<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:25869.wais]
BROWNFIELDS AND THE 50 STATES: ARE STATE INCENTIVE PROGRAMS CAPABLE OF
SOLVING AMERICA'S BROWNFIELDS PROBLEM?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERALISM
AND THE CENSUS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 13, 2005
__________
Serial No. 109-113
__________
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
______
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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
GINNY BROWN-WAITE, Florida C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada BRIAN HIGGINS, New York
KENNY MARCHANT, Texas ELEANOR HOLMES NORTON, District of
LYNN A. WESTMORELAND, Georgia Columbia
PATRICK T. McHENRY, North Carolina ------
CHARLES W. DENT, Pennsylvania BERNARD SANDERS, Vermont
VIRGINIA FOXX, North Carolina (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian
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
Shannon Weinberg, Counsel
Juliana French, Clerk
Adam Bordes, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on September 13, 2005............................... 1
Statement of:
Bartsch, Charles, senior policy analyst, Northeast-Midwest
Institute; Kathleen McGinty, secretary, Pennsylvania
Department of Environmental Protection; John Magill,
director, Office of Urban Development, Ohio Department of
Development; Douglas P. Scott, director, Illinois
Environmental Protection Agency; and Andrew Hogarth, chief,
Remediation and Redevelopment Division, Michigan Department
of Environmental Quality................................... 7
Bartsch, Charles......................................... 7
Hogarth, Andrew.......................................... 60
Magill, John............................................. 22
McGinty, Kathleen........................................ 16
Scott, Douglas P......................................... 40
Colangelo, Robert, executive director, National Brownfield
Association; Jonathan Philips, senior director, Cherokee
Investment Partners, LLC; Charles Houder, director of
acquisitions, Preferred Real Estate Investments, Inc.;
Kevin Matthews, AIG Environmental, director of Association
and Environmental Relations; and David Cartmell, president,
Kentucky League of Cities.................................. 85
Cartmell, David.......................................... 122
Colangelo, Robert........................................ 85
Houder, Charles.......................................... 125
Matthews, Kevin.......................................... 115
Philips, Jonathan........................................ 95
Letters, statements, etc., submitted for the record by:
Bartsch, Charles, senior policy analyst, Northeast-Midwest
Institute, prepared statement of........................... 10
Cartmell, David, president, Kentucky League of Cities,
prepared statement of...................................... 123
Chester, Steven E., director, Michigan Department of
Environmental Quality, prepared statement of............... 62
Colangelo, Robert, executive director, National Brownfield
Association, prepared statement of......................... 88
Houder, Charles, director of acquisitions, Preferred Real
Estate Investments, Inc., prepared statement of............ 128
Magill, John, director, Office of Urban Development, Ohio
Department of Development, prepared statement of........... 24
Matthews, Kevin, AIG Environmental, director of Association
and Environmental Relations, prepared statement of......... 117
McGinty, Kathleen, secretary, Pennsylvania Department of
Environmental Protection, prepared statement of............ 18
Philips, Jonathan, senior director, Cherokee Investment
Partners, LLC, prepared statement of....................... 98
Scott, Douglas P., director, Illinois Environmental
Protection Agency, prepared statement of................... 42
Turner, Hon. Michael R., a Representative in Congress from
the State of Ohio:
Prepared statement of.................................... 4
Prepared statement of the American Society of Civil
Engineers.............................................. 172
BROWNFIELDS AND THE 50 STATES: ARE STATE INCENTIVE PROGRAMS CAPABLE OF
SOLVING AMERICA'S BROWNFIELDS PROBLEM?
----------
TUESDAY, SEPTEMBER 13, 2005
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2203, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner, Foxx and Kanjorski.
Staff present: John Cuaderes, staff director; Shannon
Weinberg, counsel; Juliana French, clerk; Adam Bordes, minority
professional staff member; and Cecelia Morton, minority office
manager.
Mr. Turner. We called to order the meeting of the
Subcommittee on Federalism and the Census. Our hearing is
entitled, ``Brownfields and the 50 States: Are State Incentive
Programs Capable of Solving America's Brownfields Problem?''
A quorum being present, welcome to the Subcommittee on
Federalism and the Census' oversight hearing. This hearing is
the third in a series investigating the issue of brownfields
redevelopment and ways to incentivize more aggressive and
widespread redevelopment efforts.
In our two previous hearings, the subcommittee heard
testimony describing the magnitude of the problems surrounding
brownfields redevelopment. Additionally, we learned more about
the Federal Government's response to the issue and the
strengths and weaknesses of those efforts.
There are an estimated 450,000 to 1 million brownfields
across our Nation, contributing to community blight, thus
lowering property values and decreasing tax revenues. These
sites lay abandoned and unused due to Federal environmental
laws and regulations that encourage abandonment of contaminated
property by creating disincentives for cleanup and
redevelopment.
Current Federal law triggers liability for remediation of
contaminated properties once landowners have knowledge of the
contamination. However, if redevelopment begins, and
contamination is discovered, the owner may be liable for
remediation costs. If an owner abandons the property without
disturbing the contamination, remediation costs may be avoided.
The net effect of these laws and loopholes is the encouragement
of abandonment of brownfields.
If we are to achieve our goal of restoring these properties
to productive use and redevelopment into centers of economic
revitality, we must craft a Federal response to a federally
created problem. We must fashion that response to complement
existing redevelopment programs.
With this knowledge, we move forward today to focus on
State efforts to address the problem. The subcommittee will
hear from representatives from Ohio, Illinois, Michigan and
Pennsylvania. These particular States offer a number of
incentive programs to encourage brownfield redevelopment. The
incentives range from direct grants to low-interest loans, and
various tax incentives, such as credits, abatements and
forgiveness. I look forward to hearing details on these
programs and their effect on brownfield redevelopment.
Last year I, along with Chairman Tom Davis, requested that
GAO study the status of brownfield redevelopment across the
Nation. GAO's report shows that stakeholders are generally
positive about the current Federal efforts to address
brownfields, but that additional incentives such as a tax
credit are needed to spur further brownfield redevelopment and
really make a difference in communities across the country. In
response to that study, I plan to introduce legislation similar
to H.R. 4480 from last Congress, the Brownfields Revitalization
Act of 2004.
As noted earlier, many States offer tax credits or other
tax incentives, but they vary from State to State. A Federal
tax credit would apply to brownfield redevelopment across the
board, without narrow tailoring. H.R. 4480 proposed a Federal
tax credit of up to 50 percent for qualified remediation
expenses of brownfields in certain poverty-rated areas.
Specifically, credits would be available to redevelopment
projects where the local government entity included a census
tract with poverty in excess of 20 percent, although the
project need not be located within that tract. Further, the
legislation will require that sites must be enrolled in a State
voluntary cleanup program to be eligible for liability
protection afforded under the Brownfields Revitalization and
Environmental Restoration Act of 2001.
We have two panels of witnesses before us today to discuss
all of these issues. We look forward to learning more about
their various State incentive programs addressing brownfield
development efforts. We will also hear our panelists' opinions
on improving or complementing their State efforts at the
Federal level.
First we will hear from Charlie Bartsch, a senior policy
analyst at the Northeast-Midwest Institute; Kathleen McGinty,
secretary of the Pennsylvania Department of Environmental
Protection; John Magill, director of the Office of Urban
Development at the Ohio Department of Development; Douglas
Scott, director of the Illinois Environmental Protection
Agency; and Andrew Hogarth, chief of the Remediation and
Redevelopment Division at the Michigan Department of
Environmental Quality.
Our second panel of witnesses consists of representatives
from the private sector. We will hear from Robert Colangelo,
executive director of the National Brownfields Association;
Jonathan Philips, senior director of Cherokee Investment
Partners, LLC; Charles Houder, director of acquisitions for
Preferred Real Estate Investments, Inc.; and finally, Kevin
Matthews, director of association & governmental relations at
AIG Environmental.
I look forward to the expert testimony of our distinguished
panel of leaders today, and I thank you for your time.
[The prepared statement of Hon. Michael R. Turner follows:]
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Mr. Turner. I will now yield to Mr. Kanjorski for his
opening comments.
Mr. Kanjorski. Thank you, Chairman Turner. I appreciate the
opportunity at the start of this hearing to offer my views
about the brownfields program.
In 2002, Congress took a significant step to remedy the
persistent funding problems associated with the cleanup of
mine-scarred lands with the passage of the Small Business
Liability and Brownfields Revitalization Act. Through the
course of our debates over this legislation, we expanded the
Environmental Protection Agency's definition of the term
``brownfields'' to include mine-scarred lands, thus making them
eligible for Federal assistance through an EPA brownfield grant
program. As a result, many local municipalities and nonprofit
entities in my district have received brownfield grants to
remediate the environmental contamination, including mine-
scarred lands.
One organization, the Earth Conservancy, was one of the
first recipients of a brownfield grant to cleanup the mine-
scarred land. However, I remain concerned that many local
entities are not aware of the funding that this program
provides, particularly with respect to cleanup of mine-scarred
lands. In fiscal year 2004, the EPA received 670 brownfield
grant applications; of that number only 24 proposals were for
remediation of mine-scarred lands.
Also, in reviewing the testimony from the Government
Accountability Office, I learned that the Brownfield Revolving
Loan Program has been severely underutilized. To alleviate this
situation, it is my hope that we can look at ways to expand and
strengthen EPA's outreach efforts. As a result, I look forward
to hearing the testimony from our witnesses.
I would like to thank Pennsylvania Department of
Environmental Protection Secretary Kathleen McGinty for being
here to testify today. I have had numerous experiences with Ms.
McGinty during her prior service in the Clinton administration
and find her to be a creative and rather ingenious individual,
so we look forward to her testimony.
It is my hope that the committee will work to address these
issues and look for solutions to make this program more
effective.
In closing, Mr. Chairman, thank you again for the
opportunity to express my initial thoughts on these matters. I
yield the balance of my time.
Mr. Turner. It is the policy of this committee that all
witnesses are sworn in before they testify. Would our first
panel please rise and raise your right hands.
[Witnesses sworn.]
Mr. Turner. Please let the record show that all the
witnesses----
Mr. Kanjorski. Have sworn at us.
Mr. Turner [continuing]. Have responded in the affirmative.
And we will now start with our witnesses.
Each witness has kindly prepared written testimony which
will be included in the record of this hearing. Each witness
has also prepared an oral statement summarizing their written
testimony.
Witnesses will notice that there is a timer with a light on
it at the witness table. The green light indicates that you
should begin your remarks, and the red light indicates that
your time has expired. In order to be sensitive to everyone's
time schedule, we ask that witnesses cooperate with us in
adhering to a 5-minute time allowance for their oral
presentation, which will be followed by a question/answer
period by the Members.
We will begin first with Mr. Bartsch. Would you please
begin your testimony, and also, would you help me with your
last name, please.
Mr. Bartsch. It is Bartsch.
STATEMENTS OF CHARLES BARTSCH, SENIOR POLICY ANALYST,
NORTHEAST-MIDWEST INSTITUTE; KATHLEEN McGINTY, SECRETARY,
PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION; JOHN
MAGILL, DIRECTOR, OFFICE OF URBAN DEVELOPMENT, OHIO DEPARTMENT
OF DEVELOPMENT; DOUGLAS P. SCOTT, DIRECTOR, ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY; AND ANDREW HOGARTH, CHIEF,
REMEDIATION AND REDEVELOPMENT DIVISION, MICHIGAN DEPARTMENT OF
ENVIRONMENTAL QUALITY
STATEMENT OF CHARLES BARTSCH
Mr. Bartsch. Mr. Chairman, and members of the subcommittee,
thank you for the opportunity to testify. And I also want to
thank you, Mr. Chairman, for your efforts on behalf of
brownfield revitalization, which is an important issue. I have
a more detailed statement for the record, but my focus over the
next few minutes is going to be on the critical
intergovernmental foundation of successful brownfield
revitalization efforts.
I'm Charles Bartsch, director of brownfield studies at the
Northeast-Midwest Institute. For the past years I've been
tracking State-level brownfield initiatives, and I have also
worked very closely with the executive leadership of several of
the State chapters of the National Brownfield Association,
including the Ohio chapter, on these same issues in my capacity
as co-chair of its policy advisory board. And this year, in
fact, the NBA devoted its annual Washington, DC, leadership
summit to examining the components in an optimum State
brownfield program, and we have also provided those findings
for the record.
To get at the question posed in your charge to us as
witnesses, yes, State incentive programs are capable of working
toward a solution to America's brownfield problem, but they
must do so in partnership with Federal and local efforts in
ways that attract private investment to these sites. One sector
cannot solve the problem on its own.
All of the research and analysis has reinforced what many
of us have observed over the past decade, namely, that State
brownfield programs continue to evolve and mature. Today more
than half the States have some type of program in place to
support brownfield reuse, and these represent many different
but equally effective approaches in place to bring the
resources together to meet the diverse challenges of
brownfields. They recognize that no specific type of public,
private or intergovernmental partnership and no single approach
fits the financing needs of all brownfield projects.
The most hard-to-generalize State incentive programs fall
into four common categories, helping to facilitate real estate
transactions and site reuse in various ways, and I want to lay
out for the committee and explain how they can contribute to
success.
