Brownfield Redevelopment
Stakeholders Cite Additional Measures That Could Complement EPA's Efforts to Clean Up and Redevelop Properties Gao ID: GAO-05-450T April 5, 2005Brownfields are properties whose re-use may be hindered by the threat of contamination. Cleaning up and redeveloping these properties can protect human health and the environment, and provide economic benefits. The Environmental Protection Agency (EPA) provides grants to state and local governments and others for site assessments, job training, revolving loans, cleanups, and for assisting state efforts. This testimony is based on GAO's report, Brownfield Redevelopment: Stakeholders Report That EPA's Program Helps to Redevelop Sites, but Additional Measures Could Complement Agency Efforts (GAO- 05-94, December 2, 2004). GAO (1) obtained stakeholders' views on EPA's contribution to brownfield cleanup and redevelopment, (2) determined the extent to which EPA measures program accomplishments, and (3) obtained views on options to improve or complement EPA's program. Stakeholders GAO surveyed included grant recipients, state program officials, interest groups, real estate developers, and others.
Stakeholders said that EPA's Brownfields Program supports the initial stages of site redevelopment by funding activities that other lenders often do not, such as identifying contamination and cleaning up sites. While important, the impact of EPA's funding is difficult to isolate because it is often combined with funds from other sources. For example, representatives of a company that combined an EPA loan with city, state, and other federal agency funds to redevelop a brownfield site near Seattle, Washington, said that EPA's loan, while small, provided critical up-front funds for cleanup. Furthermore, while an unknown number of projects rely solely on private and other federal agencies' funding, EPA funds often go to sites with more complex cleanups, less desirable locations, or liability issues. In addition, officials in 10 states reported that EPA's assistance has been crucial to establishing and expanding the scope of their voluntary cleanup programs. EPA's performance measures have provided information on achievements in some but not all key areas of the Brownfields Program. For example, EPA has not yet begun reporting data on progress toward cleaning up and redeveloping sites or assisting state programs. As a result, the agency's--and the Congress'--ability to determine the extent to which the program is achieving its goals is limited. Furthermore, EPA has not yet developed measures to assess the extent to which the Brownfields Program achieves key outcomes, such as reducing environmental risks. Similarly, EPA's Inspector General found that the agency's performance measures do not demonstrate the program's contribution to reducing or controlling health and environmental risks. After acknowledging the limitations of the program's performance measures, in fiscal year 2004, EPA began collecting additional data--such as the number of acres ready for reuse--about properties under the program and is developing performance measures for state voluntary cleanup programs. Stakeholders identified three options for improving or complementing EPA's Brownfields Program. First, they suggested eliminating the provision in the Brownfields Act that, in effect, disqualifies from grant eligibility those landowners who purchased a brownfield site before January 2002. Second, they suggested changes to the stringent technical and administrative requirements that they believe have discouraged the use of revolving loan funds. While EPA officials maintain that the act eased administrative burdens, stakeholders believe that technical requirements continue to impede lending. Stakeholders also suggested that EPA give priority to applicants with proven administrative expertise or to coalitions that can consolidate administrative functions. Third, stakeholders believed that a federal tax credit for developers' remediation costs could attract developers to brownfields sites on a broader national basis. Although EPA and other organizations were also generally supportive of a tax credit, we did not analyze the costs and benefits of such a tax credit or any other potential incentives.
GAO-05-450T, Brownfield Redevelopment: Stakeholders Cite Additional Measures That Could Complement EPA's Efforts to Clean Up and Redevelop Properties
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Testimony:
Before the Subcommittee on Federalism and the Census, Committee on
Government Reform, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Tuesday, April 5, 2005:
Brownfield Redevelopment:
Stakeholders Cite Additional Measures That Could Complement EPA's
Efforts to Clean Up and Redevelop Properties:
Statement of John B. Stephenson, Director, Natural Resources and
Environment:
GAO-05-450T:
GAO Highlights:
Highlights of GAO-05-450T, a testimony before the Subcommittee on
Federalism and the Census, Committee on Government Reform, House of
Representatives:
Why GAO Did This Study:
Brownfields are properties whose re-use may be hindered by the threat
of contamination. Cleaning up and redeveloping these properties can
protect human health and the environment, and provide economic
benefits. The Environmental Protection Agency (EPA) provides grants to
state and local governments and others for site assessments, job
training, revolving loans, cleanups, and for assisting state efforts.
This testimony is based on GAO‘s report, Brownfield Redevelopment:
Stakeholders Report That EPA‘s Program Helps to Redevelop Sites, but
Additional Measures Could Complement Agency Efforts (GAO-05-94,
December 2, 2004). GAO (1) obtained stakeholders‘ views on EPA‘s
contribution to brownfield cleanup and redevelopment, (2) determined
the extent to which EPA measures program accomplishments, and (3)
obtained views on options to improve or complement EPA‘s program.
Stakeholders GAO surveyed included grant recipients, state program
officials, interest groups, real estate developers, and others.
What GAO Found:
Stakeholders said that EPA‘s Brownfields Program supports the initial
stages of site redevelopment by funding activities that other lenders
often do not, such as identifying contamination and cleaning up sites.
While important, the impact of EPA‘s funding is difficult to isolate
because it is often combined with funds from other sources. For
example, representatives of a company that combined an EPA loan with
city, state, and other federal agency funds to redevelop a brownfield
site near Seattle, Washington, said that EPA's loan, while small,
provided critical up-front funds for cleanup. Furthermore, while an
unknown number of projects rely solely on private and other federal
agencies‘ funding, EPA funds often go to sites with more complex
cleanups, less desirable locations, or liability issues. In addition,
officials in 10 states reported that EPA‘s assistance has been crucial
to establishing and expanding the scope of their voluntary cleanup
programs.
