Economic Development Administration
Remediation Activities Account for a Small Percentage of Total Brownfield Grant Funding Gao ID: GAO-06-7 October 27, 2005The Economic Development Administration (EDA) Reauthorization Act of 2004 (P. L. 108-373) included a requirement that GAO evaluate grants made by EDA for the economic development of brownfield sites. More than 450,000 brownfield sites--properties where redevelopment or reuse may be complicated by real or perceived environmental contamination--are scattered across the United States. This report discusses specifics of grants made by EDA at brownfields sites, including (1) the types, extent, and amount of EDA funds used for remediation activities; (2) the environmental standards and agencies involved; and (3) the economic development activities, standards, and impact.
Remediation activities conducted at EDA-funded brownfield sites appeared to be incidental to the purpose of the overall project and most often consisted of the removal and disposal of asbestos containing materials, underground storage tanks, or lead-based paint. We estimate that remediation activities were conducted at 54 percent of EDA-funded brownfield sites from fiscal year 1998 through 2004. Overall, we estimate that EDA used $4.8 million or about 1.4 percent of its grant funds to pay for remediation activities at 28 percent of the brownfield sites during this period. Grantees, former property owners, or other agencies generally were responsible for most environmental remediation costs at these sites. EDA regional environmental officers prepare environmental assessments to document a project's compliance with federal environmental requirements. In three of six EDA regional offices, we noted that the regional environmental officer routinely recommended various types of special conditions be added to grant awards concerning the remediation of hazardous substances that provide more specific assurance on a project's compliance with environmental standards. EDA requires grant recipients to certify that contractors will comply with applicable environmental requirements and works with federal, state, and local environmental agencies to ensure compliance. EDA grants to brownfield sites most often funded infrastructure improvements, such as upgrades to water and sewer lines, construction of streets and curbs, or installation of signage and lighting. EDA evaluates proposed projects competitively based on standard guidelines that emphasize increased numbers of relatively high-skill, high-wage jobs or private sector investment; strong leadership and project management experience; and matching funds from local governments or nonprofits. Data were not available on the reported economic development impact for most of the grants that GAO reviewed. Where data were available, the reported economic development data varied significantly when compared with initial project estimates for some grants. In some instances, permanent jobs or private sector investment estimates for proposed projects did not appear to be verified.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-7, Economic Development Administration: Remediation Activities Account for a Small Percentage of Total Brownfield Grant Funding
This is the accessible text file for GAO report number GAO-06-7
entitled 'Economic Development Administration: Remediation Activities
Account for a Small Percentage of Total Brownfield Grant Funding' which
was released on October 27, 2005.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Committees:
October 2005:
Economic Development Administration:
Remediation Activities Account for a Small Percentage of Total
Brownfield Grant Funding:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-7]
GAO Highlights:
Highlights of GAO-06-7, a report to congressional committees:
Why GAO Did This Study:
The Economic Development Administration (EDA) Reauthorization Act of
2004 (P. L. 108-373) included a requirement that GAO evaluate grants
made by EDA for the economic development of brownfield sites. More than
450,000 brownfield sites”properties where redevelopment or reuse may be
complicated by real or perceived environmental contamination”are
scattered across the United States.
This report discusses specifics of grants made by EDA at brownfields
sites, including (1) the types, extent, and amount of EDA funds used
for remediation activities; (2) the environmental standards and
agencies involved; and (3) the economic development activities,
standards, and impact.
What GAO Found:
Remediation activities conducted at EDA-funded brownfield sites
appeared to be incidental to the purpose of the overall project and
most often consisted of the removal and disposal of asbestos containing
materials, underground storage tanks, or lead-based paint. We estimate
that remediation activities were conducted at 54 percent of EDA-funded
brownfield sites from fiscal year 1998 through 2004. Overall, we
estimate that EDA used $4.8 million or about 1.4 percent of its grant
funds to pay for remediation activities at 28 percent of the brownfield
sites during this period. Grantees, former property owners, or other
agencies generally were responsible for most environmental remediation
costs at these sites.
EDA regional environmental officers prepare environmental assessments
to document a project‘s compliance with federal environmental
requirements. In three of six EDA regional offices, we noted that the
regional environmental officer routinely recommended various types of
special conditions be added to grant awards concerning the remediation
of hazardous substances that provide more specific assurance on a
project‘s compliance with environmental standards. EDA requires grant
recipients to certify that contractors will comply with applicable
environmental requirements and works with federal, state, and local
environmental agencies to ensure compliance.
EDA grants to brownfield sites most often funded infrastructure
improvements, such as upgrades to water and sewer lines, construction
of streets and curbs, or installation of signage and lighting. EDA
evaluates proposed projects competitively based on standard guidelines
that emphasize increased numbers of relatively high-skill, high-wage
jobs or private sector investment; strong leadership and project
management experience; and matching funds from local governments or
nonprofits. Data were not available on the reported economic
development impact for most of the grants that GAO reviewed. Where data
were available, the reported economic development data varied
significantly when compared with initial project estimates for some
grants. In some instances, permanent jobs or private sector investment
estimates for proposed projects did not appear to be verified.
Before and after Photographs of EDA-Funded Business Incubator
(Philadelphia, PA):
[See PDF for image]
[End of figure]
What GAO Recommends:
GAO recommends that the Secretary of Commerce (1) require all EDA
regional offices to use special conditions concerning the remediation
of hazardous substances and (2) ensure that EDA staff verify the
estimated jobs and private-sector investment for proposed projects.
In commenting on a draft of this report, the Department of Commerce
agreed with the report‘s findings and provided technical comments on
the recommendations which are discussed at the end of the report.