First, State tax credits, abatements and other incentives
are increasingly being applied to brownfield projects. These
programs have worked by helping with a project's cash-flow, by
allowing resources and project revenue to be used for
brownfield purposes such as site cleanup rather than for tax
payments.
Most State tax incentives are targeted to offset cleanup
costs or to provide a buffer against increased tax assessments
before the site preparation costs are paid off.
State and Federal tax incentives historically have been
used to channel investment capital and promote economic
development in areas that have needed it, and brownfield
targeting is a natural evolution of this type of program tool,
as you have recognized, Mr. Chairman, through your legislative
efforts.
Currently 23 States offer some type of tax incentive, and
today you're going to hear from some of those States; other
examples, Colorado's incentives, which have been designed to
support smaller site cleanup. Colorado allows tax credits to
offset remediation costs, 50 percent against the first $100,000
in cleanup costs, 30 percent of the second $100,000, and 20
percent of the next $100,000.
In New Jersey, brownfield site owners can negotiate for tax
rebates from the State to allow recovery up to 75 percent of
the remediation expenses.
Missouri offers a variety of property income and job
creation tax incentives as part of its brownfield redevelopment
program. Site reusers in Missouri pick from the menu according
to their project needs and package them together, with the
total value of the incentives being able to equal the cost of
remediation.
And Rhode Island has adopted the State historic
preservation tax credit to complement the existing Federal
credit, and the combined credits there have contributed to a
substantial increase in brownfield activity.
I think what we see is that we need to make sure that State
incentives are allowed to work in full partnership with Federal
incentives and are not limited or constrained by recapture or
penalty provisions.
Second, States are targeting financial assistance programs
directly to promote brownfield reuse. Capital gaps remain the
biggest barrier to brownfield reuse, and 22 States have worked
to address this issue by putting some sort of financing
incentives in place such as loans or grants to reduce initial
cash needs. These can be used to increase the lender's comfort
with projects by offering guarantees to limit their risk of
potential losses, or they can ease the borrower's cash-flow by
plugging critical capital holes or offsetting brownfield costs,
and these types of incentives can be critical to small sites.
Third, States are establishing direct brownfield financing
efforts. Often capitalized with bond proceeds, these programs
directly match resources to needs usually in places where the
private sector may fear to tread. About 14 States have done
this, and you will hear from some of those.
And fourth, more States are exploring innovative programs
to support the brownfield financing process. About half a dozen
programs do this by limiting risks or offsetting critical costs
such as those for site assessments. Most of these programs were
enacted as a way to leverage private investment while limiting
public spending, and they represent an important maturation in
brownfield public-private partnerships.
In closing, we know that funding gaps are a primary
deterrent to site and facility reuse; however, creatively
crafted and carefully targeted incentives and assistance can
help advance cleanup and reuse activities and achieve
significant community benefits.
In short, governments at all levels can find ways to help
overcome reuse challenges; however, brownfield reuse will only
succeed in the long run if State efforts can be complemented by
Federal initiatives in a true intergovernmental partnership.
Thanks for the opportunity to speak, and I look forward to
your questions.
[The prepared statement of Mr. Bartsch follows:]
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Mr. Turner. Ms. McGinty.
STATEMENT OF KATHLEEN McGINTY
Ms. McGinty. Thank you, Mr. Chairman, members of the
committee, Mr. Kanjorski especially. Very good to see you
again. And thank you for your leadership on greyfields and on
all other environmental remediation measures. Very timely
attention to this issue, Mr. Chairman. Pennsylvania is very
encouraged by your attention and our ability to share some of
our experiences.
First, as we present to you today, we do have a successful
program; 10 years into the program we are on the brink of
cleaning up our 2,000th site. What I wanted to do is share a
couple of the key reasons why we have been successful to date,
but then to emphasize some of the measures you have pointed to
that would be critical in further building our success.
First, in terms of the four key elements that have built a
successful program in Pennsylvania, first and foremost, clear,
predictable, reliable remediation standards that are geared
toward the future land use of the site; second, clear, thorough
and effective liability relief for the successful performance
of those cleanup standards; third, money.
No question that the playing field is still tilting against
brownfields, it is still much easier to develop a greenfield,
and money is key; money in three categories: site assessment,
site remediation, but then also especially site infrastructure
improvement so that site is pad ready, ready for redevelopment.
That goes beyond just the cleanup of the contamination itself,
but looking at water, looking at utilities, looking at road
infrastructure leading to that site.
Fourth and key, time is money. So the extent to which we
can streamline permitting and put a thumb on the scale for
brownfield redevelopment such that a brownfield either does not
need an individual permit, or it would receive priority
attention in the permitting process has been a key for us.
Those are the things that have worked to date.
Two key enhancements that have been added to the program in
the last year and a half: first, very important, a Memorandum
of Understanding that we have with U.S. EPA that aims to create
one cleanup policy, which means when Pennsylvania says it is
clean pursuant to EPA's standards, it is clean for State and
Federal liability purposes.
I commend EPA for working with us on this, but I would note
a shortcoming. We do have full and effective liability relief
for some Federal programs once Pennsylvania says it's clean,
but for others we are still working on it, we're not there. And
more appropriately or more accurately, our understanding with
EPA is a paper processing agreement; in other words, they have
undertaken to process with us in real time their statutes and
responsibilities as we do, too, on priority sites. Very
helpful, but we need to make the next step to full liability
relief.
Second is the matter that Mr. Kanjorski pointed to.
Pennsylvania has five sales in abandoned mine sites. For us to
redevelop abandoned properties means a greyfield has to be in;
that has been a key enhancement to our program.
Having said that, what are some of the improvements that we
would look to? First, tax credits, absolutely essential, and I
would highlight a key piece, especially to underwrite the
purchase of insurance that can backstop remediation costs.
Quick example: A State-led remediation in Pennsylvania, the
cost has skyrocketed as, for example, what we anticipated at $2
a ton to move soil to the site, with diesel prices through the
roof, we are now looking at $7 a ton to move that same soil to
that same site. What was a bankable project, what was a
financeable project is now something that is quite difficult
for us to get done. So insurance to backstop those remediation
costs in these days of skyrocketing commodity prices would be
very, very helpful.
Second, some of the bills that have been introduced that
offer tax-exempt financing, tax-free bond financing of
brownfield sites, are key. We have done that at the State
level, but frankly we are pushing up against our State volume
cap, and to the extent that tax-free bond financing opportunity
could be shared with the private sector, that would help us
very substantially.
Third, grants. In the grant category, we have a very
important program with U.S. EPA. We have benefited greatly from
the grant moneys we have received, but those grant moneys are
restricted. And the particular restriction I would point your
attention to is an inability to use more than 50 percent of
that grant money for remediation. That is important for new
brownfield programs where moneys need to be invested in
outreach; but for ours, remediation is key, and we would like
to see that money freed up.
And last, they come back to liability relief. If we could
move from what has been an important beginning in our
Memorandum of Understanding with EPA to full and effective
Federal and State liability relief, that would add the
certainty that investors and developers need.
Mr. Chairman, and members of the committee, thank you for
the opportunity to share a few thoughts in this key program.
[The prepared statement of Ms. McGinty follows:]
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Mr. Turner. Mr. Magill.
STATEMENT OF JOHN MAGILL
Mr. Magill. Good morning, Mr. Chairman. I'm John Magill,
director of the Office of Urban Development, and on behalf of
Governor Bob Taft and Lieutenant Governor Bruce Johnson,
director of the Ohio Department of Development, I thank you for
the opportunity to highlight Ohio's initiatives in brownfield
finance and opportunities for Federal, State and private market
collaborations.
Over the past 5 years, the State of Ohio has developed one
of the Nation's best brownfield programs, the $200 million
Clean Ohio Revitalization Fund. The program, funded by bonds
approved by Ohio voters in November 2000, is serving as a
catalyst for the redevelopment of brownfields. Since 2002, Ohio
has granted $97 million to 94 projects to cleanup and
assessment activities. These 94 grants are expected to leverage
more than $731 million in new investment.
I think it is important to note that Ohio's successful
strategy was developed from a task force formed to address the
challenges facing the inner core of our cities. Brownfield
redevelopment was the No. 1 issue identified by communities
during this process.
Ohio's two goals for investing funds into brownfield
projects are economic benefit and environmental improvement. We
also realize that brownfields are most likely to be
successfully converted to a new use through the free market and
decisionmaking at the local level. The results are new,
productive land uses including supermarkets, housing and
industrial commercial space. A number of examples: The city of
Dayton received over $5 million in grants to conduct demolition
and remediation activities at the former GHR Foundry and Delphi
Harrison properties. Select Tool International hopes to expand
onto a portion of the GHR site, while the remediated Delphi
property will be the western boundary of a new downtown
technology campus in Dayton.
On the opposite end of the State is Dave's Supermarket,
located in east Akron. The city received a $2.8 million grant
for cleanup, which they used to leverage an additional $10
million for redevelopment. Dave's Supermarket opened in October
2004, creating more than 100 new jobs, and is leading to
additional development around the property located in one of
the poorest sections of Akron. Likewise, through a $3 million
award, the city of Cleveland was able to leverage $8 million in
private and public funds to clean up a contaminated site,
allowing a local manufacturer, Presrite, to expand and create
50 new manufacturing jobs.
Brownfield successes can change an urban real estate market
by attracting private capital. The acquisition, cleanup and
demolition activities at AC Humko, a former Columbus margarine
factory, totaled more than $7\1/2\ million, funded in part by a
$3 million grant. Estimated private investment from equity and
private markets in the final development will exceed $50
million for market-rate housing now under construction.
And in Cincinnati, the Polk Building is being renovated and
turned into market-rate apartments ready for occupancy in
November. Asbestos contamination made the private sector
reluctant to invest capital in the project, but a $650,000
grant to abate the asbestos triggered $35 million in new
private investment for the renovation activities.
In active markets, brownfield reinvestment is more likely
to occur at a lower public cost and with greater likelihood of
success. Public policy is able in a variety of ways to affect
the vibrancy of a brownfield market. In the 108th Congress,
Chairman Turner proposed to allow taxpayers ``a credit against
income tax for expenditures to remediate contaminated sites.''
Ohio believes tax credits can be a tool to attract additional
private sector investment by enabling developers to offset
costs by using or assigning credit. That is why we encourage
Congress to continue to explore additional flexible brownfield
tools which are performance-based, enabling local citizens to
seek tangible results.
A combination of private and public resources leads to
projects with an economic and environmental return. In Ohio, we
are fortunate to be able to support projects of both State and
Federal resources. For example, my office administers a U.S.
EPA Brownfield Revolving Loan Fund. To date, we have made two
loans, with two more expected to close this fall. I would like
to acknowledge the staff of U.S. EPA for their support and
flexibility to meet the needs of our borrowers.
Access to additional sources of Federal dollars through the
tax credits or increased resources at U.S. EPA are crucial to
stretching State funding to undertake additional local
projects. I encourage you to look at these and other tools as
you continue your work. On behalf of the State of Ohio and the
Ohio Department of Development, I thank you for your time and
effort to identify new ways to combine State and Federal
resources to energize and invigorate brownfield redevelopment
throughout the Nation. Thank you.
[The prepared statement of Mr. Magill follows:]
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Mr. Turner. Mr. Scott.
STATEMENT OF DOUGLAS P. SCOTT
Mr. Scott. Thank you, Mr. Chairman, members of the
subcommittee. Good morning. My name is Doug Scott, and I am the
director of the Illinois Environmental Protection Agency. And
on behalf of Governor Rod Blagojevich, I want to thank you, Mr.
Chairman and members of the subcommittee, for holding these
hearings, and also you, Mr. Chairman, for your leadership on
this issue. You have been recognized for that leadership by the
National Brownfield Association as well as a number of mayors,
and it is very well deserved.
Brownfield remediation and land reuse is one of the most
important issues facing the urban areas in Illinois, and
although it is not as obvious, it is incredibly important for
the nonurban areas as well. Obviously there is an environmental
benefit to cleaning up areas that have contamination or are
abandoned; there is certainly a community benefit in reclaiming
property to put it back into productive use to either support
new businesses and generate new tax revenue, or to become
recreational land. There is a benefit to helping to reduce
sprawl not just by putting a particular property back into use,
but also by spurring other inner-city development and
protecting farmland.
We have seen in recent years a renaissance of cities, and
brownfield redevelopment certainly augments that trend. And
there is certainly a shared community benefit in helping
communities to reclaim properties that were once a symbol of
vibrancy in their community only to become symbols of decay.
I have had the experience of working on a brownfield issue
from a number of perspectives, as a municipal attorney in
Rockford where we dealt with numerous abandoned sites and with
a Superfund area that affected 10 square miles of our city; as
a State representative where we passed some cleanup legislation
that is very progressive in providing flexibility to risk
assessment and shared cleanup levels; as mayor of Rockford,
during which time I served as chair of the Illinois chapter of
the National Brownfield Association; and now as director of the
IEPA. As a result, I have developed an understanding of what I
think works and what could spur even more brownfield
development.
Illinois has a very aggressive brownfield plan, and under
Governor Blagojevich has become even more progressive, using
economic development funds through the Governor's Opportunity
Returns Program to supplement cleanup, as well as utilizing
other funds to clean additional sites, and providing loans,
site assessments and technical expertise.
It has become clear to me that brownfield development at
its heart is a real estate transaction, and just as in any
development, there are associated costs. In these cases, the
environmental considerations may be very large, but other
costs, such as infrastructure, may be reduced.
