[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
BROWNFIELDS AND THE 50 STATES: ARE STATE INCENTIVE PROGRAMS CAPABLE OF 
                 SOLVING AMERICA'S BROWNFIELDS PROBLEM?

=======================================================================

                                HEARING

                               before the

                       SUBCOMMITTEE ON FEDERALISM
                             AND THE CENSUS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 13, 2005

                               __________

                           Serial No. 109-113

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida           C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
KENNY MARCHANT, Texas                ELEANOR HOLMES NORTON, District of 
LYNN A. WESTMORELAND, Georgia            Columbia
PATRICK T. McHENRY, North Carolina               ------
CHARLES W. DENT, Pennsylvania        BERNARD SANDERS, Vermont 
VIRGINIA FOXX, North Carolina            (Independent)
------ ------

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

               Subcommittee on Federalism and the Census

                   MICHAEL R. TURNER, Ohio, Chairman
CHARLES W. DENT, Pennsylvania        WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       PAUL E. KANJORSKI, Pennsylvania
VIRGINIA FOXX, North Carolina        CAROLYN B. MALONEY, New York
------ ------

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     John Cuaderes, Staff Director
                       Shannon Weinberg, Counsel
                         Juliana French, Clerk
            Adam Bordes, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 13, 2005...............................     1
Statement of:
    Bartsch, Charles, senior policy analyst, Northeast-Midwest 
      Institute; Kathleen McGinty, secretary, Pennsylvania 
      Department of Environmental Protection; John Magill, 
      director, Office of Urban Development, Ohio Department of 
      Development; Douglas P. Scott, director, Illinois 
      Environmental Protection Agency; and Andrew Hogarth, chief, 
      Remediation and Redevelopment Division, Michigan Department 
      of Environmental Quality...................................     7
        Bartsch, Charles.........................................     7
        Hogarth, Andrew..........................................    60
        Magill, John.............................................    22
        McGinty, Kathleen........................................    16
        Scott, Douglas P.........................................    40
    Colangelo, Robert, executive director, National Brownfield 
      Association; Jonathan Philips, senior director, Cherokee 
      Investment Partners, LLC; Charles Houder, director of 
      acquisitions, Preferred Real Estate Investments, Inc.; 
      Kevin Matthews, AIG Environmental, director of Association 
      and Environmental Relations; and David Cartmell, president, 
      Kentucky League of Cities..................................    85
        Cartmell, David..........................................   122
        Colangelo, Robert........................................    85
        Houder, Charles..........................................   125
        Matthews, Kevin..........................................   115
        Philips, Jonathan........................................    95
Letters, statements, etc., submitted for the record by:
    Bartsch, Charles, senior policy analyst, Northeast-Midwest 
      Institute, prepared statement of...........................    10
    Cartmell, David, president, Kentucky League of Cities, 
      prepared statement of......................................   123
    Chester, Steven E., director, Michigan Department of 
      Environmental Quality, prepared statement of...............    62
    Colangelo, Robert, executive director, National Brownfield 
      Association, prepared statement of.........................    88
    Houder, Charles, director of acquisitions, Preferred Real 
      Estate Investments, Inc., prepared statement of............   128
    Magill, John, director, Office of Urban Development, Ohio 
      Department of Development, prepared statement of...........    24
    Matthews, Kevin, AIG Environmental, director of Association 
      and Environmental Relations, prepared statement of.........   117
    McGinty, Kathleen, secretary, Pennsylvania Department of 
      Environmental Protection, prepared statement of............    18
    Philips, Jonathan, senior director, Cherokee Investment 
      Partners, LLC, prepared statement of.......................    98
    Scott, Douglas P., director, Illinois Environmental 
      Protection Agency, prepared statement of...................    42
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio:
        Prepared statement of....................................     4
        Prepared statement of the American Society of Civil 
          Engineers..............................................   172


BROWNFIELDS AND THE 50 STATES: ARE STATE INCENTIVE PROGRAMS CAPABLE OF 
                 SOLVING AMERICA'S BROWNFIELDS PROBLEM?

                              ----------                              


                      TUESDAY, SEPTEMBER 13, 2005

                  House of Representatives,
         Subcommittee on Federalism and the Census,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2203, Rayburn House Office Building, Hon. Michael R. 
Turner (chairman of the subcommittee) presiding.
    Present: Representatives Turner, Foxx and Kanjorski.
    Staff present: John Cuaderes, staff director; Shannon 
Weinberg, counsel; Juliana French, clerk; Adam Bordes, minority 
professional staff member; and Cecelia Morton, minority office 
manager.
    Mr. Turner. We called to order the meeting of the 
Subcommittee on Federalism and the Census. Our hearing is 
entitled, ``Brownfields and the 50 States: Are State Incentive 
Programs Capable of Solving America's Brownfields Problem?''
    A quorum being present, welcome to the Subcommittee on 
Federalism and the Census' oversight hearing. This hearing is 
the third in a series investigating the issue of brownfields 
redevelopment and ways to incentivize more aggressive and 
widespread redevelopment efforts.
    In our two previous hearings, the subcommittee heard 
testimony describing the magnitude of the problems surrounding 
brownfields redevelopment. Additionally, we learned more about 
the Federal Government's response to the issue and the 
strengths and weaknesses of those efforts.
    There are an estimated 450,000 to 1 million brownfields 
across our Nation, contributing to community blight, thus 
lowering property values and decreasing tax revenues. These 
sites lay abandoned and unused due to Federal environmental 
laws and regulations that encourage abandonment of contaminated 
property by creating disincentives for cleanup and 
redevelopment.
    Current Federal law triggers liability for remediation of 
contaminated properties once landowners have knowledge of the 
contamination. However, if redevelopment begins, and 
contamination is discovered, the owner may be liable for 
remediation costs. If an owner abandons the property without 
disturbing the contamination, remediation costs may be avoided. 
The net effect of these laws and loopholes is the encouragement 
of abandonment of brownfields.
    If we are to achieve our goal of restoring these properties 
to productive use and redevelopment into centers of economic 
revitality, we must craft a Federal response to a federally 
created problem. We must fashion that response to complement 
existing redevelopment programs.
    With this knowledge, we move forward today to focus on 
State efforts to address the problem. The subcommittee will 
hear from representatives from Ohio, Illinois, Michigan and 
Pennsylvania. These particular States offer a number of 
incentive programs to encourage brownfield redevelopment. The 
incentives range from direct grants to low-interest loans, and 
various tax incentives, such as credits, abatements and 
forgiveness. I look forward to hearing details on these 
programs and their effect on brownfield redevelopment.
    Last year I, along with Chairman Tom Davis, requested that 
GAO study the status of brownfield redevelopment across the 
Nation. GAO's report shows that stakeholders are generally 
positive about the current Federal efforts to address 
brownfields, but that additional incentives such as a tax 
credit are needed to spur further brownfield redevelopment and 
really make a difference in communities across the country. In 
response to that study, I plan to introduce legislation similar 
to H.R. 4480 from last Congress, the Brownfields Revitalization 
Act of 2004.
    As noted earlier, many States offer tax credits or other 
tax incentives, but they vary from State to State. A Federal 
tax credit would apply to brownfield redevelopment across the 
board, without narrow tailoring. H.R. 4480 proposed a Federal 
tax credit of up to 50 percent for qualified remediation 
expenses of brownfields in certain poverty-rated areas. 
Specifically, credits would be available to redevelopment 
projects where the local government entity included a census 
tract with poverty in excess of 20 percent, although the 
project need not be located within that tract. Further, the 
legislation will require that sites must be enrolled in a State 
voluntary cleanup program to be eligible for liability 
protection afforded under the Brownfields Revitalization and 
Environmental Restoration Act of 2001.
    We have two panels of witnesses before us today to discuss 
all of these issues. We look forward to learning more about 
their various State incentive programs addressing brownfield 
development efforts. We will also hear our panelists' opinions 
on improving or complementing their State efforts at the 
Federal level.
    First we will hear from Charlie Bartsch, a senior policy 
analyst at the Northeast-Midwest Institute; Kathleen McGinty, 
secretary of the Pennsylvania Department of Environmental 
Protection; John Magill, director of the Office of Urban 
Development at the Ohio Department of Development; Douglas 
Scott, director of the Illinois Environmental Protection 
Agency; and Andrew Hogarth, chief of the Remediation and 
Redevelopment Division at the Michigan Department of 
Environmental Quality.
    Our second panel of witnesses consists of representatives 
from the private sector. We will hear from Robert Colangelo, 
executive director of the National Brownfields Association; 
Jonathan Philips, senior director of Cherokee Investment 
Partners, LLC; Charles Houder, director of acquisitions for 
Preferred Real Estate Investments, Inc.; and finally, Kevin 
Matthews, director of association & governmental relations at 
AIG Environmental.
    I look forward to the expert testimony of our distinguished 
panel of leaders today, and I thank you for your time.
    [The prepared statement of Hon. Michael R. Turner follows:]

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    Mr. Turner. I will now yield to Mr. Kanjorski for his 
opening comments.
    Mr. Kanjorski. Thank you, Chairman Turner. I appreciate the 
opportunity at the start of this hearing to offer my views 
about the brownfields program.
    In 2002, Congress took a significant step to remedy the 
persistent funding problems associated with the cleanup of 
mine-scarred lands with the passage of the Small Business 
Liability and Brownfields Revitalization Act. Through the 
course of our debates over this legislation, we expanded the 
Environmental Protection Agency's definition of the term 
``brownfields'' to include mine-scarred lands, thus making them 
eligible for Federal assistance through an EPA brownfield grant 
program. As a result, many local municipalities and nonprofit 
entities in my district have received brownfield grants to 
remediate the environmental contamination, including mine-
scarred lands.
    One organization, the Earth Conservancy, was one of the 
first recipients of a brownfield grant to cleanup the mine-
scarred land. However, I remain concerned that many local 
entities are not aware of the funding that this program 
provides, particularly with respect to cleanup of mine-scarred 
lands. In fiscal year 2004, the EPA received 670 brownfield 
grant applications; of that number only 24 proposals were for 
remediation of mine-scarred lands.
    Also, in reviewing the testimony from the Government 
Accountability Office, I learned that the Brownfield Revolving 
Loan Program has been severely underutilized. To alleviate this 
situation, it is my hope that we can look at ways to expand and 
strengthen EPA's outreach efforts. As a result, I look forward 
to hearing the testimony from our witnesses.
    I would like to thank Pennsylvania Department of 
Environmental Protection Secretary Kathleen McGinty for being 
here to testify today. I have had numerous experiences with Ms. 
McGinty during her prior service in the Clinton administration 
and find her to be a creative and rather ingenious individual, 
so we look forward to her testimony.
    It is my hope that the committee will work to address these 
issues and look for solutions to make this program more 
effective.
    In closing, Mr. Chairman, thank you again for the 
opportunity to express my initial thoughts on these matters. I 
yield the balance of my time.
    Mr. Turner. It is the policy of this committee that all 
witnesses are sworn in before they testify. Would our first 
panel please rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Turner. Please let the record show that all the 
witnesses----
    Mr. Kanjorski. Have sworn at us.
    Mr. Turner [continuing]. Have responded in the affirmative. 
And we will now start with our witnesses.
    Each witness has kindly prepared written testimony which 
will be included in the record of this hearing. Each witness 
has also prepared an oral statement summarizing their written 
testimony.
    Witnesses will notice that there is a timer with a light on 
it at the witness table. The green light indicates that you 
should begin your remarks, and the red light indicates that 
your time has expired. In order to be sensitive to everyone's 
time schedule, we ask that witnesses cooperate with us in 
adhering to a 5-minute time allowance for their oral 
presentation, which will be followed by a question/answer 
period by the Members.
    We will begin first with Mr. Bartsch. Would you please 
begin your testimony, and also, would you help me with your 
last name, please.
    Mr. Bartsch. It is Bartsch.

