<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:30693.wais]
MONITORING OUR NATION'S PULSE: A LOOK AT EXISTING FEDERAL, STATE AND
LOCAL ECONOMIC DEVELOPMENT TOOLS AND WHETHER THEY ARE ADEQUATE IN
ATTRACTING AND KEEPING BUSINESSES IN AMERICA'S HEARTLAND CITIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERALISM
AND THE CENSUS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MARCH 21, 2006
__________
Serial No. 109-195
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
30-693 WASHINGTON : 2006
_____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Federalism and the Census
MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina CAROLYN B. MALONEY, New York
------ ------
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
John Cuaderes, Staff Director
Jon Heroux, Counsel
Juliana French, Clerk
C O N T E N T S
----------
Page
Hearing held on March 21, 2006................................... 1
Statement of:
Carlson, Tom, mayor, city of Springfield, MO; Diane May,
executive director, Southwest Missouri Council of
Governments; Clint Thompson, director of planning and
community development, city of St. Joseph, MO; Jeff
Sanford, president, Memphis Center City Commission; and Jim
Cloar, president and CEO, Downtown St. Louis Partnership,
Inc........................................................ 7
Carlson, Tom............................................. 7
Cloar, Jim............................................... 66
May, Diane............................................... 15
Sanford, Jeff............................................ 58
Thompson, Clint.......................................... 23
Letters, statements, etc., submitted for the record by:
Carlson, Tom, mayor, city of Springfield, MO, prepared
statement of............................................... 10
Cloar, Jim, president and CEO, Downtown St. Louis
Partnership, Inc., prepared statement of................... 69
May, Diane, executive director, Southwest Missouri Council of
Governments, prepared statement of......................... 18
Sanford, Jeff, president, Memphis Center City Commission,
prepared statement of...................................... 60
Thompson, Clint, director of planning and community
development, city of St. Joseph, MO, prepared statement of. 25
Turner, Hon. Michael R., a Representative in Congress from
the State of Ohio, prepared statement of................... 5
MONITORING OUR NATION'S PULSE: A LOOK AT EXISTING FEDERAL, STATE AND
LOCAL ECONOMIC DEVELOPMENT TOOLS AND WHETHER THEY ARE ADEQUATE IN
ATTRACTING AND KEEPING BUSINESSES IN AMERICA'S HEARTLAND CITIES
----------
TUESDAY, MARCH 21, 2006
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Springfield, MO.
The subcommittee met, pursuant to notice, at 1 p.m., in the
Springfield City Council Chambers, Springfield City Hall, 830
Boonville Avenue, Springfield, MO, Hon. Michael R. Turner
(chairman of the subcommittee) presiding.
Present: Representatives Turner and Blunt.
Staff present: John Cuaderes, staff director; Jon Heroux,
counsel; and Juliana French, clerk.
Mr. Turner. A quorum being present, the Subcommittee on
Federalism and the Census will come to order.
I want to welcome everyone to the subcommittee's field
hearing entitled, ``Monitoring Our Nation's Pulse: A Look at
Existing Federal, State and Local Economic Development Tools
and Whether They are Adequate in Attracting and Keeping
Businesses in America's Heartland Cities.''
I want to thank Congressman Roy Blunt for asking the
subcommittee to come here today and hear the wonderful examples
of what has been accomplished in the city of Springfield. As
you know, Congressman Blunt has been a leader in ensuring the
vitality of the Federal programs that we heard about today in
Springfield that have been utilized in accomplishing the
economic development and revitalization. And it is certainly
important that on the national level, we have his love for
urban cores and for economic development and job creation. So
many of the projects that we heard about today included
Congressman Blunt's leadership and participation and it is
excellent that your community has pulled together in such a
great way, it is a phenomenal team.
And, Mayor Carlson, I want to thank you for having us and I
want to thank you for conceding this chair for us to be able to
have the hearing.
Mayor Carlson. It is a great honor to have you sitting
there.
Mr. Turner. I will not get too comfortable here, but I must
tell you that as a former mayor, I do appreciate everything
that you do and the fact that you have allowed us to come here
today to hear about ways that you have used Federal programs to
benefit your community.
The role of the Nation's economic development initiatives
and programs is to create jobs, help retain existing jobs and
stimulate industrial and commercial growth in economically
distressed areas of the United States.
They are also important in helping local communities create
more affordable housing. Over the years, Congress has created a
wide variety of Federal economic and community development
programs and incentives to help rural and urban communities
overcome periods of severe economic distress.
Before becoming a Member of Congress, I served as mayor for
the city of Dayton for two terms, 8 years, and I can tell you
that we could not have had the kind of success our community
saw in its revitalization and redevelopment without the many
different programs available to us on the Federal level at that
time.
Some of these programs on the Federal level are at risk and
others need to be improved. That is why our subcommittee is
here today. We want to hear how these programs have impacted
other heartland communities like Springfield, St. Louis, St.
Joseph or Memphis. We want to learn how these programs have
helped and where they have fallen short. We hope that our
witnesses today will provide us with a fresh perspective on how
they are using the Nation's economic and community development
portfolio and whether Congress can improve these programs to
better meet the needs of heartland communities. I am sure our
witnesses will provide us with better insight into these
programs.
Before we begin with our witness testimony, I do want to
thank the city of Springfield and Mayor Carlson for hosting us
today and for facilitating a very interesting bus tour today.
We saw some of the great examples of the community pulling
together in private-public partnerships to achieve
revitalization.
And I want to again thank Representative Roy Blunt for
having us here and also for his leadership on the national
level that has assisted both your community and mine as we have
made certain that there have been economic development tools
available for our communities.
With that, I want to recognize Mr. Blunt for any opening
comments he might have.
Mr. Blunt. Thank you, Chairman Turner. I am pleased that
you would come here and have this hearing. I know you are going
to make all of the questions, the answers, the testimony
available to your committee. I am particularly pleased that you
have had a chance to see what is going on here in Springfield,
in the center city of Springfield, and you and I are going to
be able to hear more about that from Mayor Carlson and from
Diane May and hear about what is going on in other cities that
are well represented here today.
I think the purpose of this hearing is clear and the
chairman's vision for it. Clearly, as a former mayor, he brings
incredible insight to his job as chairman of this subcommittee.
We have a handful of mayors in the Congress and they make real
differences in the discussions we have about issues like
eminent domain and Federal programs that we are going to be
discussing today.
You know, any insight we can get on how these programs are
working, which of the programs could be better, what programs
are not doing what they need to do and what programs are doing
everything they need to do and need to be encouraged to be
expanded even further. As you all know, one of the big debates
in the last Congress--at least it appeared it was going to be a
big debate--was whether or not we would adopt the
administration's proposals to significantly change, many said
eliminate, the community development block grant program. But
individuals like the five of you all came forward from all over
the country and explained how that program was used. Now I am
sure the program was not used in the best way in every
community and we hope that we can find ways to ensure that it
is, but, you know, giving communities the flexibility to try
things that work, to share things with other communities--
uniquely in our system, the States and the communities within
the States all can serve as laboratories for change. And any
time we develop strait jackets that do not allow those
laboratories to function that way, we have really failed to
take advantage of one of the great, unique aspects of the way
our structure is set up.
And so I am certainly glad you are here. I am glad to be in
the Springfield City Council Chambers. I do not think I have
ever sat here before. In fact, most of the time I have ever
spent in this room was years ago when I was the chief elections
authority for Greene County, and we would frequently have
election worker training sessions in this room. And the closest
I ever got to sitting here was standing right down there and
going through the process of what would happen on election day
in the 101 precincts we had in Greene County at that time and I
think there are more now.
But I am delighted to be here and again, I am particularly
grateful that Congressman Turner, also clearly in his heart and
his experience, Mayor Turner, is here wanting to make these
programs work in the best way possible. He has already talked
to me in the last few hours we have been together here about a
couple of ideas he has legislatively in the brownfield area and
other areas that I know I am going to take a closer look at, as
I do almost everything that Mike Turner brings to my attention
that impacts what we can do to make our cities better. And
chairman, thank you for letting me join you here at the table
today.
Mr. Turner. Thank you, Roy, and I appreciate the tour that
you organized of the successes that you have had in economic
development. We have had a great conversation all day about the
Federal programs and the successes that have occurred here in
Springfield.
And I wanted to raise that issue to tell you that even
though it has been a very exciting and fruitful discussion, the
importance of this discussion is that we will now be able to
get your comments, your enthusiasm, your successes on the
record, as part of the Federalism and Census Subcommittee. So
your testimony and your comments today, both in answers to our
questions and in what you are about to say will enter the
Federal record as we look to preserving these programs and
hopefully reforming them in ways that are useful to you.
We will now start with our witnesses. Today, we will hear
from Mayor Tom Carlson of Springfield; Diane May, executive
director of the Southwest Missouri Council of Governments;
Clint Thompson, director of planning and community development
for the city of St. Joseph, MO; Jeff Sanford, president of the
Memphis Center City Commission; and Jim Cloar, president and
CEO of Downtown St. Louis Partnership.
I want to thank all of you for being here today. I want to
thank you for the time that you have taken in preparing for
this testimony and for the time that you are giving us today.