It is essential for us to do those things that entice
private developments to the sites by providing the conditions
and incentives that make these sites attractive, or at least
comparable to greenfield areas. And it is equally clear to me
that State and local governments alone can't make this happen.
As I said, our State has been very proactive on this issue
monetarily, including through our first-in-the-Nation
noncapitalized loan program.
In addition to financial help, our efforts have also
included comprehensive risk-based remediation process focusing
on planned reuse, as you heard from Pennsylvania; No Further
Remediation letters and a Memorandum of Understanding with U.S.
EPA that says except in very narrow circumstances our NFR
letter will also end Federal involvement; voluntary cleanup
program with timely and effective decisions under well-
established procedures; Web-based access to key environmental
site data; partnerships with other government agencies, not-
for-profits, trade associations in the private sector; and site
assessment and technical assistance.
And the State and local governments have been very creative
in utilizing all of the myriad resources that they have
financially to try to assist with these sites, but it is pretty
clear to me that the number of sites isn't being lessened to
the rate that any of us would like to see. Now, it is easy to
say that more money is the answer, but unfortunately it is part
of the answer. More grant dollars to States and municipalities
to specifically target site assessment, infrastructure and
cleanup are needed. More sites have been put into play, for
example, by simply not forcing loan guarantees of Section 108
and making more grant money available.
In addition, more funds under the Brownfield Revitalization
Act would help tremendously as I'm sure we're not the only
State that has more sites than we have funds, and more dollars
for Superfund site cleanup that are under the Federal
guidelines are also needed.
When I was a legislator, I know we always heard how
spending money in a particular area would save money in the
long run, but I really believe that is true here, through
diverted infrastructure and transportation costs and increased
tax revenue. But money is only part; the rest must come from
tax credits and other targeted incentives to the private sector
to bring them into these sites. So I was very encouraged last
year by your efforts, Mr. Chairman, with H.R. 4480, and would
hope that similar efforts would be successful in this Congress.
In addition, efforts such as H.R. 4480 that can be made to
make more certain the lines of liability and possible exposure
to future or reopened claims would help tremendously to make
these sites more insurable and more bankable. In speaking with
many developers who work on these sites, one of the major
stumbling blocks is the uncertainty of future liability, which
is another factor that makes it more desirable to locate to
greenfields.
Again, on behalf of Governor Blagojevich, I appreciate the
opportunity to appear before you, and thank you for your
leadership on this issue. I would be glad to take any questions
that you have. Thank you.
[The prepared statement of Mr. Scott follows:]
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STATEMENT OF ANDREW HOGARTH
Mr. Hogarth. Good morning, and thank you for your interest
in this huge program that Michigan feels requires a substantial
coordinated effort by both local, State and Federal parties.
During the last 10 years, Michigan has done a lot to try to
provide incentives to help redevelop brownfields primarily
through a three-pronged approach: The first, providing
financial incentives; the second, State funding to do site
cleanup; and the third, a change in our liability standards.
And I will talk about those as well as identify continuing
obstacles that we see existing.
In terms of the financial incentives, we have a Renaissance
Zone Program that has been created to encourage the development
of selected areas across the State, and properties in those
areas virtually have 100 percent of their real, personal and
State and local income taxes eliminated.
Single business tax credits on a case-by-case basis are
provided to help with the expensive demolition, environmental
cleanup and other remedial actions at specific sites. Since
June 2000, this program has awarded more than $273 million in
single business tax credits, which we believe has generated
more than $3.8 billion of private investment in distressed
areas.
Tax increment financing. Under Michigan's Brownfield
Redevelopment Financing Act, brownfield redevelopment
authorities across the State are able to capture local taxes
and school taxes to reimburse developers for cleanup-related
costs. As developers develop a site and increase the value of
their property, the additional increment in tax--not property
tax--is captured by the brownfield authorities and used to
reimburse the developer for their expenses.
Since 1996, more than $300 million in tax increment
financing has been approved for more than 80 projects
throughout the State.
In addition to those incentives, the State of Michigan has
provided--spends a considerable amount of money directly to do
site cleanup both through grants and loans to communities and
by direct spending. Since 1992, we have provided $122 million
in grants and loans for some 300 individual projects. This
money is available to use for site assessments, cleanup costs
and demolition.
In addition to the money we provide for grants and loans,
we have spent over $585 million in State revenues in the last
17 years to investigate and clean up and monitor over 1,600
sites. Many of those sites were sites that have been abandoned
and taxed to the communities.
Probably the biggest impetus to getting contaminated
properties redeveloped in the State of Michigan has been a
substantial change in the liability scheme under Michigan's
cleanup law. In 1995, we went from a liability situation where
anyone that bought a piece of contaminated property, whether
they caused the contamination or not, being liable for it, to
where they would not be liable for it in the future if they did
a baseline environmental assessment. So a new purchaser or
anyone that forecloses on a piece of property, like a bank, can
conduct a baseline environmental assessment prior to or within
45 days of purchase, occupancy or foreclosure, and that
baseline environmental assessment is intended to describe the
existing contamination on the site in a manner that enables new
releases to be distinguished from the prior contamination. If
this is done, and the baseline environmental assessment is
submitted to the State, then the new owner or operator is
protected from liability for the existing contamination.
As of 2005, the DEQ has processed 8,600 baseline
environmental assessments. That means there have been 8,600
parcels of property in the State of Michigan that were
contaminated that were transferred to new owners or operators,
most of which probably would have not occurred in the past.
Our cleanup standards are risk-based and land-use-based,
which helps assure that unnecessary cleanup expenditures are
not made. I mentioned at the outset that this requires
substantial coordinated effort. We put substantial effort into
working closely with communities. For example, with the city of
Detroit, we meet at least bimonthly with staff at high levels
of both the city of Detroit and the State of Michigan, multiple
agencies, to identify barriers to redevelopment of specific
properties and bring the resources and government
decisionmaking to the table that is necessary to help
facilitate projects in a hurry. And, in fact, we have directed
over $100 million in State funding to city of Detroit projects
in the last 10 years.
What obstacles remain? Federal liability continues to be a
problem. Many potential property transactions fail due to the
inability of the buyer to resolve liability under RCRA, and to
some extent CERCLA. However, we do have a Memorandum of
Agreement with EPA that says that as long as a developer is in
compliance with the State's cleanup program, that EPA will, for
the most part, take a hands-off approach. However, the
inability of a prospective purchaser to resolve RCRA liability
remains a substantial hurdle.
Another obstacle is unrealistic expectations on the part of
the developer and the buyer or seller, lack of comprehensive
planning by communities, lack of sufficient site
characterization, overwhelming predevelopment costs, lack of
startup funds for small businesses, and lack of State and local
government resources. We will not be able to provide the
funding we have at the State level in the future.
I want to thank you for your interest in this program and
applaud your efforts to try to address it at the Federal level.
[The prepared statement of Mr. Chester follows:]
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Mr. Turner. Well, again, I want to thank each of you for
participating and bringing your unique knowledge and expertise,
and I want to thank you for your dedication to what is an
important issue both for your communities and the government,
and nationally.
It's interesting in listening to each of you--and, Mr.
Scott, you are right, at the base you have a real estate
transaction that you're doing, and I was thinking of all the
different elements of expertise that you must have to do your
jobs, and certainly you must have real estate background,
because you have ownership issues, and you have use issues. You
need environmental backgrounds because you're dealing with both
assessment and remediation; your legal background, issues of
liability, financing issues, not only just the products that
are available, but in dealing with the financial institutions
and their comfort level. And then you have, Mr. Hogarth, what
you said was the numerous governmental entities. Of course,
you've got numerous laws and regulations, and then after
dealing with all of that, you get to go in and invite the
private sector and encourage them that this really is a doable
and easy transaction when they are not necessarily going to
have that expertise. So I want to congratulate you on what
you're each accomplishing, and we want to learn from this
opportunity.
One of the things that I'm struck about with your expertise
is that we often hear anecdotally that the characterization of
these sites--that when the assessments have occurred, that
generally people are finding them to be less contaminated than
suspected. Also, though, we keep hearing anecdotally that the
programs that are currently in place might not yet be reaching
some of the most difficult sites to develop. So we may only be,
in other words, our process may be so selective that we're
resulting in the selection of easier sites, and therefore
running into less contamination.
I would like if you would each talk about what you're
seeing that people are experiencing in these programs; as
they're happening in communities, as they're happening in
States, what are we seeing in the characterization of sites,
and how penetrating are these programs? Are we getting at some
of the worst sites? And certainly that brings into the issue of
those sites that have the greatest economic potential.
Mr. Bartsch, we will start with you.
Mr. Bartsch. I guess I would start by saying what we have
seen nationally by looking at the data from the EPA grant
programs is that about one-third of all sites that are assessed
using EPA funds actually are not contaminated at all, they just
look lousy. And again, it is that perceptual issue there that
has really been an inhibitor, and that is really one of the
reasons why EPA has been able to leverage so much private
investment, because sometimes it means only a few thousand
dollars for a preliminary assessment to really show that there
is nothing there, and then the redevelopment process can go
forward.
I think Mr. Kanjorski hit on a really critical issue in
this whole thing in his opening remarks, and that is there has
not been in many places enough information gotten out to local
officials in the field who are dealing with these sites. I
probably do 50 or 60 workshops a year looking at brownfield
basics, and there still is a huge audience out there that does
not really have a full understanding of the situation that you
talked about, Mr. Chairman, where you really have to pull all
these different components together.
I think a really good example of how information is needed
can be found by looking back. The original brownfield expensing
tax incentive, which passed in 1997, got virtually no use at
all the first few years. One of the reasons for that was that
it was viewed at complicated; people didn't understand how it
worked, they didn't understand the benefits, so as a result it
really didn't get very much use. I think there is a real need,
as part of this process, to get information out there, which is
why I think, again, efforts like you're doing are important.
Ms. McGinty. Thanks, Mr. Chairman. I wanted to say at the
outset, we all touched on, one way or another, the liability
questions. We do need further work there, but I do want to
commend U.S. EPA. They have been terrific to work with and have
really been trying to be quite responsive on all of these
issues.
You said, Mr. Chairman, and I agree, these issues are about
real estate transactions, and real estate is about location,
location, location. And for us the challenge, as you say
accurately, has not been that the site is too nasty to
remediate. Remediation technology has evolved to the point
where those sites can be cleaned up. Rather, location and the
character of the site, which brings us back to the tax and
grant incentives, has been most challenging.
On the small-scale site, those sites are disadvantaged even
though they may be the corner dry cleaner. We have cleaned up
many of them, we know how to do it, it is not that complex. But
the return on investment in redeveloping a site of that size
doesn't always pencil out for the developer. So again, not the
contamination per se, but the ability to have tax and grant and
other financial incentives to achieve the kind of return on
investment that is required.
On the large-scale side, the same, at the opposite end of
the spectrum where the site is so large, the risk is holding
the property for the length of time that will be required to
line up first your anchor and then your follow-on tenants. And
so, again, financial incentives to bridge that risk gap where a
developer is holding a large-scale property in the attempt to
market that property and see developers come or renters or
leasers come back into that property. Thank you.
Mr. Magill. Thank you, Mr. Chairman.
Our perspective would be, first, to follow what Ms. McGinty
said, that local decisionmaking and market conditions affect
choices about the properties that communities will look at.
Once that occurs, the conditions on the site will vary. And one
key factor is that most grant programs and loan programs come
with a timeline to invest the dollars and compete the cleanup.
More challenging cleanups with longer schedules, higher
complexity, which often has to deal with groundwater, begin to
move off to the side because of the time to actually complete
the work.
So you have developers who have a recognition that time is
money. They're not looking to work on the most difficult sites,
but sites that have locational advantages, Ms. McGinty touched
on, produce a community benefit, and can be cleaned up on a
timely and efficient schedule at a reasonable cost, I think are
what we are seeing. And so some of the more challenging sites
with the longer timelines of remediation are not being seen, at
least in Ohio and perhaps in the other States. Thank you.
Mr. Scott. I believe the two premises that you had, Mr.
Chairman, were that many of the sites are less contaminated
than we thought, and we may not be getting at the worst. And I
would agree with both of those from my experience in Illinois,
for a lot of the reasons that have been said, but part of it
also, when you look at it, location is very important. It will
differ in each State depending on where in that State that you
are. What is transparent in terms of the real estate market in
downtown Chicago, for example, where there are a number of
brownfield sites that have been redeveloped and have become,
you know, magnificent buildings--a lot of riverfront
development, a lot of other things that have been substantially
cleaned up--the real estate market and the cost of land in the
Chicago area make it such that development can be price-
competitive with developing somewhere else, and there isn't
that much land available in other places.
If you go to other municipalities throughout the State, to
Rockford or Springfield or Joliet, it is very different; the
cost of land is much different, the availability of land is
much different depending on where you are in that particular
community. And then if you go to southern Illinois, the
economics are completely different than that. So a lot of sites
that otherwise would be cleaned up, or if you were in Chicago
if these sites were there, would be cleaned up very quickly,
get left behind.
And again, that just underscores what I think everybody has
been saying, that it is so important to try to provide those
incentives that make the playing field level. They give the
private investors, the private insurance companies, the banks,
the others that have to participate in this the reason to do
this particular site as opposed to just building out into the
next greenfield.