     STATEMENTS OF CHARLES BARTSCH, SENIOR POLICY ANALYST, 
   NORTHEAST-MIDWEST INSTITUTE; KATHLEEN McGINTY, SECRETARY, 
   PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION; JOHN 
MAGILL, DIRECTOR, OFFICE OF URBAN DEVELOPMENT, OHIO DEPARTMENT 
     OF DEVELOPMENT; DOUGLAS P. SCOTT, DIRECTOR, ILLINOIS 
  ENVIRONMENTAL PROTECTION AGENCY; AND ANDREW HOGARTH, CHIEF, 
REMEDIATION AND REDEVELOPMENT DIVISION, MICHIGAN DEPARTMENT OF 
                     ENVIRONMENTAL QUALITY

                  STATEMENT OF CHARLES BARTSCH

    Mr. Bartsch. Mr. Chairman, and members of the subcommittee, 
thank you for the opportunity to testify. And I also want to 
thank you, Mr. Chairman, for your efforts on behalf of 
brownfield revitalization, which is an important issue. I have 
a more detailed statement for the record, but my focus over the 
next few minutes is going to be on the critical 
intergovernmental foundation of successful brownfield 
revitalization efforts.
    I'm Charles Bartsch, director of brownfield studies at the 
Northeast-Midwest Institute. For the past years I've been 
tracking State-level brownfield initiatives, and I have also 
worked very closely with the executive leadership of several of 
the State chapters of the National Brownfield Association, 
including the Ohio chapter, on these same issues in my capacity 
as co-chair of its policy advisory board. And this year, in 
fact, the NBA devoted its annual Washington, DC, leadership 
summit to examining the components in an optimum State 
brownfield program, and we have also provided those findings 
for the record.
    To get at the question posed in your charge to us as 
witnesses, yes, State incentive programs are capable of working 
toward a solution to America's brownfield problem, but they 
must do so in partnership with Federal and local efforts in 
ways that attract private investment to these sites. One sector 
cannot solve the problem on its own.
    All of the research and analysis has reinforced what many 
of us have observed over the past decade, namely, that State 
brownfield programs continue to evolve and mature. Today more 
than half the States have some type of program in place to 
support brownfield reuse, and these represent many different 
but equally effective approaches in place to bring the 
resources together to meet the diverse challenges of 
brownfields. They recognize that no specific type of public, 
private or intergovernmental partnership and no single approach 
fits the financing needs of all brownfield projects.
    The most hard-to-generalize State incentive programs fall 
into four common categories, helping to facilitate real estate 
transactions and site reuse in various ways, and I want to lay 
out for the committee and explain how they can contribute to 
success.
    First, State tax credits, abatements and other incentives 
are increasingly being applied to brownfield projects. These 
programs have worked by helping with a project's cash-flow, by 
allowing resources and project revenue to be used for 
brownfield purposes such as site cleanup rather than for tax 
payments.
    Most State tax incentives are targeted to offset cleanup 
costs or to provide a buffer against increased tax assessments 
before the site preparation costs are paid off.
    State and Federal tax incentives historically have been 
used to channel investment capital and promote economic 
development in areas that have needed it, and brownfield 
targeting is a natural evolution of this type of program tool, 
as you have recognized, Mr. Chairman, through your legislative 
efforts.
    Currently 23 States offer some type of tax incentive, and 
today you're going to hear from some of those States; other 
examples, Colorado's incentives, which have been designed to 
support smaller site cleanup. Colorado allows tax credits to 
offset remediation costs, 50 percent against the first $100,000 
in cleanup costs, 30 percent of the second $100,000, and 20 
percent of the next $100,000.
    In New Jersey, brownfield site owners can negotiate for tax 
rebates from the State to allow recovery up to 75 percent of 
the remediation expenses.
    Missouri offers a variety of property income and job 
creation tax incentives as part of its brownfield redevelopment 
program. Site reusers in Missouri pick from the menu according 
to their project needs and package them together, with the 
total value of the incentives being able to equal the cost of 
remediation.
    And Rhode Island has adopted the State historic 
preservation tax credit to complement the existing Federal 
credit, and the combined credits there have contributed to a 
substantial increase in brownfield activity.
    I think what we see is that we need to make sure that State 
incentives are allowed to work in full partnership with Federal 
incentives and are not limited or constrained by recapture or 
penalty provisions.
    Second, States are targeting financial assistance programs 
directly to promote brownfield reuse. Capital gaps remain the 
biggest barrier to brownfield reuse, and 22 States have worked 
to address this issue by putting some sort of financing 
incentives in place such as loans or grants to reduce initial 
cash needs. These can be used to increase the lender's comfort 
with projects by offering guarantees to limit their risk of 
potential losses, or they can ease the borrower's cash-flow by 
plugging critical capital holes or offsetting brownfield costs, 
and these types of incentives can be critical to small sites.
    Third, States are establishing direct brownfield financing 
efforts. Often capitalized with bond proceeds, these programs 
directly match resources to needs usually in places where the 
private sector may fear to tread. About 14 States have done 
this, and you will hear from some of those.
    And fourth, more States are exploring innovative programs 
to support the brownfield financing process. About half a dozen 
programs do this by limiting risks or offsetting critical costs 
such as those for site assessments. Most of these programs were 
enacted as a way to leverage private investment while limiting 
public spending, and they represent an important maturation in 
brownfield public-private partnerships.
    In closing, we know that funding gaps are a primary 
deterrent to site and facility reuse; however, creatively 
crafted and carefully targeted incentives and assistance can 
help advance cleanup and reuse activities and achieve 
significant community benefits.
    In short, governments at all levels can find ways to help 
overcome reuse challenges; however, brownfield reuse will only 
succeed in the long run if State efforts can be complemented by 
Federal initiatives in a true intergovernmental partnership.
    Thanks for the opportunity to speak, and I look forward to 
your questions.
    [The prepared statement of Mr. Bartsch follows:]

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    Mr. Turner. Ms. McGinty.

                 STATEMENT OF KATHLEEN McGINTY

    Ms. McGinty. Thank you, Mr. Chairman, members of the 
committee, Mr. Kanjorski especially. Very good to see you 
again. And thank you for your leadership on greyfields and on 
all other environmental remediation measures. Very timely 
attention to this issue, Mr. Chairman. Pennsylvania is very 
encouraged by your attention and our ability to share some of 
our experiences.
    First, as we present to you today, we do have a successful 
program; 10 years into the program we are on the brink of 
cleaning up our 2,000th site. What I wanted to do is share a 
couple of the key reasons why we have been successful to date, 
but then to emphasize some of the measures you have pointed to 
that would be critical in further building our success.
    First, in terms of the four key elements that have built a 
successful program in Pennsylvania, first and foremost, clear, 
predictable, reliable remediation standards that are geared 
toward the future land use of the site; second, clear, thorough 
and effective liability relief for the successful performance 
of those cleanup standards; third, money.
    No question that the playing field is still tilting against 
brownfields, it is still much easier to develop a greenfield, 
and money is key; money in three categories: site assessment, 
site remediation, but then also especially site infrastructure 
improvement so that site is pad ready, ready for redevelopment. 
That goes beyond just the cleanup of the contamination itself, 
but looking at water, looking at utilities, looking at road 
infrastructure leading to that site.
    Fourth and key, time is money. So the extent to which we 
can streamline permitting and put a thumb on the scale for 
brownfield redevelopment such that a brownfield either does not 
need an individual permit, or it would receive priority 
attention in the permitting process has been a key for us. 
Those are the things that have worked to date.
    Two key enhancements that have been added to the program in 
the last year and a half: first, very important, a Memorandum 
of Understanding that we have with U.S. EPA that aims to create 
one cleanup policy, which means when Pennsylvania says it is 
clean pursuant to EPA's standards, it is clean for State and 
Federal liability purposes.
    I commend EPA for working with us on this, but I would note 
a shortcoming. We do have full and effective liability relief 
for some Federal programs once Pennsylvania says it's clean, 
but for others we are still working on it, we're not there. And 
more appropriately or more accurately, our understanding with 
EPA is a paper processing agreement; in other words, they have 
undertaken to process with us in real time their statutes and 
responsibilities as we do, too, on priority sites. Very 
helpful, but we need to make the next step to full liability 
relief.
    Second is the matter that Mr. Kanjorski pointed to. 
Pennsylvania has five sales in abandoned mine sites. For us to 
redevelop abandoned properties means a greyfield has to be in; 
that has been a key enhancement to our program.
    Having said that, what are some of the improvements that we 
would look to? First, tax credits, absolutely essential, and I 
would highlight a key piece, especially to underwrite the 
purchase of insurance that can backstop remediation costs. 
Quick example: A State-led remediation in Pennsylvania, the 
cost has skyrocketed as, for example, what we anticipated at $2 
a ton to move soil to the site, with diesel prices through the 
roof, we are now looking at $7 a ton to move that same soil to 
that same site. What was a bankable project, what was a 
financeable project is now something that is quite difficult 
for us to get done. So insurance to backstop those remediation 
costs in these days of skyrocketing commodity prices would be 
very, very helpful.
    Second, some of the bills that have been introduced that 
offer tax-exempt financing, tax-free bond financing of 
brownfield sites, are key. We have done that at the State 
level, but frankly we are pushing up against our State volume 
cap, and to the extent that tax-free bond financing opportunity 
could be shared with the private sector, that would help us 
very substantially.
    Third, grants. In the grant category, we have a very 
important program with U.S. EPA. We have benefited greatly from 
the grant moneys we have received, but those grant moneys are 
restricted. And the particular restriction I would point your 
attention to is an inability to use more than 50 percent of 
that grant money for remediation. That is important for new 
brownfield programs where moneys need to be invested in 
outreach; but for ours, remediation is key, and we would like 
to see that money freed up.
    And last, they come back to liability relief. If we could 
move from what has been an important beginning in our 
Memorandum of Understanding with EPA to full and effective 
Federal and State liability relief, that would add the 
certainty that investors and developers need.
    Mr. Chairman, and members of the committee, thank you for 
the opportunity to share a few thoughts in this key program.
    [The prepared statement of Ms. McGinty follows:]

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    Mr. Turner. Mr. Magill.

                    STATEMENT OF JOHN MAGILL

    Mr. Magill. Good morning, Mr. Chairman. I'm John Magill, 
director of the Office of Urban Development, and on behalf of 
Governor Bob Taft and Lieutenant Governor Bruce Johnson, 
director of the Ohio Department of Development, I thank you for 
the opportunity to highlight Ohio's initiatives in brownfield 
finance and opportunities for Federal, State and private market 
collaborations.
    Over the past 5 years, the State of Ohio has developed one 
of the Nation's best brownfield programs, the $200 million 
Clean Ohio Revitalization Fund. The program, funded by bonds 
approved by Ohio voters in November 2000, is serving as a 
catalyst for the redevelopment of brownfields. Since 2002, Ohio 
has granted $97 million to 94 projects to cleanup and 
assessment activities. These 94 grants are expected to leverage 
more than $731 million in new investment.
    I think it is important to note that Ohio's successful 
strategy was developed from a task force formed to address the 
challenges facing the inner core of our cities. Brownfield 
redevelopment was the No. 1 issue identified by communities 
during this process.
    Ohio's two goals for investing funds into brownfield 
projects are economic benefit and environmental improvement. We 
also realize that brownfields are most likely to be 
successfully converted to a new use through the free market and 
decisionmaking at the local level. The results are new, 
productive land uses including supermarkets, housing and 
industrial commercial space. A number of examples: The city of 
Dayton received over $5 million in grants to conduct demolition 
and remediation activities at the former GHR Foundry and Delphi 
Harrison properties. Select Tool International hopes to expand 
onto a portion of the GHR site, while the remediated Delphi 
property will be the western boundary of a new downtown 
technology campus in Dayton.
    On the opposite end of the State is Dave's Supermarket, 
located in east Akron. The city received a $2.8 million grant 
for cleanup, which they used to leverage an additional $10 
million for redevelopment. Dave's Supermarket opened in October 
2004, creating more than 100 new jobs, and is leading to 
additional development around the property located in one of 
the poorest sections of Akron. Likewise, through a $3 million 
award, the city of Cleveland was able to leverage $8 million in 
private and public funds to clean up a contaminated site, 
allowing a local manufacturer, Presrite, to expand and create 
50 new manufacturing jobs.
    Brownfield successes can change an urban real estate market 
by attracting private capital. The acquisition, cleanup and 
demolition activities at AC Humko, a former Columbus margarine 
factory, totaled more than $7\1/2\ million, funded in part by a 
$3 million grant. Estimated private investment from equity and 
private markets in the final development will exceed $50 
million for market-rate housing now under construction.
    And in Cincinnati, the Polk Building is being renovated and 
turned into market-rate apartments ready for occupancy in 
November. Asbestos contamination made the private sector 
reluctant to invest capital in the project, but a $650,000 
grant to abate the asbestos triggered $35 million in new 
private investment for the renovation activities.
    In active markets, brownfield reinvestment is more likely 
to occur at a lower public cost and with greater likelihood of 
success. Public policy is able in a variety of ways to affect 
the vibrancy of a brownfield market. In the 108th Congress, 
Chairman Turner proposed to allow taxpayers ``a credit against 
income tax for expenditures to remediate contaminated sites.'' 
Ohio believes tax credits can be a tool to attract additional 
private sector investment by enabling developers to offset 
costs by using or assigning credit. That is why we encourage 
Congress to continue to explore additional flexible brownfield 
tools which are performance-based, enabling local citizens to 
seek tangible results.
    A combination of private and public resources leads to 
projects with an economic and environmental return. In Ohio, we 
are fortunate to be able to support projects of both State and 
Federal resources. For example, my office administers a U.S. 
EPA Brownfield Revolving Loan Fund. To date, we have made two 
loans, with two more expected to close this fall. I would like 
to acknowledge the staff of U.S. EPA for their support and 
flexibility to meet the needs of our borrowers.
    Access to additional sources of Federal dollars through the 
tax credits or increased resources at U.S. EPA are crucial to 
stretching State funding to undertake additional local 
projects. I encourage you to look at these and other tools as 
you continue your work. On behalf of the State of Ohio and the 
Ohio Department of Development, I thank you for your time and 
effort to identify new ways to combine State and Federal 
resources to energize and invigorate brownfield redevelopment 
throughout the Nation. Thank you.
    [The prepared statement of Mr. Magill follows:]

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    Mr. Turner. Mr. Scott.