www.gao.gov/cgi-bin/getrpt?GAO-06-7.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William B. Shear at (202)
512-8678 or shearw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
EDA Has Provided Limited Funding for a Variety of Remediation
Activities at Brownfield Sites:
Some EDA Regions Have Developed Processes to Better Ensure Compliance
with Environmental Remediation Standards:
Grants Were Used for a Variety of Economic Development Purposes, but
Data on the Projects' Impact Were Largely Unavailable:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Examples of EDA Grants to Brownfield Projects:
Appendix III: Comments from Department of Commerce:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Types of Remediation Activities Conducted at EDA-Funded
Brownfield Sites, Fiscal Years 1998-2004:
Table 2: EDA's Investment Policy Guidelines:
Table 3: Initial Estimates and 6-Year Data on Jobs Created and
Retained:
Table 4: Initial Project Estimates and 6-Year Data on Private Sector
Investment:
Table 5: GAO Sample of EDA Grants to Brownfield Sites:
Table 6: Grants Reviewed at EDA Regional Offices:
Table 7: 95-Percent Confidence Intervals for Numeric and Percentage
Estimates:
Figures:
Figure 1: EDA Grants to Brownfield Projects Compared with Total EDA
Grants, Fiscal Years 1998-2004:
Figure 2: Remediation at EDA-Coded Brownfield Sites, Fiscal Years 1998-
2004:
Figure 3: Analysis of EDA Funding to Brownfield Sites, Fiscal Years
1998-2004:
Figure 4: Purposes and Project Goals of EDA Grants with Brownfield
Coding:
Figure 5: EDA Grant to the City of Atlanta and Northyards Business
Park, LLC:
Figure 6: EDA Grant to Philadelphia Authority for Industrial
Development:
Figure 7: EDA Grant to City of Chester, Chester, Pennsylvania:
Figure 8: EDA Grants to Greater Kelly Development Corporation, San
Antonio, Texas:
Figure 9: EDA Grant to FAME Assistance Corporation, Los Angeles,
California:
Abbreviations:
CERCLA: Comprehensive Environmental Response, Compensation and
Liability Act:
DOD: Department of Defense:
DOE: Department of Energy:
EDA: Economic Development Administration:
EPA: Environmental Protection Agency:
HUD: Department of Housing and Urban Development:
NEPA: National Environmental Policy Act of 1969:
OPCS: Operation and Planning Control System:
REO: Regional Environmental Officers:
Letter October 27, 2005:
The Honorable James M. Inhofe:
Chairman:
The Honorable Jim Jeffords:
Ranking Minority Member:
Committee on Environment and Public Works:
United States Senate:
The Honorable Don Young:
Chairman:
The Honorable James L. Oberstar:
Ranking Democratic Member:
Committee on Transportation and Infrastructure:
House of Representatives:
This report responds to a requirement in the Department of Commerce's
Economic Development Administration (EDA) Reauthorization Act of 2004
that GAO evaluate grants made by EDA for the economic development of
brownfield sites.[Footnote 1] Brownfield sites--areas where
redevelopment or reuse may be complicated by real or perceived
environmental contamination--including former industrial and commercial
properties, gas stations, and military sites. More than 450,000 of
these sites are scattered across the United States. Because of the
stigma of existing or potential contamination, brownfield sites often
remain unproductive, blighting communities while developers resort to
the use of "greenfields," or open spaces outside of cities. However,
brownfield sites often offer a number of redevelopment advantages,
including competitive locations, established infrastructure, untapped
customer and labor markets, easy access to multiple modes of
transportation, and unique development opportunities, such as historic
and culturally significant buildings. For the past 40 years, EDA has
provided support for the redevelopment of brownfield sites as a core
component of its mission to aid the nation's most economically
distressed communities.[Footnote 2] Historically, EDA's brownfield
redevelopment activities have focused on sites after assessment and
remediation (cleanup of contaminated or hazardous materials) have taken
place. However, EDA has stated that current statutory authorities allow
it to provide support for site assessment and incidental remediation
activities at brownfield sites.
To evaluate the grants made by EDA for the economic development of
brownfield sites, we (1) determined the types of remediation activities
conducted, the extent to which projects funded by EDA at brownfield
sites included remediation activities, and the amount of EDA grant
funds used for those activities; (2) identified the environmental
standards applied to projects, the role of environmental agencies
(federal, state, and local), and the amount of public participation;
and (3) identified the economic development activities conducted, the
economic development standards applied to projects, and the reported
economic development impact.
The EDA Reauthorization Act of 2004 directed GAO to evaluate EDA grants
for the economic development of brownfield sites during the 10 years
before the law came into effect [1994 to 2004]. As agreed with the
committees of jurisdiction, we limited our analysis for this report to
the grants EDA awarded to brownfield sites from fiscal years 1998
through 2004, because EDA did not begin coding these grants in its data
systems with a special brownfield code until 1998. The act also
directed GAO to use the term "brownfield site" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA). CERCLA defines a brownfield site as real property that
is or may be contaminated by a hazardous substance that could
complicate redevelopment efforts.[Footnote 3] CERCLA does not include,
under the brownfield definition, sites listed on the Environmental
Protection Agency's (EPA) National Priorities List; sites subject to
environmental enforcement actions; and sites under the custody or
control of the federal government. However, EDA codes certain grants as
brownfield sites, even though the sites are not included under the
CERCLA definition. These grants are primarily for projects at former
military or Department of Energy (DOE) installations that were still
under the control of the federal government when the grant was made. In
some cases, the federal government transferred ownership of the
brownfield site before the project was completed. As a result, this
report presents separate analyses of (1) all grants EDA coded as
brownfield sites and (2) grants EDA coded as brownfield sites that are
specifically included under the CERCLA definition.
Unlike EPA and the Department of Housing and Urban Development (HUD),
which administer specific grant programs targeted at brownfields site
redevelopment, EDA does not have a specific brownfield program.
Instead, the agency provides grants for brownfield-related activities
under three programs:
* The Public Works Program empowers distressed communities to
revitalize, expand, and upgrade their physical infrastructure to
attract new industry, encourage business expansion, diversify local
economies, and generate or retain long-term private sector jobs and
investment. For example, the program has provided grants for investment
in industrial and business parks, port facilities, and rail spurs as
well as for the redevelopment of brownfields.
* The Economic Adjustment Program helps state and local interests
design and implement strategies to adjust or bring about change to an
economy. This program focuses on areas that have experienced or are
under threat of serious structural damage to the underlying economic
base-for example, from foreign trade competition, the actual or
threatened closure of a principal industry or company, a catastrophic
natural disaster, or a terrorist attack.
* The Defense Adjustment Program, a subset of the Economic Adjustment
Program, helps communities impacted by base closures, defense contract
reductions, or both to rebuild and diversify their economies. EDA
receives funding for this program through direct appropriated funding
or transfers of funds for defense projects from the Department of
Defense (DOD) Office of Economic Adjustment.
To meet our objectives, we reviewed the project files for a random
sample of 140 of the 257 construction-related grants that EDA coded as
brownfield sites from fiscal years 1998 through 2004.[Footnote 4] We
visited EDA regional offices in Atlanta, Austin, Chicago, Denver,
Philadelphia, and Seattle to conduct our file reviews. During these
reviews, we obtained information on the remediation activities
conducted and the amount of EDA grant funds used for these activities,
economic development activities conducted and economic development
impacts, and amount of public participation in the projects. We used
the 140 construction-related grants in our sample to make estimates
about the entire population of EDA grants coded as brownfield sites and
the subpopulation of EDA grants with brownfield coding that were
included under the CERCLA brownfield definition. We interviewed
officials from EDA to obtain a better understanding of the economic
development and environmental standards applied to projects and the
role of federal, state, and local environmental agencies in the
projects. We also interviewed officials from EPA and HUD for
information about each organization's brownfield redevelopment
activities.
We conducted our work from January 2005 through September 2005 in
accordance with generally accepted government auditing standards.
Appendix I contains a detailed description of our scope and
methodology.
