[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
LANDS OF LOST OPPORTUNITY: WHAT CAN BE DONE TO SPUR REDEVELOPMENT AT
AMERICA'S BROWNFIELD SITES?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FEDERALISM
AND THE CENSUS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 5, 2005
__________
Serial No. 109-63
__________
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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_________________________________________________________________
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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 April 5, 2005.................................... 1
Statement of:
Dunne, Thomas, Deputy Assistant Administrator in the Office
of Solid Waste and Emergency Response, Environmental
Protection Agency; and John Stephenson, Director, Natural
Resources and Environment, Government Accountability Office 6
Dunne, Thomas............................................ 6
Stephenson, John......................................... 20
Plusquellic, Don, president, U.S. Conference of Mayors; James
E. Maurin, chairman, International Council of Shopping
Centers, board member, the Real Estate Roundtable; Jonathan
Philips, senior director, Cherokee Investment Partners,
LLC; and Douglas L. Steidl, president, the American
Institute of Architects.................................... 46
Maurin, James E.......................................... 59
Philips, Jonathan........................................ 81
Plusquellic, Don......................................... 46
Steidl, Douglas L........................................ 119
Letters, statements, etc., submitted for the record by:
Dent, Hon. Charles W., a Representative in Congress from the
State of Pennsylvania, prepared statement of............... 141
Dunne, Thomas, Deputy Assistant Administrator in the Office
of Solid Waste and Emergency Response, Environmental
Protection Agency, prepared statement of................... 8
Kanjorski, Hon. Paul E., a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 144
Maurin, James E., chairman, International Council of Shopping
Centers, board member, the Real Estate Roundtable, prepared
statement of............................................... 62
Philips, Jonathan, senior director, Cherokee Investment
Partners, LLC, prepared statement of....................... 85
Plusquellic, Don, president, U.S. Conference of Mayors,
prepared statement of...................................... 50
Steidl, Douglas L., president, the American Institute of
Architects, prepared statement of.......................... 121
Stephenson, John, Director, Natural Resources and
Environment, Government Accountability Office, prepared
statement of............................................... 22
Turner, Hon. Michael R., a Representative in Congress from
the State of Ohio, prepared statement of................... 4
LANDS OF LOST OPPORTUNITY: WHAT CAN BE DONE TO SPUR REDEVELOPMENT AT
AMERICA'S BROWNFIELD SITES?
----------
TUESDAY, APRIL 5, 2005
House of Representatives,
Subcommittee on Federalism and the Census,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:17 a.m., in
room 2154, Rayburn House Office Building, Hon. Michael R.
Turner (chairman of the subcommittee) presiding.
Present: Representatives Turner and Foxx.
Staff present: John Cuaderes, staff director; Shannon
Weinberg, counsel; Juliana French, clerk; Stacy Barton,
Representative Turner/chief of staff; Neil Siefring,
Representative Turner/legislative assistant; Adam Bordes,
minority professional staff member; and Cecelia Morton,
minority office manager.
Mr. Turner. Good morning. A quorum being present, this
hearing of the Subcommittee on federalism and the Census will
come to order.
Welcome to the Subcommittee on Federalism and the Census's
oversight hearing entitled, ``Lands of Lost Opportunity: What
Can Be Done to Spur Redevelopment at America's Brownfield
Sites?''
In every community across this Nation there are abandoned
parcels of property marring the faces of our cities and towns.
Behind rusted chain link fences are broken windows and
crumbling buildings. Beneath the surface there are substances
contaminating the local environment, robbing the communities in
which they exist of new jobs and other economic opportunities.
There are an estimated 450,000 to 1 million of those
parcels, known as brownfields, across our Nation, contributing
to community blight and 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. 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 abandoning
brownfields.
If we are to achieve our goal of restoring these properties
to productive use and redeveloping them into centers of
economic and community vitality, we must craft a Federal
response to a federally created problem. We cannot leave
brownfields and abandoned factories as monuments to their once
productive past. The redevelopment of brownfields will create
jobs, new living and shopping options, and spur the improvement
or development of transportation and infrastructure.
If we make redevelopment of brownfields more attractive, we
can also help reduce urban sprawl and save green space. In my
home town of the city of Dayton, over 50 acres of land
surrounding our downtown are brownfields that would attract
jobs and spur economic expansion--if the city had assistance in
addressing the environmental contamination from past use of the
parcels.
In 2002, the President signed the Small Business Liability
Relief and Brownfields Revitalization Act of 2001. While the
law codified and secured independent appropriations for the
EPA's brownfields programs, the shining accomplishment of the
act was providing some relief from the daunting amount of
potential liability for acquiring and attempting to redevelop a
brownfield site. Specifically, the act limits liability for
owners of land that is contaminated by adjoining property as
well as for prospective purchasers of known contaminated
property.
The act also clarified the CERCLA ``innocent landowner''
defense and created additional liability relief by forbidding
the Federal Government from intervening at sites being cleaned
up under a State program except in certain circumstances.
These are strong first steps in encouraging brownfield
redevelopment, and the subcommittee looks forward to hearing
from the EPA on the effect of the program and the new liability
relief and what it has achieved in this field.
We also look forward to hearing from the Government
Accountability Office. 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 EPA's brownfields
program but that additional incentives, such as a tax credit,
are needed to spur brownfield redevelopment and really make a
difference in communities across our country.
Last year, I introduced H.R. 4480, the Brownfields
Revitalization Act of 2004, to address these two greatest
impediments to redevelopment--liability and redevelopment
costs. My bill proposed a tax credit of up to 50 percent for
qualified remediation expenses of brownfields in certain
poverty rated areas. Specifically, credits are available for
redevelopment projects where a local government entity includes
a census tract with poverty in excess of 20 percent, although
the project need not be located within that tract.
H.R. 4480 also provides additional liability relief by
allowing potential responsible parties that contribute at least
25 percent of the remediation costs to receive liability
release for 100 percent of the approved remediation plan and
demolition costs.
I plan to introduce this bill in the near future with a few
key improvements. The revised bill will clarify the liability
relief provisions, making clear that the relief is limited to
the approved remediation plan, while liability for other types
of claims, such as liability to adjacent property owners or for
outstanding health complaints, is unaffected. The bill also
provides that an environmental remediation plan be approved by
the State environmental agency.
The EPA's brownfields program has assisted a number of
communities in brownfields assessment and cleanup. Stakeholders
are appreciative of EPA's brownfields program, especially with
the easing of the regulatory regime. However, when choosing
between brownfields, grayfields and greenfields for development
projects, it still comes down to a cost-benefit analysis.
Unless we significantly address the cost of redevelopment and
cleanup of these sites, the EPA's brownfield program will
continue to affect only a few thousand sites, leaving a major
gap and burdening many communities with land that cannot be
redeveloped and that remain a blighting influence.
We have two panels of witnesses before us to help us
understand the state of brownfields redevelopment efforts
nationwide as well as the impact of the EPA's brownfields
program, only 2 years into its statutory existence. We will
also hear opinions from stakeholders on their ideas for
improving and implementing the EPA's brownfields program in
order to encourage more aggressive redevelopment.
First, we will hear from Mr. Thomas Dunne, the Deputy
Assistant Administrator in the Office of Solid Waste and
Emergency Response at the Environmental Protection Agency.
Second, we will hear from Mr. John Stephenson, Director of the
National Resources and Environment team at the Government
Accountability Office.
The second panel of witnesses consists of representatives
of the stakeholder community.
First, we will hear from the Honorable Don Plusquellic,
Mayor of Akron, OH, on behalf of the U.S. Conference of Mayors.
Mayor Plusquellic, I understand that you have a plane to catch,
and I hope that you will be able to stay for at least a little
portion of the questions and answers, but I certainly know that
you will be excusing yourself and will not be able to stay for
the rest of the hearing.
After Mayor Plusquellic's testimony, we will hear from Mr.
James Maurin as chairman of the International Council of
Shopping Centers and as a board member of the Real Estate
Roundtable.
Rounding out our second panel, we will hear from Mr.
Jonathan Philips, senior director of Cherokee Investment
Partners, and Mr. Doug Steidl, president of the American
Institute of Architects.
I look forward to the expert testimony that we have before
us today on the panel of leaders that are present. I thank
everyone for their time.
As a reminder for those who want to view this hearing, it
is on our Web cast of reform.house.gov.
[The prepared statement of Hon. Michael R. Turner follows:]
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Mr. Turner. I now recognize Ms. Foxx, if she has an opening
statement.
Ms. Foxx. Mr. Chairman, I do not have any opening
statement. Thank you.
Mr. Turner. I appreciate you being here today.
We will now start with the witnesses. In this committee we
do swear in our witnesses. If you gentlemen would stand and
raise your right hands.
[Witnesses sworn.]
Mr. Turner. Let the record show that all witnesses
responded in the affirmative.
We will begin our testimony with Mr. Dunne, Deputy
Assistant Administrator with the EPA.
STATEMENTS OF THOMAS DUNNE, DEPUTY ASSISTANT ADMINISTRATOR IN
THE OFFICE OF SOLID WASTE AND EMERGENCY RESPONSE, ENVIRONMENTAL
PROTECTION AGENCY; AND JOHN STEPHENSON, DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF THOMAS DUNNE
Mr. Dunne. Thank you, Mr. Chairman and Ms. Foxx.
I am appearing today to discuss EPA's Brownfield program
and address the recommendations made in the Government
Accountability Office's report on brownfield redevelopment. I
will summarize my statement, but I would also ask my statement
be included in the record.
More than a decade ago, EPA identified a problem facing
local communities in their efforts to develop properties that
are contaminated or potentially contaminated by hazardous
substances. The private and public sector were extremely
hesitant to get involved in these sites, now known as
brownfields.
Ten years ago, EPA began providing seed money through
grants to local communities to inventory and assess
contamination at brownfield properties. Congress also enacted
legislation that provided tax incentives to promote private
sector cleanup and development at brownfields. Over the years,
EPA added grants to capitalize revolving loan funds for clean
up. The Agency also provided job training grants to promote
employment opportunities in brownfield communities.