EPA‘s performance measures have provided information on achievements in
some but not all key areas of the Brownfields Program. For example, EPA
has not yet begun reporting data on progress toward cleaning up and
redeveloping sites or assisting state programs. As a result, the
agency‘s”and the Congress‘”ability to determine the extent to which the
program is achieving its goals is limited. Furthermore, EPA has not yet
developed measures to assess the extent to which the Brownfields
Program achieves key outcomes, such as reducing environmental risks.
Similarly, EPA‘s Inspector General found that the agency‘s performance
measures do not demonstrate the program‘s contribution to reducing or
controlling health and environmental risks. After acknowledging the
limitations of the program‘s performance measures, in fiscal year 2004,
EPA began collecting additional data”such as the number of acres ready
for reuse”about properties under the program and is developing
performance measures for state voluntary cleanup programs.
Stakeholders identified three options for improving or complementing
EPA‘s Brownfields Program. First, they suggested eliminating the
provision in the Brownfields Act that, in effect, disqualifies from
grant eligibility those landowners who purchased a brownfield site
before January 2002. Second, they suggested changes to the stringent
technical and administrative requirements that they believe have
discouraged the use of revolving loan funds. While EPA officials
maintain that the act eased administrative burdens, stakeholders
believe that technical requirements continue to impede lending.
Stakeholders also suggested that EPA give priority to applicants with
proven administrative expertise or to coalitions that can consolidate
administrative functions. Third, stakeholders believed that a federal
tax credit for developers‘ remediation costs could attract developers
to brownfields sites on a broader national basis. Although EPA and
other organizations were also generally supportive of a tax credit, we
did not analyze the costs and benefits of such a tax credit or any
other potential incentives.
What GAO Recommends:
GAO‘s report recommended that EPA develop additional measures of the
Brownfields Program‘s achievements and consider stakeholder suggestions
for improving and complementing the program. EPA agreed with the
report‘s recommendations and has begun steps to implement them.
www.gao.gov/cgi-bin/getrpt?GAO-05-450T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact John B. Stephenson at
(202) 512-3841 or stephensonj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for this opportunity to discuss our work on EPA's Brownfields
Program and potential options for enhancing brownfield redevelopment
efforts. As we reported in December 2004, an estimated 450,000 to 1
million brownfields--sites whose redevelopment or reuse may be
complicated by the presence or potential presence of hazardous
substances--sit abandoned or underused across the country.[Footnote 1]
These sites have remained undeveloped for several reasons, including
uncertainty about the presence of contamination, limited cleanup
resources, and fear by the sites' owners or prospective purchasers that
they might be held liable for cleaning them up. Cleaning up and
redeveloping these properties can improve and protect human health and
the environment; increase local tax bases; and encourage smart growth
by slowing the development of undeveloped, open land. The Environmental
Protection Agency (EPA) has the lead federal role in encouraging and
facilitating the cleanup and redevelopment of brownfield sites. In
addition, state and local governments, commercial lending and real
estate development corporations, and other entities provide funding for
brownfields redevelopment--both with and without EPA's participation.
While EPA has conducted brownfield efforts since 1995, the Congress
established a formal Brownfields Program within EPA in January 2002, by
passing the Small Business Liability Relief and Brownfields
Revitalization Act (Brownfields Act) (Pub. L. No. 107-118). The
objectives of EPA's Brownfields Program are to assess, clean up, and
redevelop properties; leverage job creation; and leverage cleanup and
redevelopment funding from other sources. The Brownfields Act
authorizes $200 million annually for fiscal years 2002 through 2006, to
fund EPA grants to state and local governments and others for site
assessments, job training, revolving loans, and newly created cleanup
grants in support of brownfield revitalization efforts.[Footnote 2]
Between fiscal years 1995 and 2004, EPA awarded over 1,200 brownfield
grants totaling about $400 million. While the total amount of EPA's
grant funds is relatively small, these grants are intended to leverage
much larger amounts for brownfield cleanup and redevelopment from other
sources. For example, EPA's objective is to leverage $10.2 billion in
cleanup and redevelopment funding from fiscal years 2003 through 2008.
In addition, the act authorizes $50 million in grants to assist states
and tribes in developing and enhancing their environmental response--or
voluntary cleanup--programs to address contaminated sites. Since fiscal
year 2003, EPA has awarded about $100 million in assistance to states
and tribes.
My remarks today are based on our December 2004 report on brownfield
redevelopment and will focus on (1) the views of stakeholders--
including EPA grant recipients, state and local government officials,
real estate developers, interest groups, and others--on the extent to
which EPA's program has contributed to the cleanup and redevelopment of
brownfields; (2) the extent to which EPA measures its brownfields
program accomplishments; and (3) stakeholders' views on potential
options for improving or complementing EPA's program.
For our report, we interviewed officials in EPA's Office of Brownfields
Cleanup and Redevelopment, and other EPA offices; representatives of
industry groups and associations with brownfields expertise; eight
recipients of EPA site assessment, revolving loan, or job training
grants in Colorado, Florida, Minnesota, and Washington State; other
local stakeholders in these states, such as real estate developers,
property owners, attorneys, nonprofit organizations, and other state
and local government officials; and voluntary cleanup program officials
in these four states as well as Alabama, Alaska, Kentucky, Virginia,
West Virginia, and Wyoming. Although we did not identify a sample of
stakeholders that would allow us to generalize our findings to the
total population, our methodology enabled us to obtain a wide range of
views on EPA's program and brownfield issues.