                 STATEMENT OF DOUGLAS P. SCOTT

    Mr. Scott. Thank you, Mr. Chairman, members of the 
subcommittee. Good morning. My name is Doug Scott, and I am the 
director of the Illinois Environmental Protection Agency. And 
on behalf of Governor Rod Blagojevich, I want to thank you, Mr. 
Chairman and members of the subcommittee, for holding these 
hearings, and also you, Mr. Chairman, for your leadership on 
this issue. You have been recognized for that leadership by the 
National Brownfield Association as well as a number of mayors, 
and it is very well deserved.
    Brownfield remediation and land reuse is one of the most 
important issues facing the urban areas in Illinois, and 
although it is not as obvious, it is incredibly important for 
the nonurban areas as well. Obviously there is an environmental 
benefit to cleaning up areas that have contamination or are 
abandoned; there is certainly a community benefit in reclaiming 
property to put it back into productive use to either support 
new businesses and generate new tax revenue, or to become 
recreational land. There is a benefit to helping to reduce 
sprawl not just by putting a particular property back into use, 
but also by spurring other inner-city development and 
protecting farmland.
    We have seen in recent years a renaissance of cities, and 
brownfield redevelopment certainly augments that trend. And 
there is certainly a shared community benefit in helping 
communities to reclaim properties that were once a symbol of 
vibrancy in their community only to become symbols of decay.
    I have had the experience of working on a brownfield issue 
from a number of perspectives, as a municipal attorney in 
Rockford where we dealt with numerous abandoned sites and with 
a Superfund area that affected 10 square miles of our city; as 
a State representative where we passed some cleanup legislation 
that is very progressive in providing flexibility to risk 
assessment and shared cleanup levels; as mayor of Rockford, 
during which time I served as chair of the Illinois chapter of 
the National Brownfield Association; and now as director of the 
IEPA. As a result, I have developed an understanding of what I 
think works and what could spur even more brownfield 
development.
    Illinois has a very aggressive brownfield plan, and under 
Governor Blagojevich has become even more progressive, using 
economic development funds through the Governor's Opportunity 
Returns Program to supplement cleanup, as well as utilizing 
other funds to clean additional sites, and providing loans, 
site assessments and technical expertise.
    It has become clear to me that brownfield development at 
its heart is a real estate transaction, and just as in any 
development, there are associated costs. In these cases, the 
environmental considerations may be very large, but other 
costs, such as infrastructure, may be reduced.
    It is essential for us to do those things that entice 
private developments to the sites by providing the conditions 
and incentives that make these sites attractive, or at least 
comparable to greenfield areas. And it is equally clear to me 
that State and local governments alone can't make this happen. 
As I said, our State has been very proactive on this issue 
monetarily, including through our first-in-the-Nation 
noncapitalized loan program.
    In addition to financial help, our efforts have also 
included comprehensive risk-based remediation process focusing 
on planned reuse, as you heard from Pennsylvania; No Further 
Remediation letters and a Memorandum of Understanding with U.S. 
EPA that says except in very narrow circumstances our NFR 
letter will also end Federal involvement; voluntary cleanup 
program with timely and effective decisions under well-
established procedures; Web-based access to key environmental 
site data; partnerships with other government agencies, not-
for-profits, trade associations in the private sector; and site 
assessment and technical assistance.
    And the State and local governments have been very creative 
in utilizing all of the myriad resources that they have 
financially to try to assist with these sites, but it is pretty 
clear to me that the number of sites isn't being lessened to 
the rate that any of us would like to see. Now, it is easy to 
say that more money is the answer, but unfortunately it is part 
of the answer. More grant dollars to States and municipalities 
to specifically target site assessment, infrastructure and 
cleanup are needed. More sites have been put into play, for 
example, by simply not forcing loan guarantees of Section 108 
and making more grant money available.
    In addition, more funds under the Brownfield Revitalization 
Act would help tremendously as I'm sure we're not the only 
State that has more sites than we have funds, and more dollars 
for Superfund site cleanup that are under the Federal 
guidelines are also needed.
    When I was a legislator, I know we always heard how 
spending money in a particular area would save money in the 
long run, but I really believe that is true here, through 
diverted infrastructure and transportation costs and increased 
tax revenue. But money is only part; the rest must come from 
tax credits and other targeted incentives to the private sector 
to bring them into these sites. So I was very encouraged last 
year by your efforts, Mr. Chairman, with H.R. 4480, and would 
hope that similar efforts would be successful in this Congress.
    In addition, efforts such as H.R. 4480 that can be made to 
make more certain the lines of liability and possible exposure 
to future or reopened claims would help tremendously to make 
these sites more insurable and more bankable. In speaking with 
many developers who work on these sites, one of the major 
stumbling blocks is the uncertainty of future liability, which 
is another factor that makes it more desirable to locate to 
greenfields.
    Again, on behalf of Governor Blagojevich, I appreciate the 
opportunity to appear before you, and thank you for your 
leadership on this issue. I would be glad to take any questions 
that you have. Thank you.
    [The prepared statement of Mr. Scott follows:]

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                  STATEMENT OF ANDREW HOGARTH

    Mr. Hogarth. Good morning, and thank you for your interest 
in this huge program that Michigan feels requires a substantial 
coordinated effort by both local, State and Federal parties.
    During the last 10 years, Michigan has done a lot to try to 
provide incentives to help redevelop brownfields primarily 
through a three-pronged approach: The first, providing 
financial incentives; the second, State funding to do site 
cleanup; and the third, a change in our liability standards. 
And I will talk about those as well as identify continuing 
obstacles that we see existing.
    In terms of the financial incentives, we have a Renaissance 
Zone Program that has been created to encourage the development 
of selected areas across the State, and properties in those 
areas virtually have 100 percent of their real, personal and 
State and local income taxes eliminated.
    Single business tax credits on a case-by-case basis are 
provided to help with the expensive demolition, environmental 
cleanup and other remedial actions at specific sites. Since 
June 2000, this program has awarded more than $273 million in 
single business tax credits, which we believe has generated 
more than $3.8 billion of private investment in distressed 
areas.
    Tax increment financing. Under Michigan's Brownfield 
Redevelopment Financing Act, brownfield redevelopment 
authorities across the State are able to capture local taxes 
and school taxes to reimburse developers for cleanup-related 
costs. As developers develop a site and increase the value of 
their property, the additional increment in tax--not property 
tax--is captured by the brownfield authorities and used to 
reimburse the developer for their expenses.
    Since 1996, more than $300 million in tax increment 
financing has been approved for more than 80 projects 
throughout the State.
    In addition to those incentives, the State of Michigan has 
provided--spends a considerable amount of money directly to do 
site cleanup both through grants and loans to communities and 
by direct spending. Since 1992, we have provided $122 million 
in grants and loans for some 300 individual projects. This 
money is available to use for site assessments, cleanup costs 
and demolition.
    In addition to the money we provide for grants and loans, 
we have spent over $585 million in State revenues in the last 
17 years to investigate and clean up and monitor over 1,600 
sites. Many of those sites were sites that have been abandoned 
and taxed to the communities.
    Probably the biggest impetus to getting contaminated 
properties redeveloped in the State of Michigan has been a 
substantial change in the liability scheme under Michigan's 
cleanup law. In 1995, we went from a liability situation where 
anyone that bought a piece of contaminated property, whether 
they caused the contamination or not, being liable for it, to 
where they would not be liable for it in the future if they did 
a baseline environmental assessment. So a new purchaser or 
anyone that forecloses on a piece of property, like a bank, can 
conduct a baseline environmental assessment prior to or within 
45 days of purchase, occupancy or foreclosure, and that 
baseline environmental assessment is intended to describe the 
existing contamination on the site in a manner that enables new 
releases to be distinguished from the prior contamination. If 
this is done, and the baseline environmental assessment is 
submitted to the State, then the new owner or operator is 
protected from liability for the existing contamination.
    As of 2005, the DEQ has processed 8,600 baseline 
environmental assessments. That means there have been 8,600 
parcels of property in the State of Michigan that were 
contaminated that were transferred to new owners or operators, 
most of which probably would have not occurred in the past.
    Our cleanup standards are risk-based and land-use-based, 
which helps assure that unnecessary cleanup expenditures are 
not made. I mentioned at the outset that this requires 
substantial coordinated effort. We put substantial effort into 
working closely with communities. For example, with the city of 
Detroit, we meet at least bimonthly with staff at high levels 
of both the city of Detroit and the State of Michigan, multiple 
agencies, to identify barriers to redevelopment of specific 
properties and bring the resources and government 
decisionmaking to the table that is necessary to help 
facilitate projects in a hurry. And, in fact, we have directed 
over $100 million in State funding to city of Detroit projects 
in the last 10 years.
    What obstacles remain? Federal liability continues to be a 
problem. Many potential property transactions fail due to the 
inability of the buyer to resolve liability under RCRA, and to 
some extent CERCLA. However, we do have a Memorandum of 
Agreement with EPA that says that as long as a developer is in 
compliance with the State's cleanup program, that EPA will, for 
the most part, take a hands-off approach. However, the 
inability of a prospective purchaser to resolve RCRA liability 
remains a substantial hurdle.
    Another obstacle is unrealistic expectations on the part of 
the developer and the buyer or seller, lack of comprehensive 
planning by communities, lack of sufficient site 
characterization, overwhelming predevelopment costs, lack of 
startup funds for small businesses, and lack of State and local 
government resources. We will not be able to provide the 
funding we have at the State level in the future.
    I want to thank you for your interest in this program and 
applaud your efforts to try to address it at the Federal level.
    [The prepared statement of Mr. Chester follows:]