Since EPA's initial efforts, States, tribes, local
governments, and nonprofit organizations have begun to focus on
brownfields cleanup and development. In the year 2002,
President Bush signed into law the Small Business Liability
Relief and Brownfields Revitalization Act. This new Brownfields
Law broadened the reach of EPA's brownfield program and
provided statutory liability protection to promote private
sector participation in brownfields cleanup and development.
Under the new Brownfields Law, EPA can now award direct
cleanup grants to public sector and nonprofit property owners.
The new law also broadened the definition of what could be
considered a brownfields property. EPA can now award its
brownfields grants for petroleum-contaminated properties, mine-
scarred lands, and sites contaminated with controlled
substances.
I am pleased to report that EPA's brownfields program has
been able to produce significant results. As of March 2005, EPA
and its grant recipients have performed more than 6,800
property assessments; and as of March 2005, brownfield grantees
have leveraged $6.6 billion in cleanup and redevelopment
dollars, which has also leveraged more than 30,000 jobs.
The public investment in brownfields has proven to be a
wise investment. Studies show that for every public dollar
spent on brownfields cleanup and redevelopment, $2.50 is
leveraged in private investment.
One thing is clear, that, notwithstanding all the efforts
of Federal, State and local governments, we will never be able
to clean up the many hundreds of thousands of brownfield
properties scattered throughout our country without the funding
and know-how of the private sector.
I would like to take a minute now to comment on the GAO
report.
EPA agrees with GAO that more had to be done to develop
additional measures to quantify brownfields program
accomplishments. EPA has developed a new data collection
mechanism, the Property Profile Form, to collect information
from site assessment, cleanup and revolving loan fund grantees.
Further, a nationwide data collection effort is under way that
will collect data from the years 2003 and 2004 grantees. We
believe that this new data will enable EPA to tie program
results with property-specific activities to better gauge
brownfields program progress.
EPA is also working with State and tribal officials to
develop performance measures to gauge the impact of the EPA's
funding on the results produced by their voluntary cleanup
programs. The performance measures will tie performance to the
number of acres cleaned up and made ready for reuse or
anticipated reuse.
In addition, EPA agrees with GAO that more efforts are
needed to monitor revolving loan fund grants to determine why
they have been underutilized. EPA is committed to improving
revolving loan fund performance and ensuring that, if grant
funds are not being used, those grant funds will be closed out
or grantees will be required to transition old loan fund grants
to the new Brownfields Law program authority. To that end, I
issued a memorandum to EPA regions in September 2004 to contact
revolving loan fund grantees and request that they transition
or close out old loan funds.
Mr. Chairman, that completes my statement. I will be
pleased to answer any questions that you and other members of
the subcommittee have.
Mr. Turner. Thank you.
[The prepared statement of Mr. Dunne follows:]
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Mr. Turner. Mr. Stephenson.
STATEMENT OF JOHN STEPHENSON
Mr. Stephenson. Mr. Chairman, thank you for this
opportunity to discuss our report and recommendations on EPA's
brownfields program. The report, as you know, was issued to you
and Chairman Davis on December 2004.
Over half a million brownfield sites, such as former
industrial properties, gas stations and warehouses, sit
abandoned or unused across the country. These sites have
remained undeveloped for a number of reasons, including
uncertainty about contamination, limited resources and fear of
liability for cleanup costs. Cleaning up and redeveloping these
sites cannot only protect human health and the environment but
also improve local tax bases and encourage smart growth by
slowing development of open land.
While EPA has the lead Federal role in encouraging
brownfields development, other Federal agencies, State and
local governments, commercial lending institutions and real
estate developers also fund activities to help redevelop
brownfields. EPA provides grants that support efforts to
assess, clean up and redevelop properties, help create jobs
through new economic development and leverage cleanup and
redevelopment funding from other sources. While the total
amount of EPA's grant funds is small, about $400 million since
the program began, this investment is intended to leverage more
than $10 billion in investments from other sources.
In developing our report, we spoke to numerous grant
recipients, State and local government officials, real estate
developers and other stakeholders, and they all agreed that
EPA's program provides an important contribution to brownfields
cleanup and redevelopment. According to them, EPA grants often
provide seed money during the initial stages of brownfields
redevelopment for activities such as identifying the extent of
contamination and estimating the cleanup costs that private
lenders typically will not fund.
Stakeholders also said that EPA grants support
redevelopment of sites with complex cleanup requirements, less
desirable locations or liability issues, sites that might not
be redeveloped if left to normal market forces. In addition,
State officials told us that EPA grants have been crucial to
establishing and expanding the scope of their programs to
encourage voluntary cleanup of brownfield properties.
While stakeholders generally praised the EPA's program, we
believe that the Agency could do a better job in providing to
the Congress more useful information on the program's
accomplishments, information needed to determine whether the
program is in fact achieving its goals. For example, EPA does
not currently report program results like the number of acres
cleaned up or the impact of grants to States for their
voluntary cleanup programs.
Finally, stakeholders identified three options to improve
or compliment EPA's brownfield program.
First, they suggested eliminating the provision of the
brownfield act that makes landowners who purchased the
brownfields property before January 2002 ineligible for grants.
Stakeholders strongly believe that this clause discourages
brownfields redevelopment by limiting the number of potential
grant recipients.
Second, grant recipients and other stakeholders suggested
changes to expand the use of EPA's revolving loan funds. As of
November 2004, States had loaned out about $29 million or only
about 17 percent of the $168 million provided for this purpose.
According to stakeholders, the stringent technical and
administrative requirements to establish a revolving loan fund
have discouraged its use.
Additionally, stakeholders believe that EPA could achieve
greater results by giving priority to applicants with proven
administrative expertise or to coalitions of agencies that
could consolidate administrative functions. This could produce
economies of scale by spreading the up-front administrative
costs associated with setting up a fund over a greater number
of loans.
Third, stakeholders supported a brownfield tax credit
allowing developers to offset a portion of their Federal income
tax with cleanup expenditures. Grant recipients, developers and
other groups with brownfield expertise generally agree that
such a tax credit could attract developers to brownfield sites
on a number of national issues. I am sure you will hear more
about these stakeholder ideas on your second panel.
To enhance Federal efforts to support brownfields
redevelopment, we recommended in our December 2004, report to
you that EPA, one, develop additional performance measures to
gauge program achievements; two, weigh the merits of revising
the eligibility date provisions of the brownfield act; three,
monitor and determine why revolving loan funds have been
underutilized; and, four, consider giving priority to entities
with revolving loan fund expertise when awarding these grants.
And, as you have heard, EPA agreed with our recommendations and
is taking actions to implement them.
Mr. Chairman, that concludes my summary; and I will be
happy to answer questions as well.
Mr. Turner. Thank you.
[The prepared statement of Mr. Stephenson follows:]
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Mr. Turner. I thank both of you for being here and for the
time that you have put into this and again for EPA the effort
that you continue to put into what is an important issue for
our communities. As you know, not only do brownfields represent
an economic opportunity, they are many times a blighting
influence for people who either own property near them or for
families that live around them.
What I would like to focus today in the area of questions
really are issues of economics of brownfield redevelopment. It
strikes me in reading both the GAO report and the testimony
from EPA that many of the things that we talk about in the two
testimonies do not quite hit the economics that we have in many
of brownfield sites where the cost of cleanup and demolition of
buildings that are a nuisance upon the real estate might exceed
the value of the property and that the economic marketability
for these properties to be addressed and redeveloped just is
not there. So I want to go through a series of questions that
really look to the economic problem and then the gap that we
have in being able to address it.
My first question is really to ask that I think both of you
would agree that brownfields are a federally created problem,
that the issue of the brownfields being areas where a
potentially responsible party or a landowner has disincentives
for its redevelopment, that our current laws and regulations
actually encourage abandonment of the property; and I want to
know if both of you agree with that.
Mr. Stephenson. Because of potential liabilities, you mean?
Mr. Turner. Correct.
Mr. Stephenson. The liability requirements established in
the CERCLA and the Superfund program?
Mr. Turner. Yes.
Mr. Stephenson. Those liabilities were created in fact by
Federal law, yes.
Mr. Dunne. I would agree with that.
Mr. Turner. In situations where the costs of cleanup of the
property exceed its market value and where there is no
potentially responsible party that currently exists, either
they have ceased operating as a business or if they are an
individual corporate entity that is no longer able to be
identified as a successor entity and the costs exceed the
cleanup, would you both agree that there is no private sector
incentive, there currently is no ability for the private sector
to come in and address the redevelopment of that property?
Mr. Dunne. I would agree with that.
Mr. Stephenson. Yes.
Mr. Turner. In looking at the EPA's loan fund program--and,
first off, let me tell you that I think everyone agrees, as the
GAO report identifies, that the EPA's programs are very
important and have assisted a number of communities. However, I
do believe that, as the GAO report identifies, there is a gap
in our ability to address the need.
The loan fund itself, does recognize that the funds are
going to be returned in some way; somehow the property or
project or the individual receiving the loan is going to
economically have a way to return the funds. Could you discuss
that, Mr. Dunne, for just a moment as to how that might not be
able to assist people who have a property that isn't going to
be market viable as it is redeveloped, that is not going to
produce the proceeds that would be able to be applied to the
loan? Has that been an impediment perhaps in some of the loans
being applied to some of the more difficult sites?
Mr. Dunne. I don't think it's the repayment ability so far
that has surfaced as a problem. Banks do have bad loans that
they have to cover. I think it is in the early stages of EPA's
working on revolving loan funds that it probably wasn't
stringent enough in terms of looking at a business plan. We are
an environmental agency. We are not a banking agency. And one
of the things that we have learned and agree with GAO is that
we have to look at our criteria and take a look at
organizations that have the ability to manage the loan and also
manage a Federal grant because it is a grant. But the term
revolving loan fund is significant in terms of what it says.
The money will be returned to a fund that can be loaned out
later.
So I think that it's a good idea for us to not only tighten
the criteria in terms of a business plan but make sure that the
organizations that are going to be the recipients of these
grants have a great opportunity to be able to be successful at
making loans so they can have a viable revolving fund.
