Across Ohio, county auditors improperly classify Portable Grain Bins installed by the agricultural industry as incorporated into real estate, and therefore taxable for property tax valuation.
In a case of first-impression, the Ohio Supreme Court upheld the Board of Tax Appeals in declaring that a “grain storage bin” is a “business fixture,” and therefore not part of the real estate valuation. 
Therefore, farmers and agricultural businesses should not pay property tax on their farm equipment including Grain Storage Bins.
Factual Background
Among the county auditor’s duties is the appraisal of real estate for valuation, against which the county levies Property Taxes.  Typically the auditor will include any improvement incorporated into the real estate. 
Farm operations typically include barns, permanent silos, elevators, and grain storage bins.  The county auditor may not distinguish among these different facilities, as all are relatively “permanent” and add value to the tax duplicate, increasing the property tax base.
Yet agriculture is a business, no different than any manufacturing concern that installs heavy equipment in unique business facilities.  Those manufacturing facilities are exempt from property tax, because the land cannot be sold for the higher value to an ordinary buyer not in the same business.
The Metamora Elevator Company owns and operates eight acres of land containing silos, storage bins, tanks, and buildings used to process and to store grain.
Metamora filed complaints with the Fulton County Board of Revision, alleging that its “grain storage bins” on the premises should be classified as personal property not subject to property taxes.  This would reduce the “land” value subject to annual property taxes by over $500,000.00.
In other factual examples, similar agricultural businesses depreciate such grain storage bins as personal property.
Typical Grain Storage Bins are modular, corrugated units bolted to a concrete foundation, which can be dissembled and moved.  In contrast, silos are considered permanent and constitute realty.
On appeal to the Ohio Board of Tax Appeals determined that the storage bins were temporary structures and therefore personal property, exempt from property taxes which apply only to real property.
The Ohio Supreme Court declared the Grain Storage Bins to be “business fixtures” without the need to determine whether they also constitute personal property.
Legal Analysis
In determining whether a land owner’s real estate should increase in value for property tax purposes, the county auditor must look to the definitions in law.  R.C. 5701.02 defines real property:
As used in Title LVII of the Revised Code:
(A) 'Real property,' 'realty,' and 'land' include land itself . . . with all things contained therein, and, unless otherwise specified in this section or 5701.03 of the Revised Code, all buildings, structures, improvements, and fixtures of whatever kind on the land…
A practical test is whether the land owner might sell the property for a higher value as a result of the improvement.  Starting with bare land, building a new home on it would result in an increase in valuation for property tax purposes.
In contrast, the Ohio legislature does not treat “personal property” that happens to be located on the real estate as adding to the value.  A simple example is whether the “improvement” is not permanently affixed but can be removed.  This is often referred to as “the Jolly Green Giant” test: if the building is picked upside down and shaken, anything not affixed is not real estate for purposes of valuation.
Another example is whether the “improvement” is related only to a business, and would be of no value to an ordinary purchaser of the land unless in the same business.  In a typical building, water plumbing pipes add value to the building.  But in a beer brewery, the process piping through which the beer runs is a business fixture, and does not count toward raising the value of the real estate.
Applying these considerations to a Grain Storage Bin, even the concrete pad beneath the Portable Grain Bin and elevator equipment is considered a “business fixture” even though it cannot be moved.  If sold to an ordinary buyer, the new owner may consider the unusable concrete pad even to detract from the value of the land. 
In 1992, the Ohio General Assembly amended the definition of “personal property” to include “business fixtures.” The test is whether the equipment “primarily benefits” the business or the realty. R.C. 5701.03 defines personal property:
As used in Title LVII of the Revised Code:
(A) “Personal property” includes every tangible thing that is the subject of ownership . . . including a business fixture, and that does not constitute real property as defined in section 5701.02 of the Revised Code.
(B) “Business fixture” means an item of tangible personal property that has become permanently attached or affixed to the land or to a building, structure, or improvement, and that primarily benefits the business conducted by the occupant on the premises and not the realty. 'Business fixture' includes, but is not limited to, machinery, equipment, signs, storage bins and tanks, whether above or below ground, ****
Consistently, Ohio sales tax law treats Grain Storage Bins as personal property.  When an agricultural business purchases a Portable Grain Bin, the owner/purchaser must pay (and the seller/contractor must collect and remit,) Ohio sales tax, because R.C. 5739.01(B)(5)(b) expressly declares the Portable Grain Bin to be personal property, not incorporated into the real estate, and therefore constitutes a taxable sale.  Thus, Ohio law expressly defines a Portable Grain Bin as personal property for purposes of sales tax in construction:
Ohio Administrative Code 5703-9-14:
(C) The sale and installation of the following items is never a construction contract and such transactions are to be treated as the sale and installation of tangible personal property for sales tax purposes:
* * *
(3) Portable grain bins as defined in division (B)(5)(b) of section 5739.01 of the Revised Code;
R.C. 5739.01(B)(5)(b) is conclusive of legislative intent: 
"Portable grain bin" means a structure that is used or to be used by a person engaged in farming or agriculture to shelter the person's grain and that is designed to be disassembled without significant damage to its component parts.
Therefore, state law requires that an agricultural business pay sales tax on installation of Portable Grain Bins at the time of purchase.  It is unfair first to charge Sales Tax to an agricultural business such as Metamora, treating the assembly of a Portable Grain Bin as personal property, then turn around and charge Property Tax as though the same facility is a permanent improvement to the real estate.  Accordingly, Portable Grain Bins taxed as personal property for sales tax should not be taxed a second time as real property.
Court Decision
The Ohio Supreme Court upheld the Ohio Board of Tax Appeals, declaring that an agricultural Grain Storage Bin should be classified as a “business fixture” not subject to real estate tax.  Given the value of such large facilities, the reduction in property tax to an agricultural owner can be significant.
The Supreme Court streamlined consideration of whether the item is a “business fixture” without having to consider whether it is “real property.”  The Court found that the legislature declared storage bins to be business fixtures, and that will suffice to exempt them from property taxes.
Conclusion
The Supreme Court decision removes any doubt that Grain Storage Bins are considered “business fixtures” and exempt from property taxes.  This should result in significant savings across the agricultural industry in Ohio.
With this court precedent, farmers and agricultural businesses now can file a complaint with the county board of revision, asking that the valuation of their land be reduced by the value of any grain storage bin.
Editor’s Note: Luther L. Liggett, Jr. and David M. Scott (of Kohrman Jackson & Krantz) filed a brief in this case with the Ohio Supreme Court urging affirmance for amicus curiae (friend of the Court) Central Ohio Farmers Co-Op.