Each witness has kindly prepared written testimony, which will
be included in the record of this hearing. Witnesses will
notice that there is a timer light at the witness table. The
green light indicates that you should begin your prepared
remarks and the red light indicates that your time has expired.
The yellow light will indicate when you have 1 minute left in
which to conclude your remarks. And we will be lenient with the
time, because we do want to make certain that we get your
testimony today.
It is the policy of this committee that all witnesses be
sworn in before they testify. So if you would please rise and
raise your right hands.
[The prepared statement of Hon. Michael R. Turner follows:]
[GRAPHIC] [TIFF OMITTED] T0693.001
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[Witnesses sworn.]
Mr. Turner. Please let the record show that all the
witnesses have responded in the affirmative. And with that, we
will begin. Mayor Carlson.
STATEMENTS OF TOM CARLSON, MAYOR, CITY OF SPRINGFIELD, MO;
DIANE MAY, EXECUTIVE DIRECTOR, SOUTHWEST MISSOURI COUNCIL OF
GOVERNMENTS; CLINT THOMPSON, DIRECTOR OF PLANNING AND COMMUNITY
DEVELOPMENT, CITY OF ST. JOSEPH, MO; JEFF SANFORD, PRESIDENT,
MEMPHIS CENTER CITY COMMISSION; AND JIM CLOAR, PRESIDENT AND
CEO, DOWNTOWN ST. LOUIS PARTNERSHIP, INC.
STATEMENT OF TOM CARLSON
Mayor Carlson. I hope that does not prevent me from a
little puffing--[laughter]--about our community.
Welcome. We want to thank you for being here today. This is
a historic day in our community. I do not think we have ever
had a congressional field hearing here, that I know of in the
20-some years I have been here. And to have it in City
Chambers, it will definitely go in our local history books. So
we want to thank you for that.
What I would like you to think of in terms of our community
is thinking of it as a home. And in a home, there are a lot of
people that go into building a home and you have to have tools
to do it. We here in Springfield created a city where 3 percent
of the population lives, but 25 percent of the new jobs in the
State were created in this area last year. It is not an
accident, it is a result of that team working together. And
here, that consists of public-private partnerships and public-
public partnerships. It runs the gamut. We work well with the
county, we work well with the school system, we work well with
the local university, and we work particularly well with the
private sector. And as a consequence of that, we have built a
community that is known throughout the State as the economic
engine for the State.
But as I say, we need tools to do that. And I like the
definition of collaboration that I have used from time to time,
and it is essentially this: Collaboration is what can be done
together that could not be done separately. Those tools that we
need and the people on the team that we need to make it happen
is the Federal Government. And I want to just detail briefly
some of the tools that we have used here in this community to
create that economic engine and to create a downtown that in
the last 10 years has seen over $200 million in investment.
Let me start with the community development block grant
program. We have been the recipient of that for a long time.
Approximately 20 years ago, we decided rather than using the
money for administration or building a sidewalk, to put it into
revolving loan programs. That fund has now grown into over $25
million and has been a big part of what we have been able to do
in the downtown area, by using it for gap financing with banks,
with soft seconds, that sort of thing, facade loans. We
created, I think we can attribute over 375 new jobs, $25
million in investment in the downtown area, just because of
that.
Second, the Section 108 program and the brownfield economic
development initiative, we used that at the Universal Paint
building that you have seen today and that is the anchor for
what is going to be our West Meadows development. It would not
have been possible to have done that without those funds, and
with the flexibility that we have as a consequence of that.
We have also taken advantage of the economic development
initiative [EDI] grants. Those have made possible the 900-space
car park that we have here. I think it is one of the nicest
looking car parks you could find anywhere. It is great to see
at night and it overlooks the best minor league baseball
stadium, according to the minor league baseball teams, in the
country, that we have been able to do, again with using Federal
dollars and the ability to use judiciously eminent domain.
Let us talk about the Federal historic tax credits. I am a
developer, I do use those myself, and because of the
complexities and the expense in rehabbing old buildings, what
you have seen this morning and last night in going downtown
would not have been possible without the historic tax credit. I
can tell you that is absolutely the case. It would be a
disaster for cities throughout the country to see that program
cut back.
Any community has more dollars in its infrastructure in the
downtown area than anywhere else. You have the roads, you have
the storm sewers, you have the electric plants. It makes no
sense to let the area degenerate and then have to be building
new on the periphery, because the issue in the downtown area is
not going away. That has been a program that has worked with
the private sector, that has done a tremendous job.
Brownfield grants--through Congressman Blunt's help, we
acquired what was an eyesore and something we did not know what
to do with, which was a white elephant downtown, an old feed
mill, what was called MFA Feed Mill. We used a brownfield grant
to clean up the environmental issues, and then we conveyed it
to the University for a dollar. And then with that, the
University, through a very entrepreneurial approach with its
Center of Applied Science and Engineering, is building a nano-
technology center that is bringing $80,000 a year jobs into our
community. These are jobs for the future. These are jobs for
the 21st century. Those things would not have been possible if
we had not been able to leverage these Federal dollars and to
work in partnership.
The thing that I would like to tell you and to tell the
community is that we have been good stewards with the
taxpayers' dollars. But we at the local level, just by
definition, have a better idea of what can work and what is
needed than people that are removed from it in Washington, DC.
So there has to be a degree of flexibility. We always leverage
these funds and if they came with so many strings attached that
they were not available to us, the things that we have been
able to accomplish here in our community would not be possible.
So this is a message--I am also on the board for the
National League of Cities. The CDBG is the No. 1 issue for the
National League of Cities this year, and preservation of that
and what it can mean to our local community. Most of our money
is earmarked, it is dedicated and if the community development
block grant funds were curtailed, it would leave a much bigger
gap than what you might think in our economic tool set.
So in closing, I would just like to say, thank you,
Chairman Turner; thank you, Roy Blunt, for bringing your field
hearing here and allowing us to present this issue to you at
our local level. You do great honor to our community.
Mr. Turner. Thank you, Mayor; thank you for hosting us.
Ms. May.
[The prepared statement of Mayor Carlson follows:]
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STATEMENT OF DIANE MAY
Ms. May. Congressman Turner, Congressman Blunt, I
appreciate the opportunity to testify before you today. My name
is Diane May and I am the executive director of the Southwest
Missouri Council of Governments.
SMCOG is one of Missouri's 19 regional planning commissions
and we serve the counties of Barry, Christian, Dade, Dallas,
Greene, Lawrence, Polk, Stone, Taney and Webster Counties and
the municipal governments within those counties. Our region's
2004 population was estimated at over 542,000.
Today, I would like to talk to you from the perspective of
the smaller communities within our region. Mayor Carlson has
already, I think quite appropriately, addressed issues from the
metro perspective, but our smaller communities in our region
are also part of our local and regional economy and very
important to the success of Springfield as is Springfield's
success important to them.
From the perspective of our smaller communities, many of
the programs we work with in promoting economic development,
which is basically an improving quality of life issue, are
related in many cases to the very basic programs that are
available in that economic development toolbox.
For example, infrastructure programs that provide for basic
water, sewer, road improvement as well as technological
improvements are still absolutely essential in our smaller
communities, for them to be able to thrive and create an
environment for private investment and business development and
job creation.
Just to give you an example, we have worked with some very
small communities over in Polk County and also in Webster
County that just now are getting their very first centralized
sewer system. These communities could not survive, they have no
hope for the future without having that basic essential
infrastructure and they are getting that through combinations
of CDBG funds and other State programs.
Also, other things that are really important I think
throughout our region is continued investment in work force
development. This is essential both at the State and Federal
level. It is just critical to our success both as a region and
as a State. To give you an example I think of a successful
initiative directed toward work force development, this comes
from the Economic Development Administration, we worked with
the Monett School District to achieve a grant from EDA, an
approximately $1.25 million infrastructure development grant
from EDA for the construction of a new Southwest Missouri Area
Career Center. This career center serves 14 public school
districts and over 15 communities within that area. The $1.25
million EDA investment is matched with a local bond issue and
other resources for the construction of an approximately $7.3
million state-of-the-art facility that will enhance both
secondary and post-secondary educational and vocational
training, and also will be providing customized training
programs that have already been requested by businesses and
industries in that area that those programs cannot be provided
at the present time. So this was a very important investment in
work force development within our region in our smaller
communities.
Another item I would address that maybe you do not think
of, but disaster recovery, and I think CDBG is a good example
of this. We had very severe tornadoes that hit our area in May
2003 and in fact caused catastrophic damages in a couple of our
small communities, including Pierce City. The flexibility of
the CDBG program enabled the Missouri Department of Economic
Development to work with our Federal partners and come in and
use existing CDBG funding to fund essential projects for
recovery that are most definitely tied to the economic recovery
of those communities. And in fact, Pierce City's local sales
tax revenues are, within 2 years after the disaster, higher
than they were before. So their recovery efforts have been very
successful and it continues to be important to the area.
I would also have some suggestions regarding how we might
improve upon some programs, things that maybe we do not have
right now. One might be cost reimbursement, and I would use
Springfield as an example. The city of Springfield has
successfully partnered with the Missouri Department of
Transportation to put up the front money for certain
transportation improvements that were scheduled at longer term.