Summary:
In summary, we found the following:
* Stakeholders reported that EPA's Brownfields Program provides an
important contribution to site cleanup and redevelopment by funding
activities that might not otherwise occur. According to these
stakeholders, EPA grants are important in that they fund activities in
the initial stages of brownfield redevelopment and address sites--such
as those with more complex cleanup requirements, less desirable
locations, or liability or ownership issues--that private lenders and
others often do not. In this regard, EPA's site assessment grants
provide seed money for identifying contamination and estimating cleanup
costs, while its revolving loan fund grants support cleanup activities.
While important, the impact of EPA's funding is difficult to isolate
because it is often combined with funds from other sources. All of the
grant recipients we interviewed used EPA grants in conjunction with
funding from other sources to address brownfield sites, but an unknown
number of projects are under way or have been completed without any EPA
funding. Furthermore, officials in all 10 of the states we contacted
reported that EPA assistance has been crucial to establishing and
expanding the scope of their voluntary cleanup programs. They said that
without EPA's grants, their voluntary cleanup programs would not have
had the resources to undertake activities such as compiling state
inventories of brownfield sites and performing site assessments.
* The measures that EPA has used to date to gauge Brownfields Program
accomplishments have provided information on achievements in some but
not all key areas of the program. As a result, the agency's--and the
Congress'--ability to determine the extent to which the program is
achieving its goals is limited. First, while EPA has reported the
cumulative number of sites assessed, jobs generated, and amounts of
cleanup and redevelopment funds leveraged by the program, the agency
has not begun reporting data on grant recipients' activities to clean
up and redevelop properties--one of its primary stated objectives.
Second, EPA does not collect data on its assistance to state voluntary
cleanup programs for such activities as compiling inventories of
brownfield sites, performing site assessments, and developing guidance
for program participants. This assistance accounted for about one-third
of the total Brownfields Program funds in each of fiscal years 2003 and
2004. Third, although EPA's overall mission is to protect human health
and the environment, the agency has not yet developed measures to
determine the extent to which the Brownfields Program helps reduce
environmental risks. Acknowledging these limitations, EPA began
collecting additional information--such as the number of acres ready to
be reused--in fiscal year 2004, and is developing performance measures
for voluntary cleanup programs.
* Stakeholders identified three potential options for improving or
complementing EPA's Brownfields Program:
* First, they suggested eliminating the provision in the Brownfields
Act that, in effect, makes landowners who purchased a brownfield site
prior to January 2002, ineligible for EPA grant funding. Stakeholders
asserted that this clause continues to discourage brownfields
redevelopment by limiting program eligibility.
* Second, stakeholders suggested changes to address the
underutilization of revolving loan funds. As of November 2004, grant
recipients had loaned out less than $29 million (about 17 percent) of
the $168 million in revolving loan fund grants awarded by EPA.
According to stakeholders, the stringent technical and administrative
requirements to establish a revolving loan fund have discouraged grant
recipients from using the funds and continue to be the primary
impediments to making loans. Additionally, stakeholders believed that
EPA could achieve greater results by giving priority to applicants with
proven administrative expertise or to coalitions of agencies that could
consolidate administrative functions associated with establishing and
managing a revolving loan fund and thereby produce economies of scale.
* Third, stakeholders believed that a federal tax credit allowing
developers to offset a portion of their federal income tax with their
remediation expenditures could complement EPA's program by attracting
developers to brownfields sites on a broader national basis. While EPA
and other organizations with brownfields expertise were also generally
supportive of a federal brownfields tax credit, we did not analyze the
costs and benefits of such a tax credit or any other potential
incentives.
To enhance federal efforts to support brownfield clean up and
redevelopment, we recommended in December 2004 that the Administrator
of EPA:
* develop additional measures to gauge the achievements of the
Brownfields Program, especially those addressing the program's
environmental and state voluntary cleanup aspects;
* weigh the merits of revising the Brownfields Act to eliminate the
provision that prevents pre-January 2002 purchasers of brownfield
properties from qualifying for EPA grant funds, and, if deemed
appropriate, develop a legislative proposal to amend the act;
* monitor the brownfield revolving loan fund grants to determine why
they have been underutilized and what, if any, changes are needed to
facilitate use of these funds; and:
* determine the advantages and disadvantages of giving priority to
entities with revolving loan fund administrative expertise when
awarding grants and, if found to be beneficial, adopt this as a key
criterion for selecting grant recipients.
EPA agreed with these recommendations and Brownfields Program officials
told us that, since December 2004, the agency has taken a number of
steps to address them. With regard to measuring program achievements,
EPA is finalizing a data collection instrument that will allow the
agency to incorporate the achievements of state voluntary cleanup
programs into the measures it currently reports, such as the number of
sites assessed. Brownfields Program officials also told us that they
are working with other EPA program offices to measure and report the
cumulative acres cleaned up through the agency's overall land
revitalization efforts as an indicator of the agency's efforts to
reduce environmental risks. Concerning our recommendation on the
Brownfields Act's eligibility provision, rather than developing a
legislative proposal to amend the act, EPA included language in its
fiscal year 2006 budget request that, if enacted, would make pre-
January 2002 purchasers of brownfield properties eligible for EPA grant
funds.