Mr. Liggett focuses his practice in government contracting, administrative procedure, state licensure, construction law, property tax revision, mortgage banking, legislative lobbying, government policy formation, and litigation.  For more information, contact:  

Luther L. Liggett, Jr., Kohrman Jackson & Krantz-10 W. Broad Street, 19th Floor Columbus OH 43215-(614) 427-5742 - LLL@kjk.com.


Final Rule Issued Redefining "Waters of the United States"

The final Clean Water Rule regarding the new definition of “Waters of the U.S.” (WOTUS) was published in the Federal Register on Monday, June 29, 2015. The effective date for the rule is August 28, 2015. The rule redefines what water features will fall under the joint jurisdiction of the U.S. EPA and the U.S. Army Corps of Engineers.

The EPA received more than 1 million public comments regarding this rule and has issues a response to the comments that totals more than 8,000 pages. (Your tax dollars at work people. Has anyone managed to read this response? Lunch is on me if you can prove to my satisfaction that you managed to wade through it all.)

Several legal challenges have already been filed against the new rule by approximately 27 state attorney generals. The reason this rule is such a hot button issue for state and local governments is jurisdictional. If a water features is held to fall under the definition of WOTUS, then it usurps the jurisdiction of state and local governments.

While the federal regulators claim this new definition provides for greater clarity, many others disagree. Links to analyses of the new rule are below.

Understandably, the states and counties are upset that they may be losing control to the federal government.  As a citizen, I’m concerned as well. While state and local governments can trample on our rights as easily as the federal government, they still tend overall to be more responsive to the views and concerns of their constituents than someone sitting in an office in Washington, DC would be. Also, what may work in one state, may not be the best solution in another state. Keeping control more devolved allows for rules to be developed that are more responsive to the needs and issues of that state, as opposed to the one size fits all approach of most federal regulations.