Mr. Hogarth. Our experience is that a major portion of the
brownfield sites are not significantly contaminated. They are
contaminated to the point where they exceed residential
criteria, but they don't represent a hazard that makes them not
reasonable to redevelop. Now, that's a major portion of the
sites.
But I need to point out something about Michigan's
liability standard that changes the dynamic for a new
developer. I mentioned the baseline environmental assessment
process, and if someone does a BEA, they don't have to clean up
the site because they're not liable for the existing
contamination. Well, that makes the economics much more
favorable to the developer. The developer, though, does need to
do something in terms of the contamination. They need to not
exacerbate it, they need to assure that they don't, by virtue
of their use of the property, cause any unacceptable exposures
to occur, and they need to take reasonable precautions about
what third parties might do, like trespassers.
Now, often what that means is that someone will come onto a
piece of property, do a baseline environmental assessment, and
determine all they have to do to make the property safe to use
is pave it and put their building on it. There may be
contamination in the soil, contamination in the groundwater
that may migrate offsite, but the new owner isn't responsible
for dealing with it. Now, what that does is it transfers
responsibility to public funding when those hazards need to be
dealt with. If we can't get the liable party to deal with it,
then the State ends up having to address that with public
funds.
Now, that is a step that Michigan took, which is
significant, though, to try to level the playing field more to
get more people to reuse contaminated sites. And of course,
there are a lot of sites that are megasites, if you will, that
cost hundreds of millions of dollars to address, that we don't
think will be able to be redeveloped in our lifetime, but they
are few.
Mr. Turner. Mr. Kanjorski.
Mr. Kanjorski. This is something that Congress doesn't pay
enough attention to.
You know, in listening to your various testimonies, it
strikes me that we really have multiple issues here. One is
site-specific probably from poor manufacturing, past
experiences in major metropolitan areas of the Rust Belt, if
you will, and then massive land cleanup, coal lands cleaned up.
And I've had more of an emphasis on coal land cleanup simply
because the little sites probably do eventually take care of
themselves in some way from an economic standpoint, or at least
lead toward that, whereas when you get to the coal mine
cleanup, it becomes astronomical.
My experience is that we are pouring an awful lot of money
into engineering costs. I was thinking of your site assessment.
Every small site assessment I have ever seen, it is almost like
Washington lawyers, they start at $100,000 and go up and you
really can't get an engineering report even on a small cleaning
establishment for minimal amounts of dollars. They're very
expensive propositions.
On coal land cleanup, though, I discovered that, in the
Abandoned Mine Program, 34 percent of the cost is being spent
for engineering fees, which is horrendous when you think about
it, and yet there is advanced technology out there, GIS
systems, that can bring that cost down by at least a factor of
a half, if not more, and we haven't utilized it on a national
scale.
The other thing I was listening to is that obviously it's a
matter of money, and I was curious from your experiences how
much--you brought up the point, Mr. Bartsch, that you hold
seminars and outreach, but have there been sort of national
conventions on this issue where we get best practices, we look
at models?
One of the things that disturbs me the most is we're
creating another Beltway industry; someone needs extraordinary
expertise to know how the hell to get through the Federal
system and then the 50 State systems. And not that there is
political influence, but, boy, if there ever were--I should say
that to Ohio--if there ever were an interest in having
political influence, I mean, this would be the ideal area
because the developer or the public sector, municipality,
nonprofit organization are just absolutely in the grasp and
control of that decisionmaking process. And it is so
convoluted, it seems to me, that we should step back and try
and do a larger overview problem.
One situation that I ran into--and I put it in the form of
a bill--looking at mine lands, I suggested that we do a mine
land area redevelopment act. And we've identified millions of
acres in the country, just in my particular part of
Pennsylvania about 160,000 acres, and the western part of
Pennsylvania another 400,000 acres, astronomical when you look
at it, if you look at it in segments. But if you
compartmentalize it and say, OK, we're going to view this from
a watershed perspective and do the entire watershed study and
how the effect of the land and the water would be, how you were
consistent.
Now, to accomplish that you need public ownership. You just
have any number--in Pennsylvania, and I think West Virginia is
famous for this, too, coal cutting means our land banks, they
basically own very destroyed lands--I think Ohio is like that,
too. They pay next to nothing in taxes, no incentive to move
the land out, and they can wait there until land appreciates as
far as they want to because there is actually no exposure. And
if you don't get the cooperative effort of everybody within the
watershed system, to do reclamation is almost meaningless. I
mean, we are working on a 16,000 acre parcel of land
reclamation now, but we have maybe 10,000 other land owned by
coal cutters. If they don't participate, if they aren't
designed into the system, doing our 16,000 acres really doesn't
accomplish a great deal. Oh, it does in terms of inside the
perimeter, but in terms of the totality of the recovery
program, it doesn't work.
And I haven't seen any creativity on how we can put land
acquisition together, whether redevelopment authorities should
have the right to condemn, and how large they would have to be,
what would be the authority to do that, what are the prices
paid, what are the incentives.
The other thing I listened to is the use of tax credits,
and I was just thinking up here it is a field day for lawyers
and accountants. I mean, quite frankly, it probably is a very
specialized field at this point with extraordinarily high fees,
because who the hell else knows what to do?
Now, it seems to me that we have to create the funding, and
you, Mr. Scott, pointed out we absolutely need the funding. My
mine reclamation bill does a very simple thing, and it uses tax
credits, except not individual tax credits awarded in States
and by the Federal Government. But in totality, we say, look,
we want to create a fund of $20 billion; we're going to sell it
into the market, probably mostly to insurance companies, give
them a tax credit in lieu of interest so they can write it
straight off their return--they get a return today of probably
5 percent, thereabouts--and do it over a 30-year period, and
now have a sufficient amount of money in one fund--now this
addresses the coal aspect, coal land reclamation--and now
require any of the participants on the State level or the local
level to create a comprehensive application program. Maybe in
the Commonwealth of Pennsylvania you would have six areas
establishing what they're going to do with their land, how
they're going to use it, how long it will take and the purposes
for it. They would go in and get a long-term approved program
for site evaluation, for site remediation, for reuse
infrastructure, so that you would be moving from reclamation
right into reuse or prospective reuse with sufficient funding
in place for a period of 30 years to accomplish the end.
I haven't seen a lot of support for the bill on a State
level; as a matter of fact, it is somewhat disappointing. I
like State and local leadership, I want to encourage it, but,
quite frankly, everybody having their own little custom-
tailored program doesn't invite for efficiency. We've got to
strip away and determine what is the easiest, best and most
comprehensive approach, particularly in coal land. It affects
26 States in the Union.
Our $20 billion fund over 30 years will create enough funds
to reclaim all of the abandoned coal lands in this country over
30 years. It will cost us in loss of tax revenues around $30
billion over 30 years. And in the end you will have a defined
site, you will have a reclaimed site, and you will have
utilities and improvements in infrastructure to make it a
usable site.
That, I think, is one approach to coal land reclamation.
The individual site remediation, I think we probably need a
fund for that, too, and we could do it on a Federal level using
tax credits, but we're probably talking about losing no more
than $1 billion or $2 billion a year in revenue to the Federal
Government. That equates to 2 days in Iraq. For 2 days in Iraq,
we could clean up all the coal lands in the United States. If
you look at it in another way, for actually 3 weeks in Iraq,
that would pay for the entire program--not that we're going to
withdraw from Iraq, but it may be a little bit of what should
go into the equation sometimes as to what's important.
Now, my experience--and that's why I complimented all of
your activities--this Earth Conservancy I mentioned in my
opening remarks, 16,000 acres of land, we have reclaimed a
little over 1,000 acres thus far. We have about 4,000 more to
go.
We have never failed to receive more money back for the
reclaimed property than the value of the original purchase of
the property and all costs of remediation, because it is being
done comprehensively. We are taking land that has $100 an acre
value and in some instances moving up to $100,000 an acre in
value, but that can only be done because we did a total
comprehensive program. Using GIS systems, we know exactly how
to go at it. And this is just a small experiment, 16,000 acres.
What we want to take on is the entire 160,000 acres of the
anthracite field. Now, what I am a little disappointed in, and
I understand my good friend Rob is a progressive Governor,
Governor Rendell in Pennsylvania is a progressive Governor, and
the Governors want to get involved and the States want to get
involved and they should. But unfortunately by doing it before
we get involved, you are taking leverage away from us.
The fact of the matter is probably the States should get
together and make the commitment we will put up X number of
dollars in our funding; the only condition is that the Federal
Government create a program to match or exceed that, maybe 75-
25, something like that.
I know I am running over, Mr. Chairman, but I traveled the
country about 6 years ago with then-President Clinton, and he
knew my problem. We were working on the new markets initiative
at the time and how that could impact on using land in
developing distressed areas. So we spent a considerable amount
of time eating pork and drinking beer, and during those
sessions we would just have an open bull session.
So he asked me, he said, ``why haven't your people fixed
that land?'' Good question. Why don't people fix the land? Why
don't the people in Ohio fix the land? Why hasn't Illinois
fixed that land, or why hasn't Michigan fixed that land?
Because the people that live on those lands today didn't
cause that problem. Most of them, if you look at the makeup of
the population, are senior citizens or are a much older part of
the population, and, quite frankly, getting to that stage now,
your forward thinking sort of starts to limit because you are
not going to be around 10, 15, 20 years when the project will
be completed. So you ask yourself, why should I pay additional
tax costs to repair land that I won't even see, that I didn't
cause, I didn't get any benefit from, and more than likely my
children and grandchildren are in California, Texas, or
Virginia. So you are just not going to do it. So on a local
level there is absolutely no incentive in taxing capacity to
clean up the environment.
Now you go up to the State level. I don't know about Ohio,
Illinois, or Michigan. I can tell you in Pennsylvania, if you
are in a hard coal or soft coal area of Pennsylvania, you are
not in Philadelphia or Pittsburgh, they just don't give a damn.
They don't look at it every day. They don't live with it every
day. It doesn't really affect their economy. So the largest
portion of the tax ratables in the State have no interest in
putting their money there. So the State has no interest to do
it. Although progressive Governors, as Rob, have tried to move
ahead and do these things.
It is a national problem when you analyze this, I think.
Brownfields and the industrial sites are the result of
industrialization in the United States 100, 150 years ago,
when, like Japan, we had a growing economy. We didn't pay a lot
of attention to our environment, but Japan went back and
cleaned its environment. The United States abandoned it. It
went out and took pristine land. It is now time that we pay
back for our great industrialization by reclaiming these areas.
Second, I guess that these areas tend to be abandoned
because we don't pay attention. Particularly in the mining
area, we don't allow oil and gas industries to destroy an awful
lot of land. We have a tremendous fight with the wild natures
of Alaska now because we just don't really want to injure an
environment sometimes in order to receive energy. But, hell,
when we had the coal industry, whether it is bituminous or
anthracite, we didn't give a damn. It was Katy get the door and
do anything you wish. And they did. And they are gone. The coal
companies are gone, the people that worked there are gone, the
people that live there are too old to worry about it and aren't
going to live that long, so they don't pay attention to it. The
State doesn't want to do it because they don't live in the
area. It is up to the Federal Government. This is our payback.
I think we are at a propitious time in America to look at
long-term capital spending programs using bonding as opposed to
appropriations. If you rely on appropriations, it is who has a
hot issue today. Who would have ever thought that when we left
this city in August, Louisiana, Mississippi, and Alabama were
going to be the recipients of a couple hundred billions of
dollars of aid? It happens, and it is always just happening.
Who would have ever thought we would be in Iraq for 2\1/2\
years? It happens.
It seems to me we have to take this off the appropriation
area, put it onto a capital expenditure level, bond it with
bonds and do it over 30 years, and make it an honest, hard
commitment. But keep it at the local and State level.
I really do believe everything I have ever seen in
abandoned mines when it comes to Federal programs, they really
don't have the feel. It has to be done on the State and local
level. And there will be differences, but there shouldn't be
differences in the way laws apply, what benefits are available.
And it shouldn't boil down to the competitiveness of one State
putting a good program, an industry to reuse land in their
State in competition with another State. If we get into that
game, we are in a race to the bottom.
Instead, it should be going back to what I said. Look, all
of this land, practically, when you look at it, particularly
the coal mining land and Colorado and the other mining industry
problems are a little different. Their land value is not highly
likely to appreciate for use. But particularly knowing
Pennsylvania, if we clean up Pennsylvania, our land value and
reuse value will just explode, and all of our experience has
shown that. I think Illinois and Michigan and Ohio probably are
in that boat.
I would like to urge you, and I know Mr. Turner should take
the lead on this on behalf of the Congress, but there are a few
of us who would be willing to come out and spend a weekend
somewhere really hacking some of this over with people of your
standard across the country to come up with best practices and
what we have to do at our level.
If we have insurance problems or if we have liability
problems, the only reason we have them is, quite frankly, we
are not very bright here, and we only listen when the sound is
deafening, and it is time that you deafen us.
But I think, and my impression of Mr. Turner has been--and
I watched him, he is a junior member, he has a heart for this,
he understands it, he has the experience and the background to
do it. That is a great commodity. He chose this specialty
because he has an interest. So let's use him. He may be a
Republican, but we will forgive him for that. But let's use
him. But it is not a Republican or Democrat issue, it is an
American issue, and we actually have a chance to make money for
the country and for the people that live in these various areas
and for industry. How can you beat that?
