Summary

In recent decades, the decline of manufacturing in many cities has left a legacy of abandoned and idled factories commonly known as "brownfields," which are sometimes contaminated with hazardous wastes. The high cost of cleaning the sites up in accordance with federal and state environmental laws has deterred some new businesses from locating in brownfields, which, in turn, has deprived inner city neighborhoods of tax revenue and employment opportunities. Lenders and developers are often wary of investing in such contaminated property because under the environmental laws, they could be liable for cleaning up the contamination. Proposed legislation (S. 1285) would encourage local governments to redevelop brownfields by addressing two barriers to redevelopment: liability under the Superfund legislation and the costs to assess sites. The bill would protect lenders and property purchasers from some Superfund liability and would help with the costs of assessing the sites by providing interest-free loans of $100,000 per year, up to a total of $200,000 per site, that local governments would be permitted to use to cover these costs. This report discusses (1) what the universe of potential brownfield sites is nationwide, (2) what legal barriers Superfund presents for redeveloping brownfields, and (3) whether the proposed loans to local governments are likely to be enough for conducting site assessments.

GAO found that: (1) researchers estimate that about 150,000 acres of abandoned or underused industrial land exists nationwide; (2) lenders, property buyers, and property owners are reluctant to redevelop these sites because federal and state environmental laws may require expensive cleanups of latent industrial wastes before property improvements can be made; (3) federal law limits the liability of a party that holds ownership in a property but does not manage the property; (4) proposed legislation would limit the amount lenders would have to pay in the event they are liable, limit the liability of property buyers who assess a site for contamination before buying it, and provide assistance for state programs that encourage voluntary cleanup of industrial waste sites; (5) even if the liability of lenders and property buyers is limited, abandoned industrial sites might continue to be viewed as risky investments due to the possibility of contamination; and (6) proposed legislation would provide interest-free loans to localities to conduct site assessments to determine the extent of contamination.