In response to our recommendations on revolving loan fund grants, EPA
continues to monitor revolving loan grant activity and "deobligate"
grants to recipients who are not lending the funds, according to
program officials, thereby making these funds available for other
grants. These officials also said that the agency has bolstered its
efforts to ensure that revolving loan fund grants are awarded to
recipients with the expertise necessary to administer a fund and, in
fiscal year 2006, will reevaluate and consider strengthening grant
proposal criteria assessing applicants' ability to manage a fund.
Finally, EPA officials told us that the agency awards noncompetitive
supplemental funding to some revolving loan fund grant recipients that
have demonstrated their administrative expertise.
Background:
EPA began its efforts to address brownfield properties in 1995 with the
Brownfields Initiative under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), which was enacted in 1980 in
the wake of discoveries of abandoned hazardous waste sites around the
country. CERCLA authorizes EPA to compel parties responsible for the
contamination to clean up hazardous waste sites; allows EPA to pay for
the cleanups, then seek reimbursement from the responsible parties; and
established a trust fund to help EPA pay for cleanups and related
program activities. Under CERCLA, past and present owners and operators
of hazardous waste sites, as well as generators and transporters of the
hazardous substances, can all be held liable for cleanup costs. CERCLA
establishes a defense to liability for innocent landowners--that is,
owners who obtain property without knowing it was contaminated despite
conducting "all appropriate inquiries" regarding the present and past
uses of the property and the potential presence of onsite
contamination.
Under its Brownfields Initiative, EPA awarded several types of grants
in support of brownfields redevelopment, including, among others:
* site assessment grants, which provide funding to inventory,
characterize, assess, and conduct planning and community involvement
related to brownfield sites; and:
* revolving loan fund grants, which provide funding for recipients to
make no-or low-interest loans for brownfields cleanup.
On January 11, 2002, the Congress amended CERCLA by passing the
Brownfields Act. The act formally established EPA's Brownfields Program
and amended the criteria for establishing the innocent landowner
defense. It also limits liability for two types of parties: (1)
contiguous property owners--persons who own property that may be
contaminated by a release of hazardous substances from a neighboring
property--and (2) bona fide prospective purchasers--persons who
purchased the property after the act's passage on January 11, 2002; did
not contaminate the property; and exercised appropriate care with
respect to any hazardous waste found on the property. Both types of
parties must demonstrate that they conducted all appropriate inquiries
into the site's previous ownership and use.[Footnote 3] Under the act,
any landowner who acquired a potentially contaminated property before
January 11, 2002, is not eligible for the bona fide prospective
purchaser exemption and accordingly may not be eligible for brownfields
grants. Among other things, the act authorizes EPA to continue awarding
site assessment, revolving loan fund, and job training grants;
authorizes new cleanup grants up to $200,000 to be used directly for
brownfields remediation; and allows a portion of revolving loan fund
grants to be directed to cleanup activities as subgrants that do not
have to be repaid, in accordance with certain statutory
restrictions.[Footnote 4]
Brownfield grants are currently awarded competitively by regional
panels that evaluate grant proposals against threshold eligibility
criteria and by a national panel that scores and ranks proposals on
broader criteria. EPA has awarded over 1,200 brownfields grants
totaling about $400 million since 1995. Table 1 shows the number of
grants and the amount (in nominal dollars) awarded for each grant type
between fiscal years 1995 and 2002 (when the Brownfields Act was
passed), and during fiscal years 2003 and 2004.
Table 1: Number and Amount of Brownfield Grants Awarded:
Dollars in millions:
Grant type: Site assessment;
Fiscal years 1995[A] through 2002: Number of grants: 437;
Fiscal years 1995[A] through 2002: Amount: $103.1;
Fiscal year 2003: Number of grants: 117;
Fiscal year 2003: Amount: $30.7;
Fiscal year 2004[B]: Number of grants: 155;
Fiscal year 2004[B]: Amount: $37.6.
Grant type: Revolving loan fund;
Fiscal years 1995[A] through 2002: Number of grants: 143;
Fiscal years 1995[A] through 2002: Amount: $117.0;
Fiscal year 2003: Number of grants: 28;
Fiscal year 2003: Amount: $30.4;
Fiscal year 2004[B]: Number of grants: 18;
Fiscal year 2004[B]: Amount: $20.9.
Grant type: Cleanup;
Fiscal years 1995[A] through 2002: Number of grants: N/A;
Fiscal years 1995[A] through 2002: Amount: N/A;
Fiscal year 2003: Number of grants: 66;
Fiscal year 2003: Amount: $11.4;
Fiscal year 2004[B]: Number of grants: 92;
Fiscal year 2004[B]: Amount: $16.9.
Grant type: Job training;
Fiscal years 1995[A] through 2002: Number of grants: 57;
Fiscal years 1995[A] through 2002: Amount: $12.1;
Fiscal year 2003: Number of grants: 10;
Fiscal year 2003: Amount: $2;
Fiscal year 2004[B]: Number of grants: 16;
Fiscal year 2004[B]: Amount: $2.5.
Grant type: Other[C];
Fiscal years 1995[A] through 2002: Number of grants: 97;
Fiscal years 1995[A] through 2002: Amount: $14.4;
Fiscal year 2003: Number of grants: -;
Fiscal year 2003: Amount: -;
Fiscal year 2004[B]: Number of grants: -;
Fiscal year 2004[B]: Amount: -.
Total;
Fiscal years 1995[A] through 2002: Number of grants: 734;
Fiscal years 1995[A] through 2002: Amount: $246.6;
Fiscal year 2003: Number of grants: 221;
Fiscal year 2003: Amount: $74.5;
Fiscal year 2004[B]: Number of grants: 281;
Fiscal year 2004[B]: Amount: $77.9.