Mr. Turner. Mr. Stephenson, your report addressed some of
the difficulty in the loan fund's success.
Mr. Stephenson. What we heard from stakeholders were a lot
of the up-front costs associated with establishing the fund and
administering the fund itself was, in fact, an impediment. You
have set up a payment schedule, an interest rate, etc. This is
a relatively new fund, so it's not yet self-sustaining. You
receive payments over a period of time, and so there isn't a
funds per se. It's all been loaned out to the extent that they
can loan it out. But what we heard from stakeholders was it's
primarily that up-front expertise you need to establish the
funds itself which discourages its use. Frankly, some
developers found it easier just to go to the bank and get a
loan.
Mr. Turner. Mr. Dunne, in your testimony you indicate that
the assessment grants that have been provided have resulted in
more than 6,800 assessments. The grant programs, the
assessments, the loan program, do you have any quantification
that you can provide that would tell how many brownfield sites
have gone through an EPA process where they have received
financial assistance and have resulted in cleaned up and viable
redeveloped property?
Mr. Dunne. Currently, as I mentioned, Mr. Chairman, we are
putting together a property profile of which I think we will
have for 2003 and 2004 fairly quantifiable information that
will demonstrate the performance of the program. We recognize
the fact that there are so many brownfield sites in this
country that the number of assessments we do is fairly minute
compared to the overall number, but we also recognize the fact
that we will never be able to deal with all 450,000 to a
millionsites. Some of them just aren't going to be viable. But
we are looking for more and more ways to quantify the positive
nature of the program and the things that are successful so
that we can look for more successful ways of providing these
funds to the community so they can provide job opportunities
and other benefits.
Mr. Turner. As you go through the assessment process, does
your program include any incentives for PRPs, potential
responsible parties, to come to the table and participate in
the assessment? So many times they have knowledge that would be
very important for the success of the assessment and for
determining any environmental remediation plan.
Mr. Dunne. When you say potential responsible parties, in
the Superfund context they are not eligible for brownfields,
nor should they be in our lexicon right now. We generally want
to provide the funds and let the local entities deal with the
developers and the bankers and the other people who are
involved. We don't want to be intrusive from EPA's position in
trying to dictate from Washington how to sort out individual
problems at the local level.
Mr. Turner. You made an important point, and that is the
difference between brownfield and Superfund. Could you
elaborate on that for a moment? Because people frequently get
concerned when we talk about trying to address the brownfield
issue, that we might impact Superfund.
Mr. Dunne. As you know, in Superfund law, if we know of
responsible parties or even one party, they could be held
liable for cleaning up a whole site. Usually, contamination is
much worse at a Superfund site than it will be at a brownfield
site. So I think we are talking about a magnitude of difference
that's quite wide. And I think it's good that this law--
brownfield's-- emanated out of the Superfund law because we
were running into the concern that there were a number of local
governments who had this property but they wouldn't score high
enough with the properties to be put on the national priority
list. So if they are on the national priority list now they are
not eligible whatsoever for brownfields funding. So, by and
large, we are dealing with abandoned properties or you are
dealing with private property owners who have this site who--
because of the liability--do not want to let go of the site.
That has changed because of brownfields. There are people
now that are willing to come in as prospective purchasers and
take this property over and redevelop it if they assure that
they are not going to be liable like they would be under a
Superfund project.
Mr. Stephenson. It does have to do with the seriousness of
the contamination as well, but it is important to note that
it's potential contamination on a brownfield site. And in fact
a lot of EPA's assessments have shown that at least 30 percent
of the sites assessed don't have any contamination at all.
Mr. Turner. I thought that was encouraging in the
information that we had. But, under brownfields, an individual
property party that was responsible for the contamination of
the brownfield site, they do have liability, do they not, for
the cleanup?
Mr. Dunne. Yes.
Mr. Turner. Many times the fact that they have that
liability can result in them trying to avoid the liability by
the abandonment of the property or by not fully participating
in the redevelopment or the remediation of the property; and in
doing an assessment, I believe that many times if we could
bring those parties to the table where they would participate
in the assessment process, in the remediation process, that
their knowledge could be very important for our success. I was
wondering if, in your grant programs, your assessment programs,
your revolving loan program, if you had any incentives that
could be provided for those individuals to come to the table
and participate? I understand your statement of you want the
communities to be on the ground, so to speak, more involved,
but is there any mechanism, recognizing that the liability that
those individuals have, that EPA has to bring them and assist
them in coming to the table?
Mr. Dunne. Well, we don't have anything under the statute
that is going to relieve them of the liability. So in that
respect I guess the answer is no.
Mr. Stephenson. Can I add something, Mr. Chairman?
Mr. Turner. Please.
Mr. Stephenson. Brownfields does add the innocent landowner
defense which property owners on contiguous property, if they
have exercised their due diligence and so forth, do have
liability limitations. So you're not automatically liable for
all the cleanup. Brownfields does afford additional liability
limitations even beyond what was done under CERCLA. It sort of
codifies the principles under CERCLA as well.
Mr. Turner. Getting back to the individual that was
responsible for the contamination, with the grant programs and
with the revolving loan funds, does EPA in any way under the
area of brownfields pursue those individuals to recapture the
grant moneys that are provided or the loan funds that are
provided?
Mr. Dunne. No.
Mr. Turner. Is there a statutory reason for that?
Mr. Dunne. We don't have enforcement authority under
brownfields to go do that.
Mr. Turner. Who would have the responsibility for
pursuing----
Mr. Dunne. Well, States often have enforcement programs
that they could invoke.
Mr. Turner. I was very encouraged by the information in
your testimony about the redevelopment of brownfields resulting
in the saving of greenfields. Specifically, you cited the
statistic for every acre of brownfields reused you are saving
4\1/2\ acres of green space. Could you tell me how those
figures were arrived at? Because I think this is an important
aspect for us to focus on, that it's not just the issue of
cleaning up these sites and bringing economic opportunity back
to these sites but it's also the opportunity to conserve, which
is certainly an environmentally conscious way to proceed.
Mr. Dunne. We had a study done by George Washington
University that defined this problem and the successes in terms
of saving these acreages. So we would be happy to supply you
with any of that background.
Mr. Turner. Mr. Stephenson, you had indicated that, in
looking to stakeholders, that you did find a degree of support
for a tax credit for addressing the remediation costs. My bill,
House bill 4480, would provide a tax credit that could help
address those properties where the cost of contamination
exceeds the value of the property, giving them more--a
marketability. Could you tell me, as you pursued your study and
report of the feedback you received, why is it that you believe
that a tax credit was something that is welcomed?
Mr. Stephenson. Well, any incentive like that to offset the
initial cost of investment in a property is welcomed; and the
tax credit certainly falls into that vein.
Mr. Turner. And from EPA's perspective a tax credit is a
vehicle that you believe would also be able to accomplish
subsidizing that economic viability for the properties.
Mr. Dunne. EPA is not in the tax policy business, Mr.
Chairman, so I'll be careful about how I answer that. Maybe you
should have a Treasury Department official up here. But
certainly if it furthers the objectives of the brownfield
program, tax incentives would be a very viable tool to have.
Mr. Turner. Gentlemen, do you have anything else you would
like to add before we conclude our first panel?
Mr. Stephenson. No, we're just encouraged that EPA has
accepted our recommendation as implementing them; and we think
the brownfields program has a lot of promise.
Mr. Turner. Gentlemen, thank you very much.
We will go then to our second panel.
Gentlemen, I appreciate you being here. We have on our
second panel the Honorable Don Plusquellic, president, U.S.
Conference of Mayors; James E. Maurin, chairman, International
Council of Shopping Centers; Jonathan Philips, senior director,
Cherokee Investment Partners; and Douglas Steidl, president,
the American Institute of Architects.
Gentlemen, would you please stand to receive the oath.
[Witnesses sworn.]
Mr. Turner. Let the record show that all the witnesses have
responded in the affirmative.
Since we understand that the mayor has a plane to catch, we
are going to let him give his testimony and answer questions,
and I understand that he will be leaving us. Mayor.
STATEMENTS OF DON PLUSQUELLIC, PRESIDENT, U.S. CONFERENCE OF
MAYORS; JAMES E. MAURIN, CHAIRMAN, INTERNATIONAL COUNCIL OF
SHOPPING CENTERS, BOARD MEMBER, THE REAL ESTATE ROUNDTABLE;
JONATHAN PHILIPS, SENIOR DIRECTOR, CHEROKEE INVESTMENT
PARTNERS, LLC; AND DOUGLAS L. STEIDL, PRESIDENT, THE AMERICAN
INSTITUTE OF ARCHITECTS
STATEMENT OF DON PLUSQUELLIC
Mr. Plusquellic. Thank you, Congressman. I'm very pleased
to be here on behalf of the U.S. Conference of Mayors and the
citizens of my city, Akron, OH.
I want to thank my good friend, Congressman Mike Turner,
who invited me here to speak. Many of us throughout the world
of mayors across the country as well as many of us in Ohio know
of the great job that you did as mayor of Dayton, and I am
proud that you have not forgotten your roots and your
background as you joined this fine group of individuals here as
a Congressman. You remembered the problems that face cities
across this country, and we appreciate very much your support
of the community development block grant program, the
brownfields issue that you have been so engaged in discussing
and attempting to find solutions as well as other urban issues.
I want to acknowledge all of the fellow panelists. In one
way or another they have all helped or assisted the U.S.
Conference of Mayors and the many issues that face us in
particular in brownfields over the past number of years.
I want to give sort of a personal perspective here. Thirty-
two years ago I was elected city councilman in Akron; and at
that time, watching the mayor and his activities, I can tell
you that, for the most part, mayors, pretty much indicative of
mayors across the country, we are sort of cheerleaders with
economic development. The private sector was over here and did
their thing. The public sector was over here. But as we
transitioned in a terrible process that we went through,
unfortunately, with the loss of 35,00 rubber jobs, we on the
public side, the mayors and council members and community
leaders almost on every level have had to be directly engaged
and involved in what we call economic development.