And so they have been able to put those improvements in and
then be reimbursed by MODOT at a later date. Perhaps we may
find a way to enable cost reimbursement in some of our economic
development programs that would allow our communities to move
forward more quickly, because time is of the essence when you
are dealing with private investment and business development.
Also another area that perhaps we could consider is more
programs for land acquisition. Many of our smaller communities
may have the resources or infrastructure resources, but they do
not have the land to put in such things as business parks. We
need to find a way to make this happen. Land costs are
continuing to go higher in our communities and that might be
one option that we could be taking a look at.
In terms of general comments, I would say overall,
regardless of the program, we need to find a way to deal with
the timing, the regulations, the numbers, the variations in the
different programs. It is very, very confusing and many people
do not know. I, even dealing with programs, could not begin to
tell you the myriad of rules and requirements of all the
various programs. When you are dealing in the smaller
communities, they do not have a clue. So we have to find a way
to make things more timely, more flexible, more easily
understood.
Also, I would recommend that we need to find ways that we
can make the application processes for our programs more
consistent. We should be able to use consistent data sets for
putting together applications. That information should be
readily available and not be as confusing as it is for many of
our programs.
And I would conclude with saying that I very strongly go
along with Tom Carlson's recommendations on the issues of
regional cooperation and coordination. I think it is really
essential that we leverage all the resources that we have and
that we be able to work together. So any efforts that can be
made to encourage approaching this from regional planning
issues, working together so that all the partners can come
together and best use the resources to leverage to assist all
of our communities in improving quality of life is very
essential.
Thank you.
Mr. Turner. Mr. Thompson.
[The prepared statement of Ms. May follows:]
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STATEMENT OF CLINT THOMPSON
Mr. Thompson. Chairman Turner, Congressman Blunt, members
of the subcommittee, thank you for the opportunity to appear
before you today to discuss St. Joseph's efforts toward
brownfield redevelopment and how proposed changes being
considered regarding the use of eminent domain could affect
brownfield projects. My name is Clint Thompson, I am the
director of planning and economic development for the city of
St. Joseph, MO.
Development of our brownfield areas is key to the success
of revitalizing our downtown in St. Joseph. In 2000, we were
awarded an EPA brownfield assessment grant to help redevelop
244 acres south of our downtown on the Missouri River. The
city's ultimate goal for this area is to create new jobs and
remove blight.
EPA's brownfield grants have significantly helped cities
clean up brownfield properties. Through the assistance of EPA,
we were able to use these grant funds to perform environmental
assessments on properties owned by Burlington Northern-Santa Fe
Railroad, to help identify environmental constraints that were
holding this property back from redevelopment.
Since environmental contamination on a property is the
responsibility of the property owner, this fear created a major
disincentive for BNSF to proceed with the city's desire to
redevelop this land. BNSF's fear of having an environmental
assessment performed on property they had no intention to sell
resulted in a stalemate. To move discussions forward, one tool
the city used to help spur negotiations of the land sale was
the city's consideration of eminent domain for economic
development purposes.
Prior to this project, eminent domain actions undertaken by
the city had only been for the purpose of constructing public
infrastructure. The city of St. Joseph has never before engaged
in the use of eminent domain to acquire private property for
economic development purposes. However, without this tool, the
city would not have been able to proceed with the redevelopment
of this brownfields area.
As a local government, we are concerned with the proposed
changes regarding the use of eminent domain and hope that
proposed restrictions on the use of eminent domain as an
economic development tool, because of abuses real or perceived,
will not prohibit brownfield redevelopment efforts across the
country.
One concern that we have with the use of eminent domain is
the definition of blight. The city of St. Joseph believes that
communities should be allowed to make that determination of
blight in accordance with existing State laws that best serve
the community. Allowing local governments to make determination
of the definition of blight would provide an additional
safeguard to those concerned with abuse of this definition.
In working to redevelop this brownfield site, we found that
rail companies are motivated by the market. Creating a
situation that rewards these companies to work with local
governments for redevelopment efforts is critical in enticing
rail companies to participate in the process of brownfields
redevelopment.
Since rail companies are not interested in working with
local, State and Federal agencies on redeveloping former rail
properties, ultimately a property transaction must be
beneficial to the rail company. Local governments should use
available incentives to ensure that property transactions and
redevelopment plans succeed. Tax incentives are a good tool to
entice development of brownfield sites. The government also
needs to develop a tax credit program that allows rail
companies to donate their vacant land to benefit economic
development efforts throughout the country. Providing
incentives to rail companies to dispose of property they no
longer utilize for rail service would significantly help
redevelopment of brownfield properties throughout the Nation.
Increasing the options for communities to negotiate with rail
companies when developing brownfield sites will help to
redevelop brownfield areas quicker.
The city of St. Joseph is excited to hear about your recent
proposal to create tax credit incentives for brownfields
cleanup and redevelopment efforts. This type of program will
help stimulate private investment in brownfield areas.
St. Joseph has used a variety of economic tools to help
jumpstart development in our brownfields area. Through the use
of economic development tools, the city recently secured a
company to locate a biodiesel plant on this former brownfield
site. This biodiesel plant will not only create new jobs for
the city, but more importantly, will redevelop 30 acres of
formerly vacant, under-utilized contaminated property.
Without the support of the Federal Government to provide
incentives to encourage the development of brownfields,
communities across the country will be faced with the challenge
of redeveloping vacant, under-utilized, contaminated property
with no tools in their toolbox.
Thank you for the opportunity to speak today on efforts
regarding brownfields redevelopment.
Mr. Turner. Mr. Sanford.
[The prepared statement of Mr. Thompson follows:]
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STATEMENT OF JEFF SANFORD
Mr. Sanford. Chairman Turner, Congressman Blunt, I am
honored by your interest in my opinions on a subject that I
believe is key to the future of our country: re-establishing
the economic and social viability of central cities, and the
adequacy of Federal, State and local economic incentives in
support of that effort. I have devoted the last 8 years of my
career to the task of revitalizing downtown Memphis because I
am convinced my community, like communities across the Nation,
cannot afford the cost of unbridled urban sprawl.
I am president of the Memphis Center City Commission, a
public-private partnership charged with responsibility of
coordinating the redevelopment of downtown Memphis. As we
define it, downtown is a 6.5 square-mile area hard up against
the banks and bluffs of the mighty Mississippi. It includes a
traditional business district core and a mixed-use neighborhood
adjacent to it. Within downtown's boundaries, we have more than
$3 billion in projects underway. I think it is significant to
note that of that total, privately developed projects account
for the lion's share, about $2.5 billion.
Numbers tell our story. There are approximately 27,000
residents in downtown Memphis. We have close to 70,000 people
working downtown. Downtown has become the sports and
entertainment and cultural center of its region visited now
annually by millions of people.
Add to this the nearly perfect new 2,100-seat Performing
Arts Center, home of the Memphis Symphony, the moving Civil
Rights Museum, the Orpheum Theater, which we call the Broadway
touring capital of the South, a vibrant arts district--all of
this, not to mention the crown jewel of downtown, our
magnificent riverfront, which itself is in the midst of an
exciting long-range enhancement plan. A plan that we hope will
include the project recently announced by Springfield's own
Bass Pro, to create a destination mega store and outdoor
experience in what was formerly a 22,000-seat public sports and
concert arena.
But there is an even bigger story and the one I came to
tell you today. While Bass Pro and ballparks and new condos by
the basketful surely signal the reversal of our downtown's
fortunes, I believe the real legacy will be in our city's
decision to tackle the poverty-stricken, rundown neighborhoods
that lie adjacent to downtown's core. And by replacing
stereotypical public housing with low-rise, mixed-income
housing, we are not just changing the face of another downtown
neighborhood, we are changing people's lives.
A case in point, and a poster child for Federal economic
development funding is the Uptown Project in the neighborhoods
just north of downtown's core. Fueled by a $37 million Hope VI
grant, the city and private developers have replaced two old
dead-end public housing projects with low-rise, mixed-income
apartments and new single-family homes built on hundreds of
vacant lots in the area. The beauty of it is, it is working. We
literally have doctors and lawyers living next door to
residents who were formerly in public housing.
And based on the success of this uptown project, and after
having recently won additional Hope VI funding, the city,
through its Memphis Housing Authority, has started two similar
projects in other neighborhoods within downtown's ring. We now
believe, subject to the availability of Federal funding that
makes these projects possible, that Memphis--not just downtown
Memphis, but Memphis--can be free of public housing projects
within the next 5 years.
So far, I am proud of downtown Memphis and its
redevelopment story, but I must give credit where credit is
due. Virtually none of it would have happened without the
financial assistance of local, State and Federal programs.
Inner city development is costly, and time and again, public
initiatives have spelled the difference between projects
happening and not happening.
The footprints of Federal economic development assistance
programs are all over the downtown Memphis renaissance.
Strategic use of Federal historic tax credits, CDBG, the
Section 108 loan program, BEDI grants, Renewable Community Tax
Credits, New Market Tax Credits, all of these, including
outright congressional appropriations, have been essential to
the redevelopment of downtown.