Source: GAO analysis of EPA data.
[A] EPA awarded one site assessment grant in 1993, and two site
assessment grants in 1994, as pilot tests for its Brownfields
Initiative.
[B] Fiscal year 2004 numbers and amounts are for grants announced, not
awarded. A small number of these grants may have been awarded after the
end of fiscal year 2004, according to EPA officials.
[C] This category includes other types of grants awarded prior to the
Brownfields Act.
[End of table]
The 2002 Brownfields Act also authorizes grant funds to establish or
enhance state and tribal voluntary cleanup programs that encourage
private parties to identify and clean up sites. Some states began to
establish voluntary cleanup programs in the late 1980s to alleviate
concerns that liability under federal and state hazardous waste cleanup
laws was hindering brownfield cleanups. All 50 states now have
voluntary cleanup programs, although these programs vary considerably
in scope and breadth. The 2002 Brownfields Act authorizes EPA to
provide $50 million for each of fiscal years 2002 through 2006, to
support state or tribal programs. In 2003, EPA distributed almost $50
million among the 50 states, 30 tribes, the District of Columbia, and
the Virgin Islands to develop or enhance their programs' infrastructure
and capabilities. The Congress appropriated $50 million in funding for
state and tribal voluntary cleanup program grants for fiscal year 2004.
Stakeholders Reported That EPA's Program Enables Brownfield
Redevelopment That Might Not Otherwise Occur:
Stakeholders told us that EPA's Brownfields Program contributes
significantly to grant recipients' redevelopment efforts by providing
seed money to identify contamination and estimate cleanup costs and by
supporting cleanup activities.[Footnote 5] By funding site assessments
and cleanups, EPA supports activities that private lenders and other
government programs often do not fund, according to stakeholders. In
this regard, a revolving loan fund grant recipient in Washington State
told us that the banking industry generally is reluctant to lend money
for brownfields projects because of the high risks involved.
Consequently, EPA is an important--and sometimes the only--funding
source for the critical assessment and cleanup activities in the
initial stages of redevelopment. Stakeholders also told us that EPA's
grant funds are important to brownfields redevelopment because they are
often applied to sites with (1) more complex cleanup requirements, (2)
less desirable locations, or (3) liability or ownership issues that
make them less likely to be redeveloped by private or other
governmental investors alone.
Although stakeholders believed that EPA's contribution is important,
all of the grant recipients we interviewed told us that they often
combined funding from many sources to clean up and redevelop
brownfields, using EPA's grants in conjunction with funds from other
federal, state, and local sources. For example, a Colorado real estate
developer with whom we spoke combined an EPA brownfields revolving
loan, a substantial company equity investment, several commercial
loans, bonds, and other financing to fund a mixed-use project that will
include retail shops and housing units. Although EPA's program makes an
important contribution to some brownfields projects, an unknown number
of other projects are under way or have been completed using funds
solely from other public and private sources without any EPA
assistance. An official with the Northeast-Midwest Institute--a
nonprofit, nonpartisan research organization for the Northeast and
Midwest states--emphasized that, while EPA and other federal programs
provide key support for brownfields redevelopment, the number of
brownfield sites far exceeds the number of properties that could be
addressed by available federal resources. Similarly, in its September
2003 report on the Brownfields Program, EPA stated that while there
remain hundreds of thousands of brownfield sites across the country
that could be put to better use, the sheer enormity of the problem far
outstrips all available federal resources.
The state officials we contacted also reported that EPA brownfields
assistance is crucial to establishing and expanding the scope of their
voluntary cleanup programs. Program officials from 4 of the 10 states
we contacted--Kentucky, Virginia, West Virginia, and Wyoming--reported
that EPA's funds keep their voluntary cleanup programs operating and
that their programs would not exist without this assistance. State
officials from Colorado and Minnesota commented favorably on the
flexibility that EPA's funding provides their state programs. In this
regard, officials from all 10 states said that their programs would not
be able to accomplish a number of key activities without EPA's
assistance, such as compiling state inventories of brownfield sites,
performing limited brownfields site assessments, and developing needed
guidance and information for program participants. For example, state
officials overseeing Alabama's program said that EPA's funding allowed
the program to hire additional staff, provide training, and develop an
inventory and public record of brownfield sites. Similarly, Colorado
program officials noted that, without EPA's funding, the state's
program would not be operating at its current service level and would
not have undertaken activities such as preparing cleanup guidance to
deal with the state's growing problem of contamination from illegal
methamphetamine drug laboratories.