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    Mr. Turner. Well, again, I want to thank each of you for 
participating and bringing your unique knowledge and expertise, 
and I want to thank you for your dedication to what is an 
important issue both for your communities and the government, 
and nationally.
    It's interesting in listening to each of you--and, Mr. 
Scott, you are right, at the base you have a real estate 
transaction that you're doing, and I was thinking of all the 
different elements of expertise that you must have to do your 
jobs, and certainly you must have real estate background, 
because you have ownership issues, and you have use issues. You 
need environmental backgrounds because you're dealing with both 
assessment and remediation; your legal background, issues of 
liability, financing issues, not only just the products that 
are available, but in dealing with the financial institutions 
and their comfort level. And then you have, Mr. Hogarth, what 
you said was the numerous governmental entities. Of course, 
you've got numerous laws and regulations, and then after 
dealing with all of that, you get to go in and invite the 
private sector and encourage them that this really is a doable 
and easy transaction when they are not necessarily going to 
have that expertise. So I want to congratulate you on what 
you're each accomplishing, and we want to learn from this 
opportunity.
    One of the things that I'm struck about with your expertise 
is that we often hear anecdotally that the characterization of 
these sites--that when the assessments have occurred, that 
generally people are finding them to be less contaminated than 
suspected. Also, though, we keep hearing anecdotally that the 
programs that are currently in place might not yet be reaching 
some of the most difficult sites to develop. So we may only be, 
in other words, our process may be so selective that we're 
resulting in the selection of easier sites, and therefore 
running into less contamination.
    I would like if you would each talk about what you're 
seeing that people are experiencing in these programs; as 
they're happening in communities, as they're happening in 
States, what are we seeing in the characterization of sites, 
and how penetrating are these programs? Are we getting at some 
of the worst sites? And certainly that brings into the issue of 
those sites that have the greatest economic potential.
    Mr. Bartsch, we will start with you.
    Mr. Bartsch. I guess I would start by saying what we have 
seen nationally by looking at the data from the EPA grant 
programs is that about one-third of all sites that are assessed 
using EPA funds actually are not contaminated at all, they just 
look lousy. And again, it is that perceptual issue there that 
has really been an inhibitor, and that is really one of the 
reasons why EPA has been able to leverage so much private 
investment, because sometimes it means only a few thousand 
dollars for a preliminary assessment to really show that there 
is nothing there, and then the redevelopment process can go 
forward.
    I think Mr. Kanjorski hit on a really critical issue in 
this whole thing in his opening remarks, and that is there has 
not been in many places enough information gotten out to local 
officials in the field who are dealing with these sites. I 
probably do 50 or 60 workshops a year looking at brownfield 
basics, and there still is a huge audience out there that does 
not really have a full understanding of the situation that you 
talked about, Mr. Chairman, where you really have to pull all 
these different components together.
    I think a really good example of how information is needed 
can be found by looking back. The original brownfield expensing 
tax incentive, which passed in 1997, got virtually no use at 
all the first few years. One of the reasons for that was that 
it was viewed at complicated; people didn't understand how it 
worked, they didn't understand the benefits, so as a result it 
really didn't get very much use. I think there is a real need, 
as part of this process, to get information out there, which is 
why I think, again, efforts like you're doing are important.
    Ms. McGinty. Thanks, Mr. Chairman. I wanted to say at the 
outset, we all touched on, one way or another, the liability 
questions. We do need further work there, but I do want to 
commend U.S. EPA. They have been terrific to work with and have 
really been trying to be quite responsive on all of these 
issues.
    You said, Mr. Chairman, and I agree, these issues are about 
real estate transactions, and real estate is about location, 
location, location. And for us the challenge, as you say 
accurately, has not been that the site is too nasty to 
remediate. Remediation technology has evolved to the point 
where those sites can be cleaned up. Rather, location and the 
character of the site, which brings us back to the tax and 
grant incentives, has been most challenging.
    On the small-scale site, those sites are disadvantaged even 
though they may be the corner dry cleaner. We have cleaned up 
many of them, we know how to do it, it is not that complex. But 
the return on investment in redeveloping a site of that size 
doesn't always pencil out for the developer. So again, not the 
contamination per se, but the ability to have tax and grant and 
other financial incentives to achieve the kind of return on 
investment that is required.
    On the large-scale side, the same, at the opposite end of 
the spectrum where the site is so large, the risk is holding 
the property for the length of time that will be required to 
line up first your anchor and then your follow-on tenants. And 
so, again, financial incentives to bridge that risk gap where a 
developer is holding a large-scale property in the attempt to 
market that property and see developers come or renters or 
leasers come back into that property. Thank you.
    Mr. Magill. Thank you, Mr. Chairman.
    Our perspective would be, first, to follow what Ms. McGinty 
said, that local decisionmaking and market conditions affect 
choices about the properties that communities will look at. 
Once that occurs, the conditions on the site will vary. And one 
key factor is that most grant programs and loan programs come 
with a timeline to invest the dollars and compete the cleanup. 
More challenging cleanups with longer schedules, higher 
complexity, which often has to deal with groundwater, begin to 
move off to the side because of the time to actually complete 
the work.
    So you have developers who have a recognition that time is 
money. They're not looking to work on the most difficult sites, 
but sites that have locational advantages, Ms. McGinty touched 
on, produce a community benefit, and can be cleaned up on a 
timely and efficient schedule at a reasonable cost, I think are 
what we are seeing. And so some of the more challenging sites 
with the longer timelines of remediation are not being seen, at 
least in Ohio and perhaps in the other States. Thank you.
    Mr. Scott. I believe the two premises that you had, Mr. 
Chairman, were that many of the sites are less contaminated 
than we thought, and we may not be getting at the worst. And I 
would agree with both of those from my experience in Illinois, 
for a lot of the reasons that have been said, but part of it 
also, when you look at it, location is very important. It will 
differ in each State depending on where in that State that you 
are. What is transparent in terms of the real estate market in 
downtown Chicago, for example, where there are a number of 
brownfield sites that have been redeveloped and have become, 
you know, magnificent buildings--a lot of riverfront 
development, a lot of other things that have been substantially 
cleaned up--the real estate market and the cost of land in the 
Chicago area make it such that development can be price-
competitive with developing somewhere else, and there isn't 
that much land available in other places.
    If you go to other municipalities throughout the State, to 
Rockford or Springfield or Joliet, it is very different; the 
cost of land is much different, the availability of land is 
much different depending on where you are in that particular 
community. And then if you go to southern Illinois, the 
economics are completely different than that. So a lot of sites 
that otherwise would be cleaned up, or if you were in Chicago 
if these sites were there, would be cleaned up very quickly, 
get left behind.
    And again, that just underscores what I think everybody has 
been saying, that it is so important to try to provide those 
incentives that make the playing field level. They give the 
private investors, the private insurance companies, the banks, 
the others that have to participate in this the reason to do 
this particular site as opposed to just building out into the 
next greenfield.
    Mr. Hogarth. Our experience is that a major portion of the 
brownfield sites are not significantly contaminated. They are 
contaminated to the point where they exceed residential 
criteria, but they don't represent a hazard that makes them not 
reasonable to redevelop. Now, that's a major portion of the 
sites.
    But I need to point out something about Michigan's 
liability standard that changes the dynamic for a new 
developer. I mentioned the baseline environmental assessment 
process, and if someone does a BEA, they don't have to clean up 
the site because they're not liable for the existing 
contamination. Well, that makes the economics much more 
favorable to the developer. The developer, though, does need to 
do something in terms of the contamination. They need to not 
exacerbate it, they need to assure that they don't, by virtue 
of their use of the property, cause any unacceptable exposures 
to occur, and they need to take reasonable precautions about 
what third parties might do, like trespassers.
    Now, often what that means is that someone will come onto a 
piece of property, do a baseline environmental assessment, and 
determine all they have to do to make the property safe to use 
is pave it and put their building on it. There may be 
contamination in the soil, contamination in the groundwater 
that may migrate offsite, but the new owner isn't responsible 
for dealing with it. Now, what that does is it transfers 
responsibility to public funding when those hazards need to be 
dealt with. If we can't get the liable party to deal with it, 
then the State ends up having to address that with public 
funds.
    Now, that is a step that Michigan took, which is 
significant, though, to try to level the playing field more to 
get more people to reuse contaminated sites. And of course, 
there are a lot of sites that are megasites, if you will, that 
cost hundreds of millions of dollars to address, that we don't 
think will be able to be redeveloped in our lifetime, but they 
are few.
    Mr. Turner. Mr. Kanjorski.
    Mr. Kanjorski. This is something that Congress doesn't pay 
enough attention to.
    You know, in listening to your various testimonies, it 
strikes me that we really have multiple issues here. One is 
site-specific probably from poor manufacturing, past 
experiences in major metropolitan areas of the Rust Belt, if 
you will, and then massive land cleanup, coal lands cleaned up. 
And I've had more of an emphasis on coal land cleanup simply 
because the little sites probably do eventually take care of 
themselves in some way from an economic standpoint, or at least 
lead toward that, whereas when you get to the coal mine 
cleanup, it becomes astronomical.
    My experience is that we are pouring an awful lot of money 
into engineering costs. I was thinking of your site assessment. 
Every small site assessment I have ever seen, it is almost like 
Washington lawyers, they start at $100,000 and go up and you 
really can't get an engineering report even on a small cleaning 
establishment for minimal amounts of dollars. They're very 
expensive propositions.
    On coal land cleanup, though, I discovered that, in the 
Abandoned Mine Program, 34 percent of the cost is being spent 
for engineering fees, which is horrendous when you think about 
it, and yet there is advanced technology out there, GIS 
systems, that can bring that cost down by at least a factor of 
a half, if not more, and we haven't utilized it on a national 
scale.
    The other thing I was listening to is that obviously it's a 
matter of money, and I was curious from your experiences how 
much--you brought up the point, Mr. Bartsch, that you hold 
seminars and outreach, but have there been sort of national 
conventions on this issue where we get best practices, we look 
at models?
    One of the things that disturbs me the most is we're 
creating another Beltway industry; someone needs extraordinary 
expertise to know how the hell to get through the Federal 
system and then the 50 State systems. And not that there is 
political influence, but, boy, if there ever were--I should say 
that to Ohio--if there ever were an interest in having 
political influence, I mean, this would be the ideal area 
because the developer or the public sector, municipality, 
nonprofit organization are just absolutely in the grasp and 
control of that decisionmaking process. And it is so 
convoluted, it seems to me, that we should step back and try 
and do a larger overview problem.
    One situation that I ran into--and I put it in the form of 
a bill--looking at mine lands, I suggested that we do a mine 
land area redevelopment act. And we've identified millions of 
acres in the country, just in my particular part of 
Pennsylvania about 160,000 acres, and the western part of 
Pennsylvania another 400,000 acres, astronomical when you look 
at it, if you look at it in segments. But if you 
compartmentalize it and say, OK, we're going to view this from 
a watershed perspective and do the entire watershed study and 
how the effect of the land and the water would be, how you were 
consistent.
    Now, to accomplish that you need public ownership. You just 
have any number--in Pennsylvania, and I think West Virginia is 
famous for this, too, coal cutting means our land banks, they 
basically own very destroyed lands--I think Ohio is like that, 
too. They pay next to nothing in taxes, no incentive to move 
the land out, and they can wait there until land appreciates as 
far as they want to because there is actually no exposure. And 
if you don't get the cooperative effort of everybody within the 
watershed system, to do reclamation is almost meaningless. I 
mean, we are working on a 16,000 acre parcel of land 
reclamation now, but we have maybe 10,000 other land owned by 
coal cutters. If they don't participate, if they aren't 
designed into the system, doing our 16,000 acres really doesn't 
accomplish a great deal. Oh, it does in terms of inside the 
perimeter, but in terms of the totality of the recovery 
program, it doesn't work.
    And I haven't seen any creativity on how we can put land 
acquisition together, whether redevelopment authorities should 
have the right to condemn, and how large they would have to be, 
what would be the authority to do that, what are the prices 
paid, what are the incentives.
    The other thing I listened to is the use of tax credits, 
and I was just thinking up here it is a field day for lawyers 
and accountants. I mean, quite frankly, it probably is a very 
specialized field at this point with extraordinarily high fees, 
because who the hell else knows what to do?
    Now, it seems to me that we have to create the funding, and 
you, Mr. Scott, pointed out we absolutely need the funding. My 
mine reclamation bill does a very simple thing, and it uses tax 
credits, except not individual tax credits awarded in States 
and by the Federal Government. But in totality, we say, look, 
we want to create a fund of $20 billion; we're going to sell it 
into the market, probably mostly to insurance companies, give 
them a tax credit in lieu of interest so they can write it 
straight off their return--they get a return today of probably 
5 percent, thereabouts--and do it over a 30-year period, and 
now have a sufficient amount of money in one fund--now this 
addresses the coal aspect, coal land reclamation--and now 
require any of the participants on the State level or the local 
level to create a comprehensive application program. Maybe in 
the Commonwealth of Pennsylvania you would have six areas 
establishing what they're going to do with their land, how 
they're going to use it, how long it will take and the purposes 
for it. They would go in and get a long-term approved program 
for site evaluation, for site remediation, for reuse 
infrastructure, so that you would be moving from reclamation 
right into reuse or prospective reuse with sufficient funding 
in place for a period of 30 years to accomplish the end.
    I haven't seen a lot of support for the bill on a State 
level; as a matter of fact, it is somewhat disappointing. I 
like State and local leadership, I want to encourage it, but, 
quite frankly, everybody having their own little custom-
tailored program doesn't invite for efficiency. We've got to 
strip away and determine what is the easiest, best and most 
comprehensive approach, particularly in coal land. It affects 
26 States in the Union.
    Our $20 billion fund over 30 years will create enough funds 
to reclaim all of the abandoned coal lands in this country over 
30 years. It will cost us in loss of tax revenues around $30 
billion over 30 years. And in the end you will have a defined 
site, you will have a reclaimed site, and you will have 
utilities and improvements in infrastructure to make it a 
usable site.
    That, I think, is one approach to coal land reclamation. 
The individual site remediation, I think we probably need a 
fund for that, too, and we could do it on a Federal level using 
tax credits, but we're probably talking about losing no more 
than $1 billion or $2 billion a year in revenue to the Federal 
Government. That equates to 2 days in Iraq. For 2 days in Iraq, 
we could clean up all the coal lands in the United States. If 
you look at it in another way, for actually 3 weeks in Iraq, 
that would pay for the entire program--not that we're going to 
withdraw from Iraq, but it may be a little bit of what should 
go into the equation sometimes as to what's important.
    Now, my experience--and that's why I complimented all of 
your activities--this Earth Conservancy I mentioned in my 
opening remarks, 16,000 acres of land, we have reclaimed a 
little over 1,000 acres thus far. We have about 4,000 more to 
go.
    We have never failed to receive more money back for the 
reclaimed property than the value of the original purchase of 
the property and all costs of remediation, because it is being 
done comprehensively. We are taking land that has $100 an acre 
value and in some instances moving up to $100,000 an acre in 
value, but that can only be done because we did a total 
comprehensive program. Using GIS systems, we know exactly how 
to go at it. And this is just a small experiment, 16,000 acres. 
What we want to take on is the entire 160,000 acres of the 
anthracite field. Now, what I am a little disappointed in, and 
I understand my good friend Rob is a progressive Governor, 
Governor Rendell in Pennsylvania is a progressive Governor, and 
the Governors want to get involved and the States want to get 
involved and they should. But unfortunately by doing it before 
we get involved, you are taking leverage away from us.
    The fact of the matter is probably the States should get 
together and make the commitment we will put up X number of 
dollars in our funding; the only condition is that the Federal 
Government create a program to match or exceed that, maybe 75-
25, something like that.
    I know I am running over, Mr. Chairman, but I traveled the 
country about 6 years ago with then-President Clinton, and he 
knew my problem. We were working on the new markets initiative 
at the time and how that could impact on using land in 
developing distressed areas. So we spent a considerable amount 
of time eating pork and drinking beer, and during those 
sessions we would just have an open bull session.
    So he asked me, he said, ``why haven't your people fixed 
that land?'' Good question. Why don't people fix the land? Why 
don't the people in Ohio fix the land? Why hasn't Illinois 
fixed that land, or why hasn't Michigan fixed that land?
    Because the people that live on those lands today didn't 
cause that problem. Most of them, if you look at the makeup of 
the population, are senior citizens or are a much older part of 
the population, and, quite frankly, getting to that stage now, 
your forward thinking sort of starts to limit because you are 
not going to be around 10, 15, 20 years when the project will 
be completed. So you ask yourself, why should I pay additional 
tax costs to repair land that I won't even see, that I didn't 
cause, I didn't get any benefit from, and more than likely my 
children and grandchildren are in California, Texas, or 
Virginia. So you are just not going to do it. So on a local 
level there is absolutely no incentive in taxing capacity to 
clean up the environment.
    Now you go up to the State level. I don't know about Ohio, 
Illinois, or Michigan. I can tell you in Pennsylvania, if you 
are in a hard coal or soft coal area of Pennsylvania, you are 
not in Philadelphia or Pittsburgh, they just don't give a damn. 
They don't look at it every day. They don't live with it every 
day. It doesn't really affect their economy. So the largest 
portion of the tax ratables in the State have no interest in 
putting their money there. So the State has no interest to do 
it. Although progressive Governors, as Rob, have tried to move 
ahead and do these things.
    It is a national problem when you analyze this, I think. 
Brownfields and the industrial sites are the result of 
industrialization in the United States 100, 150 years ago, 
when, like Japan, we had a growing economy. We didn't pay a lot 
of attention to our environment, but Japan went back and 
cleaned its environment. The United States abandoned it. It 
went out and took pristine land. It is now time that we pay 
back for our great industrialization by reclaiming these areas.
    Second, I guess that these areas tend to be abandoned 
because we don't pay attention. Particularly in the mining 
area, we don't allow oil and gas industries to destroy an awful 
lot of land. We have a tremendous fight with the wild natures 
of Alaska now because we just don't really want to injure an 
environment sometimes in order to receive energy. But, hell, 