Yes, every government program is attached to reams of red
tape and true, the Federal bureaucracy can be painfully slow
and confusing. But, as downtown Memphis, downtown Springfield,
downtown Dayton and downtowns across America are coming back,
my concern is not so much with the complexities of the
programs, as it is with the continued availability and
predictability of Federal economic development support in the
future.
I am understanding and sympathetic to the budgetary
implications of wars and hurricanes, but I am also keenly aware
of the consequences of failing to rebuild our inner cities. We
have made a good start in Memphis, but we have only done in
Memphis about 40 percent of what needs to be done.
Thank you as Members of Congress for all that you have
contributed in support of central city revitalization, but keep
in mind, we still have a long way to go to reverse decades of
neglect. Please continue to make the remaking of our town
centers a Federal economic development priority.
Thank you very much.
Mr. Turner. Thank you. Mr. Cloar.
[The prepared statement of Mr. Sanford follows:]
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STATEMENT OF JIM CLOAR
Mr. Cloar. Mr. Chairman, Congressman Blunt, thank you very
much for the opportunity to be with you. I am gratified to
learn that a former local official is heading this very
important effort. I am also grateful that I could have the
slide on downtown St. Louis up here and appreciate that since I
have Turbo Tax on my laptop, my 1040 isn't showing up here for
the entire room. [Laughter.]
That has been known to happen.
The Downtown St. Louis Partnership is a privately funded,
not-for-profit organization supported by member dues and
sponsorships. On behalf of that private sector, we act as an
advocate, a catalyst and a facilitator for downtown and center
city revitalization. In that role, we also act as managers for
a $2.6 million assessment district that is funded by property
owners within a 160-block portion of St. Louis's downtown area.
Through that district, we provide enhanced management
services over and above those offered by local government with
programs including security, maintenance and economic
development. And it is particularly economic development that I
wanted to address today.
We heard a great story this morning about the efforts of
the community here in Springfield, people coming together to
create a downtown plan. In 1999, the citizens of St. Louis came
together and developed a plan that was funded by the private
sector; namely, the Danforth Foundation and Bank of America.
The other unusual thing about that plan was that it emphasized
action. And it has paid off.
In the years since that was adopted, we have had $3.3
billion of new public and private investment in our downtown
area and we have another $1 billion that is underway. The
turnaround has been remarkable. National columnist Neal Pierce
has referred to it as one of the most remarkable turnarounds he
has seen anywhere in the country. And just 2 weeks ago, a
number of us from the community were in Washington, DC, to
receive a national award from Partners for Livable Communities.
Many of those projects have been big ones, like restoration
and expansion of a convention center hotel, one of the original
Statler's that had been empty for many, many years. Just a week
ago, we rededicated the old post office right in the center of
downtown. If it looks familiar, it is similar to the old
Executive Office Building in Washington, DC. So it has more
than just local significance, it has national significance. By
the way, this used a whole myriad of tax credit programs,
including one of the first to use the New Markets Tax Credit
program.
Being here in Springfield and with my colleague from
Memphis on the right, I have to talk about the St. Louis
Cardinals. In a couple of weeks, we will have a ribbon-cutting
for our new baseball stadium and, just as importantly, the six-
block area just to the north that was a former site of old
Busch stadium will become Ballpark Village, a mixed-use project
with office, residential and entertainment uses.
Here's the way that this has broken out in downtown, and I
think what is particularly telling is in the upper right hand
corner, almost 25 percent of the investment in our downtown
area has been for residential projects. Today in downtown St.
Louis, we have about 9,700 residents. Now that is less than you
heard in Memphis, but again, we have a smaller geographic area
that we consider to be downtown. But we are really pleased with
what has happened there, particularly since the year 2000.
Since the year 2000, about a quarter of our residents are new
to the downtown area--2500 of them in 1,700 units. The
occupancy rate is very good, 91 percent of those units have
been open over 1 year. And we track it on that basis, so that
there is time for lease up and for sales. Projected, it will be
even stronger. Projects that we conservatively expect to start
within this next year and be completed by the year 2008 will
give us another 8,000 residents in our downtown area.
In turn, that has led to our developing a targeted retail
strategy where we have a merchandising plan. We have developed
meaningful incentives, not just incentives that are easy to
give, but meaningful incentives, and hired a retail
coordinator. And since the year 2004 when we started pursuing
this strategy, we have opened 26 new restaurants, 23 new retail
establishments and about an equal number of both of those we
expect to open within this next year and a half. Just a shot of
some of those, which is kind of interesting.
Now the reason that is so important and what it has to do
with economic development is people who are responsible for
bringing jobs back to downtown say you are starting in the
right place. Instead of working so hard on office tenants, if
you will start with housing, that leads to retail and
restaurants, that puts life on the street and it suddenly makes
downtown more attractive as a place to do business.
Here are the keys to our success. I mentioned before that
the plan was action oriented, it did not just quit when we
adopted the recommendations. We said that is the starting
point, not the quitting point. We have been blessed with a very
supportive city administration and we are very pleased that we
have had innovative local developers.
Tax credits have played an important role in it. And I want
to emphasize the historic preservation tax credits, for a very
significant reason. St. Louis is an old city. Many people say
it is the western most eastern city. Seventy-two percent of the
buildings in downtown St. Louis are over 50 years old and 31
percent of them are over 100 years old. That can be a problem,
as the Mayor pointed out, but it can also be an asset, because
it makes us unique, we have beautiful architecture.
The State's historic tax credit program here is a model
throughout the country, with 25 percent of the eligible costs
being available to the developer. Look at the last line, it can
also be used for ownership as well as for rental. The impact is
that 80 percent of our historic buildings are now back in
productive use. We need to keep that going.
Now here is the contrast and the only thing I want to
emphasize in terms of programs today is with the Federal
historic tax credits. You see that 20 percent of the eligible
credits are available to the developer, and quite often those
are leveraged so the developer can get 45 percent of the
eligible costs. But if you look at the second line, the Federal
program is limited only to income-producing or rental projects.
That means that it skews the market. Many of the developers who
are doing housing in downtown St. Louis are going for
apartments when there is a market demand for ownership, which
we want to encourage. As a result, they have designed many of
them so that the idea is within 5 years, they will be converted
to condominiums. The only thing I would really stress is if we
could do something at the Federal level to get rid of this
aspect that skews the local market.
And I thank you very much for your time today.
[The prepared statement of Mr. Cloar follows:]
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Mr. Turner. Thank you so much. Thank you for this great,
compelling testimony of what is needed in the communities and
what you are accomplishing in your communities.
I want to emphasize again, many of you have spent time with
us today as we toured the community. It is very important that
through this period as we are in this hearing, that we get the
full opportunity of hearing your comments because these are the
comments that will go into the Federal record. So many of the
things I might be asking you, we have already discussed, but I
would appreciate your embellishment of your thoughts and issues
on that.
Mayor, you told us of the 20/20 process that your community
went through, a visioning process where you enlisted not only
the business community, your institutions, but also the people
in the community. Could you tell us about the importance of
that process and going through that?
Mayor Carlson. Yes, thank you.
It was interesting, one of the rules we had, Congressman,
Mr. Chairman, was that no elected people could serve on the
visioning, because too many of us, me included, tend to be a
control freak. And we were a little worried about what will
happen when people really are let go to think about what they
want to do.
But what we did, we had about 20,000 hours spent, over 300
people, as you noted, just talking about what they would like
their community to be. There were no real restrictions about--
it was sort of a charette in a way. But we worked it through
and then we would have some staff people, you know, bring them
down to reality a little bit. But what was really extraordinary
about that was when that plan was finally completed, it formed
a template for how we would develop our community. And it also,
because there was so much of an endorsement on the community
for the thing, it did not matter who was on council and who was
the mayor, and what ideas those people would come up with, the
general template for where we wanted to go as a community was
set. So you did not have the start and stop sort of thing you
might see with the changes in turnover in elected people at
election.
So it became much more of a process of how do we implement
the long-term vision for this community. And it kept the wheel
out of the ditch and it kept the car on the road. The first
referendum on it was this Jordan Valley Park that you saw, and
whether we should increase the hotel-motel tax by 2 cents to
start the ice rink. That proposal, because of the process that
we had undergone, passed in every precinct in our community by
close to 80 percent. And because of that, there was a buy-in
with the community to proceed. And what I like to say and my
city manager has indoctrinated into me until I really believe
it, is process determines outcome. And if you have an inclusive
process that was, it will dictate a good outcome.
Mr. Turner. One of the things that you and I discussed
about the importance of the CDBG program is the funding
flexibility that is there, that you have invested so much time
going through a visioning process so that you and this
community know what your priorities are, you know what your
needs are and that they certainly would be different than every
other community in the country in ways that you would be able
to garner your resources and address them. The flexibility of
that program is also one of its Achilles' heels because it is
one of the ways in which it has been criticized as being a
program where there is not consistency in how the funds have
been used.
Could you speak for a moment as to how, once you completed
the 20/20 process, how the CDBG flexibility might have been
important?
Mayor Carlson. Well, clearly Diane May talked about this.