Results in Brief:
We found that remediation activities at EDA-funded brownfield sites
appeared to be incidental to the purpose of the overall projects and
included cleanup activities such as the removal and disposal of
asbestos-containing materials, underground storage tanks, lead-based
paint, and contaminated soil. Overall, we estimated that of the 257
construction-related grants with brownfield coding that EDA made from
fiscal years 1998 to 2004, approximately 139 (54 percent) of them
included some kind of remediation activity.[Footnote 5] However, EDA
contributed funding for remediation activities at only an estimated 72
(28 percent) of these brownfield sites. Grantees, former property
owners, or other agencies generally were responsible for most
remediation costs. We also estimate that of the 257 construction-
related grants, 191 (74 percent) met the CERCLA definition at the time
the grants were awarded, and remediation activities were conducted at
100 (52 percent) of the sites. Further, our review of a sample of 140
construction-related EDA grants with brownfield coding showed that EDA
did not provide a significant amount of funding for remediation
activities and that projects funded through the Defense Adjustment
Program generally required more funding for remediation activities than
projects funded through EDA's Public Works or non-Defense related
Economic Adjustment Programs. Total funding for all construction-
related grants with brownfield coding that EDA awarded in fiscal years
1998 through 2004 was $341.2 million. Of this amount, an estimated $4.8
million (or about 1.4 percent) was used for remediation activities,
including $3.7 million for remediation activities EDA funded primarily
at former military or DOE sites under its Defense Adjustment Program
and $1.1 million for remediation activities funded through regular EDA
appropriations. Similarly, we estimate that EDA provided about $226
million to brownfield sites that met CERCLA standards and used $3.3
million (or about 1.5 percent) of it for remediation activities,
including $2.3 million for remediation activities under the Defense
Adjustment Program and $1 million for remediation activities funded
through Public Works or non-Defense related Economic Adjustment
Programs.
EDA is required to ensure that environmental assessments of its
brownfield projects comply with all federal environmental statutes and
regulations. In turn, EDA requires that grant recipients certify that
their contractors and subcontractors will comply with all applicable
environmental laws and regulations and works with federal, state, and
local environmental agencies to ensure that these requirements are met.
EDA regional environmental officers (REO) prepare an environmental
assessment to document a project's compliance with federal
environmental requirements. As part of the assessment, the REO
evaluates whether the project site contains any hazardous substances
that might require remediation, using documentation submitted by grant
applicants. We noted that three of the six REOs (in Atlanta, Chicago,
and Seattle) routinely recommended adding special conditions to grant
awards that grant recipients provide evidence to the government that
hazardous substances had been remediated in accordance with
environmental standards not identified in the standard terms and
conditions of the awards. The REO in EDA's Chicago office told us that
special conditions, while not required, provided EDA with more specific
assurance that a project complied with standards for the remediation of
hazardous substances. EDA does require that grant applicants provide
evidence that the public is aware of proposed projects, but does not
impose a specific public participation requirement for grants. For most
of the grants we reviewed, we found evidence that efforts were being
made to inform the public of proposed projects through venues such as
newspaper articles, public meetings, and public notices.
EDA brownfield grants were used for various economic development
purposes, most often for infrastructure improvements and building
demolition or renovation that resulted in the development of industrial
and business parks, business incubators, training facilities, and
tourism and recreation facilities. EDA evaluates proposed construction
projects competitively based on standard investment policy guidelines
that emphasize increased numbers of relatively high-skill, high-wage
jobs or private sector investment, strong leadership and project
management experience, and matching funds from local governments or
nonprofits. EDA grant applicants are required to demonstrate how
proposed projects will meet or exceed these guidelines. We found that
data were not available on the reported economic development impact for
most of the grants that we reviewed because the projects either had not
been completed or had not been completed long enough to establish
results. However, the reported economic development data that were
available sometimes varied significantly from the initial project
estimates. Further, while regional staff are required to verify
permanent job and private sector estimates, we found that in some
instances the estimates for proposed projects did not appear to be
verified. For example, one EDA grant we reviewed for the development of
a biotechnology center estimated that the project would generate 400
permanent jobs. But this estimate included 300 students who were
expected to graduate from the center within 5 years and whose jobs
would therefore not be a direct result of the project.
To better ensure that remediation activities are conducted in
accordance with applicable regulations and to obtain better economic
development impact data, this report recommends that the Secretary of
Commerce (1) require all EDA regional offices to use special conditions
concerning the remediation of hazardous substances and (2) ensure that
EDA staff verify the estimated jobs and private-sector investment for
proposed projects.
In commenting on our draft report, the Deputy Secretary of Commerce
wrote that the report accurately reflects EDA's role in supporting
brownfield revitalization projects and that remediation activities are
a small part of EDA's activities. Two of the comments addressed our
recommendations. The first stated that adding special conditions would
not change grantees' and EDA's obligations to ensure that projects
comply with applicable laws and regulations. However, we found that
half of EDA's regional offices were using special conditions with some
success and believe it would be beneficial if all EDA regional offices
adopted this best practice. The second comment questioned our
recommendation that verification of projected jobs and private
investment in initial applications be strengthened, noting that the
data for completed projects after 6 years were too limited. This
recommendation is based on our findings that some initial estimates did
not appear to be effectively substantiated. We continue to believe that
substantiating these estimates would help EDA make more accurate
funding decisions and increase the chances of EDA funding projects with
the greatest potential impacts.
Background:
EDA was established in 1965 within the Department of Commerce to
generate jobs, help retain existing jobs, and stimulate industrial and
commercial growth in economically distressed areas of the United
States.[Footnote 6] EDA fulfills its mission through grants to state
and local governments, Indian tribes, educational institutions,
nonprofit organizations, and others. EDA grants, including those in
support of brownfield redevelopment, are intended to create wealth and
minimize poverty by promoting a business environment that attracts
private capital investment and creates relatively higher-skill, higher-
wage jobs.
EDA grants to sites coded as brownfields represent a small portion of
the agency's total grants portfolio. EDA awarded 363 grants totaling
$358.8 million to sites coded as brownfields (including construction
and planning grants) from fiscal years 1998 through 2004. EDA grants to
sites coded as brownfields represented 13.6 percent of the $2.6 billion
of the agency's total grants portfolio of 6,826 grants EDA awarded
during this period (fig. 1).
Figure 1: EDA Grants to Brownfield Projects Compared with Total EDA
Grants, Fiscal Years 1998-2004:
[See PDF for image]
[End of figure]
In 1998, EDA began coding grants to brownfield sites with a special
initiatives code, 1 of more than 100 such codes EDA uses to categorize
its grants.[Footnote 7] EDA generally uses the same CERCLA definition
of a brownfield site as EPA, but it also codes as brownfield sites some
venues that are not included under the CERCLA definition of a
brownfield site, primarily former military or DOE installations that
are still under the control of the federal government at the time the
grant is awarded. Under its current statutory authorities EDA can make
grants to these sites without requiring that the grant recipient have
title to the property.[Footnote 8] In such cases, EDA generally
requires that the grant recipient provide evidence that the property
will be transferred at a future date or obtain a leasehold interest in
the property until it transfers.