Akron has repositioned itself as a diverse manufacturing,
technology, education and research center; and a couple of
years ago Newsweek magazine picked Akron as one of America's
top 10 hot tech cities.
When I became mayor, I realized early on the importance of
being directly involved in the redevelopment efforts of our
community, and now I spend more than half of my time dealing
directly with businesses, business leaders. I think the
question remains, what is the proper role for local, State and
the Federal Government to play in facilitating the economic
development and specifically brownfields redevelopment?
Mayors and local governments are responsible, I think, in
today's complex and competitive world, this global marketplace
we all live in, to facilitate and be responsible for assisting
businesses to retain and create jobs. We are always actively
recruiting and trying to work to retain jobs as well as
facilitate new expansions. As a matter of fact, the plane I
have to catch is to go overseas where I will be attending at
least two different trade missions or participating in at least
two different trade missions.
But in our cities we find it impossible to get the job done
without the proper tools and resources, and many of those are
not directly related to the public side. Regarding the benefits
of brownfields, for instance, or the redevelopment of
brownfields in our communities, our U.S. Conference of Mayors
last survey shows that 121 cities have successfully redeveloped
close to 1,200 brownfield sites consisting of nearly 11,000
acres of land and the creation of over 117,000 jobs.
While that is very commendable and those successes are
wonderful examples of what local governments have had to do or
forced to do, there's an estimated 500,000 brownfield sites
that could be redeveloped, saving greenfields and providing
opportunities for more job opportunities in our community.
Many cities, I would argue, have done a good job of
developing what might be described as low-hanging fruit or what
we might describe as light tan brownfields, those areas that
are not completely contaminated or with little contamination or
in a very desirable location, making it beneficial for
businesses to take a chance on developing. But this is
certainly not applicable to some cities--Youngstown, OH would
be one--where the difficulties of hemorrhaging of jobs out of
their communities is so overwhelming or the population loss or
the difficulties in bringing back economic development is so
great or in those cases where the brownfields are so
contaminated that we literally have people walking away from
them. Those sites are very difficult to get people to
redevelop, and those tough cases are really what I think your
bill will help to address.
The current market conditions really make it impossible for
a private business person to want to take on that liability
issue in particular. Even if the idea of cleaning up the site
is something that they can take within their budget or within
their timeframe, most developers just aren't anxious to take
the chance on those environmentally contaminated sites; and
without those extra incentives it's impossible to get those
developers back.
The mothballing of sites is probably the greatest problem
that we face, where companies realize that it's so expensive
and the liability so great that they just decide to wall it
off, fence it off, and leave it. And in cities across this
country there's really no motivation without some kind of an
incentive.
As I address the future, I want to say that the Nation's
mayors very much appreciate President Bush's leadership by
signing the brownfields bill into law. The law has resulted in
a boost in our efforts to redevelop some of those sites. This
program needs to continue and needs to be fully funded,
especially the money that is targeted toward local governments
efforts.
Other programs that have been successful include the
Brownfields Showcase Communities program and the EDA program
that targets brownfields as well as HUD's BEDI program.
But the one thing that has been missing is this incentive
that you discussed with the first panel for the private sector
themselves to spur their interest in redeveloping these sites,
and that's why we are extremely pleased and excited about your
bill, Congressman, with the tax incentive. It is very similar
to a program already existing in the Federal Government, the
Historic Tax Credit Program, which has seen considerable
success in Akron in reusing our older commercial and industrial
buildings.
A key component that I want to talk about is the incentive
for the original responsible polluter to participate. Even if
that company only contributes 25 percent of the remediation
costs, they receive liability release for 100 percent of the
approved plan demo and remediation costs. I think this is a
particularly important issue, and I want to say and I have
stated this before to you publicly, that it is one that the
Conference of Mayors supports.
We have always believed in this general rule that the
polluters should pay, and at first blush that always seems to
be the right position to take. We know the result, though, is
that companies mothball sites and walk away; and we need to
have something that motivates the holder of the land to at
least provide an assessment of the property and determine
whether or not we can participate in helping to bring it back.
I want to also say that many of those sites are in the most
economically disadvantaged areas. To me, that means the people
who need the jobs the most are at a disadvantage because they
have sites close to them that could be redeveloped if we had
something that really provided that incentive. So I am very
much excited about that part of your proposal, and we want to
work with you from the Conference of Mayors.
We understand the difficulty in not only the legal
liabilities issues, many of the other issues that both extremes
talk about when they talk about a bill dealing with these
environmental issues, but in a time when we really need to be
focusing on creating jobs, reutilizing resources and, I would
add, preserving our green spaces, that the brownfields
redevelopment is a way to accomplish these goals in our
metropolitan economies that mean so much to the Nation's
economy.
I want to take just a moment before I answer questions to
sincerely thank you for the opportunity to quickly share with
you my perspective as mayor regarding the importance of
brownfields redevelopment and your creative way of trying to
address the issues that you know all too well, coming from an
older, industrialized city, the importance that brownfield
redevelopment can have not only to our general areas of concern
like tax base but truly in redevelopment of neighborhoods and
providing job opportunities where they were needed. So we look
forward to working with you to continue this work to bring back
our communities, our neighborhoods, and I will be happy to
answer any questions that you might have.
[The prepared statement of Mr. Plusquellic follows:]
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Mr. Turner. Mayor, the EPA, when they were addressing us,
talked about acknowledging that this is a federally created
problem. They acknowledged that the current Federal laws and
regulations encourage abandonment, and they acknowledged that
the current programs that provide assistance for assessment or
cleanup are having what they classified as a minuscule impact
on the number of brownfields that are out there.
You talked about tax base and, knowing that cities are not
structured in a tax revenue collection manner to bring in
dollars that are solely for economic development, you are
focusing on fire, police, providing basic services. Since the
Federal dollars there are minimal and the problem is federally
created, what do you do as a mayor when you're going out and
identify a site, you are trying to bring jobs to your
community? You have, as most cities do, an issue of the
availability of land. You have a parcel that has all the
infrastructure that's there. It's an attractive site,
locationwise. There aren't Federal resources available to you.
How do you go about trying to find funds to environmentally
remediate and address these sites for redevelopment?
Mr. Plusquellic. Well, in this difficult time, I would
remind everyone in Washington and Columbus, OH, and all the
State capitals around the country that we're all suffering the
consequences of whatever it is that our country is going
through. It's not just the Federal level and State level. So
local governments are even more impacted by the economic
conditions; and in cities where older industrial properties
have supplied the economic strength of our country, the jobs,
the tax base for our countries but have been left behind in
this migration, in this global competition, it is even more
difficult for those communities to find the local resources,
which is why this is a very difficult issue for many of us.
In some instances, it is so absolutely necessary that we've
gone out--I have personally on behalf of the city--to get
involved with sites because they have such a negative impact on
the surrounding area that we've started a process of trying to
clean up or clear up or at least make the initial assessment of
the property because it has such a devastating effect to the
property around it.
I would suggest the biggest eyesore in Summit County, maybe
in northeast Ohio, was located in the northernmost building of
the former B.F. Goodrich complex. The B.F. Goodrich complex
itself had been sold and was starting to undergo a
revitalization. Meanwhile, there were two buildings left in the
northern end, closest to downtown, closest to our local
newspaper and the folks who looked at it every day out the
window, and it had an impact from everybody coming into town on
that side, the south side of downtown Akron. We started out
spending our own money trying to start to assess, first of all,
what the cleanup cost would be.
We finally received an inquiry from a company that wanted
to move to Akron from outside of the State. So we spent our own
dollars, over $3 million in cleanup costs, and didn't have time
to wait for a Federal program or a State program to kick in. We
had an opportunity to bring in 200 to 300 new jobs, for the
most part, to Akron, so we ended up ourselves finding a way,
struggling with our budget difficulties, to come up with the
local dollars that were needed. And we accepted the liability
because, at that time, it was questionable whether or not we
were going to have the State system in place to get the letter
of no further action and the covenant not to sue. So we found a
way to make it work.
But in many cities that just isn't possible, and in many
instances we don't have companies that can wait for us to go
and do the assessment when we have a real, live businessperson
ready to go on a site, which is another part of this process
that personally I think it would be worthwhile to have a system
where people are involved early on in not only identifying but
doing the assessment so that you know what the costs are and
you know the time period that you are dealing with. That delay
when you do have a businessperson who you finally find who's
willing to take that risk and the unknown of how long it might
take and the costs they might incur or the city it might incur
makes it more difficult to find businesses to locate in those
areas. That's just an added problem, I think, that needs to be
addressed as well.
Mr. Turner. Being a mayor, you have sat across the table
from potential developers that are coming in and you're
discussing with them a site. There has been a change in the
law, obviously, with respect to liability. If someone comes in
and buys a site, they may be able to avoid the liability for
the cleanup of the site.
But one thing that seems to me to be still a disincentive,
because we don't have a vehicle like the tax credits that will
subsidize the cleanup, is that an individual who looks at
redeveloping a site still has to weigh the possibility that
they would lose their capital investment, that the value of the
property, once it is redeveloped, if contamination is
discovered to be more expensive than was thought or further
contamination is found after they have undertaken investment in
the property, that risk which they don't have in a greenfield,
which is separate from the issue of just them being personally
liable for the cleanup, but that their value that they have
invested in the property might be lost or devalued is also a
disincentive. Have you had individuals when you are sitting
across the table trying to encourage them to go into a site
that have raised the issue of that risk?
Mr. Plusquellic. Well, the other added part is getting a
construction loan and then permanent financing for a project.
And something that a developer normally does--I have actually
literally been in the same example that I used. The developer
was an Akron, committed, dedicated person who wanted to do the
right thing, didn't have a lot of experience in redevelopment
in brownfield sites, jumped in and started spending his own
cash in anticipation of getting construction loans and
literally had the bank pull out.
I sat in this meeting and negotiated with the banks to get
the loans available for him that I've never had to do before.