If the CDBG program came with too many strings attached, we
would be constantly trying to shoehorn in the CDBG program to
meet a need that we have here in the community that would then
hamper its effectiveness. By having the program coming to us
with more flexibility, it works so much better.
Now I would agree 100 percent with this whole notion of
federalism and Congressman Blunt spoke eloquently about this in
the sense that what you want to do is have 50 States with 50
laboratories that are doing things and seeing what works. And
so my notion would be if you find that there are certain
programs that do not work, then say OK, you cannot take 40
percent of your budget, as some cities might, and spend it on
administration. So rather than trying to predict ahead of time
what might not work, you know, maybe do it in a way that you
say as long as--do not prejudge something, let them see if it
is working. You know, there are certain benchmarks you can do.
There are outcomes, those kinds of things, but once you have
restricted it so much, then it loses effectiveness.
And just quickly, one thing I would like to just say, from
my perspective as Mayor of this community, I think that
earmarks get a bum rap. The thing about earmarks is it allows a
Congressman or a Senator who knows about a particular need in a
community to set aside a small amount of money to meet that.
And, you know, that is what we would much rather see here than
trying to tailor our request so that we have an effective grant
writing technique. What earmarks have done for our community--I
wish they would bring another congressional hearing here and
see what it has done, it has been a great boon for our
community. We do not have anything to be embarrassed about here
in southwest Missouri.
Mr. Turner. That is excellent, that is great that you make
that point because it does allow your congressional
representative, as we saw today when we drove by many of these
projects where Congressman Blunt has provided and directed
Federal funding, where there may not be a specific grant
program that would have been able to assist you, it is
accomplished through the earmark process.
Mr. Thompson, you talked about brownfields and brownfield
redevelopment. As you and I discussed, I have a bill, House
Bill 4480, that would provide a tax credit for environmental
remediation. It is 50 percent of the environmental remediation
and demolition costs, including petroleum remediation for a
site. It would be stackable with what you have here in Missouri
with the tax credit that is there, and largely would respond to
the issue that some of these sites, the cost of cleanup and
building demolition exceed the value of the land.
Would you find a program like that to be helpful in your
processes of brownfields?
Mr. Thompson. Yes, sir, I think any program or incentive
tool that we can utilize for redevelopment of brownfields will
help. The key to developing these sites is providing enough
layering of incentives to bring down the cost of the overall
redevelopment project.
When you are talking about brownfield sites, you have sites
that can typically have high contamination levels and so the
cleanup of that property can sometimes be expensive. So
anything that can limit the cost of that cleanup that allows
that property to become more marketable to a private user, is
going to turn that property quicker. And these incentives and
programs that you have been working on I think are a great tool
to help spur economic development on these sites and encourage
private investment to come back into these sites at an
affordable price.
Mr. Turner. Mr. Sanford, Mr. Cloar, you both talked about
the importance of housing in downtown revitalization and we
certainly saw on our tour today the loft housing and other
types of housing that is here. You made a couple of points that
I would like to revisit and would like you to talk about.
One, you talked about the importance of housing in the area
that attracts then retail and restaurants and other vitality.
If you would speak about that for a moment.
And also, the second aspect of the Missouri Historic Tax
Credit, providing the opportunity for ownership and not just
rental. There is a bill pending that would open up the historic
tax credit that would permit it to be used for ownership
projects. And if you would talk for a moment how that might
assist the type of project that you see in your communities.
Mr. Sanford.
Mr. Sanford. Chairman Turner, let me say, first of all,
that the whole phenomenon of downtown housing, if we stop to
think about it in the historical perspective and at least to
the level that we are seeing it today, is really toward--my
belief is the first job is to redefine our inner cities and
then to redevelop the center cities. The downtowns will not be
what they were in the past, life has changed. And housing,
downtown as a residential neighborhood is really somewhat of a
new phenomenon. It is finding new value and purpose in the
inner city and in downtowns. Retail follows rooftops, it is
said. And a certain service economy and jobs are created in
support of residential neighborhoods. But I think it is a very,
very important phenomenon that we are all in support of.
Mr. Turner. Mr. Cloar.
Mr. Cloar. Two aspects particularly the second one, as I
mentioned earlier, we have seen developers that come into our
office and they have talked about a project and we have
encouraged them that the market out there is for ownership.
Particularly, an economist with the Federal Reserve Bank in St.
Louis was on a panel with me just last week and he talked about
in the city of St. Louis the aspirations that 80 percent of the
people want to own their homes. That is not, from the slides I
showed before, the way the pattern is going in downtown St.
Louis. The demand is there for ownership, but the developers
quite often feel like we have to put--even after talking with
us and us showing them what the market is, several times they
go away and they say we are going to start off with rental. And
in 5 years, then we will convert to ownership, to condominiums.
And we just think that skews the way the situation ought to be.
One of the particular reasons that housing is so important
to downtown, as I mentioned before, leading to life on the
street, but there is an even more direct impact, where the
young technology companies and the knowledge companies that are
moving into downtown. Younger people like a 24/7 environment,
they like the vitality that comes from an urban lifestyle, and
they like the fact that they can live in downtown also. We
talked with one recently that I think Forbes magazine had
listed as one of the 100 fastest growing in the country, they
have 65 people right now, they expect to be at 100 by the end
of this year, and they said that 40 percent of their people
live within four blocks of where the workplace is.
So that is our real growth in downtown, from an employment
standpoint, is getting these knowledge companies back in.
Mr. Turner. I just want to make a note before I ask a
question of Ms. May. Many of you had mentioned the issue of
eminent domain and as we have the important national discussion
and many times at the State and local level discussion of how
we are going to approach eminent domain, I think it is always
important for us to note that so many of the symbols of
America, those things that we see that we think of as symbols
of our cities or symbols of our country, were accomplished with
the use of eminent domain. And Mr. Cloar, you are probably
aware that the St. Louis Arch was built with eminent domain.
Mr. Cloar. Right.
Mr. Turner. Ms. May, I have a question for you. You had
indicated that one of the reforms that you would like to see
among Federal agencies is a unification of the application
process. I thought you might be able to share just a little bit
more of your frustration in that respect with us for the
record, that would capture what that opportunity would be.
Ms. May. Well, you know, I would have to say because of
privacy issues that you are not always able to share
information and data. But working with Federal and State
agencies, many times we need to use multiple funding sources
to, you know, package a project to make it workable, that the
requirements for data are different, the application periods
are different. I am not just focusing on one specific
particular agency, but I think anything that we can do to have
more consistency in the process where possible. You know, it
certainly would not hurt to have some of our Federal agencies
actually have applications that can be filled out, I mean
actually in Word version, and you do not have to use a
typewriter. You know, we are still dealing with that.
So I think we need very simple things that can be done to
make the process easier for our communities and for those
organizations or agencies that are assisting them. Consistency
of data as well as consistency of review, you know, and
assessment on programs.
Mr. Turner. Great. Thank you so much.
Mr. Blunt.
Mr. Blunt. Thank you. Ms. May, recently the chairman of the
full committee, Tom Davis, talked about another issue and said
we had an analog government in a digital world. And the
government is way behind the private sector in so many ways,
right down to how you fill out the forms, which you just
reminded me that you had to--some of these forms, you have to
find a typewriter somewhere and get the form filled out that
way. And way behind where the private sector is and has been
for some time now.
One thing I think I am very much in agreement with. I
believe I am summarizing your views right and generally the
views of the Mayor also on this topic, but your point is that
in the applications and the information, do much more to
encourage consistency there and then do the maximum to
encourage flexibility with how you propose to use the money
that is available to you.
Ms. May. I would agree with that.
Mr. Blunt. I think that is an important concept that we
ought to think about. As we are also talking about the
infrastructure that is available, the concentration of that
infrastructure in center cities.
I do not know, Mr. Thompson, in St. Joseph--I am very
familiar with your downtown, as you know, but I do not know
whether you had a lot of residential population where you are
working now or not. Just kind of my sense of this, turning to
Mr. Cloar, what was the population of the area in St. Louis you
are working in now, that is now 10,000, that you hope to be--
what was the high population number there?
Mr. Cloar. It was not much higher than that at any one
point.
Mr. Blunt. Because this was always more of a industrial,
commercial sort of area?
Mr. Cloar. Yes, sir.
Mr. Blunt. The city population is dramatically different
than it was 50 years ago, right?
Mr. Cloar. The city population is about half what it was 50
years ago. It has now stabilized and coming back a little bit
stronger. And I think downtown and strong inner city
neighborhoods, just as Jeff Sanford referred to, are important
to the city as a whole too. And they all kind of feed off each
other, those older neighborhoods feeding off of downtown and
vice versa.
Mr. Blunt. Would that be the same case, Mr. Sanford, in
Memphis? Where you are working to bring people now, did a lot
of people ever live there or was this largely a commercial,
manufacturing area that you are trying to bring back because
those buildings survived?
Mr. Sanford. It is, as I said, Representative Blunt, the
redefinition of a neighborhood into a residential neighborhood.
Downtown was business, downtown was commercial. On its outer
edges, it was railroad repair yard. Yes, the answer is this is
new.