EDA has six regional offices across the United States that administer
its grant programs. Each regional office accepts preapplication
investment proposals from prospective grantees. Based on established
regulations, EDA regional officials encourage only those investment
proposals that will significantly benefit areas experiencing or
threatened with substantial economic distress to continue with the
application process. Before receiving a grant, an entity must submit a
preapplication proposal to an EDA regional office responsible for that
area. After preliminary reviews by various EDA regional office staff,
each preapplication proposal is considered by the regional Investment
Review Committee, which consists of the division chiefs and other
regional office staff, to ensure that the entity is eligible to receive
funds and that the project is likely to provide benefits meeting EDA's
criteria. The committee decides whether the entity should be invited to
submit an application, but EDA headquarters reviews the committee's
recommendation action for quality assurance. Grant funds are awarded
upon completion of the application.
EDA Has Provided Limited Funding for a Variety of Remediation
Activities at Brownfield Sites:
We found that remediation activities at brownfield sites typically
included the removal and disposal of materials containing asbestos,
underground storage tanks, lead-based paint, and contaminated soil.
Generally, these activities have been a small part of much larger
projects that involved infrastructure improvements, renovations of
buildings, or complete demolition of existing structures that do not
meet current building codes. Overall, we estimate that remediation
activities were conducted at about half of the 257 construction-related
grants that EDA coded as brownfield sites from fiscal years 1998
through 2004. EDA provided funding for remediation activities at only
about a quarter of the sites, using an estimated 1.4 percent of its
funding to pay for these activities because these costs were generally
covered by grantees, former property owners, or other agencies. Our
estimates showed similar percentages for the subset of brownfield sites
meeting CERCLA standards and indicated that EDA spent more for
remediation activities on projects funded through the Defense
Adjustment Program than for projects funded through its other programs
(Public Works or non-Defense related Economic Adjustment Programs).
Although remediation activities took a variety of forms, removing and
disposing of materials containing asbestos was the primary activity
(table 1).
Table 1: Types of Remediation Activities Conducted at EDA-Funded
Brownfield Sites, Fiscal Years 1998-2004:
Remediation activity conducted: Asbestos abatement;
Estimated percent of projects[A]: 84.
Remediation activity conducted: Underground storage tank removal;
Estimated percent of projects[A]: 35.
Remediation activity conducted: Lead-based paint abatement;
Estimated percent of projects[A]: 17.
Remediation activity conducted: Other[B];
Estimated percent of projects[A]: 46.
Source: GAO analysis of EDA data.
[A] Percentages do not add to 100 percent because some projects
required multiple types of remediation.
[B] Other remediation activities included removing and disposing of
contaminated soil or polychlorinated biphenyl materials and cleaning up
contaminated groundwater.
[End of table]
EDA officials said that remediation activities were often necessary to
the redevelopment of brownfield sites. For example, asbestos-containing
materials are often found in buildings constructed before 1970 and must
be removed if the structures are to conform to EPA standards. EPA has
regulated the use of asbestos since 1973 through various laws such as
the Clean Air Act and the Toxic Substances Control Act.[Footnote 9]
On the basis of our sample of 140 EDA grants made to brownfield sites
between 1998 and 2004, we estimated that remediation activities were
conducted at 54 percent of the sites EDA coded as brownfields and at 52
percent of the sites that met the CERCLA definition. We also estimated
that EDA provided funding for remediation at 28 percent of all the
sites coded as brownfields (fig. 2).
Figure 2: Remediation at EDA-Coded Brownfield Sites, Fiscal Years 1998-
2004:
[See PDF for image]
[End of figure]
EDA officials said that they generally tried to limit the amount of
grant funds that were used for remediation activities, per an EDA
Directive effective July 1992 and later clarified in a memorandum from
the Acting Assistant Secretary of EDA in June 2000, which states that
EDA typically participates in hazardous waste cleanups as part of a
larger economic development project, but not as the principal activity
of the EDA funded activity. As previously stated and further shown in
the examples presented below, we generally found this to be true for
the projects we reviewed. EDA officials explained that they were in
business to redevelop blighted areas in order to create higher paying
jobs and promote private investment and that remediation was an
incidental EDA activity. They noted that former property owners or
other federal agencies, such as EPA or HUD that have specific
brownfield grant programs, should help fund remediation at sites
requiring a significant amount of environmental cleanup. Specific
examples where EDA funded remediation activities that appeared to be
incidental to the larger projects include the following:
* A project in Cumberland, Maryland, funded in 2002, that met the
CERCLA definition of a brownfield site required environmental
remediation work to renovate an existing building for use as a micro-
enterprise business incubator and training facility. From EDA's
investment of $900,000 in the project, about 2 percent of EDA's funds
were used to remove asbestos and lead paint found throughout the
building being renovated.
* A 1999 project in Atlanta, Georgia that met the CERCLA definition of
a brownfield site received EDA grant funds to help construct a proposed
business park, including a roadway, and a water line and sanitary sewer
line. During the project, the contractors discovered the buildings
scheduled for demolition contained asbestos, and the soil underneath
the path of the road was contaminated with lead and petroleum. EDA
agreed to participate only in cleanup activities associated with
demolition of the buildings that were in the footprint of the EDA
improvements (asbestos and removal of contaminated soil). Of EDA's
investment of $1.2 million, about 7 percent of the funds were used for
remediation.
Other federal agencies and grantees played a larger role than EDA in
cleaning up some sites:
* EDA provided $1.57 million to the Lawrence Economic Development
Corporation in 2002 for infrastructure improvements (water lines,
sanitary sewers, and roads) to a brownfield site in South Point, Ohio,
that was listed on EPA's National Priority List. EDA's project, located
on about one-third of this Superfund site, required removing
contaminated soil, burying the soil onsite, and covering it with a clay
cap. EDA did not provide any funding for these remediation activities.
Instead, the previous owner paid about $1 million for the remediation.
The federal and state EPAs were responsible for monitoring the
remediation. Although the site was completely remediated, it did not
meet the CERCLA definition for a brownfield site because it remains on
EPA's National Priority List since EPA plans to continue performing
groundwater testing for an extended period of time, possibly another 20
years.
* In 2000, EDA provided $1.1 million funding through the Defense
Adjustment Program to develop infrastructure (storm drains, new streets
and sidewalks, street lights, sewer lines, and water lines) for an
industrial park in Pomona, California. This site required removal of
asbestos, underground storage tanks, and lead paint. Because the
project was located on the former Naval Industrial Reserve Ordnance
Plant and the Navy still legally owned the land, the Navy paid for all
remediation costs. The California Department of Toxic Substance Control
provided documentation to EDA that it had provided regulatory oversight
for the necessary remediation activities. This project did not meet the
CERCLA definition of a brownfield site since the land was still owned
by the Department of the Navy.
Appendix II contains additional details on the Atlanta project and
examples of remediation at other EDA sites coded as brownfields.
Overall, we found that of the $341 million EDA provided to sites coded
as brownfields from fiscal years 1998 through 2004, an estimated 1.4
percent of its funding, or $4.8 million, was used for remediation
activities. Similarly, of the estimated $226 million for sites coded as
brownfields meeting the CERCLA definition, we estimate that EDA used
about 1.5 percent, or $3.3 million, of its funding for remediation
activities (fig. 3).