Analysis by The Associated General Contractors of America

Fact Sheet by the National Association of Counties
Article published by the National Association of Realtors

While both the U.S. House of Representatives and the U.S. Senate has either passed or is considering legislation to address the rule and potentially restart the rulemaking process, President Obama has indicated he would veto any such bill.
The end result of this new rule will be increased federal involvement in the regulation of land use.
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OHIO SUPREME COURT RULES THAT A TENANT’S ABANDONMENT OF NONCONFORMING USE CANNOT CONSTITUTIONALLY BE IMPUTED TO MOBILE-HOME PARK’S OWNER





The Supreme Court of Ohio recently ruled, in State ex rel. Sunset Estate Properties, L.L.C., v. Lodi, Slip Opinion No. 2015-Ohio-790, that a portion of the Village of Lodi’s zoning code (dealing with abandonment of nonconforming mobile home use) is unconstitutional on its face

The facts in this case are simple enough (the law is another matter).  Basically, the appellees, Sunset Properties, L.L.C., and Meadowview Village, Inc., each own property in Lodi on which they operate mobile-home parks. Both properties are in areas currently zoned in districts that do not permit mobile-home parks, however, the mobile-home parks are deemed legal nonconforming uses (under Ohio Revised Code Section 713.15) because such uses existed prior to the passage of the Village’s zoning ordinance. In other words, they are (what is commonly known as) “grandfathered.”

In 1987, the Village of Lodi (the appellant in the Ohio Supreme Court case) passed an ordinance (Lodi Zoning Code 1280.05(a)) regarding abandonment of nonconforming uses.  Generally, the ordinance contained two parts. The first provided a general time frame for deemed abandonment: when a nonconforming use has been discontinued for six months or more. The second part was specific to mobile homes. This provision stated that the absence or removal of a mobile home from its lot constitutes discontinuance from the time of removal. In reliance on this provision, when a tenant left one of appellees’ mobile-home-park lots and the lot was vacant for longer than six months, Lodi would refuse to reconnect water and electrical service when a new tenant wanted to rent the lot.  As a result, appellees were not able to re-rent these lots and claimed they lost a property right due to the corresponding loss of use/income.

As a result of the Village of Lodi’s actions, the appellees filed suit, and requested, among other things, a declaration from the trial court that the ordinance is unconstitutional and constitutes a taking of their properties. The trial court granted summary judgment in favor of Lodi on all counts. The mobile-home park owners appealed, asserting that the trial court erred in granting summary judgment in favor of Lodi.  The Ninth District Court of Appeals agreed with the park owners and reversed the trial court’s judgment, holding that Lodi’s zoning ordinance was unconstitutional on its face. The Village of Lodi then appealed to the Ohio Supreme Court, who affirmed the Ninth District’s judgment.

Before rationalizing its holding, the Ohio Supreme Court in Sunset Estates first reminds us that “[t]his court has consistently approved the constitutionality of comprehensive zoning ordinances.” The court cited several cases where the court held zoning to be a valid legislative function of a municipalitys police powers and that a strong presumption exists in favor of the validity of such zoning ordinances. Since the specific ordinance being reviewed in Sunset Estates dealt with abandonment of non-conforming uses, the court then cited cases establishing that Ohio courtshave upheld both the denial of the right to resume a nonconforming use after a period of nonuse, and the denial of the right to substitute new buildings for those devoted to an existing nonconforming use and to add or extend such buildings.” In fact, according to the court, nonconforming uses may be regulatedto the point that they wither and die”, and still pass constitutional muster. However, as the court in Sunset Estates clarified, “the authority of state and local governments to regulate land use is vast but not unbounded.”

The boundaries, according to the Ohio Supreme Court are established in Section 1, Article XIV, Amendments, United States Constitution, and Section 16, Article I of the Ohio Constitution, providing that no person shall be deprived of life, liberty or property without due process of law. And, as the court previously reasoned in Akron v. Chapman, 160 Ohio St. 382, 385 (1953), “property” contemplates not only ownership and possession, but “the substantial right of unrestricted use, enjoyment, and disposal.” Consequently, the court in Sunset Estates reasoned that in order for a nonconforming use to be extinguished, the use must be voluntarily abandoned, not taken away. Non-conforming uses cannot be regulated by an ordinance that deprives a property owner of a vested property right.

Constitutionally speaking, the court held that the deprivation of the vested private-property rights of mobile-home-park owners was not rationally  related  to  Lodi’s legitimate  goals  of  protecting  property  values  and encouraging  development. Factually disturbing to the court was the fact that the plain language of the (last sentence of the) Village of Lodi’s ordinance imputed a tenant’s abandonment of one lot within a mobile-home park on the park’s owner.  In so doing,the provision impermissibly deprives the owner of the park of the right to continue the use of its entire property in a manner that was lawful prior to the establishment of the zoning ordinance.” In other words, the vacation of a mobile park tenant from its pad is not (and should not be deemed) according to the court, a voluntary abandonment of the non-conforming use by the mobile park owner.