Mr. Blunt. Mr. Thompson, are you doing the same thing
essentially?
Mr. Thompson. With the help of Mayor Carlson, yes. Tom has
been a huge advocate for bringing back residential population
to downtown St. Joseph, and what we found in St. Joseph is the
fact that to bring back this urban core, you have to create a
neighborhood and residential housing does that. You have to
create a population base that wants to bring in the retail and
the other components, just as was stated earlier that retail
follows rooftops, so in the case of downtown, whatever business
is looking to locate is going to look to see where the center
of population is. And St. Joseph has had success with using tax
credits, State Historic Tax Credits, to rehab our wealth of
historic structures in downtown. And Senator Bond recently was
able to secure us $1 million in Federal funding to demolish an
old hospital in our downtown area. And from the success of the
money we were able to secure to demolish that hospital, it is
going to be market rate condos.
So one thing that we have seen in our community is the fact
that you have to start at some point with residential housing,
typically it is low to moderate use, and then market rate will
follow. But generating that population base then drives the
rest of the success for all of downtown.
Mr. Blunt. And Mayor, since Mr. Thompson mentioned you were
doing some work in St. Joseph, I know that the city here has
benefited from some of your personal business development, I
know Joplin has as well. I do sense some concern in southwest
Missouri that you are doing too much work other places.
[Laughter.]
And good work. I wonder if you would talk a little bit
about the historic tax credits. Both the city and then if you
want to expand beyond that in the other communities you have
worked in, what do they do to make these projects possible and
do the Missouri Tax Credits in the historic area make a
stackable--do they make an important difference in whether you
are able to do what you are able to do?
Mayor Carlson. Certainly. As Mr. Cloar outlined, the
Federal historic credit is a 20 percent credit and it can only
be used for commercial purposes. However, the Missouri Historic
Credit is a 25 percent credit against State taxes and it can be
used for both commercial and residential purposes. Because in
Missouri, we have both of them, it has the effect of coming
close to cutting in half the cost of the reconstruction
efforts.
Clearly, what has occurred in the St. Louis area, more so
than anywhere in the State, to a lesser degree in Kansas City;
you know, that renovation, that resurgence in those downtown
communities would not be possible.
When you go into an older area and are going to redo a
building, all the new building codes kick in and it is frankly
a lot cheaper to build new than it would be to renovate old.
And without these historic credits, you just would not see it
happening. The downtown, Congressman, would look like it did 20
years ago, where we had transients camping out on upper floors
and building little fires to stay warm. That would clearly be
the case.
So what you have nowadays on these programs is that any
program has a learning curve. Mr. Cloar and Mr. Sanford talked
about the New Market Tax Credits, those rolled out I think 4 or
5 years ago and the tax lawyers cannot figure out just exactly
how they have to work and they start working into them and they
start using them, and what happens is if there is not
predictability in the Tax Code and with the programs, people
think it's too much brain damage to try to learn the program.
On the State level, what you have with the State credits
too is the same sort of thing and the credits frequently are
sold. I am going to build a building, I sell the credits to an
investor, take the money and build the building. And what you
have to have is some stability because a 100 percent credit may
go for 60 or 70 cents on the dollar the first year or two until
the banks and financial institutions get used to them and
comfortable with them, and then they start ramping up and the
Treasury is getting more bang for its buck with it. We have
seen that with the State Low Income Housing Tax Credit, for
example, which has been really active for about 5 or 6 years,
which was originally going for 20, 25 cents on the dollar. That
is modeled after the Federal low income housing credit, by the
way. That is now up to 40 cents, so it has come close to 70 or
80 percent increase in value, but people have to get used to
them.
The same way with these other programs that we look at.
When we go in and try to look at doing a project and we have to
layer it with this program, is there some CDBG money that the
city may have to put into it, and what any developer has is he
has a limited quantum of expertise and he has to decide whether
he is going to learn your new program and take advantage of it.
And if you feel like well, it is not going to be there for
awhile and the rules are getting changed, they are just going
to take a buy with it. And what you want it to do is not going
to happen. So what I am trying to say is it is great to tweak
things but they need to be there and it needs to be
predictable. Or, you know, Diane May, I am sure can tell you
about a lot of programs out there. Cities, smaller communities
in particular do not have the staff for them and if the program
did not change very much and they could learn it, then Boliver,
MO could learn how to use it and then the next thing you know,
Monett is. But if it is changing all the time, they just hold
up their hands and they are not going to go there.
I hope that is responsive to your question.
Mr. Blunt. It is.
Diane May, talking about again back to the analog/digital,
the slow time process in making decisions. I think you suggest
in your testimony that the government is way behind the private
sector in its ability to evaluate an application and decide and
move forward. How big an obstacle do you see that in the whole
area of using these government programs?
Ms. May. I think that on some programs, I am seeing an
improvement, but I think it is still difficult, particularly if
we are trying to marry different types--funding from different
types of programs together. Missouri has made significant
strides, particularly in dealing with infrastructure
development through their joint committees with USDA Rural
Development, Missouri Department of Natural Resources and DED
on CDBG funding for infrastructure developments. They now have
a pre-application process, which they have had for the past
several years. That has increased--or reduced, shall we say,
reduced timing significantly on packaging programs for
communities. But I still think that there is always room for
improvement.
I think it may be more, not so much just in the timing but
also in the rules and regulations and all the requirements that
go along, all the red tape, is where can we streamline that as
much as possible, to improve upon, because developers, they
need to move forward. Time is money for them and there are
communities we have worked with where there has been
development interest, but they just, as Mayor Carlson just
said, they do not want to jump into it, it is too difficult.
And particularly working with very small communities, as Mr.
Carlson said, many of them do not have the staff available to
walk potential private investors through the process. They do
not have it, so it does not happen.
Mr. Blunt. Anybody else have any experience with that where
the private investor is just--the decisionmaking process, the
Federal Government costs you the project because the private
investor just loses--any particular thing you want to say,
Jeff?
Mr. Sanford. Congressman, I would simply say that speaking
to the complexities, speaking to the timeliness or lack
thereof, the New Market Tax Credit program, which I
wholeheartedly support and we are making considerable use of
now in Memphis, is an example though. It is not for the faint
of heart and in fact, I would say it takes money to make money.
I am looking here, and you know, I want to be careful, I do not
want to indict the program. But I am looking at the U.S.
Department of the Treasury's overview of the program. And if I
were to read to you the three paragraphs, I would conclude that
you need to hire a Washington lawyer to make this work. It is
just not for the faint hearted and we have seen evidence in our
community that only those private sector developers with the
bank accounts and the wherewithal really can come to understand
this well enough through the attorneys and others they hire, to
make it work. Here it is.
Mr. Cloar. That is a program I point to most also. As the
Mayor said, it has been out there for several years, but even
until a year ago--I am involved with several national
organizations, the Urban Land Institute, I am incoming chairman
of their Public/Private Partnership Council, and we have tried
to have briefings on it and they have said as soon as somebody
understands it--and these are experts--they said as soon as
somebody understands it, then we will convey it out there.
But it is complex and I think the other speakers today have
talked about there are tradeoffs in all these things. I would
mention the Urban Land Institute recently published a document
called the ``Ten Principles of Public/Private Partnerships,''
although it is mostly focused on local government, how you work
together, each understanding the other's sides, I think many of
those same principles also apply to the Federal Government in
the way that these programs are administered--with the best of
intent, sometimes that gets in the way of what the ultimate
goal is.
Mr. Blunt. Mayor, did you have something to add?
Mayor Carlson. Yes, one thing I can think of in particular
that we have had difficulty with is the conflict between the
ADA, Americans with Disabilities Act, and the Federal historic
credit. What you will have is you will go in and redo a hotel
or something and to get the Federal historic credits, they say
you have to keep these windows just like they are or the
doorways just like this. But then the ADA people say oh, no, it
has to be changed. And you know, as a developer, you say you
guys get on the same page, tell me which way to hop and we will
do it. But this is really frustrating and it creates a big
expense for us from time to time.
Mr. Blunt. Let us talk about eminent domain just a little
bit. I guess the question is, the Kelo decision got the
Congress upset, got a lot of Governors and legislators upset. I
think I am safe in saying it was a new judicial view that
eminent domain is served by a better taxpayer. In fact, Sandra
Day O'Connor wrote a great dissenting opinion I thought about
how anybody is subject to a better taxpayer of some kind, every
retail establishment could be replaced by a mall, every home
could be replaced by a factory, you know.
What kind of advice would you give the Congress as we look
at that decision, the concerns about that better taxpayer point
of view, but also the understanding that there is a greater
public good served by the use of eminent domain and how do you
balance the American belief in private property rights and the
American belief in the greater good. And anybody can--we can
start at either end or in the middle or wherever you want to
start. Do you want to start, Jim?
Mr. Cloar. Yes, sir. Yeah, I think there has understandably
been a large over-reaction to the Supreme Court decision or
essentially a non-decision, because they did not really change
anything, but it did shine the spotlight on the fact that
eminent domain has currently been abused in many, many cases.
And I think it is not so much eminent domain itself, as the
process and the way it has been applied.