Figure 3: Analysis of EDA Funding to Brownfield Sites, Fiscal Years
1998-2004:
[See PDF for image]
[End of figure]
We also analyzed EDA grant funds spent on remediation activities
through regular EDA appropriations and appropriated or transferred DOD
funding. EDA receives direct appropriated or transferred funding under
the Defense Adjustment Program for projects at former military or DOE
installations that have closed and are in the process of being
redeveloped. These sites often require extensive remediation. Our
analysis demonstrated that EDA has spent more for remediation
activities on projects funded through the Defense Adjustment Program
than for projects funded through its Public Works or non-Defense
related Economic Adjustment Programs--$3.7 million and $1.1 million,
respectively (fig. 3). From fiscal years 1998 through 2004, EDA
received $135 million in direct-appropriated or transferred funding for
construction-related projects under the Defense Adjustment Program, or
about 40 percent of the total grant funding provided to sites coded as
brownfields during this period.
Our sample of 140 grant awards contained 46 grants funded through the
Defense Adjustment Program. For seven of these grants, more than 10
percent of the funding was designated for remediation activities,
including two grants made to brownfield sites that were included under
the CERCLA definition at the time the grants were awarded. For one of
these grants, $1.46 million or 29 percent of the funding was earmarked
for remediation activities (see the Philadelphia case study in app.
II). For projects funded through direct appropriations under the
Defense Adjustment Program, EDA has the discretion to choose and
administer the projects in accordance with their Economic Adjustment
Program authority. However, according to EDA officials, the majority of
EDA projects in the Defense Adjustment Program are undertaken with
transferred funding pursuant to a memorandum of understanding between
EDA and DOD's Office of Economic Adjustment. The officials added that
these projects are often funded pursuant to a targeted DOD
appropriation, and EDA is generally left with little or no up-front
decisional authority over which projects should receive funding. In
addition, the officials stated that in these projects, DOD's Office of
Economic Adjustment provides EDA with a general framework for the
project; and EDA, which primarily serves as the grant administrator,
works directly with the grantee to establish the specific scope of work
and controls the disbursement of funds for eligible expenses.
Some EDA Regions Have Developed Processes to Better Ensure Compliance
with Environmental Remediation Standards:
EDA is required to ensure that environmental assessments of its
projects coded as brownfields comply with various federal environmental
requirements. EDA relies on federal, state and local environmental
agencies to ensure that grant recipients and their contractors and
subcontractors comply with applicable environmental standards. REOs
prepare environmental assessments to document compliance with federal
environmental requirements and determine whether the project site
contains any hazardous substances that might require remediation. We
noted that the REOs at three of EDA's six regional offices routinely
recommended adding special conditions to grant awards concerning the
remediation of hazardous substances in order to provide EDA with more
specific assurance that projects were complying with environmental
standards. We also noted that while EDA requires grant applicants to
provide evidence that the public is aware of proposed projects, it does
not have a specific public participation requirement.
Environmental Assessments Document That Projects Comply with Applicable
Environmental Laws:
Under the National Environmental Policy Act of 1969 (NEPA), EDA
generally evaluates the likely environmental effects of brownfield
projects it is proposing using a relatively brief environmental
assessment or, if the action will be likely to significantly affect the
environment, a more detailed environmental impact statement.[Footnote
10] These environmental assessments are conducted in accordance with
federal environmental statutes and regulations.[Footnote 11] To
document a project's compliance with this act and other federal
environmental requirements, REOs prepare environmental assessments to
help ensure that adverse environmental impacts are mitigated or avoided
to the extent possible. As part of the assessment, the REO reviews
documentation from grant applicants to determine whether any hazardous
substances are present at the project site that may require remediation
activities. For example, grant applicants are required to certify on
the Applicant Certification Clause (Form ED-536) whether a project site
is contaminated by toxic or hazardous substances. The form includes
questions related to the presence of asbestos-containing material,
underground storage tanks, equipment (such as electrical transformers)
containing polychlorinated biphenyls, and other hazardous substances.
Grant applicants are also required to submit copies of any
environmental surveys or inspection reports conducted for the project
site and documentation from any investigations by federal, state, or
local environmental agencies that are related to it.
In three regional offices (Atlanta, Chicago, and Seattle), we noted
that REOs routinely recommended adding special conditions on the
remediation of hazardous substances to grant awards. For example:
* In 1998, EDA attached a special condition to a $668,500 grant made to
the city of Cleveland, Ohio and the Shorebank Enterprise Group for the
renovation and expansion of an existing business incubator building to
be used by new and emerging companies at a brownfield site that met the
CERCLA definition. The condition stipulated that before the project
closed and EDA made the final disbursement, the recipient would provide
evidence satisfactory to the government that all asbestos had been
disposed of in a manner that complied with applicable state and federal
regulations.
* In 1999, EDA attached a special condition to a $750,000 grant to the
city of Marquette, Michigan for infrastructure improvements to
facilitate business revitalization in the central business district,
including the replacement of water mains, sanitary sewer mains,
sidewalks, and curbs at a brownfield site that met the CERCLA
definition. The condition stipulated that the recipient agreed to
remediate any soils found to contain regulated levels of contamination
as defined by the Michigan Department of Environmental Quality, using
procedures approved by the department.
* In 1999, EDA placed another condition on a $1,085,200 grant to Lenoir
City and Loudon County Tennessee for the demolition of existing
structures and construction of a new two-story building in the central
business district at a brownfield site that met the criteria in CERCLA.
The purpose of the new building was to house a satellite campus that
included a community college, career center, city library, and business
development center. This special condition required the recipient to
furnish evidence satisfactory to the government that all asbestos and
lead-based paint materials had been removed or contained from the
property before construction started, in accordance with the National
Emission Standards for Hazardous Air Pollutants and other appropriate
standards and regulations.
The REO at EDA's Chicago regional office told us that special
conditions concerning the remediation of hazardous substances provided
EDA with more specific assurance that a project would comply with
environmental standards not identified in the standard terms and
conditions of EDA grant awards. The Chicago REO also told us that
special conditions could be used to protect the government from
liability if individuals were injured by exposure to hazardous
substances at EDA-funded brownfield sites. The Chicago REO added that
while such conditions were not required, they were useful in
emphasizing the grant recipient's responsibilities for site-specific
environmental issues.
EDA's Seattle regional office routinely attaches specific assessments
and additional documentation requirements of environmental hazards to
Defense Adjustment Program project deeds. According to the Seattle
office's regional counsel, while the environmental restrictions are
often benign and unobtrusive, they promote efficiency by calling
attention to the restrictions and placing the onus on the grantee to
meet the additional requirements in the deed. The REO at EDA's Denver
regional office also agreed that special conditions concerning the
remediation of hazardous substances were more effective than EDA's
standard terms and conditions, although we did not identify any grants
to which the Denver REO attached such conditions. According to
officials at EDA headquarters, as part of its due diligence under NEPA
and depending upon the project facts and timing for remediation, the
agency may make its financial assistance conditional on the grantee's
providing evidence that a remediation plan has been approved at the
state level or of actual compliance with a state process.