But we have to do it in some more comprehensive way that
doesn't benefit private, political, or otherwise or economics
flowing to anyone. Let's not build a Beltway industry. That
would be the worst thing we could do. I am sure they are
starting out there. There are a lot of good tax lawyers trying
to figure out how they can turn a good dollar by doing this.
Although we want the private sector heavily involved, I
think it will require nonprofit or governmental overall
comprehensive planning to get to the scheme, to get to the
application of what should be done.
In the process of cleaning up land, you are going to clean
up water, too, and when you add the savings and the benefits of
those things, in our little project-by-project attacking of
this, it is going to cost us 5 or 10 times more than it would
if we did it comprehensively. So we have the time. Let's do it
right. Let's make it a war on anti-environmental activity.
But I happened to have an experience of being on Wall
Street yesterday and meeting with some of the financial people.
The first time in my life I have gotten the impression--I
should say the first time in a decade--they are ready for a
progressive era. They now know that America can't just live off
its droppings, we have to be inventive. One of the most
inventive things--and certainly of great value--is land. God
ain't making any more. So it is up to us to make it or return
it to its status of good use.
So I want to compliment you all. I didn't have particular
questions. I was going to ask a question of Ms. McGinty, to
have her have a chance to show her brilliance, but I will save
that for another day.
Mr. Turner. Thank you for your comments and thank you for
your passion on this. I certainly look forward to working with
you on this issue.
Mr. Bartsch. Mr. Chairman, can I make a couple of
observations on Mr. Kanjorski's comments, because I think what
is really critical when we are talking about shaping brownfield
programs and strategies, he was talking about a 16,000-acre
mine site, and many of us were talking about quarter-acre gas
stationsites, and we have named two sites. The real challenge
is how do you structure something that really meets this?
I think what you need to do is really have flexibility to
allow locals in the private sector to package grants and loans
and bond proceeds and things like this together in a way that
really works best for them to make this happen, to really do
this.
Also from the State perspective, Mr. Kanjorski mentioned
the role of new technologies, and there is no better place for
new technology to gain acceptance in the marketplace than
working through a State volunteer cleanup program to get it
into the mix.
Second, I think in support, I would throw railroads into
the mix as well as mines. We need to come up with ways that may
not be conventional environmental ways to get those folks to
the table, and it may be things like more rigorous enforcement
of Sarbanes-Oxley or things like that.
Third is we are thinking about these incentive programs.
There has never been an issue that has yielded more return on
the public investment than the brownfields funding.
Fourth, I just wanted to mention to the committee that EPA,
along with about two dozen other organizations, sponsors an
annual brownfield conference which will be held this year in
Denver, November 2nd to 5th. It is free. Please encourage your
constituents to go. Several thousand people will get together
to share information on best practices, on new technologies and
on strategies, and it is really a good opportunity to get at
some of the informational concerns that we have all talked
about.
Thank you.
Mr. Turner. The environmental tax credit bill, which I
drafted and am working on the redraft for this Congress, has in
it a mechanism for release of liability; the concern being that
in setting up a tax credit program, we don't want it to be a
revolving loan fund or result in just numerous lawsuits for
recovery of the tax credits. We put the tax credits out and
apply them for cleanup. We want to make certain that those are
a subsidy and a gap filler.
But also we were hoping that we would provide an incentive
for the past owners to come to the table, where in my
experience from what I have seen so far generally, even if you
have a successful brownfield cleanup, that still we haven't
reached out and successfully brought those individuals to the
table.
In looking at ways to structure liability relief, a
suggestion has been made that the tax credit bill have as its
liability relief mechanism a requirement that the parties enter
the State voluntary cleanup programs; that in those State
voluntarily cleanup programs, there is a bar of enforcement by
EPA; and that what we would merely do is hook into those
liability relief provisions.
So, for example, what we would have is a tax credit that
would be administered by the State development agencies, as the
low-income housing tax credit is, and that in the application
that there would be preferential points that are provided to
project that include the past polluter, the individual who has
past liability, and the requirement that the redevelopment go
through the State voluntary cleanup program, which would then,
through the 2001 act, include the bar of enforcement by EPA.
So as each of you have experience in the issue of these
State voluntary cleanup programs, I would like your positions
and opinion as to whether or not that would be an effective
liability release, since what we have found in trying to
fashion this tax credit, when we put a liability release in it,
we find that people either react very negatively to a whole new
release package being created, or are very concerned as to what
its limitations and scope will be.
If the State voluntary cleanup program bar of enforcement
release is sufficient, if you are finding it is successful in
giving people the confidence to enter into a program, then we
wouldn't have to reinvent the wheel, we would be able to hook
into this.
Kathleen, in your comments you said there is insufficient
liability relief in the programs you currently have. So I am
interested in your comments.
Ms. McGinty. Thank you very much, and I think the direction
you are going is really encouraging. So let me be a little more
precise in terms of where we do have full and effective
liability relief and where we need further work.
Where we have full and effective--and maybe where each of
us has a memorandum with EPA--is with regard to CERCLA and
Superfund liability. Where Pennsylvania is the only State in
the Nation with a further MOA with EPA is with regard to RCRA
and TSCA liability. And there, this is the way that breaks
down.
For a substantial part of RCRA liability, EPA has granted
us in this MOA full liability relief upon successful completion
of the State voluntary program, just as you say. However,
where, for example, there is groundwater contamination, or
where, for example, the proposed remedy is what is referred to
as pathway elimination--in other words, the contaminant stays,
but you block it off so that a human or sensitive ecosystem is
not exposed--in those cases, to date anyway, EPA retains
further enforcement authority.
With regard to TSCA, since that is the bravest new world,
if you will, again we thank EPA for putting that on the table
with us in our MOA, but so far it is procedural. EPA has
committed that they will process the TSCA liability piece as we
process the State, the CERCLA, and those pieces of RCRA which
EPA has not retained overriding authority on.
So it is further closing out on RCRA and getting a formula
together where TSCA also can be satisfied upon completion of
the State voluntary program. That is the new universe we need
to get into, which is the subject of our MOA, but where we are
still working to make it real, and to really have one cleanup
program.
The last thing I would just say, I want to pick up on your
point about further points if you have the original party with
liability at the table, the original responsible party, and
come back to Mr. Kanjorski's point.
At least in a State like Pennsylvania, and I think with my
rust belt colleagues here it is similar----
Mr. Turner. It is an impressive lineup.
Ms. McGinty. But we are sunny personalities even if we are
from the rust belt. Companies are long gone. I can assure you
where there is a viable responsible party anywhere still in the
mix, we do go vigorously after them. So the point is where
there is a responsible party, to bring them to the table. But I
just wanted to caution not to hold it against us----
Mr. Turner. It is set up if they exist, if there is one.
Ms. McGinty. Thank you very much.
Mr. Turner. Thank you. John.
Mr. Magill. The suggestion that follows the program mirrors
what we do with the Ohio revitalization fund. All of our
projects have to go through a State regulatory program so there
is a performance-based outcome to be able to hang onto the
grant. You perform or the community would have to repay the
grant. So I think the key to this is that it is performance-
based. I think this is really important in this particular
industry. It demonstrates the citizens can get it done and get
approved.
From our perspective, I think this is a good place to start
because it is known; and the point has been made by other
members, do not reinvent the wheel and create new mechanisms.
It also then allows for a piloting operation. If it fails, you
can make changes. You don't create something new and tinker
with that.
The only caveat would be that in some States that the
voluntary cleanup program does not cover all cleanups.
Brownfields are a wider perspective. We would look forward to
working with the subcommittee in the direction to try to make
sure to try to capture all brownfields. We could look at RCRA
and some of the other sites and not only get after the
traditional ones.
Mr. Scott. I think it is going in exactly the right
direction, because as has already been said by my colleagues
here, this is pretty much what we do already. To get somebody
into the program that each of us have, although there are some
differences, you pretty much have to go through the voluntary
site program, and that is already set up, and there are MOUs
with EPA to enable us to do that. So I think, as John said, it
will help greatly because you really are just plugging in a new
piece to something that exists, rather than creating a new
program.
So I think it is heading in the right direction, with, as
has already been said, the admonition it is going to need to
encompass more than most of our MOUs do right now. In order for
it to accomplish all of the things we are trying to do, that we
are trying to do and that you are trying to do, it is going to
need to be a little bit more broadly based than the MOUs have
been to date.
Mr. Hogarth. I don't have much to add to that. The devil is
in the details, and we would certainly be willing to assist
with further detailed review and comment as you move forward.
Mr. Turner. Thank you.
Mr. Bartsch. I would just add that I think that is a good
approach, again, with the reasons given already to be looked
at. Each State has a program in place, and I think what we saw
after the passage of the national brownfields law a couple of
years ago, the States will be able to then change to better fit
the Federal structure that is laid out.
What is good about using the State voluntary cleanup
programs, I think from sort of an environmental perspective, is
it really does provide a recognized mechanism to provide some
assurance to the community at large that these things are
proceeding properly.
Mr. Turner. Thank you. I want to give each of you an
opportunity to add anything to the record if you would like at
this point. If there is a question we didn't ask you or
something you would like to respond to or any additional
comments you have, to give you an opportunity for any closing
statements, if any of you have to.
Mr. Bartsch. I would just like to again thank the
subcommittee for pursuing this. I think that I have been doing
community development issues for a long time, and I have not
seen one where sort of the environmental overlay on the
economic development process has been so significant.
Brownfields, as we have said, really are real estate
transactions that happen to have an environmental twist to
them, and our challenge is really working to structure programs
that fit all of these different situations.
So, again, I encourage you to continue with your efforts,
and as you do that, just to make sure they can be as flexible
as possible to address as many different needs as possible.
Ms. McGinty. Thank you. Just two quick points, both of
which derive from Mr. Kanjorski's remarks.
First, in terms of transaction costs and reducing some of
the analysis that goes into these cleanup programs, we have
instituted an initiative whereby the State will defer to a
cleanup program for smaller, less complicated sites, if it is
PE certified, if you have a professional engineer, a
professional geologist, certifying to the cleanup. We do not do
iterative reviews. We ultimately decide if it meets our
standard, but we do not do the iterative engineering reviews. I
share that for your consideration.
The second and last thing I would just pick up on, and we
haven't really mentioned it here but it is inherent in the idea
of a 30-year bond or patient capital, long-term capital. One of
the things about these programs and these cleanups is once you
have the containment structure in place, it is forever and for
always, amen. You need to know that those dollars will be there
today, tomorrow, and well into the future so that the community
and we all have the confidence that contaminant not only today,
but 30 years from now, is still contained, that there has been
no breach of the containment structure, etc. So the idea of
long-term, patient capital could be very, very important to
maintaining the integrity of brownfield remediation programs.
Mr. Magill. Thank you again, Chairman Turner, members of
the community, for your interest in brownfields. I would only
add that the programming needs to remain, I think, flexible
with the local and particularly private market orientation
because, at the end of the day, the private capital resources
dwarf our ability to generate government investment; and if
they can be attracted to brownfields, they will help us finance
the cleanup, construction, resulting in the new jobs or the
parks, and, as Mr. Scott referenced, invigorate the local
communities, whether they are rural or urban. Thank you.
Mr. Scott. Thank you again, Mr. Chairman, and members of
the subcommittee. I also wanted to say a couple of things about
what I thought were the very good remarks by Mr. Kanjorski.
We too have an interest in mining cleanup, as well as in
clean coal technology and the continued use of coal for an
energy source, and have done a lot of things toward that regard
in the last couple of years.
I think that from our standpoint, if you are going to do
something more comprehensive on a national level with respect
to mined lands, I think that would be a fantastic thing to be
able to do. I think you would help to drive down the
transaction costs that are associated with engineering, with
legal fees, with financial fees that are associated with that.
I think that is a benefit. But also a comprehensive plan to try
to get at all of those, I think would be very good.
In terms of best practices or in help to develop any long-
range plan, Mr. Bartsch mentioned there are other ongoing
brownfields conferences. The State of Illinois--and I am sure
all my colleagues do this as well--are continually reaching out
to both the public and private sector, plus we have
organizations like the National Brownfields Association which
is doing that.
But in terms of if this was an offer, I will take you up on
it. The suggestion that we sit down with other members who have
an interest in this, myself and colleagues from Illinois and
from other States, I would be more than happy to do that and
would just make that offer to you; that anytime that is
something you would like to explore, Mr. Chairman or Mr.
Kanjorski or other Members, I would be more than happy to do
that.
Mr. Hogarth. I would just like to mention one piece of the
puzzle that didn't get much attention today, and that is
leaking underground storage tanks. Just in Michigan, we have
4,200 sites that are orphaned leaking underground storage tank
sites. That is the places where the liable party is gone,
bankrupt. That 4,200 sites we calculate represents a need of
about $1\1/2\ billion, with a ``b,'' just in Michigan to
appropriately address them. They are spread all over the State,
largely in urban areas, sometimes four corners at an
intersection, and they pose a significant part of our
brownfield problem.
We have only been getting about $1 million a year out of
the Federal trust fund to deal with these sites. So anything
you can do to help address that problem would help the States.
Mr. Kanjorski. Do you move in and drain the containers or
do they still contain the pollutants?