when we had the coal industry, whether it is bituminous or 
anthracite, we didn't give a damn. It was Katy get the door and 
do anything you wish. And they did. And they are gone. The coal 
companies are gone, the people that worked there are gone, the 
people that live there are too old to worry about it and aren't 
going to live that long, so they don't pay attention to it. The 
State doesn't want to do it because they don't live in the 
area. It is up to the Federal Government. This is our payback.
    I think we are at a propitious time in America to look at 
long-term capital spending programs using bonding as opposed to 
appropriations. If you rely on appropriations, it is who has a 
hot issue today. Who would have ever thought that when we left 
this city in August, Louisiana, Mississippi, and Alabama were 
going to be the recipients of a couple hundred billions of 
dollars of aid? It happens, and it is always just happening. 
Who would have ever thought we would be in Iraq for 2\1/2\ 
years? It happens.
    It seems to me we have to take this off the appropriation 
area, put it onto a capital expenditure level, bond it with 
bonds and do it over 30 years, and make it an honest, hard 
commitment. But keep it at the local and State level.
    I really do believe everything I have ever seen in 
abandoned mines when it comes to Federal programs, they really 
don't have the feel. It has to be done on the State and local 
level. And there will be differences, but there shouldn't be 
differences in the way laws apply, what benefits are available. 
And it shouldn't boil down to the competitiveness of one State 
putting a good program, an industry to reuse land in their 
State in competition with another State. If we get into that 
game, we are in a race to the bottom.
    Instead, it should be going back to what I said. Look, all 
of this land, practically, when you look at it, particularly 
the coal mining land and Colorado and the other mining industry 
problems are a little different. Their land value is not highly 
likely to appreciate for use. But particularly knowing 
Pennsylvania, if we clean up Pennsylvania, our land value and 
reuse value will just explode, and all of our experience has 
shown that. I think Illinois and Michigan and Ohio probably are 
in that boat.
    I would like to urge you, and I know Mr. Turner should take 
the lead on this on behalf of the Congress, but there are a few 
of us who would be willing to come out and spend a weekend 
somewhere really hacking some of this over with people of your 
standard across the country to come up with best practices and 
what we have to do at our level.
    If we have insurance problems or if we have liability 
problems, the only reason we have them is, quite frankly, we 
are not very bright here, and we only listen when the sound is 
deafening, and it is time that you deafen us.
    But I think, and my impression of Mr. Turner has been--and 
I watched him, he is a junior member, he has a heart for this, 
he understands it, he has the experience and the background to 
do it. That is a great commodity. He chose this specialty 
because he has an interest. So let's use him. He may be a 
Republican, but we will forgive him for that. But let's use 
him. But it is not a Republican or Democrat issue, it is an 
American issue, and we actually have a chance to make money for 
the country and for the people that live in these various areas 
and for industry. How can you beat that?
    But we have to do it in some more comprehensive way that 
doesn't benefit private, political, or otherwise or economics 
flowing to anyone. Let's not build a Beltway industry. That 
would be the worst thing we could do. I am sure they are 
starting out there. There are a lot of good tax lawyers trying 
to figure out how they can turn a good dollar by doing this.
    Although we want the private sector heavily involved, I 
think it will require nonprofit or governmental overall 
comprehensive planning to get to the scheme, to get to the 
application of what should be done.
    In the process of cleaning up land, you are going to clean 
up water, too, and when you add the savings and the benefits of 
those things, in our little project-by-project attacking of 
this, it is going to cost us 5 or 10 times more than it would 
if we did it comprehensively. So we have the time. Let's do it 
right. Let's make it a war on anti-environmental activity.
    But I happened to have an experience of being on Wall 
Street yesterday and meeting with some of the financial people. 
The first time in my life I have gotten the impression--I 
should say the first time in a decade--they are ready for a 
progressive era. They now know that America can't just live off 
its droppings, we have to be inventive. One of the most 
inventive things--and certainly of great value--is land. God 
ain't making any more. So it is up to us to make it or return 
it to its status of good use.
    So I want to compliment you all. I didn't have particular 
questions. I was going to ask a question of Ms. McGinty, to 
have her have a chance to show her brilliance, but I will save 
that for another day.
    Mr. Turner. Thank you for your comments and thank you for 
your passion on this. I certainly look forward to working with 
you on this issue.
    Mr. Bartsch. Mr. Chairman, can I make a couple of 
observations on Mr. Kanjorski's comments, because I think what 
is really critical when we are talking about shaping brownfield 
programs and strategies, he was talking about a 16,000-acre 
mine site, and many of us were talking about quarter-acre gas 
stationsites, and we have named two sites. The real challenge 
is how do you structure something that really meets this?
    I think what you need to do is really have flexibility to 
allow locals in the private sector to package grants and loans 
and bond proceeds and things like this together in a way that 
really works best for them to make this happen, to really do 
this.
    Also from the State perspective, Mr. Kanjorski mentioned 
the role of new technologies, and there is no better place for 
new technology to gain acceptance in the marketplace than 
working through a State volunteer cleanup program to get it 
into the mix.
    Second, I think in support, I would throw railroads into 
the mix as well as mines. We need to come up with ways that may 
not be conventional environmental ways to get those folks to 
the table, and it may be things like more rigorous enforcement 
of Sarbanes-Oxley or things like that.
    Third is we are thinking about these incentive programs. 
There has never been an issue that has yielded more return on 
the public investment than the brownfields funding.
    Fourth, I just wanted to mention to the committee that EPA, 
along with about two dozen other organizations, sponsors an 
annual brownfield conference which will be held this year in 
Denver, November 2nd to 5th. It is free. Please encourage your 
constituents to go. Several thousand people will get together 
to share information on best practices, on new technologies and 
on strategies, and it is really a good opportunity to get at 
some of the informational concerns that we have all talked 
about.
    Thank you.
    Mr. Turner. The environmental tax credit bill, which I 
drafted and am working on the redraft for this Congress, has in 
it a mechanism for release of liability; the concern being that 
in setting up a tax credit program, we don't want it to be a 
revolving loan fund or result in just numerous lawsuits for 
recovery of the tax credits. We put the tax credits out and 
apply them for cleanup. We want to make certain that those are 
a subsidy and a gap filler.
    But also we were hoping that we would provide an incentive 
for the past owners to come to the table, where in my 
experience from what I have seen so far generally, even if you 
have a successful brownfield cleanup, that still we haven't 
reached out and successfully brought those individuals to the 
table.
    In looking at ways to structure liability relief, a 
suggestion has been made that the tax credit bill have as its 
liability relief mechanism a requirement that the parties enter 
the State voluntary cleanup programs; that in those State 
voluntarily cleanup programs, there is a bar of enforcement by 
EPA; and that what we would merely do is hook into those 
liability relief provisions.
    So, for example, what we would have is a tax credit that 
would be administered by the State development agencies, as the 
low-income housing tax credit is, and that in the application 
that there would be preferential points that are provided to 
project that include the past polluter, the individual who has 
past liability, and the requirement that the redevelopment go 
through the State voluntary cleanup program, which would then, 
through the 2001 act, include the bar of enforcement by EPA.
    So as each of you have experience in the issue of these 
State voluntary cleanup programs, I would like your positions 
and opinion as to whether or not that would be an effective 
liability release, since what we have found in trying to 
fashion this tax credit, when we put a liability release in it, 
we find that people either react very negatively to a whole new 
release package being created, or are very concerned as to what 
its limitations and scope will be.
    If the State voluntary cleanup program bar of enforcement 
release is sufficient, if you are finding it is successful in 
giving people the confidence to enter into a program, then we 
wouldn't have to reinvent the wheel, we would be able to hook 
into this.
    Kathleen, in your comments you said there is insufficient 
liability relief in the programs you currently have. So I am 
interested in your comments.
    Ms. McGinty. Thank you very much, and I think the direction 
you are going is really encouraging. So let me be a little more 
precise in terms of where we do have full and effective 
liability relief and where we need further work.
    Where we have full and effective--and maybe where each of 
us has a memorandum with EPA--is with regard to CERCLA and 
Superfund liability. Where Pennsylvania is the only State in 
the Nation with a further MOA with EPA is with regard to RCRA 
and TSCA liability. And there, this is the way that breaks 
down.
    For a substantial part of RCRA liability, EPA has granted 
us in this MOA full liability relief upon successful completion 
of the State voluntary program, just as you say. However, 
where, for example, there is groundwater contamination, or 
where, for example, the proposed remedy is what is referred to 
as pathway elimination--in other words, the contaminant stays, 
but you block it off so that a human or sensitive ecosystem is 
not exposed--in those cases, to date anyway, EPA retains 
further enforcement authority.
    With regard to TSCA, since that is the bravest new world, 
if you will, again we thank EPA for putting that on the table 
with us in our MOA, but so far it is procedural. EPA has 
committed that they will process the TSCA liability piece as we 
process the State, the CERCLA, and those pieces of RCRA which 
EPA has not retained overriding authority on.
    So it is further closing out on RCRA and getting a formula 
together where TSCA also can be satisfied upon completion of 
the State voluntary program. That is the new universe we need 
to get into, which is the subject of our MOA, but where we are 
still working to make it real, and to really have one cleanup 
program.
    The last thing I would just say, I want to pick up on your 
point about further points if you have the original party with 
liability at the table, the original responsible party, and 
come back to Mr. Kanjorski's point.
    At least in a State like Pennsylvania, and I think with my 
rust belt colleagues here it is similar----
    Mr. Turner. It is an impressive lineup.
    Ms. McGinty. But we are sunny personalities even if we are 
from the rust belt. Companies are long gone. I can assure you 
where there is a viable responsible party anywhere still in the 
mix, we do go vigorously after them. So the point is where 
there is a responsible party, to bring them to the table. But I 
just wanted to caution not to hold it against us----
    Mr. Turner. It is set up if they exist, if there is one.
    Ms. McGinty. Thank you very much.
    Mr. Turner. Thank you. John.
    Mr. Magill. The suggestion that follows the program mirrors 
what we do with the Ohio revitalization fund. All of our 
projects have to go through a State regulatory program so there 
is a performance-based outcome to be able to hang onto the 
grant. You perform or the community would have to repay the 
grant. So I think the key to this is that it is performance-
based. I think this is really important in this particular 
industry. It demonstrates the citizens can get it done and get 
approved.
    From our perspective, I think this is a good place to start 
because it is known; and the point has been made by other 
members, do not reinvent the wheel and create new mechanisms. 
It also then allows for a piloting operation. If it fails, you 
can make changes. You don't create something new and tinker 
with that.
    The only caveat would be that in some States that the 
voluntary cleanup program does not cover all cleanups. 
Brownfields are a wider perspective. We would look forward to 
working with the subcommittee in the direction to try to make 
sure to try to capture all brownfields. We could look at RCRA 
and some of the other sites and not only get after the 
traditional ones.
    Mr. Scott. I think it is going in exactly the right 
direction, because as has already been said by my colleagues 
here, this is pretty much what we do already. To get somebody 
into the program that each of us have, although there are some 
differences, you pretty much have to go through the voluntary 
site program, and that is already set up, and there are MOUs 
with EPA to enable us to do that. So I think, as John said, it 
will help greatly because you really are just plugging in a new 
piece to something that exists, rather than creating a new 
program.
    So I think it is heading in the right direction, with, as 
has already been said, the admonition it is going to need to 
encompass more than most of our MOUs do right now. In order for 
it to accomplish all of the things we are trying to do, that we 
are trying to do and that you are trying to do, it is going to 
need to be a little bit more broadly based than the MOUs have 
been to date.
    Mr. Hogarth. I don't have much to add to that. The devil is 
in the details, and we would certainly be willing to assist 
with further detailed review and comment as you move forward.
    Mr. Turner. Thank you.
    Mr. Bartsch. I would just add that I think that is a good 
approach, again, with the reasons given already to be looked 
at. Each State has a program in place, and I think what we saw 
after the passage of the national brownfields law a couple of 
years ago, the States will be able to then change to better fit 
the Federal structure that is laid out.
    What is good about using the State voluntary cleanup 
programs, I think from sort of an environmental perspective, is 
it really does provide a recognized mechanism to provide some 
assurance to the community at large that these things are 
proceeding properly.
    Mr. Turner. Thank you. I want to give each of you an 
opportunity to add anything to the record if you would like at 
this point. If there is a question we didn't ask you or 
something you would like to respond to or any additional 
comments you have, to give you an opportunity for any closing 
statements, if any of you have to.
    Mr. Bartsch. I would just like to again thank the 
subcommittee for pursuing this. I think that I have been doing 
community development issues for a long time, and I have not 
seen one where sort of the environmental overlay on the 
economic development process has been so significant. 
Brownfields, as we have said, really are real estate 
transactions that happen to have an environmental twist to 
them, and our challenge is really working to structure programs 
that fit all of these different situations.
    So, again, I encourage you to continue with your efforts, 
and as you do that, just to make sure they can be as flexible 
as possible to address as many different needs as possible.
    Ms. McGinty. Thank you. Just two quick points, both of 
which derive from Mr. Kanjorski's remarks.
    First, in terms of transaction costs and reducing some of 
the analysis that goes into these cleanup programs, we have 
instituted an initiative whereby the State will defer to a 
cleanup program for smaller, less complicated sites, if it is 
PE certified, if you have a professional engineer, a 
professional geologist, certifying to the cleanup. We do not do 
iterative reviews. We ultimately decide if it meets our 
standard, but we do not do the iterative engineering reviews. I 
share that for your consideration.
    The second and last thing I would just pick up on, and we 
haven't really mentioned it here but it is inherent in the idea 
of a 30-year bond or patient capital, long-term capital. One of 
the things about these programs and these cleanups is once you 
have the containment structure in place, it is forever and for 
always, amen. You need to know that those dollars will be there 
today, tomorrow, and well into the future so that the community 
and we all have the confidence that contaminant not only today, 
but 30 years from now, is still contained, that there has been 
no breach of the containment structure, etc. So the idea of 
long-term, patient capital could be very, very important to 
maintaining the integrity of brownfield remediation programs.
    Mr. Magill. Thank you again, Chairman Turner, members of 
the community, for your interest in brownfields. I would only 
add that the programming needs to remain, I think, flexible 
with the local and particularly private market orientation 
because, at the end of the day, the private capital resources 
dwarf our ability to generate government investment; and if 
they can be attracted to brownfields, they will help us finance 
the cleanup, construction, resulting in the new jobs or the 
parks, and, as Mr. Scott referenced, invigorate the local 
communities, whether they are rural or urban. Thank you.
    Mr. Scott. Thank you again, Mr. Chairman, and members of 
the subcommittee. I also wanted to say a couple of things about 
what I thought were the very good remarks by Mr. Kanjorski.
    We too have an interest in mining cleanup, as well as in 
clean coal technology and the continued use of coal for an 
energy source, and have done a lot of things toward that regard 
in the last couple of years.
    I think that from our standpoint, if you are going to do 
something more comprehensive on a national level with respect 
to mined lands, I think that would be a fantastic thing to be 
able to do. I think you would help to drive down the 
transaction costs that are associated with engineering, with 
legal fees, with financial fees that are associated with that. 
I think that is a benefit. But also a comprehensive plan to try 
to get at all of those, I think would be very good.
    In terms of best practices or in help to develop any long-
range plan, Mr. Bartsch mentioned there are other ongoing 
brownfields conferences. The State of Illinois--and I am sure 
all my colleagues do this as well--are continually reaching out 
to both the public and private sector, plus we have 
organizations like the National Brownfields Association which 
is doing that.
    But in terms of if this was an offer, I will take you up on 
it. The suggestion that we sit down with other members who have 
an interest in this, myself and colleagues from Illinois and 
from other States, I would be more than happy to do that and 
would just make that offer to you; that anytime that is 
something you would like to explore, Mr. Chairman or Mr. 
Kanjorski or other Members, I would be more than happy to do 
that.
    Mr. Hogarth. I would just like to mention one piece of the 
puzzle that didn't get much attention today, and that is 
leaking underground storage tanks. Just in Michigan, we have 
4,200 sites that are orphaned leaking underground storage tank 
sites. That is the places where the liable party is gone, 
bankrupt. That 4,200 sites we calculate represents a need of 
about $1\1/2\ billion, with a ``b,'' just in Michigan to 
appropriately address them. They are spread all over the State, 
largely in urban areas, sometimes four corners at an 
intersection, and they pose a significant part of our 
brownfield problem.
    We have only been getting about $1 million a year out of 
the Federal trust fund to deal with these sites. So anything 
you can do to help address that problem would help the States.
    Mr. Kanjorski. Do you move in and drain the containers or 
do they still contain the pollutants?
    Mr. Hogarth. Well, in most cases, the tanks have been 
emptied. It is the material that has already leaked out into 
the ground, the soil, and the groundwater that poses the 
remaining hazard. Sometimes it is a significant hazard.
    Mr. Kanjorski. I had one in my district that we spent $30 
million on, just one site.
    Mr. Turner. As we turn to our second panel, I want to 
acknowledge that although my hometown is Dayton, OH, and my 
district is in Ohio, my family roots are in Kentucky. And we 
have the mayor of Maysville, KY, David Cartmell, who is also 
the president of the Kentucky League of Cities, and, with Mr. 
Kanjorski's approval, we are going to add him to our second 
panel.
    I would like to call for that panel. We will take a short 
recess.
    [Recess.]
    Mr. Turner. We will reconvene as we prepare for the second 
panel. We are going to begin with Robert Colangelo, executive 
director, National Brownfield Association. Robert, I appreciate 
your being here.
    I was reminded I did not swear you in. As you know, it is 
the policy of this committee that the witnesses be sworn in 
prior to their testifying. If you would please rise and raise 
your right hands.
    [Witnesses sworn.]
    Mr. Turner. Let the record show that all the witnesses have 
responded in the affirmative. I think each of you will recall 
from when we began panel I that you have on the table a light 
system. Green is when you are to begin your comments, red is 
when you to are to end your comments. Each of you has been 
provided a 5-minute time period. We appreciate the fact you 
have provided us with written testimony and that you have an 
oral summary of your testimony. We will end with a question and 
answer period.
    Robert.