Much of my history, I have lived in other States where
there was a State prohibition against using eminent domain for
private re-use. That just meant that quite often they were more
clever about defining what was a public re-use.
Certainly your heart goes out to those people who have lost
their homes, particularly those who are in poor financial
situation and it is wrenching to their lives, if it is going
for a mall or something like that. But there are numerous cases
where eminent domain has been used for clearly the greater
public good and quite often it may be an out-of-state, out-of-
town landowner who is clearly blocking the way toward
revitalization that would benefit the people in the local
community. And they hold onto it, knowing that they have almost
got local government over a barrel, that they will have to pay
their price. And that is not quite fair either, that is not
fair to the local taxpayers.
So I just hope we do not throw the baby out with the
bathwater. Clearly, there needs to be some tweaking, some fine-
tuning, and certainly some protection for the rights of folks
if their property is taken for eminent domain. But I think the
concept itself still is appropriate.
Mr. Sanford. I would agree with Mr. Cloar. We could not
have undertaken the projects I described earlier where we are
replacing the stereotypical public housing with these new mixed
income neighborhoods if we did not have in the toolbox the
power of eminent domain. I do think it should be difficult, but
it should not be impossible.
Maybe my perspective is a local one, but even in light of
the new decision, so long as the ultimate decision rests with
local legislative bodies, at least in my community, I am not
too worried about people's property being taken unfairly or for
illegitimate purposes.
Mr. Blunt. Mr. Thompson.
Mr. Thompson. With I guess the recent discussion on eminent
domain, I think one thing that St. Joseph has looked at or
considered, as far as eminent domain and how it is used, is
kind of on a conservative basis. When we are doing public
infrastructure projects using eminent domain, there is a clear
public benefit in how the city has utilized its power in that
capacity, but in our example with our brownfields
redevelopment, you have a railroad company that sometimes can
be more difficult than working with the Federal Government. And
that is not a knock on the Federal Government, but the railroad
has been around longer I think than the Federal Government
sometimes, for some reason. But with an entity such as that,
whether it be a railroad company or any private ownership, when
they have no intent to move on a piece of property for the
benefit of the public and the overall community and the
community clearly lays out a vision and intent for that
property for the benefit of a public use, and in this instance
it was to create jobs and to revitalize a whole area south of
our downtown, I think on the local level, if city policymakers
clearly demonstrate their use of eminent domain and each local
entity has the ability to control how eminent domain can be
used, eminent domain can be a good tool in our toolbox.
Mr. Blunt. Did you feel like, dealing with the railroad,
they had some liability concerns though?
Mr. Thompson. Yes. And actually just getting onto their
property to perform an assessment to determine what that
liability was, was difficult. Clearly when you are using
Federal funds and EPA, you are really bound by the liability
that is attached once you start using Federal funds on a piece
of property, and so I understand their concern of not wanting
to know what is on there, because once they know, they are
responsible. And actually, through the State's voluntary
cleanup process, there is a good program that is out there that
limits the liability exposure by the property owner, and really
it is an educational process that, in this case, the city had
to educate the railroad that private ownership was willing to
take over that liability if we could just exchange transfer of
ownership. And that was really a common ground that we met.
Their property, as it sat, was a liability, but it could be
viewed as an asset by a private entity if the city had funding
to help clean up that process.
Mr. Blunt. You want to talk about eminent domain a little
bit, Diane?
Ms. May. Well, that is a difficult one representing a
myriad of communities throughout the region. So I would have to
say in the discussions our board has had, we do not have--they
do not express one opinion on this, but I think overall, there
is concern that I have heard from the communities we represent
that the process may need to be fixed, whether we are talking
Federal or State. And the State of Missouri, of course, is
looking at this, but to ensure that there is opportunity for
the affected property owner to participate in that process, to
be able to make their concerns known at the beginning of the
process, and that there be adequate compensation in terms of
relocation assistance, because many that may be involved in
that process of eminent domain, they may not be able to move or
relocate to a new location, even if they are paid fair market
value. So those are the concerns that I have heard from our
communities. I do not think that any of them are saying we want
to throw the whole process out. Obviously they recognize the
public benefit and when we talk about using it for economic
development benefits, nobody is really clearly saying no, but
they feel improvements are needed in protecting property
owners' participation in that process and in just compensation.
Mr. Blunt. Mayor Carlson.
Mayor Carlson. Thank you, Mr. Blunt.
One of the issues that I have not heard anybody talk about
on this eminent domain issue is this--in Missouri right now, we
are talking, in fact I talked to two or three legislators at
lunch about where the eminent domain legislation is, and from a
lawyer's standpoint, one of the concerns is that they are going
to totally rewrite the definition of fair market value. And let
me tell you what that does. And the same thing would happen to
Congress. If they come through and rewrite the definition, that
stops economic development in the State for the next 3 years,
because nobody is going to buy anything through an eminent
domain process, knowing that it can be challenged. So that
means that you are going to have to go all the way to the
Supreme Court and have these legal questions decided, and
however many cases that takes. If that happens in Missouri, we
have just driven economic development into Nebraska, into
Illinois, into Tennessee, into Kansas, until 100 years of case
law is redone. The same thing would happen at the Federal
level. It is one thing to take fair market value and stick with
whatever that is, and if you want to do an add-on like legacy
value; if the guy has been on the farm for 100 years, he needs
to get an extra 10 percent, whatever it is, that is one thing.
But you have to be darn careful that you do not rewrite the
laws so now the courts have to redo 100 years of case law and
slow it down.
The second thing I would tell you is, as an elected
official, I have a severe aversion to pain. We are not going to
condemn somebody's property unless the community is really in
favor of it. It just does not work that way. You all are
getting a lot of pressure and phone calls from people because
of the whole notion of property rights. Well, believe me, when
I hear about it--I got it at the shoe repair shop today, you
know. I hear it and feel it all the time. We are not going to
abuse that process. What you do see sometimes is sort of a
shell game, in the sense that we have in the State, for
example--and there are more than one--but we have what they
call Section 353 corporations, that you can delegate the
ability to condemn property and then the elected official can
back off and say it was not me.
So if you at the Congress level are saying well, we want
some more accountability, well on those issues where Federal
funds are involved, then say an elected person needs to call
the shot. That will keep some accountability in the process,
but you will not be throwing out the baby with the bathwater.
Mr. Blunt. Mr. Thompson.
Mr. Thompson. If I could piggyback on the Mayor's comments.
The city, as I mentioned before, we have a former hospital
downtown, and part of that is involved in a Tift project and
part of it is involved in a Chapter 353 redevelopment
corporation, as the Mayor said. It allows that entity the power
of eminent domain in certain situations.
But when you are talking about the use of eminent domain,
we look at it from the perspective of property rights, but the
fact that if an individual who has a house within this area
that the 353 has established in this particular project, has
put their time and money into their house to rehab it and make
it to the historic stature that it once was, and then you have
a dilapidated, vacant house next door that the individual is
not maintaining, not paying taxes--in this particular case,
what we call Uptown Redevelopment Project, we look at the
benefit of eminent domain to go in and protect the property
right of that person who has actually invested in their
property, to protect their property rights from having an
eyesore and a liability right next door. In this case, the 353
allows condemnation power by that redevelopment corporation to
protect property rights of individuals who actually are
reinvesting in the neighborhood and to encourage private
investment. So I think it is important--property rights has two
different angles. The city has to protect both sides of the
fence, but I think the side that we look at more or less is on
the property rights of those individuals who actually are
paying their taxes and reinvesting in their neighborhoods, how
can we help their neighborhood grow and in that case acquire
land for the benefit of the public by allowing a private owner
who wants to come in and do something on that particular
property.
Mr. Blunt. There is at least one State legislator here and
he has been listening very closely to this part of this
discussion.
Chairman, I have one other brief line of questions, but I
think I will go to you for awhile and then if you do not cover
it, come back to me.
Mr. Turner. Thank you. I only have two real quick
questions.
Mayor Carlson, we spoke about this before on the issue of
eminent domain. That is the issue of the tool of eminent domain
permitting a willing acquisition of property by a willing
seller, and a willing buyer being the government. When we
went--on the Federal level when the discussion began on the
Kelo decision, my staff began to look at good examples of
eminent domain and bad examples of eminent domain. And one of
the things that was evident to us is that when we look at
issues of good eminent domain, some of the developments that
might have included eminent domain resolve themselves before
the actual eminent domain litigation has to occur. Because
eminent domain was available as a tool, the parties come to the
table and you have a reasonable transaction.
Could you talk for a second about, have you had the
experience that eminent domain as a tool has made it possible
for you to undertake transactions that do not require the
actual litigation?
Mayor Carlson. Well, that is exactly the case, Mr.
Chairman. I would imagine--I can think of all the development
that we have done in downtown Springfield, I think there has
been maybe one or two cases where it has actually been
contested, but it was a mechanism, as you outline, to bring
everybody to the table. And typically it is good news when the
city comes knocking on your door and saying we would like to
acquire your property--it is good news.
Without that tool, we would not be able to assemble the
property to do a redevelopment. Most of what you saw in Jordan
Valley Park would not have occurred if we had not had that
mechanism to bring everything together so that we can prepare
the property.