But it was because of one overriding reason, and you just
touched upon it. The potential for the liability was so great
that the banks didn't want to have any part in loaning the
money, either in a short-term construction loan or in permanent
financing; and so we had to help them structure that. The city
of Akron took on all of the liability in the future for any
environmental cleanup that was required beyond the $3 to $4\1/
2\ million that we spent. We have continuing monitoring wells.
We do a number of things to test and provide information to the
State EPA.
So we ended up taking the risk, but absolutely that is a
problem for not only the developer but for anybody thinking
about loaning money, the concern about the long-term liability.
Mr. Turner. Mayor, I know that your time is limited, so I
will end my questions at this point and ask you if there is any
other item that you want to discuss or place on the record?
Mr. Plusquellic. Other than just once again thank you.
Obviously, having people here understand firsthand the
difficulties that we have in redeveloping our communities helps
considerably when you're debating and discussing bills; we are
very hopeful that in this session you will be successful in
getting your colleagues to support this.
I think it is a real step forward that adds considerably to
our ability to deal with these correctly stated, I think, in
some circles, very difficult issues. We are all hung up on
holding somebody accountable and liable for this. But, in many
instances, these folks are long since gone. The folks who might
have dumped something at the Firestone, the B.F. Goodrich, the
Goodyear or the general sites I can tell you in Akron have long
passed. And we have no idea what might be there but helping get
a new business in to take the place of those major employers is
really a great advantage to cities like Akron and Dayton and
Youngstown and Cleveland and places around the country. So we
appreciate your help, your understanding of this issue, and
your continued commitment to work with us. Thank you,
Congressman.
Mr. Turner. Thank you, Mayor.
And we will go on to receive the testimony then of the
remainder of the panel.
Mr. Maurin.
STATEMENT OF JAMES E. MAURIN
Mr. Maurin. Mr. Chairman, thank you for the opportunity to
appear before you today. And while the mayor of Akron is
walking out, I just want to say, as a developer for the last 30
years and having worked with city and county and, in Louisiana
County, parish governments, I was inspired by your comments and
particularly by your knowledge of this whole area and industry.
The mayors are starting to get it, and they are starting to
understand what it takes to be able to develop these types of
properties. So I want to thank you for your comments, Mayor.
My name is James E. Maurin, and I am founder and chairman
of Stirling Properties in Covington, LA, a suburb of New
Orleans. I have been a developer for 30 years in the gulf south
and have redeveloped approximately half a dozen brownfield
sites. I am testifying today on behalf of the International
Council of Shopping Centers and the Real Estate Roundtable.
ICSC is the global trade association of the shopping center
industry. It has more than 50,000 members, and we represent
owners, developers, retailers, lenders and other professionals
active in the industry.
Collectively, the Real Estate Roundtable members hold
portfolios containing over 5 billion--that's with a 'b', 5
billion square feet of developed property valued at over more
than $700 billion.
In recent years, changes in Federal laws have successfully
addressed many of the barriers that inhibited private sector
efforts to clean up and redevelop contaminated sites. As the
threat of excessive environmental liability recedes, the
remaining problem with most well located brownfield sites is a
fairly simple one: Money. Other things being equal, it costs
more to clean up and redevelop a brownfield than it does simply
to buy and develop a greenfield. Properly conceived, brownfield
redevelopments are investments, whether undertaken by the
public or the private sector. And there are few investments of
public dollars that produce such a positive economic and
environmental dividend.
A simple calculation of how much it costs the Federal
Treasury to offer a grant, a loan or a tax incentive is
incomplete without factoring into the equation the future jobs
and tax revenues that will be created during and after a
brownfield cleanup. Several members of this subcommittee must
recognize this fact, because they are co-sponsors of H.R. 280,
the Brownfields Redevelopment Enhancement Act. This bill would
streamline the Federal grantmaking process for States and
tribes, and make brownfield-related environmental cleanup and
economic development activities eligible for community
development block grant assistance. We are reviewing this bill
now, and I feel certain that ICSC and the Roundtable will be
able to formally endorse this legislation in the near future.
Last year, ICSC and the Roundtable endorsed a proposal
originated by Chairman Turner. The Brownfields Revitalization
Act, formally H.R. 4480, would dedicate a limited dollar amount
for tax credits tied to the cost of remediating brownfield
contamination.
Congress is generally reluctant to create new tax credits.
There is a well-founded worry that excessively generous tax
credits would distort a healthy market. But that is not to say
that tax credits cannot be carefully designed and targeted to
address specific problems. As with the low-income housing tax
credit program, the private sector would still provide much of
the necessary funds for cleanup, but the availability of tax
credits could tip the scales in favor of proceeding with a
project rather than passing over an otherwise promising site.
Under Mr. Turner's proposal, which we understand will soon
be reintroduced, the tax credits would only be available under
projects conducted pursuant to a State-approved remediation
plan. The bill helps leverage the capital necessary for
cleanups by making these credits transferrable to third parties
such as banks. The tax credits would be available for up to 50
percent of the remediation costs, including both demolition
costs and the cost of cleaning up petroleum contamination. In
my written statement, I go into more detail as to why these two
aspects are so vitally important.
While the tax credit approach could benefit even large-
scale remediation projects, I suspect that it would prove most
valuable to small and medium scale cleanups where funding
options can be even more limited. We should not underestimate
the contribution that small-scale projects can make to the
economic vitality of a community.
Another bill that we encourage Congress to pass is H.R.
877, introduced by Representative Weller, Representative
Becerra and Representative Johnson of Connecticut. H.R. 877
would do three things to encourage brownfield cleanups. It
would make Internal Revenue Code Section 198 permanent. Section
198 allows the expensing of brownfield cleanup costs, but it is
currently scheduled to sunset at the end of this year. It would
broaden the definition of hazardous substances in Section 198
so it covers petroleum, pesticides, lead paints and asbestos
contaminants. Again, my written statement provides greater
detail on why this is important. It would repeal the provision
in the law requiring the recapture of the Section 198 deduction
when the property is sold. Without this change, there is no
real incentive.
In conclusion, the ICSC and Real Estate Roundtable urge
Congress and this committee to explore tax incentives to induce
the private sector to clean up and redevelop contaminated
sites. We believe that a tax credit approach would stimulate
economic revivals in numerous communities, and we encourage
this committee to seriously consider such an approach.
In addition, we specifically endorse H.R. 877 and the
Brownfield Revitalization Act of 2005, formerly H.R. 4480. If
Congress passes these sound incentive proposals, the results
will be the injection of new capital into rehabilitation
projects. Many small urban-centered businesses will benefit
resulting in substantial job creation and economic
revitalization. Also, the viability of existing sites will
improve and thus ease the pressure to develop greenfields,
allowing for the preservation of more open space.
I thank the chairman and the members of the committee for
this opportunity to appear before you today and look forward to
your questions. Thank you.
[The prepared statement of Mr. Maurin follows:]
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Mr. Turner. Thank you.
Mr. Philips.
STATEMENT OF JONATHAN PHILIPS
Mr. Philips. Mr. Chairman, my name is Jonathan Philips, and
I represent Cherokee Investment Partners, based in Raleigh, NC.
Thank you for the opportunity to testify today.
I would like to cover three basic topics. First, I want to
provide you with an introduction of Cherokee, who we are and
what we do. Second, I want to share with you some of the
lessons learned regarding brownfield revitalization in
communities all across this country. Finally, I want to comment
on two critical pieces of brownfield legislation introduced
during the 108th Congress. Cherokee is the world's largest
brownfield investor. We currently manage over $1 billion of
assets and have acquired over 330 sites across 35 States,
Canada and Europe since inception. Our investors, consisting of
public pension funds and other institutional investors, have
entrusted us to deploy over $1\1/2\ billion of equity and debt
capital toward brownfield revitalization. We will spend
hundreds of millions to clean up pollution at the sites in our
current portfolio unlocking a potential of over $4 billion of
further redevelopment. Our projects range in size from cleanup
and redevelopment of a portfolio of 68 gas station pads, with
extensive petroleum hydrocarbon contamination, to redevelopment
of the Meadowlands in New Jersey, a 1,300 acre site with eight
former landfills with remediation expenses of $230 million and
a total project cost of $1 billion.
In fairness, though, we rarely undertake a project alone.
One of the key factors of Cherokee's success has been our
willingness to enter into public-private partnerships to
achieve larger community goals. An example is the announcement
of the national joint initiative between the U.S. Conference of
Mayors and Cherokee to help mayors identify contaminated
properties with the greatest potential for redevelopment and
match them with capital, risk management experience and
revitalization expertise.
In partnership with the U.S. EPA and local governments, we
have made strides toward cleaning up America's contaminated
lands. However, significant barriers prevent the revitalization
of the vast majority of this Nation's brownfields.
Historically, owners of contaminated real estate often have
focused resources on avoiding liability rather than site
cleanup. As the true cost of mothballed sites have become
known, the public and private sectors have worked together to
create new mechanisms to revitalize brownfields. These
stakeholders have effectuated important changes in court
rulings, environmental laws, regulations and enforcement
action, urbanization, insurance, and availability of financing
vehicles to address the cleanup and reuse of these properties.
Just as our Nation required the public and private sectors,
working together, to produce the important reforms of the past
several years, a similar partnership will continue to be
important to ensure an acceleration of the rate of cleanups
across the country. The economic drivers of brownfield
redevelopment are similar to those found in typical greenfield
development, but environmental contamination introduces several
costs, timing and liability hurdles to success. Adding to the
complexity and costs associated with cleaning up existing
contamination, brownfield developers have difficulty using
financial leverage, as has been addressed already today in this
panel, because brownfield appraisal is generally low and banks
require lower loan-to-value ratios to protect themselves from
the risk of having to own and manage stigmatized properties
with questionable value. For this reason, the availability of
public debt financing can be critical to making projects
numbers work. High equity requirements combined with increased
expenses due to remediation costs can lead to low-return
investment. In 1998, the Urban Land Institute reported that the
average rate of return for brownfields was under 3 percent,
well below that of greenfield projects.
