Chicago has come up with a program to eliminate the contamination-suit risks banks face in redeveloping long-abandoned sites.

The Windy City's "model lending package" spells out the steps banks can take, in cooperation with borrowers, to avoid liability for contaminated sites. The plan was devised by the Brownfields Forum, a committee created by Chicago Mayor Richard M. Daley, to entice banks to lend on abandoned industrial sites, or "brownfields."

By using the state's voluntary cleanup program and collecting all the necessary documentation, banks can protect themselves from lawsuits stemming from on-site contamination that existed before the bank got involved with the property.

"If the reason bankers are not lending on these sites is contamination, we think this can help," said James P. O'Brien, a partner at the law firm of Chapman & Cutler. "The basic idea is that any bank that wants to lend on contaminated land can take these suggestions and put them into their own practices."

Bill Trumbull, a spokesman for the city of Chicago, said similar programs exist in Connecticut, Ohio, Michigan, Indiana, and Minnesota. Officials from San Francisco, Dallas, and New Orleans have called Chicago to ask about the plan, he reported.

To begin, a borrower contacts the state environmental protection agency. Before the cleaning can start, the agency reviews the site to determine what needs to be done. Then it oversees the cleanup efforts.

The average cost to enter the program is $5,000, with the price of the actual cleanup varying greatly depending on the amount of contamination. These costs may be paid by the bank, the borrower, or a combination of both.

Once completed, the state agency must issue a statement proclaiming that the site no longer poses any significant health threat. This "no-further- action letter" is aimed at absolving the bank from liability for anything the cleanup program might have missed.

Jan Sheinson, environmental risk manager at American National Bank in Chicago, said he thinks the package will encourage bankers to reconsider lending to these sites, which have frequently been shunned in the past.

The U.S. Environmental Protection Agency is one of the groups involved in the Brownfields Forum, which also includes other federal, state, and local government agencies, along with industrialists, bankers, and lawyers.

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