A second point I would make is we will frequently have the
owner of the property ask us to condemn it, and it is for tax
reasons. If you said you cannot condemn the property, then when
we acquire the property, it now becomes a taxable transaction,
so you have a guy that has a printing company that wants to
move from the Jordan Valley Park area out into an industrial
park. If you say that we cannot go through the condemnation
process, he has to send one-third of the proceeds, of his
profit, to the Federal and State government, which means when
he starts in again, he's got a bigger bank loan and we just
unwittingly jeopardized the operation of his business. But if
it's through a condemnation process, all that money, so long as
it is reinvested in the next--I do not know what the years, I
think it is 2 years, is non-taxable. So you have kept people at
work, you have kept a business going.
Finally, without the eminent domain process, we would not
be able to get clear title to property. Occasionally,
particularly with distressed property, nobody cares about it,
the title is all fouled up, and only through this process are
we able to value the property, take it, put the proceeds in the
court and let whoever is going to claim it, figure it out. But
without that, we could not go forward and acquire a critical
piece of the property, so the whole development process would
fail.
The main thing that I hope that Congress and the State does
is preserve eminent domain for purposes of slum and blight. If
you do that, you have saved 80 percent of it. Everybody is
worried about the Kelo decision where the people have their
houses and they are kicked out to put in nicer houses or
whatever. That is not what we are doing and we use it in terms
of slum and blight. And if you preserve that, you have gone a
long way toward ensuring the economic vitality of our
downtowns.
Mr. Turner. There was a GAO study of EPA brownfields grant
programs and assistance programs, and through that GAO study,
it indicated that the assessment funds, the grant funds that
are provided for communities that are going to take
environmental remediation assessment processes, that most of
the conclusions that are drawn, once those are complete, is
that the property is not as contaminated as people had expected
it to be. And I would like to know from Mr. Thompson and the
Mayor if that has been your experience in utilizing the
assessment funds, if the studies have seemed to indicate that
the properties are not as contaminated as you would have
expected.
Mayor Carlson. I think that is generally true. Probably the
city manager could speak more intelligently about that, but
yes, that is true. The problem is just what Clint was laying
out a little earlier, is nobody will let you get on their
property because they are afraid--you know, let sleeping dogs
lie--if we let you guys come on there and the word gets out and
then the EPA is on our backs, and so just stay away. Those are
the issues that we run into frequently.
Mr. Turner. Mr. Thompson.
Mr. Thompson. I think the fear of the unknown is what keeps
some of these properties from being redeveloped. And in our
particular case, when you had a piece of property that had
always been for railroad use for as long as history dates on
the property, you know there is some sort of contamination on
that site. And after we actually were able to get onto the
property to perform an assessment, it turned out to be that the
required remediation steps were much smaller, less significant
than originally was anticipated. And when you have particular
properties--this was approximately 30 acres--and the cleanup is
less than $300,000, we felt that was pretty minimal based on
the infrastructure that is on that site, and the fact that
there was rail access on that site made the property very
valuable. That was one of the selling points, is if you do have
the money and funds through EPA or different mechanisms to
actually clean up the property, you can turn these properties
to private ownership for below market value of what greenfield
sites are going. And ultimately the idea behind brownfields is
to calm the urban sprawl when you have a development in your
inner city that already has the infrastructure in place and
nearby housing to support the job creation.
But to answer your question, in our particular case, the
unknown fear was what really held this property back, and then
once we made the determination of what existed on the property
as far as cleanup, it was probably less than what was
originally thought.
Mr. Turner. Thank you. Mr. Blunt.
Mr. Blunt. On the topic of community development block
grants, I know that the chairman believes and that I believe
that the flexibility of those is a good thing. Members of
Congress were generally very reactive to the idea that those
would be abolished.
I wanted you for the record, Mayor Carlson, to talk about
the program that the city has implemented here to use that
block grant money.
And then the other question I have is if there are any
negatives to even the short-term possibility that those block
grants would not be extended. I know like the Section 108
program, you use future community development block grants to
secure current loans. Talk about both of those topics, if you
would like to, and then anybody else. And that will be my last
question.
Mayor Carlson. Well, what we have done with the community
development block grant program over the last 20 years is take
a large portion of it and put it into revolving loan programs.
We have also done it with the HOME money that we get from the
Federal Government. We have used it for sewer extensions to
subsidize people that could not afford the $3,000 that it took
to hook up for a sewer and it was creating a health hazard. So
we would give them financing for 15 years, that sort of thing.
We have used it with a lot of downtown facade loans. We
would use it in inner city neighborhoods to fix up properties.
Depending on a person's ability to repay, they might pay a
market rate of interest, usually it is a little bit less than
that. Or they may pay no interest at all until they sell or die
and then the home is sold.
But we have a lot of program income by putting that money
back in so that now that figure is over--I think it is in the
neighborhood of about $25 million. When you look at something
that we have that has ranged from about a million and a half to
$2 million over that period of time, it is pretty remarkable.
And then what we were able to do on some things, and I
believe we used it on the Universal Paint program, is we took
that portfolio and then we securitized it and borrowed money
against it to put into other things. And so that money has gone
back over and over again into the community.
All the time, Congressman and Chairman Turner, what we have
is a bank somebody will come in and he will work with the
historic credits and he says I want to do a restaurant downtown
Springfield or a new business and I need $1 million. And
through the historic credits and the bank loan, I qualify for
$900,000 of that. By using this CDBG money as the gap for that,
we make a project possible that would not have been possible
otherwise.
If that drops off, that whole program--and again, it gets
right back to what I was saying earlier about the importance of
predictability. We have the staff, we know how to work the
program, we are getting better and better at it, and you cut it
back, then we have to make strategic decisions about, well, is
Congress going to change in the future on this, are they going
to do something else? Do we redirect our staff? And then if it
is changed 2 or 3 years from now, we have to ramp up all over
again. There is always that lead time and that is the whole
thing, once you get the ball rolling, you need to be able to
depend on the predictability of all these issues to plan. It is
a complex process. And the Federal Government with the CDBG is
such an important part of that, to pull the rug out from under
us really has very deleterious consequences. And I understand
you all have a lot of important decisions to make. I could just
talk about the effects it has on our community.
Mr. Blunt. I would not expect the rug to be pulled out, but
clearly when somebody reaches down and takes ahold of the rug,
you have to wonder what is going to happen to the rug. I
understand that as well.
Anybody else want to talk about that?
[No response.]
Mr. Blunt. And then I did have one other question I
remembered. That reminded me. The Hope VI, Mr. Sanford, talk a
little bit to me about that program. Some of your testimony
indicated really that it seemed to be a process that took more
time than it should, that the requirements were onerous.
Mr. Sanford. No, I was saying Federal assistance programs
in general, that it could be argued that they are historically
too complex, too difficult to access. However, I would put up
with that in exchange for, as the Mayor said and I said
earlier, more predictability. Development is a long-term
process and it takes a long time to turn around decades of
decline in our cities. And I would exchange all of the notions
of inaccessibility or complexity for the predictability of some
of these programs.
Hope VI is a centerpiece program in the redevelopment of
our downtown, used quite honestly to do away with, get rid of,
stereotypical public housing. We are changing people's lives
with that program. The expense of doing that is far too great
for our local community to take on without Hope VI type of
assistance. Call the program what you will, but see in Memphis,
see in other cities around the country how it is changing the
paradigm in terms of low income housing, moving people into a
higher station in their communities.
Mr. Blunt. Anybody have anything you want to add, a
question we failed to ask or a thing that has come to your mind
in this discussion you want to be sure and get on the record
here today?
[No response.]
Mr. Blunt. Well, Chairman Turner, I want to thank you
particularly for taking time to come to Springfield today and
to hold this hearing and make it available to your whole
committee and to add it to your vast amount of knowledge on
these topics. It means a lot to me that you would be here and I
am grateful to you.
Mr. Turner. Thank you, Congressman Blunt. I greatly
appreciate you inviting us and having this subcommittee here.
We all know of Congressman Blunt's effectiveness in his
leadership position, being third in leadership in the House and
being able to preserve an advocate for the important community
and economic development programs.
And now I personally know, from being in the community and
seeing the successes that you have had in your community, the
reason why you are such an effective advocate for CDBG and
these other programs, because your community is highly
organized and highly successful in a partnership with you as
the leadership has come together to revitalize the community
here. A lot of great, exciting things going on here. And these
stories will help us as we take them back to the committee to
tell how these Federal programs are being successful and
working.
And Mayor, I want to thank you again for all your time and
the time of your staff and the tours that you have given us of
what you have been accomplishing.
And I do want to comment on one thing I think is probably
in part a symbol to the success that you have. And I note that
at the seat of every council member and of yours, there is a
copy of the mission statement of your community, which begins
with the sentence, ``The people of our community are the only
reason we are here.'' And certainly from all of the leadership
of the community that I have met and certainly from your
Congressman, I have seen that your community lives up to that
mission statement.
With that, I want to thank you and we will be adjourned.
[Whereupon, at 2:40 p.m., the subcommittee was adjourned.]
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