Mr. Hogarth. Well, in most cases, the tanks have been
emptied. It is the material that has already leaked out into
the ground, the soil, and the groundwater that poses the
remaining hazard. Sometimes it is a significant hazard.
Mr. Kanjorski. I had one in my district that we spent $30
million on, just one site.
Mr. Turner. As we turn to our second panel, I want to
acknowledge that although my hometown is Dayton, OH, and my
district is in Ohio, my family roots are in Kentucky. And we
have the mayor of Maysville, KY, David Cartmell, who is also
the president of the Kentucky League of Cities, and, with Mr.
Kanjorski's approval, we are going to add him to our second
panel.
I would like to call for that panel. We will take a short
recess.
[Recess.]
Mr. Turner. We will reconvene as we prepare for the second
panel. We are going to begin with Robert Colangelo, executive
director, National Brownfield Association. Robert, I appreciate
your being here.
I was reminded I did not swear you in. As you know, it is
the policy of this committee that the witnesses be sworn in
prior to their testifying. If you would please rise and raise
your right hands.
[Witnesses sworn.]
Mr. Turner. Let the record show that all the witnesses have
responded in the affirmative. I think each of you will recall
from when we began panel I that you have on the table a light
system. Green is when you are to begin your comments, red is
when you to are to end your comments. Each of you has been
provided a 5-minute time period. We appreciate the fact you
have provided us with written testimony and that you have an
oral summary of your testimony. We will end with a question and
answer period.
Robert.
STATEMENTS OF ROBERT COLANGELO, EXECUTIVE DIRECTOR, NATIONAL
BROWNFIELD ASSOCIATION; JONATHAN PHILIPS, SENIOR DIRECTOR,
CHEROKEE INVESTMENT PARTNERS, LLC; CHARLES HOUDER, DIRECTOR OF
ACQUISITIONS, PREFERRED REAL ESTATE INVESTMENTS, INC.; KEVIN
MATTHEWS, AIG ENVIRONMENTAL, DIRECTOR OF ASSOCIATION AND
ENVIRONMENTAL RELATIONS; AND DAVID CARTMELL, PRESIDENT,
KENTUCKY LEAGUE OF CITIES
STATEMENT OF ROBERT COLANGELO
Mr. Colangelo. Mr. Chairman, it has been an honor and
privilege to work with you to battle blight and really bring
these properties back responsibly to redevelopment. It is also
a pleasure to address the honorable members of the
subcommittee, and we appreciate your interest in improving
State financial incentive programs related to the complex issue
of brownfield redevelopment.
I come here today offering two perspectives, one as the
founder of a private development company that has successfully
redeveloped more than 1 million square feet of brownfield
property in the Chicago area, and the other as the executive
director of a nonprofit organization dedicated to the
responsible redevelopment of brownfields, the National
Brownfield Association, where we have more than 900 members
from the public and private sector that are really the experts
in the industry that are dedicated to bringing these properties
back to responsible use.
My experience as a private sector developer is that State
brownfield programs provide liability relief, financial
incentives, and technical assistance. Most developers who
purchase and prepare properties have come to rely heavily on
the liability relief offered through State voluntary cleanup
programs.
One of the strongest liability reliefs is provided by the
Illinois EPA through its No Further Action letter. These
comfort levels provide a defined level of liability relief to
developers who have responsibly remediated sites and it gives
them the ability to secure debt financing for these brownfield
projects.
Technical assistance and financial incentives, while great
ideas, are often impractical for most private development. The
Ohio Clean Revitalization Fund is an example of a program that
does work. Developers often consider incentives as an
afterthought because of the perceived or real difficulties in
securing them, the small amount of assistance typically
available within a program in relation to the project cost and
the time required to secure these funds.
It is my experience that most financial incentives go
directly to cities or nonprofit development corporations and
the limited amount of program funds that is available to the
private sector often requires an intense investment of time and
the use of expensive consultants to help navigate through the
program eligibility requirements and the application process.
Most traditional developers will pass on a brownfield site
rather than take a chance on a project that will only work if
government incentives are provided.
Two incentive programs that I have personally found that
work well are tax increment financing and State tax credit
programs. These incentives are attractive enough to convince
private sector developers and investors to take a risk on the
brownfield project. The use of brownfield tax credit programs
has worked well both in New York, Michigan, and other States.
As time goes on, fewer easy-to-develop brownfield sites are
available. Increasingly, cities are left with the harder, more
complicated brownfield sites, and these sites will require
meaningful government incentives to attract private sector
investment and developer interests. The challenge to every
government agency is to strike a balance, to be developer
friendly, without being overly incentive-rich.
Brownfield sites by their definition require incentives to
bring them to par with unimpaired properties. For government
incentives to be meaningful to the private sector, programs
should be easy to understand and administer, apply to a wide
type of projects, allow flexibility in the use of funds,
provide meaningful funding amounts, and allow for unused funds
to be transferred or refunded.
Chairman Turner, I personally commend your efforts to look
for financial incentive solutions, and I support legislation
which would create a Federal brownfield tax credit and that
would allow for demolition and remediation expenses to earn a
Federal tax credit.
Putting my other hat on as executive director of the NBA, I
would like to introduce our recently completed analysis of
State voluntary and brownfield cleanup programs. This could be
a possible resource to you. Mr. Kanjorski, you asked about some
resources and analysis of programs, and this paper was
completed by the NBA as a result of our Brownfield Leadership
Summit held in Washington, DC, in May 2005. In there we looked
at all the State programs and made some key recommendations and
we highlighted elements of different State programs that work.
So we encourage you to look at this.
What we found is that although no single State has
developed a ``best program,'' many States have been very
creative in developing specific program elements that work
well. When designing incentive programs, we encourage you to
consider the recommendations provided in this paper.
Again, Members of Congress are to be commended for their
willingness to consider and promote new financial incentives
that attract private sector investment to these properties. And
I thank the committee for the opportunity to speak and look
forward to your questions. Thank you.
Mr. Turner. Thank you.
[The prepared statement of Mr. Colangelo follows:]
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STATEMENT OF JONATHAN PHILIPS
Mr. Philips. Mr. Chairman, members of the committee, my
name is Jonathan Philips and I am senior director of Cherokee
Investment Partners. As you may recall, I testified before the
subcommittee on April 5th regarding the effectiveness of
Federal brownfield programs, and I feel honored to add my
testimony today by addressing our experience with State
programs. Thank you for this opportunity.
Cherokee is the world's largest and most active firm
specializing in brownfield revitalization. Since inception, we
have acquired hundreds of impaired properties. Our objective is
to transform these sites into productive, sustainable, and
liability-free assets. As a result, communities have enjoyed
safer, less polluted environments, increases in jobs and tax
revenues, and a vast reduction in sprawl.
We can tell you firsthand that well-designed State programs
are a critical component of this Nation's efforts to revitalize
lands. We also believe they are not sufficient to solve this
Nation's brownfield problem in our lifetime.
In my written testimony, I highlight a number of innovative
State programs and also reference a number of excellent surveys
of them, some of which were conducted with the help of some of
my fellow panelists. In the interest of time, I will not repeat
that information here today.
Given the diverse tools offered by various States, tax
credits, voluntary cleanup programs, tax increment financing
and the like, one might mistakenly think that we should have
the brownfield problem solved. However, as you know, there are
at least 450,000 to 1 million brownfields in this country and
only 16,000 sites, less than 4 percent, have been redeveloped
or are currently in the process of redevelopment through State
and voluntary cleanup programs.
To further illustrate this point, I am pleased to share
some internal data from our periodic review of our activity and
that of others in our field.
Of the Nation's many sites, we typically focus on a
prescreened subset of roughly 450 over a 2-year period and then
select as many as 10 for investment. Two years later, when we
research those remaining 440 sites, we can consistently find
that not more than 5 to 10 have been chosen for investment by
others. Frequently, that number is much lower. Please consider
this data. The private sector invests in fewer than 5 percent
of our prescreened sites, leaving 430 to sit idle indefinitely.
Our data confirms what we all know: Despite existing
programs, the vast majority of this Nation's brownfields, not
just the prescreened ones, remain unattractive to investors.
Last April, I encouraged this committee to think about
sites plotted on an economic continuum with two halves, sites
underwater and above water. An economically underwater site is
one that the market ignores given the risk-reward calculus.
An above-water site is likely to be revitalized by the
private sector without assistance. Along this continuum are
sites that fall barely below water. These are sites that have a
shot at being redeveloped during a favorable economic upturn or
with a slight nudge from an incentive program.
Unfortunately, most brownfields are clustered toward the
underwater side of the continuum, many considerably so. Without
significant public assistance, these sites may never be touched
by the private sector, which raises a critical point: These
terms, underwater and above water, simplistically exclude all
but the internal cost-reward of a developer. They do not
reflect beneficial public externalities brought by
transformation, such as less pollution, improved health, more
jobs, reduced sprawl and increased tax revenues, each of which
can and should be present value monetized on the local, State
and Federal levels and used to aggressively stimulate
reclamation, much as Mr. Kanjorski and others have discussed
already in terms of long-term bonding. TIFs do a good job of
this.
A mission of government then must be to target that group
of sites that are both underwater from a market perspective and
above water from a public perspective. Fortunately, we have
models that can show us the way forward. One example is the tax
credit for rehabilitating historic structures that Congress
created in 1976. It has stimulated more than $33 billion in
private investment, with over 325,000 housing units, of which
75,000 are for low and moderate-income families.
I believe that this Federal model has been successful for
two reasons: First, it is uniform across the Nation, and;
second, it works in tandem with State programs to drive more
historic sites from underwater to above-water status. Given
this, doesn't it make sense to think about applying the
successive tax credits to brownfields?
Chairman Turner's brownfield proposal creates a
transferable tax credit for eligible costs at qualified sites.
Critically, this credit could be leveraged early in a project,
thus allowing a pioneering developer to attract some of the
riskiest capital with the equity created by the forward sale of
the credit.
For investors the impact is real, as they would be able to
delay a portion of their equity investment, thus boosting rates
of return and more easily attracting debt and equity.
In this sense, Chairman Turner's proposal tracks the
historic credit model. The existence of such a credit would
allow us and others to consider sites that are below water from
a private perspective but above water from a public benefit
perspective. A credit would be a logical extension adopted,
such as a 2001 brownfield law, section 198 expensing, and the
recently passed bill that was cosponsored by many, including
Chairman Turner.
A national transferable credit would be a powerful and
fitting complement to State efforts. After all, as a friend
once told me, you don't fight a forest fire with a water
pistol.
Nearly every Member of Congress has the misfortune of
brownfields in their districts. Together we can transform these
sites and build healthy communities with robust job and tax
bases and strong economies.
We look forward to continuing to work with members of this
committee, and Congress as a whole, to explore new ways to
accelerate cleanups. Please do not hesitate to call upon us as
both a resource for these legislative endeavors and for
assistance with specific sites that are in need of targeted
assistance.
Mr. Chairman, members of the committee, it has been an
honor and privilege to testify here today. I am happy to answer
any questions you have.
[The prepared statement of Mr. Philips follows:]
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STATEMENT OF KEVIN MATTHEWS
Mr. Matthews. Mr. Chairman and members of the subcommittee,
thank you for inviting AIG Environmental to testify on State
incentive programs for brownfields. I am Kevin Matthews, and I
serve as director of government relations for AIG
Environmental.
AIG Environmental is a division of the American
International Group. AIG's general insurance operation includes
the largest underwriters of commercial and industrial insurance
in the United States and the most extensive property casualty
network.
AIG environmental pioneered the use of environmental
insurance and has 25 years of experience underwriting
environmental at-risk and is currently the Nation's leading
provider of environmental insurance. We view ourselves as a
solutions company as we work to provide innovative approaches
to handle environmental liability and cleanup issues.
Throughout our history we have developed new insurance
products to respond to new and emerging risks for both the
public and private sectors.
Environmental insurance is not the silver bullet for
brownfields redevelopment. However, it is one of the tools in
the tool chest that helps lead to successful cleanup and
redevelopment because it has often helped address some of the
greatest concerns of brownfields redevelopment: environmental
liabilities and uncertainties concerning cleanup.
We are here today to focus on State programs that utilize
environmental insurance to advance the cleanup and reuse of
brownfields. The three States we work most closely with in
these programs are Massachusetts, Wisconsin, and California. I
will speak about the Massachusetts approach. The other States
are covered in my written testimony.
The one thing I would like to leave you with is for every
$1 that the Commonwealth of Massachusetts spends on
environmental insurance, they get $458 in return in private
investment. Keep that in mind as we go forward.
The Massachusetts Brownfield Redevelopment Access to
Capital Program [MASSBRAC], was created by the Commonwealth to
provide a pool of funds to be used to guarantee loans made to
developers who agreed to clean up and reuse brownfields. What
was quickly learned by Mass Business is that capital is
available for brownfields. However, what stymied brownfields
redevelopment was the fear of environmental liability from a
historic contamination and the concerns that cleanup costs
would exceed the cleanup cost estimate.
The staff of Mass Business took it upon themselves to
determine if tools were available that could address such
concerns and spur redevelopment. What they discovered was that
environmental insurance could address these issues. So Mass
Business entered into a contract with AIG Environmental where
member companies of AIG would provide site owners or developers
pollution legal liability insurance and cleanup cost cap
insurance at prenegotiated rates and coverage. Mass Business
would subsidize the premium cost of insurance to qualified
developers. The subsidies ranged from 25 percent to 50 percent
of the insurance premium costs.