EPA's Current Performance Measures Are Not Sufficient For Effective
Program Oversight and Decision Making:
The performance measures that EPA reports to the Congress regarding its
brownfield activities do not fully address the program's central
objectives, thereby limiting both the agency's and the Congress'
ability to determine the extent to which the program is achieving its
goals. According to EPA, the specific objectives and goals for the
Brownfields Program are to (1) assess, clean up, and redevelop 9,200
properties; (2) leverage $10.2 billion in cleanup and redevelopment
funding; and (3) leverage 33,700 jobs. In its fiscal year 2003 annual
report, EPA reported to the Congress on the cumulative (1) sites
assessed, (2) jobs generated, and (3) cleanup and redevelopment funds
leveraged. However, EPA did not report the number of properties cleaned
up or redeveloped under the program. In addition, EPA's performance
measures do not provide information on the impact of EPA's funding to
state voluntary cleanup programs, which comprised about one-third of
the total Brownfields Program funds in each of fiscal years 2003 and
2004. Moreover, while EPA's objective to assess, clean up, and
redevelop properties addresses the environmental impact of the program,
its measures do not allow the agency to determine the extent to which
the program helps reduce environmental risks, a key agency goal. In
2002 and 2004, the EPA Inspector General reported that while the
Brownfields Program's current performance measures may provide
information on economic outputs and activities, the measures do not
provide information on how risks to human health and the environment
will be reduced or controlled.[Footnote 6] Furthermore, we testified in
July 2004 that EPA is not consistently ensuring that its grants--such
as those awarded under the Brownfields Program--are clearly linked to
environmental results.[Footnote 7]
Recognizing the limitations of its performance measures and supporting
data, EPA is taking steps to obtain and report additional information
that may better measure Brownfields Program accomplishments. In August
2002, EPA initiated an internal work group to develop a data collection
instrument to gather information from site assessment, cleanup, and
revolving loan fund grant recipients beginning in fiscal year 2004. EPA
officials believe that this instrument will provide them with more
detailed information on such factors as common contaminants and
property size, and will allow the agency to better measure the direct
economic and environmental impact of EPA's activities on a property-
specific basis. EPA officials anticipate that these data will provide a
better measurement of program results, and they plan to conduct further
evaluations after a full year of data collection to determine whether
and how to use the data to develop environmental indicators. EPA also
has efforts under way that may assist the agency in developing
performance measures to gauge the impact of its funding for voluntary
cleanup programs. In 2004, EPA formed a work group of state and tribal
officials that analyzed methods that states currently use for measuring
their programs. EPA officials told us that the work group is now
developing performance measures for EPA's assistance to voluntary
cleanup programs that could be implemented by the end of fiscal year
2005.
A recent review by the Office of Management and Budget (OMB) has also
prompted EPA to take steps to develop measures that provide a more
comprehensive picture of the Brownfields Program's impact. In February
2004, OMB completed an EPA Program Assessment and Rating Tool review--
a systematic method of assessing the performance of program activities,
focusing on their contribution to an agency's achievements of its
strategic and program performance goals.[Footnote 8] According to the
Director of EPA's Office of Brownfields Cleanup and Redevelopment, OMB
recently approved a performance indicator that will be used in future
OMB reviews and will enable OMB to compare the efficiency of the
Brownfields Program with other federal programs, and could also be
incorporated into the program's strategic plan and annual performance
report.[Footnote 9] Finally, EPA's fiscal year 2005 annual performance
plan included additional information that more closely links the
program to the goals of its strategic plan. The plan added a new
measure that tracks the number of cleanup grants awarded and added a
targeted goal--60 properties--for the "properties cleaned up" measure
that was included in the previous annual plan without such a goal. This
latter measure potentially addresses the program's environmental
impact. While incorporating this measure and goal as well as efforts to
collect additional information are steps forward in measuring the
agency's progress in achieving the program's goals and objectives, EPA
must ensure that its data collection efforts address the program's
central activities and that, once collected, it uses these data to
inform the Congress on program results.
Stakeholders Identified Changes That Could Enhance Existing Federal
Brownfield Redevelopment Efforts:
Stakeholders suggested three options for improving or complementing
EPA's Brownfields Program.[Footnote 10] First, stakeholders believed
that revising a restrictive provision of the Brownfields Act could
expand the number of eligible grant applicants. The act effectively
limits grant eligibility to parties who purchased their property after
January 11, 2002.[Footnote 11] The stakeholders we interviewed
suggested that EPA's Brownfields Program could have a broader impact if
those who purchased property prior to January 11, 2002, were also
eligible to receive brownfields grants. Representatives of three of the
organizations with brownfields expertise mentioned that many local
governments that were actively addressing brownfields by acquiring
these sites before the law was enacted have been penalized by the act's
eligibility date. EPA brownfields officials and a coalition of groups
with brownfields expertise reported that EPA rejected a number of
brownfield grant applications in fiscal year 2003, and other
applications were never submitted, largely because of the eligibility
date. Although the Consolidated Appropriations Acts for Fiscal Year
2004 and Fiscal Year 2005 temporarily suspended the eligibility date
for each respective fiscal year, all of the stakeholders we spoke with
who raised this issue believed that the date will continue to limit
program eligibility--and, thereby, the program's support of brownfields
redevelopment--until it is permanently revised. The Director of EPA's
Office of Brownfields Cleanup and Redevelopment supports removing the
eligibility date from the requirements for obtaining prospective
purchaser liability protection, noting that the act's other
requirements for obtaining prospective purchaser liability protection
are sufficient without specifying the date of acquisition.
Second, almost one-half of the stakeholders we contacted suggested
changes to address the underutilization of revolving loan fund grants.