The court did clarify that it had no problem with ordinances that provide that a nonconforming use shall not be re-established at the end of a certain period of abandonment. In fact, the Ohio Revised Code has a general provision addressing nonconforming land use (O.R.C. Section 713.15). The court also had no problem with Lodi’s Zoning Code…except for the final sentence.  

The last sentence of Lodi Zoning Code 1280.05(a) rendered the ordinance “arbitrary” and irrational” (according to the court) because the Lodi ordinance does not distinguish “abandonment” or “discontinuance” for any type of nonconforming use other than relative to mobile homes. In other words, while all other property owners and businesses must voluntarily abandon the nonconforming use of the property, mobile home parks alone can be forced into involuntary abandonment simply by a mobile home being removed  (i.e., a structure that is designed to be moved) from a lot.

State ex rel. Sunset Estate Properties, L.L.C., v. Lodi is not without controversy. Two dissenting judges and others are not happy with the court’s decision, because they believe the majority was “trigger happy” in pushing the “unconstitutional button.”According to the dissenting judges, “the court of appeals failed to exercise judicial restraint in deciding this case on constitutional grounds without first fully addressing nonconstitutional issues that could have been resolved.” Citing prior case law, the dissent noted that the Ohio Supreme Court does not reach constitutional issues unless absolutely necessary… and that “courts should exercise judicial restraint and determine whether a case can be resolved based on non-constitutional issues before considering constitutional issues.”

In fact, the original complaint raised two, non-constitutionally based issues: 1) the Lodi Zoning Code 1280.05(a) conflicts with state law; and 2) there is an issue of interpretation, namely as to whether or not Lodi Zoning Code 1280.05(a) authorized Lodi to extinguish the nonconforming use of the properties in question, lot by lot.

     Even though the dissenting judges commented that the 9th District Court of Appeals failed to review these non-constitutional issues, they declined to review them as well. Perhaps there is merit to these claims. ORC 713.15 does use the term “voluntarily discontinued” while Lodi Zoning Code 1280.05(a) states that absence or removal of a mobile home “shall constitute discontinuance”.  Conflicting provisions? Maybe. Could the court have resolved this case based upon the interpretation of vs. the constitutionality of Lodi’s Zoning Code 1280.05(a)? Perhaps. In any event, at least mobile home park operators in Ohio are smiling in the wake of State ex rel. Sunset Estate Properties, L.L.C., v. Lodi.

Breaking: US Supreme Court overturned the EPA's air quality rule

 
The US Supreme Court overturned today the air quality rule that was issued by the Environmental Protection Agency (EPA) under the Obama Administration, holding that the EPA did not properly consider the costs of the regulation.

Click here to read The Hill's article on the decision issued today.
Click here to read the Court's opinion.
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Remembering Kelo v. City of New London -- 10 Years Later

Last week marked the 10th anniversary of the US Supreme Court’s 5-4 decision known as Kelo v. City of New London.  In that decision the Supreme Court ruled private economic development is a public use under the 5th amendment to the US Constitution. This decision allows governments at all levels to take people’s private property, including their homes, businesses and farms, and hand that property over to another private party to develop in a way more the that government’s liking with the expectation it will raise more tax revenue or create jobs.

Public reaction against the decision was strong.  I’m letting my own personal opinion show through here, but this cavalier approach to eminent domain shows a tremendous disrespect by governments for its citizens and their property and livelihood, combined with a bit of economic elitism.  This is exacerbated by the need for governmental agencies to obtain a valuation of the property that works within their limited tax dollars.  All around it leads to private citizens losing their property for objectionable reasons and receiving compensation that’s often on the low end of its fair value. If a small business is involved, the compensation for moving that business to a new location is frequently inadequate.

In the first 5 years after Kelo, approximately 43 states passed some level of reform to curb at least the excesses of eminent domain unleashed by Supreme Court’s decision.  Here in Ohio, the Ohio Supreme Court in 2006 issued its decision in City of Norwood v. Horney (110 Ohio St.3d 353) which essentially reversed the application of Kelo in the state of Ohio, and held that economic development, in and of itself, does not satisfy the public use requirement of the Ohio Constitution.