EDA Works with Federal, State, and Local Environmental Agencies to
Ensure That Grant Recipients Comply with Applicable Environmental Laws:
As we have seen, EDA requires grant recipients and their contractors
and subcontractors to comply with all applicable federal, state, local,
and territorial environmental laws as part of the standard terms and
conditions of its grant awards. EDA works with environmental agencies
at all levels of government to ensure that grant recipients comply with
environmental requirements, but state environmental agencies (along
with EPA) generally take the lead in ensuring such compliance. For
example:
* In 2000, EDA funded a project in Kansas City, Missouri to demolish
blighted structures, rehabilitate combined sewer lines, and replace
catch basins at an existing industrial park site. This site also met
the criteria of a brownfield under CERCLA. About 9 percent of the $1
million awarded to the project was used for the removal of material
containing asbestos found in the structures. The project file showed
that the Missouri Department of Natural Resources issued a permit to
the firm that completed the asbestos remediation in accordance with the
state's asbestos regulations.
* EDA funded another project that met the criteria of a brownfield
under CERCLA in Newport, Rhode Island in 2002, for infrastructure and
site work on a former naval housing site that was being redeveloped as
a community college, preschool program, and office complex. EDA funded
$26,394 of the remediation costs for soil contaminated with arsenic
(about 3 percent of the $1 million awarded to the project). The project
file showed that the Rhode Island Department of Environmental
Management provided oversight of the cleanup of the contaminated soil
to ensure compliance with the state policy for the remediation of
arsenic contaminated soil.
EDA Grants Do Not Include A Specific Public Participation Requirement:
We found that EDA required grantees to provide evidence of any efforts
they had made to ensure that the public was aware of proposed projects,
but it does not have a specific public participation requirement.
Grantees could use newspaper articles, public meetings, or public
notices as evidence of public awareness efforts. We found this type of
evidence in the project files for an estimated 81 percent of the
projects coded as brownfields. In some cases, the public might have
been aware of projects, but we did not find evidence that grantees had
tried to disseminate information in the project files; in some cases,
EDA officials could not locate the evidence. EDA also requires grant
applicants to fully describe any public controversy surrounding or
objections to the proposed project, including the steps that were taken
to resolve any issues, and submit a copy of the transcript if formal
public hearings were held. Our analysis showed that most of the
projects were not controversial and that public hearings were held for
an estimated 27 percent of the projects with brownfield coding. For
example:
* A project funded in 2002 in Trenton, New Jersey involved moving
industrial park businesses from a flood prone industrial area to a
flood protected area. The property contained asbestos, underground
storage tanks, and contaminated soil, but much of the remediation had
been done prior to this EDA grant.[Footnote 12] The project met the
criteria of a brownfield site in accordance with CERCLA. According to
the environmental assessment, the project was discussed at open city
council meetings, and EDA officials said that they were not aware of
any objections to the project.
* Another project funded in 1998 in Los Angeles, California involved
converting an abandoned four-story building into a business incubator.
The project met the criteria of a brownfield site in accordance with
CERCLA. EDA spent less than $100,000 of a $1.8 million grant on
remediation. The project details were posted in the California Areawide
Clearinghouse, a biweekly public review and comment process, and sent
to the Southern California Association of Governments. The project also
received widespread newspaper coverage.
* A project funded in 2002 in Boston, Massachusetts involved renovating
an industrial building in a shipyard and purchasing a boat lift to help
attract new business. The project met the criteria of a brownfield site
in accordance with CERCLA. At the time of our review, EDA had spent
just over $1,000 of a $1 million grant on asbestos removal. According
to the project file, public hearings were not held on this specific
grant, but over 20 public meetings were held on planned renovations of
the entire shipyard over a 3-year period. The file also documented that
there was no controversy involving the project.
Grants Were Used for a Variety of Economic Development Purposes, but
Data on the Projects' Impact Were Largely Unavailable:
We found that EDA brownfield grants were used for various economic
development purposes that resulted in the creation of industrial and
business parks, business incubators, training facilities, and tourism
and recreation facilities. The guidelines EDA uses to evaluate proposed
projects emphasize a variety of factors, including the following:
* The number of relatively higher-skill, higher-wage jobs the project
will generate;
* private sector investment in the project;
* strong leadership skills and project management experience; and:
* the amount of matching funds that are available from local
governments or nonprofits.
We found that data were not available on the reported economic
development impact for most of the grants that we reviewed because the
projects either were not complete or had not been completed long enough
to establish results. However, we found during a review of project
files that some estimates of the permanent jobs or private-sector
investment a project would create did not appear to have been properly
verified.
EDA Grants Supported a Variety of Economic Development Purposes:
For our analysis, we reviewed EDA grants to sites coded as brownfields
to determine the grants' purposes and project goals. We found that the
most common purpose of EDA grants to brownfield sites was to make
infrastructure-related improvements, such as upgrading water and sewer
lines, constructing streets and curbs, and installing signage and
lighting. EDA's development activities supported a variety of projects.
Figure 4 shows the most common purposes of EDA grants, along with the
goals or types of projects--most commonly industrial parks and other
commercial developments--that were planned for former brownfield sites.
Figure 4: Purposes and Project Goals of EDA Grants with Brownfield
Coding:
[See PDF for image]
[A] Percents do not sum to 100 because some of the projects had more
than one purpose, goal, or both.
[B] Other purposes included transportation development, financial
assistance, and waste water treatment upgrades.
[C] Other project goals included providing low-income housing and
upgrading transportation.
[End of figure]
When eligible grant applicants submit preapplication proposals for
construction projects, EDA must first determine whether the project
area is eligible for assistance.[Footnote 13] Project areas eligible
for EDA assistance generally include those that have one of the
following:
* an unemployment rate at least 1 percentage point higher than the
national average for the most recent 24-month period for which data are
available;
* per capita income that is 80 percent or less of the national average
for the most recent period for which data are available; or:
* a special need, as determined by EDA, arising from actual or
threatened severe unemployment or economic adjustment problems
resulting from severe short-term or long-term changes in economic
conditions.[Footnote 14]
After determining that a project area is eligible for assistance, EDA
evaluates project proposals competitively, based on five investment
policy guidelines (See table 2). These guidelines are intended to focus
on results rather than processes and encourage investment in U.S.
communities based on risk and the expected return on the taxpayer's
investment. EDA's investments through these guidelines also aim to
attract private sector investment, have a higher probability of
success, and ultimately result in an environment where relatively high-
skill, high-wage jobs are created.
Table 2: EDA's Investment Policy Guidelines:
Investment policy guidelines: Be market based and results driven;
Description: Investments should capitalize on a region's competitive
strengths and positively move a regional economic indicator measured on
EDA's Balanced Scorecard--for example, by increasing the number of
relatively high-skill, high-wage jobs; increasing tax revenue; or
increasing private-sector investment in the local community.
Investment policy guidelines: Have strong organizational leadership;
Description: Projects need to demonstrate strong leadership
capabilities, relevant project management experience, and a significant
commitment of human-resources talent to ensure their success.