As of November 1, 2004, recipients of revolving loan fund grants had
loaned about $28.6 million (about 17 percent) of the $168 million in
such grants that EPA had awarded up to that date. EPA data show that,
of the 154 active grants, 47 grant recipients had made 67 loans for
brownfields projects and the remaining grant recipients had made no
loans. Reacting to this situation, EPA began rescinding revolving loan
fund grants from communities that had not used them and "deobligated"
about $12 million in revolving loan funds, thereby making them
available to make other grants.[Footnote 12] Furthermore, the Senate
Committee on Appropriations expressed disappointment in the revolving
loan component of EPA's Brownfields Program, noting in the report
accompanying EPA's fiscal year 2004 appropriations bill that only a
small percentage of grant recipients had made loans, resulting in only
a small number of completed brownfield site cleanups over the life of
the program.[Footnote 13] In response to these concerns, EPA officials
told us that the Brownfields Act's provision allowing a portion of loan
funds to be awarded to brownfield projects in subgrants that do not
have to be repaid will bring renewed interest in the loans.[Footnote
14] EPA also told us the act eased the administrative burden on grant
recipients by no longer requiring their full adherence to CERCLA
National Contingency Plan requirements.[Footnote 15]
According to five revolving loan fund grant recipients and a number of
developers, however, other technical and administrative requirements
have also discouraged grant recipients from using the funds. Managing a
revolving loan fund requires a government or nonprofit entity to
perform many of the functions of a commercial lending institution,
including establishing interest rates and collateral requirements;
processing and approving loans; and collecting loan payments. While
factors such as the availability of low-interest private loans play a
role in the number of loans made, revolving loan fund grant recipients
told us that staff time and expertise are key to making these loans.
Representatives of eight stakeholder groups indicated that EPA could
achieve greater results with revolving loans by giving priority to
applicants with proven expertise or to coalitions of agencies that can
consolidate administrative functions and thereby produce economies of
scale. Specifically, stakeholders reported that grant recipients with
in-house technical expertise, who partnered with other agencies with
expertise, or that hired contractors to obtain technical expertise were
better positioned to set up a fund because they were able to gain
access to financial expertise or experience in administering other
revolving loan funds. For example, the Department of Environmental
Services in Hennepin County, Minnesota, contracted with a nonprofit
organization that specializes in servicing loans to manage its fund.
Hennepin County has made four loans totaling over $1.7 million to local
brownfield projects.
In the same vein, grant recipients said that coalitions that
consolidate administrative functions and pool revolving loan fund
grants were able to take advantage of economies of scale by making more
loans once they had made the up-front administrative investment to
establish the fund. Nine grant recipients and other stakeholders told
us that EPA's grants were not large enough to justify the time and
effort required to establish a fund because it is frequently depleted
after one or two loans are made. The 67 loans made to date range from
$50,000 to $1.95 million, with an average loan amount of about
$420,000. The act limits revolving loan fund grants to $1 million, and
many grants have been funded at less than this amount. However, EPA
grant guidelines allow coalitions of eligible entities to apply
together to receive funds of up to $1 million each. For example, five
entities could jointly apply and each receive up to $1 million, for a
total of up to $5 million for the coalition. In selecting grant
proposals, EPA currently evaluates grant applicants' ability to manage
a fund as 1 of 10 ranking criteria, allocating it a maximum of 10
points out of a possible 120 points.[Footnote 16] While EPA's fiscal
year 2005 grant proposal guidelines require a description of previous
experiences managing federal funds and a plan for managing the loan
fund in accordance with prudent lending practices, EPA's draft guidance
to regional offices does not require grant applicants to discuss the
expertise or resources they will rely on to implement prudent lending
practices. We did not evaluate EPA's grant selection or award process.
Finally, stakeholders generally supported a federal brownfields tax
credit, which would allow developers to offset a portion of their
federal income tax with remediation expenditures, to complement EPA's
Brownfields Program and encourage brownfields redevelopment. All of the
stakeholders we spoke with about such a tax credit believed that it
could attract developers to brownfield sites on a broader national
basis and enhance the federal, state, and local brownfields
redevelopment efforts currently under way. One stakeholder noted that
while brownfields redevelopment is still a small and specialized real
estate market, a federal tax credit could attract new developers and
investors to these projects. At least 10 developers and 5 state or
local government officials also said that other similar federal tax
credits, such as the federal low-income housing and historic
rehabilitation credits, have proven effective in stimulating
redevelopment.[Footnote 17] The U.S. Conference of Mayors and other
organizations told us that a federal tax credit has tremendous
potential to foster new brownfield redevelopment. Furthermore, a
brownfields redeveloper in Minnesota suggested that a federal tax
credit would be most effective if the credit were directed to
brownfield projects with more complex contamination, liability, or
cleanup issues that would be less likely to be redeveloped without
federal aid. Nevertheless, while stating that a credit could be
beneficial, three stakeholders voiced concern about a tax credit's
potential impact on federal revenue. EPA's Brownfields Program Director
generally supported a federal brownfields tax credit as an incentive to
new brownfields redevelopment. We did not analyze the costs and
benefits of such a tax credit or any other potential incentives.
Conclusions:
Although stakeholders we contacted acknowledged that EPA's contribution
to brownfields revitalization is significant, the agency has not fully
measured or reported to the Congress on the extent of this
contribution. This information is needed both for EPA to improve the
effectiveness of the program and the Congress to improve congressional
decision making and oversight. While EPA has collected and reported
data on some of the program's achievements, further action is needed to
ensure that both the agency and the Congress have sufficient
information on program results, particularly with regard to its
assistance to state and tribal voluntary cleanup programs and impacts
on environmental risks. EPA has initiated efforts to obtain additional
data, but the agency must ensure that these efforts address the
program's central activities and that, once collected, it uses these
data to inform the Congress on program results. Although stakeholders
we contacted praised EPA's program, they identified a number of
limitations that, if addressed, could improve the program. However,
while it appears that these suggestions might potentially enhance
brownfield efforts, a careful review of their implications is warranted
before EPA or the Congress takes action to implement them.
Mr. Chairman, this concludes our prepared statement. We would be happy
to respond to any questions that you or Members of the Subcommittee may
have.
Contacts and Acknowledgements:
For further information about this testimony, please contact me at
(202) 512-3841. Richard P. Johnson, Kirk Menard, Joanna Owusu, and
Vincent P. Price made key contributions to this statement.