When assessing how brownfield investment compares with
other real estate investment decisions, it is clear that
brownfields fall within the upper range of the risk return
spectrum. One of the lessons of this data is that, if we wish
to foster a more active private sector participation in the
cleanup of our Nation's polluted land, we have two levers to
adjust. One can either lower the risk associated with tackling
a brownfield project or increase the potential project return.
Absent one or both of these factors, most traditional
developers will follow the easy road: content to make sizable
returns converting the next farmstead to suburban sprawl on
that proverbial edge of the town.
Given what we know about the causes of the problem, how do
we move beyond our current situation where some sites are being
redeveloped while literally hundreds of thousands of others
continue to languish? A friend once told me that, for every
complex difficult problem, there is usually a simple solution,
and it is usually wrong. I think that is true for the
brownfield issue. If there were one simple solution, we
probably would have found it and enacted it long ago. It is
clear to me that the brownfield problem is a complex continuum
and merits some categorization. Some sites are already
economically above water; that is to say that, without
additional incentives, those sites will likely be revitalized.
Other sites are marginally under water, and with some
coordinated efforts, creativity and a modest economic push,
these sites would likely be redeveloped within a reasonable
period of time. And then there are substantial underwater sites
typically located in less attractive markets involving
unusually large risks and/or requiring more substantial
economic partnership.
When identifying a national prioritization of these
categories, policymakers have certainly differed. Regardless of
one's views, we would be doing our country a disservice by not
understanding this brownfield market segmentation and crafting
policies that target them appropriately. Given the complexity
of this problem, the solution must also be multifaceted with a
mix of Federal, State and local incentives focused on both
reducing risk and increasing project returns. Fortunately,
America has built a solid foundation over the past few years to
attack this problem. The EPA grants program has been an asset
to communities across this Nation. In addition, programs such
as Section 198 enacted in 1997 and the provisions of the
brownfield law enacted in 2002 provide creative tools to crack
the brownfield problem. But as good as these tools are, we know
that we need to do more if we are to solve this problem in our
lifetimes. Today, the Federal Government's challenge should be
to build on this foundation and to look for bold, innovative
ways to reduce barriers and create market-based incentives to
attract significant volumes of private capital to help
remediate and redevelop our Nation's brownfields.
In the last year, Congress has considered two critical
pieces of tax legislation that do just that. These bills are
H.R. 3527, sponsored by Congresswoman Nancy Johnson and co-
sponsored by Chairman Turner, and H.R. 4480, sponsored, too, by
Chairman Turner. The first bill, H.R. 3527, was signed into law
last year as part of the Jobs Act. This bill amends the Tax
Code to encourage investment in contaminated lands by allowing
tax exempt entities to invest in the revitalization of highly
contaminated sites without the risk of incurring unrelated
business income tax penalties. These penalties had driven our
largest real estate investors away from brownfields. This law
eliminates the unintended penalties and makes brownfield
investment more attractive for the managers of an estimated 60
percent of the institutional capital in this country, tax
exempt investors such as pension funds, endowments and
foundations.
The second bill, H.R. 4480, establishes a transferrable tax
credit that would create a critical early financing solution
and allow pioneering developers to attract more capital with
the equity created by that credit and revitalize otherwise
economically marginal projects. Such a transferrable credit
will serve to further unlock the large quantity of
environmentally impaired sites around the Nation and will
dramatically accelerate the rate at which brownfield sites are
revitalized in America. Taken together, these two pieces of tax
legislation have the potential to prompt cleanup of more
brownfield sites in the next 5 years than in the last 50 years
combined.
Allow me to conclude with a startling statistic: The U.S.
Chamber of Commerce estimates that, at the current rate of
remediation, it will take 10,000 years to clean up our Nation's
brownfields. Clearly, we can and must do better. I sit before
you today as testament to the fact that with perseverance,
patience, integrity and prudent financial and risk management,
the private sector can play a substantial role in cleaning up
the pollution of this country's industrial past. This problem
is too big for any one organization, government or market
sector to take on single handedly, that is, if we want to have
a chance at solving this problem in our lifetimes. Congress
must be bold, and we commend Chairman Turner's leadership. The
transferrable tax credit provisions in Chairman Turner's
legislation will dramatically accelerate the rate and
geographic scope of brownfield revitalization in America.
Nearly every Member of Congress struggles with the problem of
brownfields within their own district. I know many of you--many
of your colleagues also do as well. We look forward to working
with Chairman Turner and the members of this subcommittee to
continue to explore new ways to accelerate brownfield cleanups.
Please do not hesitate to call upon us for these legislative
endeavors or for assistance with specific sites that come to
your attention.
Mr. Chairman, members of the committee, it has been an
honor and a privilege to testify here today. I am happy to
answer any questions. Thank you.
[The prepared statement of Mr. Philips follows:]
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Mr. Turner. Thank you, Mr. Philips.
Mr. Steidl.
STATEMENT OF DOUGLAS L. STEIDL
Mr. Steidl. Mr. Chairman, good morning. I'm Doug Steidl,
president of the American Institute of Architects. On behalf of
our 75,000 members nationwide, I wish to congratulate you and
this subcommittee's insights into our most strategic issue for
our communities, and to thank you for the opportunity to appear
today as you begin your deliberation on the state of designated
brownfield sites across America.
Architects have some unique talents. Our most formidable
skill is our ability to capture abstract goals and turn them
into tangible form. We also integrate multi-disciplinary teams
to work efficiently for a common goal, and as a result of that,
it usually is that we are the first professional brought on
board to address a project site. Bricks and mortar are the
physical result of our work, but architects do more than create
buildings; we believe we create communities. Through our
understanding of people and how they interact with their
physical environment, we add vision and value to our citizens'
lives. In addition, architects are leaders in their communities
and help drive the design construction sector of our national
economy. That sector accounts for 8 percent of our gross
domestic product. For these reasons, I believe, we are uniquely
qualified to testify on the issue of brownfields. The American
Institute of Architects is intensely concerned about making the
Nation's communities healthy, safe, livable, and sustainable
places. As a result, we have long had an interest in finding
imaginative and constructive uses for urban land that now lies
fallow because of the residual contamination that is part of
its industrial heritage.
In 2001, the AIA took a strong position favoring H.R. 2869,
Congressman Paul Gillmor's brownfields bill, which became the
Small Business Liability Relief and Brownfields Revitalization
Act. That statute established the U.S. Environmental Protection
Agency's current brownfields program and has led the way in
changing the Nation's perception about abandoned real estate.
The AIA is heartened by the progress that has been made under
that program but believes that more rapid progress is both
possible and necessary.
I come here today commending you for holding this hearing.
I also come with a message: The time is now for Congress to
enact new brownfields legislation. The AIA has a position. Our
interest in brownfields redevelopment springs from our
commitment to fostering vital, healthy communities. The AIA is
concerned that abandoned industrial sites in every State
threaten local citizens with exposure to toxins. They serve as
dead zones in the midst of neighborhoods drastically in need of
revitalization, and they isolate and divide people and cities.
The contamination is thus responsible for stymieing
redevelopment and limiting economic investment and job
creation. It often leads to sprawl and uncontrolled growth as
land is sought elsewhere in greenfields.
The U.S. EPA's use of Federal dollars to remedy such sites
has had notable results. Unfortunately, as the Government
Accountability Office's brownfields report of last December
points out, there are far more brownfield sites requiring
remediation than the U.S. EPA program could ever hope to
address in our lifetimes. As a result, Federal legislation is
needed to expedite site cleanup and foster economic
redevelopment of these properties. At a time when our Nation is
searching for solutions to sprawl and pollution, these sites
are the new frontier, bursting with community potential and
economic hope. I might add that, in general, and in my personal
practice, the responsible party has not been the party to
mitigate brownfields; it's either the local government and
institutional clients, such as a university, and, in some very
rare circumstances with minor mitigation requirements, the new
landowner. These properties are often in central urban
locations where costly utilities are already in place. This
represents a real opportunity for sustainable development that
helps the economy and the environment.
In addition, brownfield cleanup offers an opportunity to
improve human health. Though I am not a health expert, I
believe that, without incentives for cleanup and redevelopment,
contaminated properties will continue to pose public health
hazards long into the future. According to the AIA, brownfield
reuse will increase the local tax base, create jobs, revitalize
neighborhoods, link vital city services and extend
environmental protection for all citizens.
The GAO reports, between fiscal years 1995 and 2004, the
U.S. EPA awarded over 1,200 brownfield grants, totaling about
$400 million. Unfortunately, an estimated 450,000 to as many as
1 millionsites remain. More must be done to promote
revitalization, and the most creative way to address this need
is to harness the power of private capital.
There are success stories. Many American cities are
undergoing a renaissance. Young professionals and empty nesters
have begun to migrate to cities and continue to make them the
location of first choice. Brownfield redevelopment capitalizes
on this trend and helps the urban revitalization momentum
going. I have included three detailed success stories, Glen
Cove, NY; Charlotte, NC; and Pittsburgh, PA, for this
subcommittee's consideration. These are but three of many. They
appear in the copy of my remarks that was submitted for the
record.
In conclusion, the American Institute of Architects
believes that Federal tax credits for remediation expenditures
at brownfield sites will provide the needed incentive to induce
private parties to undertake the cleanup and rebuilding of
these sites. The AIA supported H.R. 4480, the chairman's
legislative effort in the 108th Congress, which would have
allowed taxpayers a credit against income tax for expenditures
to remediate contaminated sites. The AIA is pleased to see that
he has improved and reintroduced that legislation again in the
109th Congress. We look forward to working with you and your
growing contingent of co-sponsors. We believe that it is
necessary that these incentives be enacted during this session
of Congress. Thank you.
[The prepared statement of Mr. Steidl follows:]
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Mr. Turner. Gentlemen, I thank you for your testimony and
your insight that you bring, but I also thank you for your
commitment to this issue. Because one of the things that is
very clear in your testimony is a love of your communities and
a love of the projects you have undertaken that has brought you
to participate in brownfield redevelopment, because, as you all
testified, certainly greenfield redevelopment is easier and has
a greater potential many times for return. Your dedicating
yourself to brownfield redevelopment, we all know, is both a
philanthropic as well as a business dedication.