Investment policy guidelines: Advance productivity, innovation, and
entrepreneurship;
Description: Projects should embrace the principles of
entrepreneurship, enhance regional clusters and leverage and link
technology innovators and local universities to the private sector to
create the conditions for greater productivity, innovation, and job
creation.
Investment policy guidelines: Look beyond the immediate economic
horizon, anticipate economic changes, and diversify the local and
regional economy;
Description: Any investment must be part of an overarching, long-term
comprehensive economic development strategy that enhances a region's
success in achieving a rising standard of living by supporting existing
industry clusters, developing emerging new clusters, or attracting new
regional economic drivers.
Investment policy guidelines: Demonstrate a degree of commitment;
Description: Projects should exhibit (1) high levels of local-
government or nonprofit matching funds and private sector leverage; (2)
clear and unified leadership and support by local elected officials;
and (3) strong cooperation among the business sector, relevant regional
partners, and local, state, and federal governments.
Source: EDA.
[End of table]
EDA currently gives further priority to proposed projects that enhance
regional competitiveness and support long-term development of the
regional economy. EDA considers the following as strategic investments
that enhance regional competitiveness and support long-term development
of the regional economy, including projects that:
* upgrade core business infrastructure, including transportation,
communications, and specialized training programs;
* implement regional strategies that involve all stakeholders and
support regional benchmarking initiatives;
* encourage institutional collaboration, reflect strong leadership
commitment, and encourage a formalized structure to maintain consensus;
* cluster development establishing research and industrial parks that
encourage innovation-based competition and recruitment efforts;
* help communities plan and implement economic adjustment strategies in
response to sudden and severe economic dislocations;
* support technology-led economic development, and reflect the
important role of linking universities and industry and technology
transfers; and:
* advance community and faith-based social entrepreneurship in
redevelopment strategies for areas of chronic economic distress.
Given its funding resources, EDA invites successful project proposals
to submit full applications.
Insufficient Time Has Elapsed to Assess the Economic Development Impact
of Brownfield Projects:
We found that insufficient time had elapsed to assess the economic
development impact of most of the grants that we reviewed, either
because the projects had not been completed or had not been completed
long enough to establish results. EDA has two primary measures of the
economic development impact of construction-related projects--(1) the
number of permanent jobs a project creates or retains and (2) the
amount of private-sector investment that a grant generates. Because the
typical project is completed 3 years after the grant is awarded, EDA
monitors performance results at 3, 6, and 9 years after the award. Data
for jobs created after 3 years were available during our review for 32
percent of the 257 construction-related grants that EDA coded as
brownfield sites, while data for jobs created after 6 years were
available for 11 percent. Data on private-sector investment generated 3
years after grants were awarded were available for 25 percent and after
6 years for 9 percent of the grants. EDA officials stated that the most
reliable data on economic development impact are those from 6-and 9-
year evaluations.
EDA officials said that they relied to a certain extent on applicants'
estimates of job creation and private investment in determining whether
to fund a brownfield project. To evaluate the initial estimates, we
compared 12 of the 140 grants that had both data on estimated job
creation in the original application with data on job creation at the 6-
year evaluation. Because of the limited data, we were not able to
project our results to all construction-related projects coded as
brownfields. For the 12 grants that had both types of information, we
found that the reported jobs created or retained differed substantially
from the initial project estimates for more than half of the grants
(table 3).
Table 3: Initial Estimates and 6-Year Data on Jobs Created and
Retained:
Project: 1;
Initial project estimate: 150;
Reported jobs after 6 years: 7.
Project: 2;
Initial project estimate: 800;
Reported jobs after 6 years: 24.
Project: 3;
Initial project estimate: 620;
Reported jobs after 6 years: 478.
Project: 4;
Initial project estimate: 725;
Reported jobs after 6 years: 35.
Project: 5;
Initial project estimate: 115;
Reported jobs after 6 years: 163.
Project: 6;
Initial project estimate: 1,500;
Reported jobs after 6 years: 60.
Project: 7;
Initial project estimate: 72;
Reported jobs after 6 years: 1,234.
Project: 8;
Initial project estimate: 400;
Reported jobs after 6 years: 180.
Project: 9;
Initial project estimate: 100;
Reported jobs after 6 years: 49.
Project: 10;
Initial project estimate: 100;
Reported jobs after 6 years: 290.
Project: 11;
Initial project estimate: 23;
Reported jobs after 6 years: 77.
Project: 12;
Initial project estimate: 100;
Reported jobs after 6 years: 290.
Source: GAO analysis of EDA data.
[End of table]
We also compared 6 of the 140 grants that had both estimates of private
sector investment in the original applications with data on such
investment at the 6-year evaluation. We found that the reported private
sector investment 6 years after grant approval differed substantially
from the initial investment estimates for most of the grants (table 4).
Table 4: Initial Project Estimates and 6-Year Data on Private Sector
Investment:
Project: 1;
Initial project estimate: $30,000,000;
Reported private sector investment after 6 years: $30,000.
Project: 2;
Initial project estimate: $230,000;
Reported private sector investment after 6 years: $750,000.
Project: 3;
Initial project estimate: $1,526,439;
Reported private sector investment after 6 years: $932,685.
Project: 4;
Initial project estimate: $2,000,000;
Reported private sector investment after 6 years: $1,794,000.
Project: 5;
Initial project estimate: $1,600,000;
Reported private sector investment after 6 years: $5,577,264.
Project: 6;
Initial project estimate: $15,000,000;
Reported private sector investment after 6 years: $10,000,000.
Source: GAO analysis of EDA data.
[End of table]
We did not try to determine whether a direct causal relationship
existed between the grants EDA made to brownfield sites and the
reported economic development. However, as we have noted in prior
reports, we believe that attempting to quantify the gains from economic
development programs is difficult. Determining that a causal
relationship exists would require (1) documenting improvement in the
targeted area, (2) linking specific elements in the program to the
economic changes, and (3) measuring the growth stemming from other
influences on the region's economy in order to isolate the impact that
could be attributed to EDA's program.[Footnote 15]
Economic Development Estimates Outlined in Project Proposals Were Not
Always Appropriately Verified:
We found that in some cases project proposals that provided estimates
of the potential jobs or investment did not appear to have been
verified. Grant applicants are required to estimate both the number of
permanent jobs their project will create or retain and the amount of
private sector investment the proposed projects will generate,
including jobs directly related to the project. Regional office staff
are required to verify the estimates before the projects begin, but we
found instances in which verification appeared to have been
insufficient. For example:
* In 1999, EDA awarded a $1.39 million grant to the city of Laredo,
Texas, for the construction of a bridge overpass and road to connect an
existing industrial brownfield site to an interstate highway. The
bridge overpass was designed to span existing railroad tracks in order
to prevent collisions between trains and tractor-trailers traveling
from the industrial site. EDA project summary documents indicated that
the project would retain an estimated 1,500 jobs at the industrial
site. However, the project file contained no documentation suggesting
that the existing tenants would vacate the industrial site if the
bridge overpass and road were not constructed.