The program has led to rapid growth in the Massachusetts
brownfield program. Here are the results as provided by Mass
Business. The number of sites in the program totals 259. The
dollar value of the sites cleaned up is $145 million. The
investment in loans created out of this is $2.1 billion. The
number of jobs created is 25,000. The amount of money the
Commonwealth of Massachusetts has spent on environmental
insurance is $4.8 million. That ratio is $1 for every $458 in
return.
What MASSBRAC did was address the concerns with regard to
environmental liability issues by making two AIG environmental
insurance policies available to MASSBRAC program participants.
These environmental insurance policies, pollution legal
liability and cleanup cost cap insurance, are detailed in my
written statement.
AIG Environmental is extremely proud to have participated
in this program since its inception. We are just as proud of
the results we have achieved in the Commonwealth. In fact, the
greatest success was last year the U.S. EPA Region I Phoenix
Award winner was one of our insureds in the Commonwealth of
Massachusetts.
Fortunately, Congress had the foresight in the 2002
brownfield law to allow EPA grant recipients to use funds from
those grants to purchase environmental insurance. Therefore,
local and State governments and qualified nonprofits can use
EPA brownfield funds to offset the cost of establishing State
or local environmental insurance programs or using the grants
for specific brownfields transactions.
AIG Environmental is extremely proud of our role in
brownfield transactions. We truly enjoy working at all levels
of government to make brownfields redevelopment a reality. One
of our greatest joys was when the Atlantic Station project in
Atlanta, GA, was selected as the National Phoenix Award winner
in 2004. AIG Environmental companies were intimately involved
in this project at numerous levels, and we take great pride in
our contribution of making that section of Atlanta come alive
again.
Again, environmental insurance is just one of the tools
utilized in brownfields redevelopment. Perhaps its use is one
of the best leveraging tools available. State programs that
have used this tool have been proven very successful, and we
look forward to working with this committee and the chairman to
assist in developing legislation that will allow States to take
advantage of similar programs.
Thank you. I will be happy to answer any questions you
might have.
[The prepared statement of Mr. Matthews follows:]
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STATEMENT OF DAVID CARTMELL
Mr. Cartmell. Mr. Chairman and members of the committee,
thank you so much for letting me speak on such short notice. I
am here today wearing three hats. I am a developer, not in the
developer sense, but I come from a city that has done
brownfield developments. I am the mayor of Maysville, KY, a
city of multiple brownfield issues. I am the president of the
Kentucky League of Cities, which has taken the lead in the
redevelopment of Kentucky cities, and I am the chairman of the
executive committee of the newly formed National Brownfields
Association Chapter in Kentucky.
Maysville is a small city of 9,000, but we have 10,000
jobs. I come from a town built on sin, whiskey, tobacco, and
hemp. But it is the milk that did us in, because we had
Carnation, and we have a condensary that condensed all the milk
in Ohio and Kentucky, and consequently through the lead process
and canning process it contaminated virtually half of our city.
Through a partnership with the Kentucky EPA and Federal
EPA, we cleaned this site. The city acquired this site from
Nestle, or from its predecessor--or successor, Silgan. We
cleaned the site. We won the Kentucky Earth Day Award for 2005,
but as of today we have not received a clean bill of health
from the EPA. This is ongoing for 10 years. This is our 10th
year.
It is difficult for us, simply because there is a new
company from New Jersey located there with 100 employees that
wishes to purchase. They will not purchase without the clean
bill of health.
Moreover, with each administration change, there is a
change of interpretation of rules. In addition to this,
Maysville has 31 tobacco warehouses abandoned, an abandoned
hospital with a $1.3 million asbestos cleanup bill, and
multiple cotton mills and other factories. It is a
disappointment that Kentucky received no EPA grants this last
funding cycle, even though there were multiple applications.
Personally, as a city, we have used every smart growth tool
available to us. We have planning and zoning, we have stopped
growth beyond our urban services boundary. But we need help
with streamlining this process. We do need the targeted
incentives, we need Chairman Turner's tax incentives, we need
help to cope with the future liabilities, and we need a timely
release on liability.
Mr. Chairman, I would like to thank you for pursuing this
interest so vital to the redevelopment of our cities, and thank
you for letting me speak today.
[The prepared statement of Mr. Cartmell follows:]
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STATEMENT OF CHARLES HOUDER
Mr. Houder. My name is Charlie Houder. I am the director of
acquisitions for Preferred Real Estate Investments. I want to
thank the committee for the opportunity to be here today, and
also want to thank Mr. Colangelo of the NBA for his efforts in
this regard and for at least bringing me here today. When I
first spoke to him, I contacted him about playing point guard
for the 76ers, and then realized the NBA stood for something
else and I realized we had other things to talk about; namely,
brownfields.
Preferred Real Estate Investments is a private real estate
developer. We are a for-profit company first and last. We are
not a brownfields developer in the sense that we seek
properties that are contaminated to focus our development
efforts on. However, we do have a major development focus on
infill sites and large corporate surplus sites around the
country, and invariably they bring along with them
environmental liability. So over the 20-years history of the
company, we have by necessity developed an expertise in being
on the very front lines of dealing with environmental
liabilities.
I am also a big believer in the fact that pictures speak
1,000 words. In my business, in my day-to-day work, it is much
more conversational than presentational, so I thought the best
way to kind of work through some of these examples is to show
pictures of what we are actually here talking about. And what
we are actually here talking about, especially in the context
of what I do, is specific sites. Yes, contaminated sites, yes,
but what these sites lead to.
And the purpose behind cleaning them up--and this speaks to
Mr. Kanjorski's comments--is that there are communities that
are beholden to these sites and that rely on the land that
oftentimes comprises a large majority of the city or town or
neighborhood that these sites are located in. And I thought we
could walk through a couple examples as a way of illustrating
the import of what we are talking about here today.
This is an example of some of the companies that we have
done business with over the last 20 years. I think one of the
common themes underlying everything that we talk about here
today is paying attention to the corporate owner of real estate
and the corporate seller. These are cases where the corporate
owner is well known; the corporate site that they own, that
they may have mothballed or put into minimal use is well known;
but the problem is that because of a lack of regulatory
certainty and because of all of the minefields, perceived or
otherwise, that pertain to taking environmentally challenged
problems through a transaction, they refuse to put them back
into productive use.
These are a few examples of companies that have taken that
leap and worked through that maze, sometimes minefield, of
working with a private developer to bring properties back into
productive use.
This site I am going to focus on in particular is a former
PECO site. PECO stands for Philadelphia Electric Co. It is a
subsidiary of Exxon which is based in Chicago. This was a
former power plant on the banks of the Delaware River, just
south of Philadelphia, PA. It is located in Chester, PA, which
historically was a heavy manufacturing town.
This power plant was built and designed by the same
architect that designed Union Station in Washington. It was
built at a time when power plants were designed to be monuments
to their product, to convince people of the certainty and
reliability of the energy that they provided. Over time, this
power plant provided the energy that built most of the ships
for the World War II war effort and fueled all of the industry
along Chester's waterfront. Over time, it became functionally
obsolete. The buildings and industry in Chester became obsolete
and moved offshore or simply closed down.
As a result, Chester as a community essentially closed
down. Largely a minority community, the typical social ills
crept in: crime, educational problems, AIDS, poverty and every
other social ill you can imagine.
When we came to this site, PECO had brought in every expert
in the United States to figure out what to do with this site.
It is an 80-acre piece of ground right on Chester's waterfront.
Every expert in the world told them, ``the only functional use
for this is to knock it down. Even if you were able to do
something with the property, what would you have? There is
simply no market for it.''
We took a different approach. We thought that it could be
the linchpin of a major economic redevelopment on the Chester
waterfront, so we undertook in partnership with the
Pennsylvania DEP and the EPA what was at the time the most
complex demolition project in the United States. It involved a
major rehabilitation of the environmental condition of the site
and a major deposition and rehabilitation of the interior
portions of the site.
Over the 4-year course of the project, it was redeveloped
into an office building. It is now fully leased to the likes of
Wells Fargo and a software company. It has created 2,000 jobs
in a city where, when we started this project, there were a
total of 3,000 jobs. I think it speaks highly to the fact that
targeted environmental efforts, with State and certainly
Federal cooperation in conjunction with private developers, can
lead to a dramatic resurgence of an entire community.
This one building has led to an entire rejuvenation of the
Chester waterfront. This is what it looked like once the
building was complete. This is a master plan. You will see the
small blue square at the bottom left is the original building.
This has given rise to a major redevelopment of retail,
residential, and further commercial redevelopment of the
Chester waterfront.
This is just some examples of what the original turbine
hall looked like and how it was basically gutted and new office
space created.
I think this speaks volumes to the import of why we are
here today. This project was done utilizing Federal tax
credits, historic tax credits, and I think those programs and
programs like that work very well in making projects like this
work.
Some further examples of the interior once it was redone.
This is another quick example.
I am going to run through a couple of other case studies of
projects that were done. This is a former Bud plant in
Philadelphia. Again, a large contaminated site where there was
an even greater perception of contamination than there actually
was.
This is in a former American Standard plant, a former
toilet factory in Hamilton, NJ. Again, a contaminated site that
worked with the public and private partnership, and again with
the corporate seller, convincing the corporate seller to come
to the table to effect a sale.
Texas Instruments in Attleboro, MA. Again, an old
dilapidated, functionally obsolete surplus corporate site that,
working with Texas Instruments, we were able to navigate
through environment concerns.
Last, a former Ingersoll Rand site in Phillipsburg, NJ,
where Ingersoll Rand had the belief in the town and worked with
us to help navigate through the environmental questions.
I will conclude my testimony with that and look forward to
answering any specific questions.
[The prepared statement of Mr. Houder follows:]
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Mr. Turner. In listening to the various State programs, one
of the things that I think is interesting about their
assistance is that there are some programs that provide
recapturing grants, revolving loan funds, etc.; others provide
direct subsidy, it is not recoverable. It seems to me that in
many of these sites that the gap--the subsidy is needed in a
manner that is not recoverable. That means that these sites are
not going to be, even when they're remediated--that the process
of acquiring the property and remediating the property when
compared to the cleaned value prior to complete redevelopment
is still going to be a negative proposition. In other words,
you're still going to have a negative value when you add in the
cost of acquisition and remediation prior to the redevelopment.
And you have, each of you, experience in a number of
different redevelopment projects. In the tax credit bill that I
have brought forward, it is a straight subsidy. We're not
seeking to recover the funds. Do you think that is an essential
element, as we look to a broader scheme, to redevelop the
brownfields? Mr. Colangelo.
Mr. Colangelo. Mr. Chairman, yes, I do. I think one of the
most difficult things to secure is your debt financing on a
project, and through this tax credit bill, I think it would
bring additional comfort to banks and the lending community so
that you would have lesser lines on equity. So I think that a
tax credit bill could clearly be a catalyst to encourage some
more of the banking industry to get involved with these
brownfield sites.
Mr. Philips. Mr. Chairman, I would echo Mr. Colangelo's
comment as well, and also point out that a number of people,
not just on this panel, but previously on the first panel, had
suggested that smaller sites were more problematic perhaps
because they received less attention and they were lower-
profile sites. And if you think about a tax credit, that can
be--again, as I mentioned in my oral testimony, it could be a
forward sale situation where you can create equity, and that
chunk of equity could then be leveraged to either attract more
equity or to attract debt capital, and that is critical to
everybody, but clearly to a smaller entity because what it does
is it doesn't start the clock of the return investment until--
or at least a portion of it until you deploy that capital later
in the project. So that is critical.
And I just wanted also to point out similarly the recapture
issue and sort of providing a subsidy versus providing
something that has to be returned or recaptured, such as the
BDI program--the Economic Development Industry program, I
should say--is it worked before. It has worked in the historic
preservation tax credit.
I was speaking to a developer just recently who has
purchased a site, purchased a site in Durham, NC. We're
headquartered in Raleigh, NC, and we're apparently right down
the street, and the site was purchased for $14 million. The
site would have never been touched. It was an old tobacco
warehouse; it would never have been touched had it not been for
the historic tax credit. The entity rehabilitated the site,
sold the site for--when you think about all the soft costs and
the hard costs and everything combined and the interest
payments, the debt service--for less than $14 million, but,
because of the credit, was able to make it a viable project.
Those are the kind--when I talk about above-water versus
underwater sites in my testimony, this is what I'm talking
about. There is a gap where there is huge public benefit, but
for the developer, to the investor they still are viewed as
under water because they can't monetize or commodify those
public benefit externalities. And I would encourage you to
continue on your mission to pursue the tax credit for that
reason as well.
Mr. Matthews. In our experience with several States that
have environmental insurance programs, there are those who do
credits and those who do subsidies. The subsidies are far more
successful. As a matter of fact, you can directly see it in
Massachusetts. When they first opened the program, they offered
a 50 percent subsidy toward the premium of environmental
insurance. Due to budget cutbacks, they had to reduce that
subsidy to 25 percent at one point in time. The number of sites
coming into the program dropped by 50 percent when they cut the
subsidy by that amount, so it is directly corollary.
In States where there is just a tax credit available, we
see much, much smaller activity, I mean substantially less
activity in that market.
Mr. Turner. Mr. Cartmell.