And I wanted to talk a minute about the issue of the cost.
We focus many times on the liability issue, but in undertaking
brownfield redevelopment, each of you have to have a level of
expertise that you would not find in the average developer or
someone who might want to undertake a redevelopment project
that includes the bureaucratic processes of environmental
remediation.
Mr. Philips, you talked about the private/public
partnerships many times that have to be brought together. Many
times there are grant programs or other types of financial
assistance to address some of the costs which themselves are
complex. The bureaucratic processes in getting approvals for
the undertaking of the environmental remediation, I believe, is
a very complex process. Could you talk about the cost, your
experiences there and addressing the bureaucratic processes and
working with EPA, State EPAs, some of the things that you see
that are working there, some of the things that you see that
need to be improved? Start with Mr. Maurin.
Mr. Maurin. Yes. Again, my personal experience is limited
to probably a half a dozen sites, and these sites have been in
the States of Louisiana and Mississippi. And where I've heard,
quite honestly, that there have been in the past issues with
regard to the EPA we have found in both States that, working
with their local DER, DEQ, both States have enacted brownfields
legislation. And for the most part, quite honestly, we have
been able to be very successful in working with the States
directly themselves and have had little or no interference or
problems or issues with the EPA.
Now, my experience is really the last 4 or 5 years, and
then only in two limited States. But I must say that the States
do get it. In the case of Mississippi, we had a very large
project in which they did not have a brownfield law which, as a
result of our project, we induced the State to actually pass a
brownfield law about 4 or 5 years ago. So I've had very good
experiences working with the States and have had little or no
problems on the EPA side.
Mr. Turner. Mr. Philips, again, also addressing the issue
of the increased costs in going through those processes as you
put your projects together.
Mr. Philips. Sure. First, though, on the EPA question. We
found that, when we come into a situation, we're generally
proposing to do something that no one has ever proposed to do
before. We walk into a regulator's office and say we want to
aggressively clean up this site, and we want to do it now and
we want to use our own money to do it. And it's a very
different reception than I imagine others might receive. And we
applaud that the EPA recently maybe not so recently has taken a
fairly targeted and focused approach toward reuse of sites
under EPA jurisdiction. And that has also been a great program
and great to work with them. But the time that it takes to
engage in the regulatory process and to engage in the
permitting onsite is a critical, critical issue, and I'm glad
you asked about it, Congressman. Time is the biggest enemy of a
viable return on investment for us, and we are putting money,
our investors' capital, in from day one for cleanup. We want to
make sure that permitting process, that regulatory process can
occur quickly, and that usually happens through the education
of the States and local jurisdictions. And I will just give you
a very short case study on this.
A few years ago, we bought a portfolio of sites. Some were
in San Francisco, another was in Georgia. And we engaged in the
redevelopment process concurrently for both sites. By the time
we had cleaned up and redeveloped and permitted the properties
in California, the Georgia property had not yet begun to be
permitted because we were still engaging in the regulatory
process. That is not necessarily a criticism of Georgia, but it
may be just an issue of resource allocation or a familiarity
with these sorts of projects, but it goes to show you how much
of a difference States can make, at least on this level, in the
regulatory and permitting process that you have raised.
Mr. Turner. Mr. Steidl.
Mr. Steidl. Approvals are generally not a problem if you
have all your data together. The problem we see with many of
our clients, especially in the private sector, is that they
want to move yesterday; and in moving yesterday, they don't
have a timeframe in order to allow for investigation and
approvals. So the risk factor goes up, but it's primarily a
time issue. They make the decision before they get to totally
evaluating the dollars. The decision's made. We can't do it
time wise, let's go to the greenfield.
Where we have had projects that moved forward in a
brownfield, they've primarily either been institutional, such
as a university. We have a project with a university right now
that they have a 5-year plan, so they started investigating the
initial cost, the contamination assessment and everything 5
years ago. When they got to the project, they had to increase
their budget by $800,000 on an $11 million project, and that is
a 2-acre site, and it's an urban site that is not--it's
basically minor contamination. So, 7 percent for minor
contamination.
The other projects where we've had private developers work
have been a negotiated process with the municipal government.
And what usually happens is the municipal government will
guarantee so many dollars in order to abate whatever the
materials are, and then the developer does anything that's new
construction. That is a real burden on the local citizen, the
government, the taxpayer. The public/private cooperation has to
work in a different way, and I think your bill, if the statutes
are set up on how it can be done and it can be simplified in
the approval process, will be a real plus.
Mr. Turner. Having been a mayor, and then, obviously, any
mayor is active in economic development in their community.
When I look at abandoned properties, I see them differently
sometimes than many others. If I drive by an abandoned house, I
don't think, someone wants to live there anymore--no one wants
to live there anymore. I think, gee, the title must be pretty
messed up. I wonder why no one can acquire that house and
redevelop and refurbish it.
Similarly with brownfields. When I drive by an abandoned
factory site, I think of the environmental contamination, the
impediments, the risk, the risk of capital, the liability
risks. But there are many people who think differently. When
they drive by an abandoned factory, they think that the
usefulness of that property has passed, that the location is no
longer desirable, that economic development as a wave has moved
on; and then, if the property is located in the central city,
that it is no longer desirable for someone to redevelop and
bring back to productive use.
You all obviously are active in environmental remediation
projects for redevelopment. What is your perspective? Do you
believe that if we did provide an incentive, that these
properties would become attractive? That it's not just that
there is more than just the environmental contamination that's
keeping them from being redeveloped? Or if we address the issue
of subsidizing that remediation, will we in fact see an engine
for economic development in these areas?
Mr. Maurin.
Mr. Maurin. Well, Mr. Philips made a comment in his
testimony kind of categorizing brownfield sites into three
categories. And those that clearly need no incentive
whatsoever, the benefit and the cost are there. And of course,
most of those have been done already. Most of those have
happened. The second category needs slight incentives to make
them profitable. And then there is that third category that we
all have to ultimately focus on if we are going to solve the
problems of the cities, and those are the ones that are just
really under water, is the term that was used. And I think
that, as a private developer, when we look at a redevelopment
project, we will essentially put it into one of those three
categories.
I think that the best thing that we see in the cities,
however, particularly with the old factories or whatever, is
the adaptive reuse of those properties; i.e., a developer
stepping forward and saying that, in the eyes of the people of
Akron, for example, that has been a factory for 80 years or 90
years. But a developer walks in, looks at the city, looks at
the revitalization, and he sees a residential development. He
sees a condominium project. He sees something entirely
different. And I think that's where the marriage between the
private development community together with the local
government, I think that's really where the ideas are coming
from. There's kind of an entrepreneurism in this whole area
right now in the area of adaptive reuse. And I think that in
some of the tougher ones that we have to work with, that's
where we have to be thinking.
Mr. Turner. Mr. Philips.
Mr. Philips. Yes. I believe in certain cases is more than
merely environmental contamination cost. To use a case study,
in our experience, we are leading the largest investment in the
history of the city of Camden, NJ, a city where, like many
other cities, there are a number of brownfield sites. But there
are also other problems. There are economic development
problems, there is blight, and there is perceived stigma, and
there are questions of assemblage: How does one assemble enough
property in one mass to really make a critical difference to
the residents of a community, and to encourage a true
revitalization of that area? Those are the things that we
struggle with, and we look to public-private partnership,
again, to try to help solve.
Mr. Turner. Mr. Steidl.
Mr. Steidl. I think the three tiers of classification is a
good example, and that the middle tier will be addressed by
this issue. Geographic issues and economic issues of a region
also play in. Mayor Plusquellic mentioned Youngstown, OH. I
think Youngstown, OH, will have a tough time just because of
the overall demand placed by the city. But there is a tendency
by singles, young professionals and retirees to enjoy the city
again, to go back to a pedestrian lifestyle and to look at the
cultural levels that happen in a city. And I can tell you that
two examples, one in Akron, OH, the city is essentially out of
downtown land. It's framed in by some highways hills, and
ravines; I know that Mayor Plusquellic has proposed tearing out
a highway in order to provide land in the downtown area. And I
think there are many cities where these types of sites are
available adjacent to a downtown area that would really
stimulate the economy.
I just visited Richmond, VA, and their adaptive reuse of
warehouse buildings and storage facilities into housing is at
an end or very near to an end because they are out of the
buildings. They've run out of adaptive reuse positions. And I
think that these types of incentives will create in that second
tier a great deal of enthusiasm. People want to be in cities
and see that as a viable alternative to their lifestyle now.
Mr. Turner. In the brownfields tax credit bill which I
proposed, 4480, there is a provision that allows those who were
responsible for the contamination to step forward and
participate in the cost of environmental remediation in
exchange for a release for the remainder of the cost for the
redevelopment plan that the tax credit is applied to. There has
been some concern about providing that release. I view it as an
incentive to get them to the table. They have a significant
amount of knowledge that's important for putting together the
assessment and the redevelopment plan. Also, their contribution
to the overall costs are important.
Mr. Steidl, I believe you had said that many times, that
the past contaminator is not involved in the redevelopment. I
would like, if you would, from your experience, to speak about
that issue; whether or not, when you have undertaken the
redevelopment, if the past contaminator has been to the table,
has worked with you, if there is any incentives that you have
seen that brings them to the table. If you believe that the
incentive of a release that's provided in the bill would be
helpful in bringing them to the table and bringing their
capital to the table. Could you speak to that issue, Mr.
Maurin?
Mr. Maurin. You know, it's a very good question, and I'm
just personally thinking here, and I'm not sure. I will say
that the original superfund law passed well over 20 years ago,
quite frankly, I think in hindsight we look--all of us look at
it and say on one hand it got the attention. It really got our
attention. It got everyone's attention, particularly if you
were in the chain of title on a contaminated property. But in
many ways, it tried to deal with the issue of contaminated
properties with one cut, one way, only one way. And I think
that what has happened in subsequent legislation that's
occurred is being able to look at some of the things that
didn't work in superfund and basically getting some properties
really out of that category and moving it into another
category, the brownfield category. And I think that's been a
tremendous help. I think that the incentives certainly very
well may help some of these mothballed sites, as the mayor
talked about, that the owners have simply mothballed them, and
they continue to still be a blight on the cities of America. So
I think the incentives will help. I think that we have to look
back upon the last 20-plus years of that rule, literally, that
the polluter pay rule and what success we've had, what limited
success we've had on it and possibly look at incentives to get
those folks that were involved with that to the table. So I
think this is a move in the right direction.