 STATEMENTS OF ROBERT COLANGELO, EXECUTIVE DIRECTOR, NATIONAL 
  BROWNFIELD ASSOCIATION; JONATHAN PHILIPS, SENIOR DIRECTOR, 
CHEROKEE INVESTMENT PARTNERS, LLC; CHARLES HOUDER, DIRECTOR OF 
 ACQUISITIONS, PREFERRED REAL ESTATE INVESTMENTS, INC.; KEVIN 
   MATTHEWS, AIG ENVIRONMENTAL, DIRECTOR OF ASSOCIATION AND 
    ENVIRONMENTAL RELATIONS; AND DAVID CARTMELL, PRESIDENT, 
                   KENTUCKY LEAGUE OF CITIES

                 STATEMENT OF ROBERT COLANGELO

    Mr. Colangelo. Mr. Chairman, it has been an honor and 
privilege to work with you to battle blight and really bring 
these properties back responsibly to redevelopment. It is also 
a pleasure to address the honorable members of the 
subcommittee, and we appreciate your interest in improving 
State financial incentive programs related to the complex issue 
of brownfield redevelopment.
    I come here today offering two perspectives, one as the 
founder of a private development company that has successfully 
redeveloped more than 1 million square feet of brownfield 
property in the Chicago area, and the other as the executive 
director of a nonprofit organization dedicated to the 
responsible redevelopment of brownfields, the National 
Brownfield Association, where we have more than 900 members 
from the public and private sector that are really the experts 
in the industry that are dedicated to bringing these properties 
back to responsible use.
    My experience as a private sector developer is that State 
brownfield programs provide liability relief, financial 
incentives, and technical assistance. Most developers who 
purchase and prepare properties have come to rely heavily on 
the liability relief offered through State voluntary cleanup 
programs.
    One of the strongest liability reliefs is provided by the 
Illinois EPA through its No Further Action letter. These 
comfort levels provide a defined level of liability relief to 
developers who have responsibly remediated sites and it gives 
them the ability to secure debt financing for these brownfield 
projects.
    Technical assistance and financial incentives, while great 
ideas, are often impractical for most private development. The 
Ohio Clean Revitalization Fund is an example of a program that 
does work. Developers often consider incentives as an 
afterthought because of the perceived or real difficulties in 
securing them, the small amount of assistance typically 
available within a program in relation to the project cost and 
the time required to secure these funds.
    It is my experience that most financial incentives go 
directly to cities or nonprofit development corporations and 
the limited amount of program funds that is available to the 
private sector often requires an intense investment of time and 
the use of expensive consultants to help navigate through the 
program eligibility requirements and the application process. 
Most traditional developers will pass on a brownfield site 
rather than take a chance on a project that will only work if 
government incentives are provided.
    Two incentive programs that I have personally found that 
work well are tax increment financing and State tax credit 
programs. These incentives are attractive enough to convince 
private sector developers and investors to take a risk on the 
brownfield project. The use of brownfield tax credit programs 
has worked well both in New York, Michigan, and other States.
    As time goes on, fewer easy-to-develop brownfield sites are 
available. Increasingly, cities are left with the harder, more 
complicated brownfield sites, and these sites will require 
meaningful government incentives to attract private sector 
investment and developer interests. The challenge to every 
government agency is to strike a balance, to be developer 
friendly, without being overly incentive-rich.
    Brownfield sites by their definition require incentives to 
bring them to par with unimpaired properties. For government 
incentives to be meaningful to the private sector, programs 
should be easy to understand and administer, apply to a wide 
type of projects, allow flexibility in the use of funds, 
provide meaningful funding amounts, and allow for unused funds 
to be transferred or refunded.
    Chairman Turner, I personally commend your efforts to look 
for financial incentive solutions, and I support legislation 
which would create a Federal brownfield tax credit and that 
would allow for demolition and remediation expenses to earn a 
Federal tax credit.
    Putting my other hat on as executive director of the NBA, I 
would like to introduce our recently completed analysis of 
State voluntary and brownfield cleanup programs. This could be 
a possible resource to you. Mr. Kanjorski, you asked about some 
resources and analysis of programs, and this paper was 
completed by the NBA as a result of our Brownfield Leadership 
Summit held in Washington, DC, in May 2005. In there we looked 
at all the State programs and made some key recommendations and 
we highlighted elements of different State programs that work. 
So we encourage you to look at this.
    What we found is that although no single State has 
developed a ``best program,'' many States have been very 
creative in developing specific program elements that work 
well. When designing incentive programs, we encourage you to 
consider the recommendations provided in this paper.
    Again, Members of Congress are to be commended for their 
willingness to consider and promote new financial incentives 
that attract private sector investment to these properties. And 
I thank the committee for the opportunity to speak and look 
forward to your questions. Thank you.
    Mr. Turner. Thank you.
    [The prepared statement of Mr. Colangelo follows:]