In 2007, Ohio’s legislature passed S.B. 7, which amended Ohio’s eminent domain law. S.B. 7 provided a comprehensive definition of ‘blight’ that narrowed its application and curbed some of the worst abuses of blight studies employed by some local governments.

S.B. 7 also put into place new pre-appropriation requirements and procedures for appropriation proceedings, and provided for additional compensation to landowners, along with provides for their costs and potentially attorney fee awards.

While many property rights groups and others feel that Ohio’s amendments to its eminent domain law were insufficient, these changes, when combined with the Norwood decision, constitute progress in the right direction.

As for the property taken by the City of New London, Connecticut as a result of the Kelo decision, what happened to it?  The houses were torn down except for Ms. Kelo’s house, which was moved at private expense. The land remains vacant and undeveloped, occupied only by some feral cats. The original development plan that triggered the eminent domain action and lawsuit was poorly planned and feel apart. After 10 years, there is finally some development planned for the condemned property--a park is planned for the parcel that was Ms. Kelo’s house.
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Integrating “Livability Principles” in Brownfields Redevelopment

Reprinted with permission from Kara A. Allison, APR, of Hull & Associates, Inc.

Have you applied for federal brownfields funding lately? Perhaps you’ve noticed an increasing emphasis on incorporating sustainable concepts, equitable development, and other livability-focused activities into these funding proposals. It’s a shift in approach designed to support growing stronger, more sustainable communities nationwide, and if you want to secure federal funding for your future brownfields projects it’s time to start paying attention to the details now.

The Partnership for Sustainable Communities – an interagency partnership formed in 2009 between the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Transportation (DOT), and the U.S. Environmental Protection Agency (EPA) – works to coordinate federal housing, transportation, water, and other infrastructure investments to make neighborhoods more prosperous, allow people to live closer to jobs, save households time and money, and reduce pollution. The partnership agencies incorporate six principles of livability into federal funding programs, policies, and future legislative proposals – which we’re now seeing with increased frequency in federal brownfield funding applications.

So just the very nature of even implementing a brownfields project puts a community on the right path to incorporating the “livability principles” identified by the Partnership for Sustainable Communities, right? Not quite. But here are a few ways to start thinking about how to encompass every aspect of the Livability Principles in planning your next brownfield redevelopment project:

  • Provide More Transportation Choices – Set your local brownfields task force loose on researching information for an infrastructure assessment study to help make recommendations for improved and additional community transportation alternatives, including ways to increase walkability in target corridors and neighborhoods.
  • Promote Equitable, Affordable Housing – Include recommendations in remedial action plans about whether assessed sites could be used to improve and grow the community’s stock of affordable, energy-efficient housing, particularly for sites assessed within any neighborhood improvement areas.
  • Enhance Economic Competitiveness – Focus on and conduct assessments at key sites, which will increase opportunities for economic competitiveness by identifying brownfields for future cleanup. Market restored properties to new and expanding businesses which will in turn create both construction and permanent jobs in the community. 
  • Support Existing Communities – Use outreach activities and public meetings in the targeted community to leverage information and gather input into the brownfield redevelopment process. Include local organizations, residents, and businesses from the impacted neighborhoods to support your grassroots, early brownfields planning initiatives.
  • Coordinate and Leverage Federal Policies and Investments – Apply for and leverage multiple sources of federal, state, and local grant funding for brownfields. Use logical steps in layering the available sources of public funding (planning, assessment, cleanup, and reinvestment) to help secure and attract private funding to keep growing investments in your local brownfields initiative.
  • Value Communities and Neighborhoods – Begin assessing brownfield sites in the most impacted core of your community. It not only provides the ability to restore a sense of community pride in the targeted corridor, but within the community as a whole. An added bonus: you’ll see a ripple impact on the greater regional area and the opportunity to leverage broader support for your local community brownfield initiative.
HULL & Associates, Inc. is a project development and consulting firm specializing in the Alternative Energy, Brownfields, Environmental, Shale Oil & Gas, and Waste Management markets, with seven offices strategically located in Ohio, Pennsylvania, and Indiana. Re: Brownfields, Hull’s more than 25 years of experience includes successfully securing and leveraging funding, assessment, remediation and redevelopment projects. Kara A. Allison, APR, is HULL’s Brownfields Market Leader.


Want to know more? Contact Kara at 614.793.8777 or kallison@hullinc.com.