Mr. Turner. Mr. Philips.
Mr. Philips. We regularly deal with the question of how to,
so to speak, pry open the vault, how to see what's behind the
doors of a potential seller. How do we persuade a seller to
allow testing when that seller has never assessed their
property, and has never done so out of fear, frankly, of being
put on notice legally that they would be liable then for
cleanup and potentially other penalties?
In an ideal world, there ought to be a way to conduct an
assessment even if it's by a third party that is not so
punitive to the owner of the property who may have had no
responsibility other than through corporate secession, to
encourage them to allow a third party to assess their property
and not trigger some of the penalties and enforcement.
I do on the other hand understand the concern that some
have that they don't want to completely eviscerate the
disincentive for future bad actors to perform--to allow
contamination to occur on their sites. And so that seems to be
the tension.
But I think we need to be progressive thinking and realize
that right now, if we want to clean up these sites, we have to
look for new solutions. And, Mr. Chairman, you have offered a
very intriguing solution that we have been working with you to
support and help, and we applaud your efforts in figuring out
ways to bring PRPs to the table. And one of the comments that I
didn't include in my oral testimony, but I think it's really
important for the private sector to be more involved on the
Federal level. The EPA has a multi-agency brownfields program.
There ought to be private sector individuals or entities
involved in that, talking about the latest brownfield evolving
changes in climate, and I think that will help get the PRPs
more comfortable. And with some innovative solutions like the
ones you have proposed, we will be able to see some of these
sites unlocked for future reuse or redevelopment.
Mr. Turner. Mr. Steidl.
Mr. Steidl. This is obviously opinion and not based on
fact. I have one fact, and that fact is that I've never been
involved in a project that looked at a brownfield where the
principally responsible parties were involved. And so I think
that your proposal is a creative way of testing the waters at
this point as to whether that motivation will bring principally
responsible parties back into the formula, perhaps with
information on the site. But that limitation of liability or
elimination of risk is a creative solution that I believe
should be explored.
Mr. Turner. One of the things that I'm repeatedly asked
when we talk about the number of brownfields that are out
there, if there is a rule of thumb on evaluating the costs for
addressing remediation of these sites. Each of you have
experience in this. I wonder if you have a rule of thumb that
you look to on an acreage basis or a project basis that can
give people an understanding of a way to work toward an
estimate of the cost of addressing these sites. Mr. Maurin.
Mr. Maurin. We really don't. And what we find as we
evaluate these sites--and much of our development of these
types of sites have been tenant driven. We have had a
developer, an interested user that wants to be there, and it
just happens to be a contaminated site. And what we as
developers do, quite honestly, is evaluate the site, look at
the cost that it's going to take to get that site to kind of
back to zero to get the contamination cleaned up, and we look
at our user, we look at--and then we also meet with the local
authority, with the mayor and look at them. And, quite
honestly, we have been involved with some sites that were, in
terms of the value of the site were very expensive, but the
city was willing to participate in some form or fashion, in
some sort of grant or some sort of inducement. So, on our own,
we would have passed that site. In other cases, between we as
the developer and our user, we were able to fully pick up the
cost of the remediation of that site and move on and redevelop
it. So, quite honestly, there is no real simple formula, I
don't believe, for coming up with what makes one feasible and
another not feasible.
Mr. Turner. Mr. Philips.
Mr. Philips. Mr. Chairman, I would echo that sentiment.
We've looked into quantitative indicators, and they all seem
fairly imperfect. The per-acre measure doesn't reconcile the
rural situation with the urban situation or the coastal
situation. Likewise, on a per-square-foot basis, it's difficult
to quantify with a rule of thumb what the likely cost of the
cleanup might be. It's so particular to each site and also to
the eventual reuse. Is the site going to be reused? Is it going
to be an industrial facility again that needs to be cleaned up
to industrial standards? Or is it going to be a residential
facility? That's going to greatly impact what kind of costs we
are going to assess or calculate as part of the formula for
making these decisions. So each site is so unique.
If I had to guess--this is my own personal opinion, a
number like 25 percent to 40 percent may not be too far off the
mark. I would be willing, if the committee were interested, to
research our own internal data and report back the findings.
Mr. Turner. That would be excellent. I would appreciate it.
Mr. Philips. Sure.
Mr. Turner. Mr. Steidl.
Mr. Steidl. I have no figures. I don't think there's a
formula. We've never been able to find one. I mean, there are
things for some individual specifics, but each site's so
unique. I concur with what's been said previously.
Mr. Turner. One final question. When I served as mayor I
had the opportunity to travel with the American Institute of
Architects as part of the U.S. Conference of Mayors to look at
brownfield sites in Europe and what they were doing there to
address redevelopment and cleanup. So I'm certainly aware from
that, that what other countries are doing in addressing this
both in the manner of cleanup and in liability provisions may
be different. I wondered if any of you would like to speak on
the issue of what other countries may be doing so we can also
look at that as opportunities for us. Mr. Steidl.
Mr. Steidl. Well, that tour was made I believe in 2001, and
there were some fantastic examples of what can be done that
came out of it. I personally do not have that data, but we can
go back as the American Institute of Architects and collect
some of those examples and get them to you. Europe has a
different approach or atmosphere that allows some of those
items to be executed as opposed to what might happen in this
country. But we will be glad to get back to you.
Mr. Turner. Excellent.
Mr. Philips. We at Cherokee buy sites in other countries
and have some desire to expand our program, started in the
United States, to other areas of the globe. And our experience
has been mostly in Europe, and it has been telling. In some
European countries, the national government has actually
approached us to assist with a particular site. That was
something that surprised us, frankly, and it was a breath of
fresh air. Clearly, brownfields have plagued Europe as much or
more than our own Nation, and the leadership there has
recognized the problem. But beyond a recognition, European
countries have taken some bold steps. Our London office has
marveled at the legislation that was passed in the United
Kingdom which required that 60 percent of all new development--
I believe this is correct, 60 percent of all new development
shall occur on brownfield sites. Imagine what that mandate has
done to educate the traditional development community about
brownfields.
In places like the African continent, cleanup may encounter
more hurdles. Our pro bono projects in Ethiopia, for example,
encountered a legal system that did not adequately support the
core concept of property rights, individual property rights.
And this makes it difficult to make bets on how and when the
future value of what you're going to clean up and revitalize is
going to pay back, or to know the costs associated with the
cleanup and the other project costs.
So I think it varies drastically depending where on the
globe one looks. But we certainly have plenty to learn from
other countries, although I believe our country may be leading
the pack in many respects.
Mr. Turner. Excellent point. We want to ask if anyone has
anything else that they would like to add?
Mr. Maurin. No. Not really. Again, I've had no personal
experience on that. I would only say that, just with my travels
with the International Council of Shopping Centers this year,
where we do have some 90 countries that are members, in my
travels around the world, I have seen a wide variety on the
issues of redevelopment and cleanup, particularly inner city.
When you go from China all the way to Western Europe, and even
within Western Europe you see a wide variety of rules and
levels of concern on this. So I agree with the comment made
here that I think the United States is probably kind of the
leader of the pack right now with regard to, on a Federal
level, being able to be as involved and as focused on the
cleanup of our environmentally contaminated sites. I've found
no other examples that might be ones that we could follow.
Mr. Turner. Excellent. Well, are there any other additional
comments that any of you would like to put on the record before
we conclude?
Great. Well, before we adjourn, I would like to thank each
of you for participating, and both of our panels, for their
participation today. I appreciate your willingness to share
your knowledge and experiences and thoughts with us today. I
also would like to thank the participation of the staff and the
members of the committee for their support for us undertaking
this hearing.
Clearly, there are numerous remediation redevelopment
success stories, thanks to EPA's brownfields program, and I
commend the EPA for their accomplishments thus far. With
450,000 to 1 million brownsites lying idle across the Nation,
we must recognize that there remains room for improvement. I am
encouraged by the EPA's continued work in the area of
performance measures development. We cannot effectively evolve
this program unless we know where improvements may be
necessary.
One area we already know needs improvement is aid in the
post-assessment and cleanup phase. That's why we need to
address the redevelopment phase. According to landowners and
developers, the two largest impediments to redevelopment of
brownfields are liability and the high cost of redevelopment.
The Brownfields Act addressed liability by providing some
relief from the superfund law. We must now address the
remaining gap. Without reasonable financial incentives, we may
be looking at a problem that is too big to address through
regulation and grant programs alone. As we have heard from both
GAO and the representative stakeholders on our panel, a tax
credit for remediation costs would go a long way toward
encouraging more aggressive redevelopment of these blighted
properties. Redevelopment brings new economic vitality to areas
that badly need jobs, new or improved infrastructure, and the
economic activity of new shopping services and living choices.
As I mentioned at the beginning of today's hearing, in the very
near future, I will be introducing the legislation directly on
point here. At the same time, the subcommittee will continue
its oversight of the many issues discussed before us today. In
early May, I plan on holding hearings in Ohio on the subject of
brownfields. I believe the perspective from stakeholders
outside the Beltway will give the subcommittee a better
understanding of this issue. It is my hope that we will hear
from those who are faced with the issue on a day-to-day basis
at those hearings.
Again, I want to express my thanks for the witnesses for
their time today. In the event there may be additional
questions that we don't have time for, I appreciate your
willingness to answer additional questions, and the record will
remain open for 2 weeks for submitted questions and answers by
other members of the subcommittee. Thank you.
[Whereupon, at 12:08 p.m., the subcommittee was adjourned.]
[The prepared statements of Hon. Charles W. Dent and Hon.
Paul E. Kanjorski follow:]
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