* In 2002, EDA awarded a $3 million grant to the Research Corporation
of the University of Hawaii to help the School of Medicine construct a
biotechnology center for technology transfer at a brownfield site and
to acquire equipment for the center. EDA project summary documents
indicated that the center would generate an estimated 400 permanent
jobs. However, this estimate included 300 students who were expected to
graduate from the center within 5 years--indirect jobs that should not
have been included in the permanent jobs estimate.
* In 1998, EDA awarded a $2.25 million grant to the Fitzsimons
Redevelopment Authority in Denver, Colorado for the construction of
50,000 square feet of interior space in a bioscience park center at a
brownfield site--the second grant this project had received (the first
was used to construct the building). EDA project summary documents
indicated that an estimated 100 jobs would result from the project.
However, the EDA project summary documents for the first grant also
used the same permanent jobs estimate, so that the same jobs appear to
have been counted twice.
Officials at some EDA regional offices said that they did not have the
capacity or resources to verify the permanent jobs or private sector
investment estimates submitted by grant applicants for proposed
projects. Instead, they relied largely on their professional judgment
and past knowledge and experience when reviewing permanent job and
private-sector investment data for proposed projects. However, by not
effectively substantiating the data applicants supply, EDA may not be
funding those projects with the greatest potential economic development
impact.
Conclusions:
We found that, overall, EDA grants were being used for a variety of
economic development activities that resulted in the reclaiming of
former brownfield sites. Although we could not measure the precise
economic impact of these projects, potentially, they serve a purpose
that is difficult to quantify in reclaiming previously blighted land
and structures and reducing the need to further develop rapidly
disappearing "greenspace." During our review, we found (1) best
practices that could usefully be emulated and (2) a lack of appropriate
verification procedures during the grant application process, as
follows:
* Grant recipients and their contractors and subcontractors must comply
with all applicable environmental laws as part of the standard
conditions of EDA grant awards. We noted that REOs at three of EDA's
six regional offices routinely recommended adding special conditions to
grants involving the remediation of hazardous substances that
emphasized the need to comply with any environmental standards that the
grant might not specifically identify in the standard terms and
conditions of EDA grant awards. These special conditions help ensure
that projects comply with all environmental standards, promote
efficiency, and help limit any potential liability to the government.
* Although EDA processing procedures require that regional office staff
verify the estimated permanent jobs and private sector investment for
proposed projects, we found instances in which these estimates appeared
out of line but were not questioned by EDA staff. Substantiating these
estimates would help EDA make more accurate funding decisions, based on
more accurate job forecast and investment information, and would likely
increase the chances of EDA funding projects with the greatest
potential impact.
Recommendations:
We recommend that the Secretary of Commerce direct EDA to take the
following two actions:
* implement a standard procedure that would require regional offices to
add a special condition to grants for brownfield sites where
remediation of hazardous substances is required stipulating that the
grant recipient provide evidence that remediation has been conducted in
accordance with all applicable federal, state, and local regulations--
including those not mentioned in the standard EDA grant forms--and:
* ensure that regional staff verify estimated jobs and private-sector
investment for proposed projects by following existing guidelines or
creating new ones, as necessary.
Agency Comments and Our Evaluation:
We provided the Department of Commerce with a draft of this report for
review and comment. The Deputy Secretary provided written comments that
are presented in appendix III. The letter stated that the report
accurately reflects EDA's role in supporting brownfield revitalization
projects and that remediation activities are a small part of EDA's
activities. The letter also included technical comments, which have
been incorporated in this report, where appropriate. Two of the
technical comments dealt with our recommendations.
We recommended that EDA require regional offices to add a special
condition to grants for brownfield sites that grantees provide evidence
that remediation has been conducted in accordance with all applicable
federal, state, and local regulations. The Deputy Secretary noted that
adding a special condition did not change a grantee's and EDA's
overarching obligation to ensure that a project complies with all
applicable laws and requirements. However, we found that three of EDA's
six regional offices were routinely using such special conditions as a
best practice. Officials in the regions implementing the practice told
us that the special conditions (1) provided more specific assurances
that projects were complying with environmental standards, (2) helped
protect the government from liability if individuals were injured, and
(3) promoted efficiency by placing the onus on the grantee to meet
additional requirements. Given these benefits, we believe it would be
beneficial if all six EDA regional offices adopted the practice.
The Deputy Secretary also questioned our recommendation that regional
staff increase efforts to verify estimated jobs and private sector
investment for proposed projects, because our sample size of projects
with 6-year data was too small. We agree that the data do not allow for
projections to all construction-related projects coded as brownfields.
However, our recommendation was based on the fact that EDA's processing
procedures required EDA regional staff to verify these estimates before
construction began. We found examples of approved estimates that did
not appear to be effectively substantiated by EDA staff. Verifying
these estimates could help ensure that EDA funds those projects with
the greatest potential impact.
We will send copies of this report to the Secretary of Commerce,
relevant congressional committees, and other interested parties and
will make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-4325 or [Hyperlink, shearw@gao.gov]. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff who made key
contributions to this report are listed in appendix IV.
Signed by:
William B. Shear:
Director, Financial Markets and Community Investment:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
To evaluate the grants made by EDA for the economic development of
brownfield sites, we (1) determined the extent to which brownfield
projects funded by EDA grants included remediation activities, the
types of remediation activities conducted, and the amount of EDA grant
funds used for those activities; (2) identified the environmental
standards that applied to EDA projects, examined the role of federal,
state, and local environmental agencies, and the amount of public
participation in the projects; and (3) identified the economic
development standards that applied, the economic development activities
conducted, and the reported economic development impact for the
projects.
To meet our objectives, we obtained data from EDA on all grants awarded
from fiscal years 1998 through 2004 that were coded as brownfield
sites. For each grant, we obtained the following information from the
database that EDA uses to track its grants:
* grant recipient's name,
* fiscal year the grant was awarded,
* project number,
* grant amount,
* funding source,
* investment type,
* general project description,
* state investment amount,
* jobs created or retained 3 years after approval,
* jobs created or retained 6 years after approval,
* private investment generated 3 years after approval, and:
* private investment generated 6 years after approval.
We selected a sample of 140 (54 percent) of the 257 construction-
related grants EDA awarded that were coded as brownfield sites. As
table 5 shows, our sample consisted of the 32 grants EDA awarded in
fiscal year 2002 (regardless of grant amount), the 17 grants EDA
awarded from fiscal years 1998 through 2004 for amounts greater than or
equal to $2.5 million (excluding 2002), and a random sample of 91
grants EDA awarded from fiscal years 1998 through 2004 for amounts less
than $2.5 million (excluding 2002).
Table 5: GAO Sample of EDA Grants to Brownfield Sites:
Grants awarded in 2002 (any amount);
Public Works/other nondefense economic adjustment: 32;
Defense adjustment: 0;
Total: 32;
Sample: 32.
Grants awarded from 1998 to 2004 (excluding 2002):
Amount