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                 STATEMENT OF JONATHAN PHILIPS

    Mr. Philips. Mr. Chairman, members of the committee, my 
name is Jonathan Philips and I am senior director of Cherokee 
Investment Partners. As you may recall, I testified before the 
subcommittee on April 5th regarding the effectiveness of 
Federal brownfield programs, and I feel honored to add my 
testimony today by addressing our experience with State 
programs. Thank you for this opportunity.
    Cherokee is the world's largest and most active firm 
specializing in brownfield revitalization. Since inception, we 
have acquired hundreds of impaired properties. Our objective is 
to transform these sites into productive, sustainable, and 
liability-free assets. As a result, communities have enjoyed 
safer, less polluted environments, increases in jobs and tax 
revenues, and a vast reduction in sprawl.
    We can tell you firsthand that well-designed State programs 
are a critical component of this Nation's efforts to revitalize 
lands. We also believe they are not sufficient to solve this 
Nation's brownfield problem in our lifetime.
    In my written testimony, I highlight a number of innovative 
State programs and also reference a number of excellent surveys 
of them, some of which were conducted with the help of some of 
my fellow panelists. In the interest of time, I will not repeat 
that information here today.
    Given the diverse tools offered by various States, tax 
credits, voluntary cleanup programs, tax increment financing 
and the like, one might mistakenly think that we should have 
the brownfield problem solved. However, as you know, there are 
at least 450,000 to 1 million brownfields in this country and 
only 16,000 sites, less than 4 percent, have been redeveloped 
or are currently in the process of redevelopment through State 
and voluntary cleanup programs.
    To further illustrate this point, I am pleased to share 
some internal data from our periodic review of our activity and 
that of others in our field.
    Of the Nation's many sites, we typically focus on a 
prescreened subset of roughly 450 over a 2-year period and then 
select as many as 10 for investment. Two years later, when we 
research those remaining 440 sites, we can consistently find 
that not more than 5 to 10 have been chosen for investment by 
others. Frequently, that number is much lower. Please consider 
this data. The private sector invests in fewer than 5 percent 
of our prescreened sites, leaving 430 to sit idle indefinitely.
    Our data confirms what we all know: Despite existing 
programs, the vast majority of this Nation's brownfields, not 
just the prescreened ones, remain unattractive to investors.
    Last April, I encouraged this committee to think about 
sites plotted on an economic continuum with two halves, sites 
underwater and above water. An economically underwater site is 
one that the market ignores given the risk-reward calculus.
    An above-water site is likely to be revitalized by the 
private sector without assistance. Along this continuum are 
sites that fall barely below water. These are sites that have a 
shot at being redeveloped during a favorable economic upturn or 
with a slight nudge from an incentive program.
    Unfortunately, most brownfields are clustered toward the 
underwater side of the continuum, many considerably so. Without 
significant public assistance, these sites may never be touched 
by the private sector, which raises a critical point: These 
terms, underwater and above water, simplistically exclude all 
but the internal cost-reward of a developer. They do not 
reflect beneficial public externalities brought by 
transformation, such as less pollution, improved health, more 
jobs, reduced sprawl and increased tax revenues, each of which 
can and should be present value monetized on the local, State 
and Federal levels and used to aggressively stimulate 
reclamation, much as Mr. Kanjorski and others have discussed 
already in terms of long-term bonding. TIFs do a good job of 
this.
    A mission of government then must be to target that group 
of sites that are both underwater from a market perspective and 
above water from a public perspective. Fortunately, we have 
models that can show us the way forward. One example is the tax 
credit for rehabilitating historic structures that Congress 
created in 1976. It has stimulated more than $33 billion in 
private investment, with over 325,000 housing units, of which 
75,000 are for low and moderate-income families.
    I believe that this Federal model has been successful for 
two reasons: First, it is uniform across the Nation, and; 
second, it works in tandem with State programs to drive more 
historic sites from underwater to above-water status. Given 
this, doesn't it make sense to think about applying the 
successive tax credits to brownfields?
    Chairman Turner's brownfield proposal creates a 
transferable tax credit for eligible costs at qualified sites. 
Critically, this credit could be leveraged early in a project, 
thus allowing a pioneering developer to attract some of the 
riskiest capital with the equity created by the forward sale of 
the credit.
    For investors the impact is real, as they would be able to 
delay a portion of their equity investment, thus boosting rates 
of return and more easily attracting debt and equity.
    In this sense, Chairman Turner's proposal tracks the 
historic credit model. The existence of such a credit would 
allow us and others to consider sites that are below water from 
a private perspective but above water from a public benefit 
perspective. A credit would be a logical extension adopted, 
such as a 2001 brownfield law, section 198 expensing, and the 
recently passed bill that was cosponsored by many, including 
Chairman Turner.
    A national transferable credit would be a powerful and 
fitting complement to State efforts. After all, as a friend 
once told me, you don't fight a forest fire with a water 
pistol.
    Nearly every Member of Congress has the misfortune of 
brownfields in their districts. Together we can transform these 
sites and build healthy communities with robust job and tax 
bases and strong economies.
    We look forward to continuing to work with members of this 
committee, and Congress as a whole, to explore new ways to 
accelerate cleanups. Please do not hesitate to call upon us as 
both a resource for these legislative endeavors and for 
assistance with specific sites that are in need of targeted 
assistance.
    Mr. Chairman, members of the committee, it has been an 
honor and privilege to testify here today. I am happy to answer 
any questions you have.
    [The prepared statement of Mr. Philips follows:]

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                  STATEMENT OF KEVIN MATTHEWS

    Mr. Matthews. Mr. Chairman and members of the subcommittee, 
thank you for inviting AIG Environmental to testify on State 
incentive programs for brownfields. I am Kevin Matthews, and I 
serve as director of government relations for AIG 
Environmental.
    AIG Environmental is a division of the American 
International Group. AIG's general insurance operation includes 
the largest underwriters of commercial and industrial insurance 
in the United States and the most extensive property casualty 
network.
    AIG environmental pioneered the use of environmental 
insurance and has 25 years of experience underwriting 
environmental at-risk and is currently the Nation's leading 
provider of environmental insurance. We view ourselves as a 
solutions company as we work to provide innovative approaches 
to handle environmental liability and cleanup issues.
    Throughout our history we have developed new insurance 
products to respond to new and emerging risks for both the 
public and private sectors.
    Environmental insurance is not the silver bullet for 
brownfields redevelopment. However, it is one of the tools in 
the tool chest that helps lead to successful cleanup and 
redevelopment because it has often helped address some of the 
greatest concerns of brownfields redevelopment: environmental 
liabilities and uncertainties concerning cleanup.
    We are here today to focus on State programs that utilize 
environmental insurance to advance the cleanup and reuse of 
brownfields. The three States we work most closely with in 
these programs are Massachusetts, Wisconsin, and California. I 
will speak about the Massachusetts approach. The other States 
are covered in my written testimony.
    The one thing I would like to leave you with is for every 
$1 that the Commonwealth of Massachusetts spends on 
environmental insurance, they get $458 in return in private 
investment. Keep that in mind as we go forward.
    The Massachusetts Brownfield Redevelopment Access to 
Capital Program [MASSBRAC], was created by the Commonwealth to 
provide a pool of funds to be used to guarantee loans made to 
developers who agreed to clean up and reuse brownfields. What 
was quickly learned by Mass Business is that capital is 
available for brownfields. However, what stymied brownfields 
redevelopment was the fear of environmental liability from a 
historic contamination and the concerns that cleanup costs 
would exceed the cleanup cost estimate.
    The staff of Mass Business took it upon themselves to 
determine if tools were available that could address such 
concerns and spur redevelopment. What they discovered was that 
environmental insurance could address these issues. So Mass 
Business entered into a contract with AIG Environmental where 
member companies of AIG would provide site owners or developers 
pollution legal liability insurance and cleanup cost cap 
insurance at prenegotiated rates and coverage. Mass Business 
would subsidize the premium cost of insurance to qualified 
developers. The subsidies ranged from 25 percent to 50 percent 
of the insurance premium costs.
    The program has led to rapid growth in the Massachusetts 
brownfield program. Here are the results as provided by Mass 
Business. The number of sites in the program totals 259. The 
dollar value of the sites cleaned up is $145 million. The 
investment in loans created out of this is $2.1 billion. The 
number of jobs created is 25,000. The amount of money the 
Commonwealth of Massachusetts has spent on environmental 
insurance is $4.8 million. That ratio is $1 for every $458 in 
return.
    What MASSBRAC did was address the concerns with regard to 
environmental liability issues by making two AIG environmental 
insurance policies available to MASSBRAC program participants. 
These environmental insurance policies, pollution legal 
liability and cleanup cost cap insurance, are detailed in my 
written statement.
    AIG Environmental is extremely proud to have participated 
in this program since its inception. We are just as proud of 
the results we have achieved in the Commonwealth. In fact, the 
greatest success was last year the U.S. EPA Region I Phoenix 
Award winner was one of our insureds in the Commonwealth of 
Massachusetts.
    Fortunately, Congress had the foresight in the 2002 
brownfield law to allow EPA grant recipients to use funds from 
those grants to purchase environmental insurance. Therefore, 
local and State governments and qualified nonprofits can use 
EPA brownfield funds to offset the cost of establishing State 
or local environmental insurance programs or using the grants 
for specific brownfields transactions.
    AIG Environmental is extremely proud of our role in 
brownfield transactions. We truly enjoy working at all levels 
of government to make brownfields redevelopment a reality. One 
of our greatest joys was when the Atlantic Station project in 
Atlanta, GA, was selected as the National Phoenix Award winner 
in 2004. AIG Environmental companies were intimately involved 
in this project at numerous levels, and we take great pride in 
our contribution of making that section of Atlanta come alive 
again.
    Again, environmental insurance is just one of the tools 
utilized in brownfields redevelopment. Perhaps its use is one 
of the best leveraging tools available. State programs that 
have used this tool have been proven very successful, and we 
look forward to working with this committee and the chairman to 
assist in developing legislation that will allow States to take 
advantage of similar programs.
    Thank you. I will be happy to answer any questions you 
might have.
    [The prepared statement of Mr. Matthews follows:]

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                  STATEMENT OF DAVID CARTMELL

    Mr. Cartmell. Mr. Chairman and members of the committee, 
thank you so much for letting me speak on such short notice. I 
am here today wearing three hats. I am a developer, not in the 
developer sense, but I come from a city that has done 
brownfield developments. I am the mayor of Maysville, KY, a 
city of multiple brownfield issues. I am the president of the 
Kentucky League of Cities, which has taken the lead in the 
redevelopment of Kentucky cities, and I am the chairman of the 
executive committee of the newly formed National Brownfields 
Association Chapter in Kentucky.
    Maysville is a small city of 9,000, but we have 10,000 
jobs. I come from a town built on sin, whiskey, tobacco, and 
hemp. But it is the milk that did us in, because we had 
Carnation, and we have a condensary that condensed all the milk 
in Ohio and Kentucky, and consequently through the lead process 
and canning process it contaminated virtually half of our city.
    Through a partnership with the Kentucky EPA and Federal 
EPA, we cleaned this site. The city acquired this site from 
Nestle, or from its predecessor--or successor, Silgan. We 
cleaned the site. We won the Kentucky Earth Day Award for 2005, 
but as of today we have not received a clean bill of health 
from the EPA. This is ongoing for 10 years. This is our 10th 
year.
    It is difficult for us, simply because there is a new 
company from New Jersey located there with 100 employees that 
wishes to purchase. They will not purchase without the clean 
bill of health.
    Moreover, with each administration change, there is a 
change of interpretation of rules. In addition to this, 
Maysville has 31 tobacco warehouses abandoned, an abandoned 
hospital with a $1.3 million asbestos cleanup bill, and 
multiple cotton mills and other factories. It is a 
disappointment that Kentucky received no EPA grants this last 
funding cycle, even though there were multiple applications.
    Personally, as a city, we have used every smart growth tool 
available to us. We have planning and zoning, we have stopped 
growth beyond our urban services boundary. But we need help 
with streamlining this process. We do need the targeted 
incentives, we need Chairman Turner's tax incentives, we need 
help to cope with the future liabilities, and we need a timely 
release on liability.
    Mr. Chairman, I would like to thank you for pursuing this 
interest so vital to the redevelopment of our cities, and thank 
you for letting me speak today.
    [The prepared statement of Mr. Cartmell follows:]

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                  STATEMENT OF CHARLES HOUDER