FOOTNOTES
[1] GAO, Brownfields Redevelopment: Stakeholders Report That EPA's
Program Helps to Redevelop Sites, but Additional Measures Could
Complement Agency Efforts, GAO-05-94 (Washington, D.C.: December 2,
2004).
[2] EPA's site assessment grants provide funding for a grant recipient
to inventory, characterize, assess, and conduct planning and community
involvement related to brownfield sites. EPA also awards brownfields
job training grants to provide environmental training for residents of
brownfields communities. EPA's revolving loan fund grants provide
funding for recipients to make no-or low-interest loans or subgrants
for brownfields cleanup. EPA also awards cleanup grants that provide
direct funding for a recipient to address contamination at brownfield
sites.
[3] In August 2004, EPA proposed a rule that would establish specific
requirements and standards for conducting all appropriate inquiries
into the previous ownership, uses, and environmental conditions of a
property for the purposes of qualifying for CERCLA liability
protection.
[4] EPA guidance limits the portion of funds that can be used as
subgrants to 40 percent of the original grant amount.
[5] These stakeholders included a nonprobability sample of eight EPA
brownfields grant recipients, as well as real estate developers,
property owners, attorneys, and nonprofit organizations, which the
grant recipients identified, and several industry groups and
associations representing state and local governments with brownfields
expertise that we identified. Some stakeholders did not offer a
response to our open-ended questions on various issues, while others
offered more than one response. We did not determine the extent to
which stakeholders agreed or disagreed with any particular response
offered by other stakeholders.
[6] EPA, Office of Inspector General, Observations on EPA's Plans for
Implementing Brownfields Performance Measures, 2002-M-00016
(Washington, D.C.: May 24, 2002) and Substantial Progress Made, But
Further Actions Needed in Implementing Brownfields Program, 2004-P-00-
20 (Washington, D.C.: June 21, 2004).
[7] GAO, Grants Management: EPA Continues to Have Problems Linking
Grants to Environmental Results, GAO-04-983T (Washington, D.C.: July
20, 2004).
[8] EPA and other federal agencies are required under the Government
Performance and Results Act (GPRA) to develop strategic plans covering
at least 5 years and submit them to the Congress and the Office of
Management and Budget. GPRA also requires agencies to set annual
performance goals and to prepare annual reports setting forth the
performance measures and the agency's actual program performance as
compared with the annual goals. OMB developed a Program Assessment and
Rating Program for federal agencies in 2002 to improve program
performance and better link performance to budget decisions.
[9] OMB also directed EPA to modify its currently reported measures to
provide more accurate information about the program's impact. EPA
agreed to qualify two of its Brownfields Program performance measures-
-jobs generated and cleanup and development funds leveraged--by
indicating that the EPA investment "enabled" the outcome. OMB believed
that this addition (1) recognized that other entities were involved in
the creation of jobs and the leveraging of funds on brownfield projects
and (2) impacted these measures.
[10] These stakeholders included representatives of eight land
developers and other private companies and four organizations with
brownfields expertise.
[11] The act states that responsible parties are not eligible for
brownfields grants. The current owner of a contaminated property is
generally considered to be a responsible party. However, persons who
purchased property after January 11, 2002, may be considered bona fide
prospective purchasers, who are not generally responsible parties.
[12] Thirty grants were expected to be deobligated by the end of
calendar year 2004, and 44 additional grants were expected to be
reissued under the new requirements in the act by this date.
[13] EPA officials stated that informally collected information
obtained as of November 1, 2004, suggested that cleanups have been
completed at 37 brownfield sites, are ongoing at 19 others, and 3 more
are about to get under way. They explained that since EPA brownfield
funds generally represent only a portion of ongoing cleanup activities,
recipients may delay reporting progress until such time as all site
cleanup activities are completed.
[14] EPA guidance allows up to 40 percent of revolving loan fund grant
dollars to be distributed as subgrants to provide direct assistance for
brownfield cleanups.
[15] Prior to 2002, EPA-funded brownfields cleanups were subject to the
National Contingency Plan (NCP)--CERCLA regulations that provide EPA's
blueprint for how to respond to hazardous substance releases. Under the
2002 Brownfields Act, an NCP provision applies to EPA-funded
brownfields cleanup only if EPA determines the provision is relevant
and appropriate to the Brownfields Program. While EPA regions will
determine the terms and conditions applicable to each grant, EPA
expects that grant recipients will receive increased flexibility as a
result of the new provision. EPA, however, retains certain requirements
in order to ensure environmental cleanups protect public health and the
environment.
[16] In addition to management capabilities, EPA evaluates (1) the
grant proposal budget; (2) the community's need for brownfields
redevelopment; (3) the process for selecting loan or subgrant
recipients; (4) the target market and business plan for making loans
and subgrants; (5) the sustainable reuse of projects; (6) the creation
or preservation of public or greenspace; (7) community involvement
activities; (8) the reduction of threats to human health and the
environment; and (9) the leveraging of additional funding resources.
According to EPA officials, the grant proposal budget, target market
and business plan, and the leveraging additional resources criteria
also provide an assessment of applicants' ability to manage the grant.
[17] The federal low-income housing tax credit provides an owner of
newly constructed or renovated rental housing, who sets aside a
specified percentage of units for low-income persons for a minimum of
15 years, with a tax credit over a 10-year period. The federal historic
rehabilitation tax credit provides the owner of a certified historic
structure with a tax credit equal to 20 percent of the amount of
qualified rehabilitation expenditures.
