Table of contents: DTSC CLEAN and ISCP Loan Programs
Owners and prospective purchasers of commercial real estate in California—particularly properties with a history of industrial use such as dry cleaners, auto repair facilities, and light manufacturing—are often confronted with the same threshold issue: environmental contamination that complicates financing, delays redevelopment, or stops a transaction altogether.
What is less widely understood is that the California Department of Toxic Substances Control (DTSC) does not function solely as an enforcement agency. It also administers financing programs specifically designed to move contaminated properties—commonly referred to as brownfields—through investigation and cleanup and back into productive use.
Two of the most significant of these programs are the CLEAN Loan Program and the Investigating Site Contamination Program (ISCP). For commercial property owners, these programs can materially change both the risk profile and the financial feasibility of a project.
Why These Programs Exist: The Brownfield Problem in California
Across California, thousands of commercial properties sit underutilized because of known or suspected contamination. This is especially true for sites historically used for dry cleaning operations, where releases of chlorinated solvents such as perchloroethylene (PCE) have impacted soil and groundwater, often migrating beyond property boundaries.
From a regulatory perspective, these sites present a dual concern: potential risk to human health and the environment, and the economic stagnation that occurs when otherwise valuable property cannot be redeveloped.
DTSC’s loan programs are designed to address both. By providing access to capital for investigation and remediation, the agency seeks to remove a primary barrier to redevelopment—namely, the cost and uncertainty associated with environmental cleanup.
The ISCP Loan Program: Financing Environmental Investigation
The Investigating Site Contamination Program (ISCP) is intended to fund the early stages of environmental assessment. This is the phase where property owners and purchasers are trying to move beyond preliminary due diligence and determine the nature and extent of contamination.
For properties such as former dry cleaners or industrial sites, this often involves subsurface investigation, soil and groundwater sampling, and technical analysis sufficient to evaluate potential regulatory pathways and cleanup costs.
A distinguishing feature of the ISCP program is its treatment of project feasibility. If, after investigation, DTSC determines that the site is not economically viable for redevelopment, a significant portion of the loan—up to 75 percent—may be forgiven. This structure reflects an intentional policy choice: to encourage investigation even where outcomes are uncertain, without requiring property owners to fully absorb the downside risk.
In practical terms, ISCP can serve as a bridge between initial environmental due diligence and informed decision-making. It allows property owners to develop a defensible understanding of site conditions without committing substantial upfront capital in situations where the project may ultimately prove infeasible.
The CLEAN Loan Program: Financing Remediation and Redevelopment
Once contamination has been characterized and a remedial approach identified, the CLEAN Loan Program provides funding for the next phase: cleanup.
CLEAN loans are significantly larger and are intended to cover the costs associated with implementing DTSC-approved remedial actions. For properties impacted by dry cleaning operations, this may include removal or treatment of contaminated soil, groundwater remediation systems, and long-term monitoring where required.
The program is structured to support projects that will result in a tangible public benefit, including improved environmental conditions, increased property values, and the return of underutilized sites to productive use. As a result, applicants are typically expected to demonstrate not only the technical viability of the cleanup, but also a credible plan for redevelopment or continued commercial use.
From a financial standpoint, the availability of below-market financing for remediation can be determinative. Cleanup costs are often the single largest obstacle in redeveloping contaminated commercial property. By reducing the cost of capital, the CLEAN program can make projects feasible that would not otherwise satisfy underwriting criteria.
Implications for Dry Cleaner Sites and Other Impacted Commercial Properties
The relevance of these programs is particularly acute for properties associated with historical dry-cleaning operations. PCE and related solvents are among the most common contaminants encountered in California, and their behavior in the subsurface—particularly vapor intrusion concerns—can create complex and costly regulatory obligations.
For owners of these properties, the combination of ISCP and CLEAN funding offers a structured pathway: first to define the scope of the problem, and then to implement a remedy under DTSC oversight.
More broadly, these programs are applicable to a range of commercial and industrial properties where environmental conditions have impaired value or limited use. This includes sites that have remained idle for extended periods, as well as properties where transactions have failed due to environmental uncertainty.
Integration with Environmental Liability and Transaction Strategy
From a legal and transactional perspective, the availability of DTSC loan programs intersects with several core environmental liability frameworks.
Prospective purchasers seeking to qualify for Bona Fide Prospective Purchaser protections under the federal Superfund law (CERCLA) often need to demonstrate that they have taken reasonable steps to address contamination. Participation in a DTSC-supervised investigation or cleanup, supported by ISCP or CLEAN funding, can be consistent with that requirement.
At the same time, the allocation of responsibility between buyer and seller remains a central issue. The presence of financing does not eliminate liability; rather, it provides a mechanism for managing and addressing it. Purchase agreements, indemnities, and environmental insurance must still be carefully structured in light of known or potential conditions.
It is also important to recognize that DTSC’s role in these programs is dual: the agency is both regulator and lender. That can streamline oversight and decision-making, but it also means that participants are operating within a defined regulatory framework from the outset.
A Structured Path Forward for Contaminated Property
For many commercial property owners, environmental contamination is viewed as a binary issue—either manageable at acceptable cost or prohibitive. DTSC’s CLEAN and ISCP loan programs introduce a more nuanced reality.
They provide a staged approach: investigation supported by shared risk, followed by cleanup financed at favorable rates, all within a regulatory structure designed to facilitate redevelopment. For dry cleaner sites and other impacted commercial properties, this can transform the analysis from “whether” a project is viable to “how” it can be executed.
Conclusion
DTSC’s CLEAN and ISCP loan programs are best understood not simply as funding sources, but as tools for unlocking the value of contaminated commercial real estate in California.
For owners of dry-cleaning properties, industrial sites, and other environmentally impacted assets, these programs offer a practical pathway through investigation, remediation, and ultimately redevelopment. When integrated into a broader legal and transactional strategy, they can reduce uncertainty, improve project economics, and make viable projects that might otherwise be set aside.
Understanding how to access and deploy these programs is therefore not just a technical exercise—it is a critical component of modern environmental and real estate practice in California.
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The Law Office of Jennifer F. Novak offers smart legal support for property owners and businesses. We focus on environmental court cases and rule compliance. Our team handles soil and groundwater cleanup, Clean Water Act citizen suits, and Water Board orders. We guide you through complex rules and fight for fair treatment. Contact us today for dedicated environmental legal help.