Mr. Cartmell. Our success has been, in taking the State
subsidy, which we have through a renaissance program, doing the
project ourselves and then selling it to a developer. So
certainly even for us the subsidy was the defining factor for
us to complete the project.
Mr. Turner. Mr. Houder.
Mr. Houder. I think, as was mentioned by the former panel,
typically when it comes to incentives, the size of the
incentives that can be offered by the Federal or State
government, at least in our experience with the size of the
sites that we basically develop, are typically not the
difference maker in us deciding whether a site works or doesn't
work, with the exception of tax credits. Tax credits, certainly
the historical tax credit program has been a difference maker.
That is probably the single incentive program that has the
ability to tip the scale in undertaking a development project.
Mr. Turner. Mr. Kanjorski.
Mr. Kanjorski. Well, it has certainly been worthwhile to
hear your experiences. I'm glad to see there is a very
sophisticated insurance program out there. I'm certainly going
to take it back to my district and see that we utilize it. So
we're going to get you more business.
Mayor, it is always great to see local leadership like
yours come forward and tackle these tough problems.
Unfortunately, the experience of many people that are in public
life doesn't lend them to your facility to do that, so it is
great to see you here. And Kentucky has to be better off. I've
gone through major parts of Kentucky; I know you have the same
problems we have in Pennsylvania.
On your reconstruction, I'm going to get your card; I have
a couple of sites.
And, Mr. Philips, you obviously are one of the
sophisticated industries now that we have grown up in this
field, so it would be very helpful for you to be very close to
Mr. Turner in structuring this to see how we can tailor it in
the best financial way to attract the private market.
Mr. Philips. Not part of any Beltway industry, I promise.
Mr. Kanjorski. If you do that, I will kill you.
And, Mr. Colangelo, you obviously come with a developer's
experience, and now the national perspective of what is
happening.
I'm going to walk away from this hearing more optimistic
than I thought I would when I came to it, so I just want to
congratulate you all, thank you for coming in. And then, again,
thank Mr. Turner for a real enlightened presentation here and
some real thought on his side to get something done creatively
in Congress. It doesn't call for great national headlines, but
Mr. Turner's actions here are the type of things that really
spell well for the Congress, because over the long run it
accomplishes far more than longshots.
Mr. Matthews. Mr. Kanjorski, if I might add, specifically
in Pennsylvania, Representative--Senator Erickson and
Representative Frankel from the State legislature have both
introduced legislation to establish a program similar to
Massachusetts; and it is currently moving through the house and
senate at this point in time.
Mr. Kanjorski. If you would get me that thing, I would be
happy to write a letter to the members of the legislature to
support it.
Mr. Matthews. Thank you.
Mr. Colangelo. And, Mr. Kanjorski, I also wanted to mention
that Pennsylvania was one of the founding members of the
National Brownfield Association, and we are happy to announce
that we are just launching our Pennsylvania chapter this month,
and we would like to invite you to our inaugural reception in
Harrisburg. And Pennsylvania has long been a leader in this,
and I do encourage you to be optimistic. There's members like
this from the public and private sector all along the country
that are really dedicated to responsibly--and I mean
responsibly--cleaning these up right, but making sure they
provide economic benefit. And we've had the privilege of
working with Congressman Turner on this issue, and I again
encourage you that there is a good group of people that are
very dedicated.
Mr. Kanjorski. I'm impressed.
Mr. Turner. Well, Mr. Kanjorski, I look forward to working
with you on this. We've had discussions before about the
brownfield spill, and also your mining and reclamation efforts,
and your bill and the funding mechanism that you use with
respect to bonding. I look forward to working with you on that
because this is obviously something that is important to both
our States, and it is important to have a bipartisan effort to
address this.
And, Mayor, I also want to congratulate you. It is
interesting, I think, these days that when people run for local
government, they think in terms of services and police and
fire, and not the need to become local developers. But with
these issues of brownfields, really the future of our
communities, what they're going to look like, really require
people to step up like you have with the expertise to take on
projects that are a little bit more complex to make them
happen, because the private sector really at this point does
not have the tools yet to do it. So I commend you for that.
And I want to ask you all the last question, which was the
same question that I asked the first panel with respect to the
voluntary cleanup programs on the State level. As I discussed
with the brownfields bill, the tax credit bill that I have been
working on, the liability release provisions within it, we are
looking now to hook that into the voluntary cleanup program
rather than have language in the bill that would provide a
separate release and some angst to individuals as to how that
might be applied.
We heard from the representatives from the States as to how
the volunteer cleanup program liability or bar of enforcement
from the Federal EPA has worked effectively for them with some
caveats of RCRA and TSCA as an area where it would need to be
expanded or nailed down between their State and U.S. EPA.
Each of you having experience in the area of the
remediation, I would like your thoughts as to a tax credit
program that requires the recipients to participate through the
volunteer cleanup program and its effectiveness.
Robert.
Mr. Colangelo. Thank you.
First of all, I would like to state that brownfields are
really a balance, and it's a balance between four stakeholder
groups, property owners, developers and investors, service
professionals and government. And I'd really like to commend
government both at the legislative level as well as the Federal
agencies, U.S. EPA, and the State and local government, who
really come together to work together to try to make the
process quicker, because that's the big hindrance to the
private sector; it's time. It's also a balance between buyers
and sellers.
What you see right now in many State voluntary cleanup
programs is that you have two levels of liability relief. The
buyer can get out of--or has very defined liability relief, but
the original contaminator can't get out of that liability
relief. What you propose, I think, starts to address that
issue, and what I think it would do, personally, is it is going
to allow companies to be more apt to clean up these sites, and
you're going to put a larger supply of developable properties
onto the marketplace.
The NBA, in our last leadership summit, wrote a white paper
on what we can do to bring more corporate brownfield properties
to market, and we found that corporate America owns more than
43 percent of these industrial commercial properties, and the
No. 1 concern they have is getting out of the liability relief.
So I commend these States on these voluntarily cleanup
programs that have come a long way, and I think what you are
proposing takes it the next step further. And again, making
sure that they're responsibly cleaned up, I think, puts the
controls to keep the balance in the system that we've created.
Mr. Turner. John.
Mr. Philips. Thank you.
Just a couple of comments on indemnification. We offer that
as part of our program. We indemnify our sellers, and we do
that not just because of our funds, but we do that with
backstopping it with companies like AIG Insurance. We are one
of the largest buyers of environmental insurance perhaps in the
world, and we think that it's very important to provide this
kind of comfort to sellers or even potentially responsible
parties. And we think it's important that you're thinking about
this issue in the bill. It could have easily have just been a
tax credit piece of legislation without the liability
component, and this is very important.
Second, in our experience at Cherokee, we do take many of
our sites through the voluntary cleanup program anyway, and we
think that as time has gone on, and more have been adopted
throughout the States, and the 50 States, we have seen that it
has become a more popular route. And it seems to me to be an
intriguing option to help integrate States into the process of
the Federal tax credit to sort of provide a requirement that
one goes through the State voluntary cleanup program. I think
it has many attractive elements.
Mr. Matthews. We encourage all of our States to go through
the voluntary cleanup programs. We are familiar enough with
them now, and each individual State that we do it, the best way
to go, makes it more predictable, better for us to underwrite.
In terms of the environmental liability, you have opened
the Pandora's box to where a lot of people either consider
environmental liability to either be religion or business. We
consider it to be business. We think there are ways to actively
structure different approaches to put the environmental
liability back in a box and deal with it. We've done it at the
most complicated Superfund site in the United States where the
U.S. EPA gave a full release of liability to the single
responsible party at that site because they designed the
appropriate structure to move forward with. Cherokee,
Preferred, a lot of other companies, that's how they do it now.
Environmental liability is just simply a business; you
structure a program and you move forward.
Having other people see it that way is very difficult, but
as more and more of them see the examples put before us--and
that's why we're glad you have us here so we can say, we've
done it here, we've done it here, we've done it here, this is
routine business, you can move this forward. The NBA's white
paper is an excellent source of information about why this is a
problem, why not moving environmental liability to business
practice and keeping it as something that--you know, if you
look back to CERCLA, CERCLA was a liability statute, but it was
really passed to a lot of extent to punish companies who
contaminated property. Well, we are kind of beyond that now;
now is a chance to move forward and put sites back into reuse
that are part of the unintended consequences of CERCLA. And so
the more we can do that, the more opportunities you give us--
and that is why we are willing to work with you on your bill to
say here is a way to design this so that those environmental
liabilities are covered and addressed and are backstopped by
all types of financial instruments that are out there.
Mr. Cartmell. I would just like to echo what Mr. Matthews
said, that anything that will let industry see the--hastens the
process and lets them see the light at the end of the tunnel, I
think, is beneficial.
Mr. Turner. Charles.
Mr. Houder. I echo the comments made earlier. I think
making the tax credits part of a voluntary cleanup program
makes perfect logical sense, and responsible developers are
going to be doing that anyway. So I think it makes sense to do
that.
And to echo what Robert said, I think the other critical
piece is to provide some path for the corporate seller, to not
leave them out of the equation--or the seller, corporate or
otherwise--simply because that so often is the last stumbling
block that cannot be overcome.
And then with respect to what Mr. Matthews was saying, I
think that part of this, you know, certainty and, I guess,
legislative certainty to take this out of the realm of religion
and to make it firmly on a business footing. I think the more
expedited these things can be as, and as people see that
environmentally contaminated sites are put quickly back into
productive use helps, I think, sort of tone down some of the
emotion that sometimes goes along with these sites.
Mr. Turner. I want to give you an opportunity for any
closing comment for things that have not been raised.
Mr. Colangelo. Again, I want to commend you. What Congress
may not realize that they have done is they have created an
industry. It is called the brownfield industry and 10 years ago
it was a collection of a bunch of crazy people thinking they
could buy these contaminated properties. And now, by our best
estimates, there are between 5,000 to 10,000 people that make
their livelihood redeveloping brownfields, and these jobs
aren't going to go offshore. These jobs are jobs that are going
to stay in the country. This is a very highly specialized field
where you need experts like this from both the public and
private sector to take these old factories that house jobs that
stayed here to redevelop these and put those back to use.
And so I think anything the government can do to provide
any type of seed funding in the form of incentives to attract
the large amount of private sector dollars will just help the
brownfield industry grow and create a work force that is going
to stay here. So thank you.
Mr. Philips. Thank you very much for having us. I really
appreciate you giving this hearing, and I wanted to thank the
staff as well for doing such an excellent job in coordinating
all of us and our testimonies.
I would just leave you with a final thought, which is to
consider the real estate market that we find ourselves in
around the country. I mean, a lot of people have expressed
different opinions on how many brownfields are out there and
how many brownfields--what is the subset of brownfields that
are still attractive; are they minimally contaminated; are they
considerably contaminated? In today's real estate market, the
hottest, perhaps, that it has been certainly in our lifetimes,
the sites that are not being developed now, I would venture to
say that they're not going to be developed for a long time.
They need help. The low-hanging fruit is not there, it's gone,
and these efforts, the consideration especially now of
innovative solutions like you're proposing, Chairman Turner,
are very well appreciated, and we want to thank you very much
for that.
Mr. Matthews. Thank you for the opportunity to be here. I
think the one thing to always keep in mind is flexibility.
Every brownfield is a little different, and being overly
prescriptive only leads to problems down the road. But allowing
the public sector and the private sector to work together
within a framework that allows them to get creative where they
need to be creative is critical to moving forward with a
variety of brownfields that are still out there today.
Mr. Cartmell. The majority of brownfields being--
numberwise--being located in the city, I just want to thank you
for the opportunity to listen to us, for hearing us. Thank you.
Mr. Houder. And I thank you, too, for the opportunity. You
know, if you think about brownfields, it definitely has the
potential or I think is one of the silver bullet issues,
economic issues in the United States; because if you think in
terms of other crises, energy crises, infrastructure crises,
the rejuvenation and rehabilitation of these key infill urban
and suburban sites has the potential to greatly reduce those
other problems.
And so I commend you for your efforts on this, and thank
you, because I think this is one of probably the greatest
examples of the best work government can do is taking on things
that are under most people's radar screens that are relatively
complicated, but at the end of the day have the greatest impact
on people's day-to-day lives. So thank you.
Mr. Turner. We have a statement from the American Society
of Civil Engineers which will be entered into the record.
[The information referred to follows:]
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Mr. Turner. And before we adjourn, I would like to thank
our distinguished witnesses for their participation today, and
I appreciate your willingness to share your knowledge,
experiences, and thoughts.
I would also like to thank my colleagues for their
participation today. We had numerous State-created solutions to
the issues of brownfields remediation and redevelopment
highlighted today. These programs have successfully
incentivized redevelopment efforts across the Nation; however,
we also heard State programs, while helpful, also have
limitations. According to landowners and developers. The two
largest impediments to redevelopment of brownfields are
liability and the high cost of redevelopment. As we have heard
from numerous stakeholders, a tax credit for remediation costs
would go a long way toward encouraging more aggressive
redevelopment of these blighted properties.
Again, I want to thank our witnesses for their time today,
and in the event that there are any additional questions that
we did not have time for today, the record will remain open for
a period of 2 weeks for submission of additional questions and
answers.
I thank you, and we stand adjourned.
[Whereupon, at 12:23 p.m., the subcommittee was adjourned.]
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