    Mr. Houder. My name is Charlie Houder. I am the director of 
acquisitions for Preferred Real Estate Investments. I want to 
thank the committee for the opportunity to be here today, and 
also want to thank Mr. Colangelo of the NBA for his efforts in 
this regard and for at least bringing me here today. When I 
first spoke to him, I contacted him about playing point guard 
for the 76ers, and then realized the NBA stood for something 
else and I realized we had other things to talk about; namely, 
brownfields.
    Preferred Real Estate Investments is a private real estate 
developer. We are a for-profit company first and last. We are 
not a brownfields developer in the sense that we seek 
properties that are contaminated to focus our development 
efforts on. However, we do have a major development focus on 
infill sites and large corporate surplus sites around the 
country, and invariably they bring along with them 
environmental liability. So over the 20-years history of the 
company, we have by necessity developed an expertise in being 
on the very front lines of dealing with environmental 
liabilities.
    I am also a big believer in the fact that pictures speak 
1,000 words. In my business, in my day-to-day work, it is much 
more conversational than presentational, so I thought the best 
way to kind of work through some of these examples is to show 
pictures of what we are actually here talking about. And what 
we are actually here talking about, especially in the context 
of what I do, is specific sites. Yes, contaminated sites, yes, 
but what these sites lead to.
    And the purpose behind cleaning them up--and this speaks to 
Mr. Kanjorski's comments--is that there are communities that 
are beholden to these sites and that rely on the land that 
oftentimes comprises a large majority of the city or town or 
neighborhood that these sites are located in. And I thought we 
could walk through a couple examples as a way of illustrating 
the import of what we are talking about here today.
    This is an example of some of the companies that we have 
done business with over the last 20 years. I think one of the 
common themes underlying everything that we talk about here 
today is paying attention to the corporate owner of real estate 
and the corporate seller. These are cases where the corporate 
owner is well known; the corporate site that they own, that 
they may have mothballed or put into minimal use is well known; 
but the problem is that because of a lack of regulatory 
certainty and because of all of the minefields, perceived or 
otherwise, that pertain to taking environmentally challenged 
problems through a transaction, they refuse to put them back 
into productive use.
    These are a few examples of companies that have taken that 
leap and worked through that maze, sometimes minefield, of 
working with a private developer to bring properties back into 
productive use.
    This site I am going to focus on in particular is a former 
PECO site. PECO stands for Philadelphia Electric Co. It is a 
subsidiary of Exxon which is based in Chicago. This was a 
former power plant on the banks of the Delaware River, just 
south of Philadelphia, PA. It is located in Chester, PA, which 
historically was a heavy manufacturing town.
    This power plant was built and designed by the same 
architect that designed Union Station in Washington. It was 
built at a time when power plants were designed to be monuments 
to their product, to convince people of the certainty and 
reliability of the energy that they provided. Over time, this 
power plant provided the energy that built most of the ships 
for the World War II war effort and fueled all of the industry 
along Chester's waterfront. Over time, it became functionally 
obsolete. The buildings and industry in Chester became obsolete 
and moved offshore or simply closed down.
    As a result, Chester as a community essentially closed 
down. Largely a minority community, the typical social ills 
crept in: crime, educational problems, AIDS, poverty and every 
other social ill you can imagine.
    When we came to this site, PECO had brought in every expert 
in the United States to figure out what to do with this site. 
It is an 80-acre piece of ground right on Chester's waterfront. 
Every expert in the world told them, ``the only functional use 
for this is to knock it down. Even if you were able to do 
something with the property, what would you have? There is 
simply no market for it.''
    We took a different approach. We thought that it could be 
the linchpin of a major economic redevelopment on the Chester 
waterfront, so we undertook in partnership with the 
Pennsylvania DEP and the EPA what was at the time the most 
complex demolition project in the United States. It involved a 
major rehabilitation of the environmental condition of the site 
and a major deposition and rehabilitation of the interior 
portions of the site.
    Over the 4-year course of the project, it was redeveloped 
into an office building. It is now fully leased to the likes of 
Wells Fargo and a software company. It has created 2,000 jobs 
in a city where, when we started this project, there were a 
total of 3,000 jobs. I think it speaks highly to the fact that 
targeted environmental efforts, with State and certainly 
Federal cooperation in conjunction with private developers, can 
lead to a dramatic resurgence of an entire community.
    This one building has led to an entire rejuvenation of the 
Chester waterfront. This is what it looked like once the 
building was complete. This is a master plan. You will see the 
small blue square at the bottom left is the original building. 
This has given rise to a major redevelopment of retail, 
residential, and further commercial redevelopment of the 
Chester waterfront.
    This is just some examples of what the original turbine 
hall looked like and how it was basically gutted and new office 
space created.
    I think this speaks volumes to the import of why we are 
here today. This project was done utilizing Federal tax 
credits, historic tax credits, and I think those programs and 
programs like that work very well in making projects like this 
work.
    Some further examples of the interior once it was redone. 
This is another quick example.
    I am going to run through a couple of other case studies of 
projects that were done. This is a former Bud plant in 
Philadelphia. Again, a large contaminated site where there was 
an even greater perception of contamination than there actually 
was.
    This is in a former American Standard plant, a former 
toilet factory in Hamilton, NJ. Again, a contaminated site that 
worked with the public and private partnership, and again with 
the corporate seller, convincing the corporate seller to come 
to the table to effect a sale.
    Texas Instruments in Attleboro, MA. Again, an old 
dilapidated, functionally obsolete surplus corporate site that, 
working with Texas Instruments, we were able to navigate 
through environment concerns.
    Last, a former Ingersoll Rand site in Phillipsburg, NJ, 
where Ingersoll Rand had the belief in the town and worked with 
us to help navigate through the environmental questions.
    I will conclude my testimony with that and look forward to 
answering any specific questions.
    [The prepared statement of Mr. Houder follows:]

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    Mr. Turner. In listening to the various State programs, one 
of the things that I think is interesting about their 
assistance is that there are some programs that provide 
recapturing grants, revolving loan funds, etc.; others provide 
direct subsidy, it is not recoverable. It seems to me that in 
many of these sites that the gap--the subsidy is needed in a 
manner that is not recoverable. That means that these sites are 
not going to be, even when they're remediated--that the process 
of acquiring the property and remediating the property when 
compared to the cleaned value prior to complete redevelopment 
is still going to be a negative proposition. In other words, 
you're still going to have a negative value when you add in the 
cost of acquisition and remediation prior to the redevelopment.
    And you have, each of you, experience in a number of 
different redevelopment projects. In the tax credit bill that I 
have brought forward, it is a straight subsidy. We're not 
seeking to recover the funds. Do you think that is an essential 
element, as we look to a broader scheme, to redevelop the 
brownfields? Mr. Colangelo.
    Mr. Colangelo. Mr. Chairman, yes, I do. I think one of the 
most difficult things to secure is your debt financing on a 
project, and through this tax credit bill, I think it would 
bring additional comfort to banks and the lending community so 
that you would have lesser lines on equity. So I think that a 
tax credit bill could clearly be a catalyst to encourage some 
more of the banking industry to get involved with these 
brownfield sites.
    Mr. Philips. Mr. Chairman, I would echo Mr. Colangelo's 
comment as well, and also point out that a number of people, 
not just on this panel, but previously on the first panel, had 
suggested that smaller sites were more problematic perhaps 
because they received less attention and they were lower-
profile sites. And if you think about a tax credit, that can 
be--again, as I mentioned in my oral testimony, it could be a 
forward sale situation where you can create equity, and that 
chunk of equity could then be leveraged to either attract more 
equity or to attract debt capital, and that is critical to 
everybody, but clearly to a smaller entity because what it does 
is it doesn't start the clock of the return investment until--
or at least a portion of it until you deploy that capital later 
in the project. So that is critical.
    And I just wanted also to point out similarly the recapture 
issue and sort of providing a subsidy versus providing 
something that has to be returned or recaptured, such as the 
BDI program--the Economic Development Industry program, I 
should say--is it worked before. It has worked in the historic 
preservation tax credit.
    I was speaking to a developer just recently who has 
purchased a site, purchased a site in Durham, NC. We're 
headquartered in Raleigh, NC, and we're apparently right down 
the street, and the site was purchased for $14 million. The 
site would have never been touched. It was an old tobacco 
warehouse; it would never have been touched had it not been for 
the historic tax credit. The entity rehabilitated the site, 
sold the site for--when you think about all the soft costs and 
the hard costs and everything combined and the interest 
payments, the debt service--for less than $14 million, but, 
because of the credit, was able to make it a viable project.
    Those are the kind--when I talk about above-water versus 
underwater sites in my testimony, this is what I'm talking 
about. There is a gap where there is huge public benefit, but 
for the developer, to the investor they still are viewed as 
under water because they can't monetize or commodify those 
public benefit externalities. And I would encourage you to 
continue on your mission to pursue the tax credit for that 
reason as well.
    Mr. Matthews. In our experience with several States that 
have environmental insurance programs, there are those who do 
credits and those who do subsidies. The subsidies are far more 
successful. As a matter of fact, you can directly see it in 
Massachusetts. When they first opened the program, they offered 
a 50 percent subsidy toward the premium of environmental 
insurance. Due to budget cutbacks, they had to reduce that 
subsidy to 25 percent at one point in time. The number of sites 
coming into the program dropped by 50 percent when they cut the 
subsidy by that amount, so it is directly corollary.
    In States where there is just a tax credit available, we 
see much, much smaller activity, I mean substantially less 
activity in that market.
    Mr. Turner. Mr. Cartmell.
    Mr. Cartmell. Our success has been, in taking the State 
subsidy, which we have through a renaissance program, doing the 
project ourselves and then selling it to a developer. So 
certainly even for us the subsidy was the defining factor for 
us to complete the project.
    Mr. Turner. Mr. Houder.
    Mr. Houder. I think, as was mentioned by the former panel, 
typically when it comes to incentives, the size of the 
incentives that can be offered by the Federal or State 
government, at least in our experience with the size of the 
sites that we basically develop, are typically not the 
difference maker in us deciding whether a site works or doesn't 
work, with the exception of tax credits. Tax credits, certainly 
the historical tax credit program has been a difference maker. 
That is probably the single incentive program that has the 
ability to tip the scale in undertaking a development project.
    Mr. Turner. Mr. Kanjorski.
    Mr. Kanjorski. Well, it has certainly been worthwhile to 
hear your experiences. I'm glad to see there is a very 
sophisticated insurance program out there. I'm certainly going 
to take it back to my district and see that we utilize it. So 
we're going to get you more business.
    Mayor, it is always great to see local leadership like 
yours come forward and tackle these tough problems. 
Unfortunately, the experience of many people that are in public 
life doesn't lend them to your facility to do that, so it is 
great to see you here. And Kentucky has to be better off. I've 
gone through major parts of Kentucky; I know you have the same 
problems we have in Pennsylvania.
    On your reconstruction, I'm going to get your card; I have 
a couple of sites.
    And, Mr. Philips, you obviously are one of the 
sophisticated industries now that we have grown up in this 
field, so it would be very helpful for you to be very close to 
Mr. Turner in structuring this to see how we can tailor it in 
the best financial way to attract the private market.
    Mr. Philips. Not part of any Beltway industry, I promise.
    Mr. Kanjorski. If you do that, I will kill you.
    And, Mr. Colangelo, you obviously come with a developer's 
experience, and now the national perspective of what is 
happening.
    I'm going to walk away from this hearing more optimistic 
than I thought I would when I came to it, so I just want to 
congratulate you all, thank you for coming in. And then, again, 
thank Mr. Turner for a real enlightened presentation here and 
some real thought on his side to get something done creatively 
in Congress. It doesn't call for great national headlines, but 
Mr. Turner's actions here are the type of things that really 
spell well for the Congress, because over the long run it 
accomplishes far more than longshots.
    Mr. Matthews. Mr. Kanjorski, if I might add, specifically 
in Pennsylvania, Representative--Senator Erickson and 
Representative Frankel from the State legislature have both 
introduced legislation to establish a program similar to 
Massachusetts; and it is currently moving through the house and 
senate at this point in time.
    Mr. Kanjorski. If you would get me that thing, I would be 
happy to write a letter to the members of the legislature to 
support it.
    Mr. Matthews. Thank you.
    Mr. Colangelo. And, Mr. Kanjorski, I also wanted to mention 
that Pennsylvania was one of the founding members of the 
National Brownfield Association, and we are happy to announce 
that we are just launching our Pennsylvania chapter this month, 
and we would like to invite you to our inaugural reception in 
Harrisburg. And Pennsylvania has long been a leader in this, 
and I do encourage you to be optimistic. There's members like 
this from the public and private sector all along the country 
that are really dedicated to responsibly--and I mean 
responsibly--cleaning these up right, but making sure they 
provide economic benefit. And we've had the privilege of 
working with Congressman Turner on this issue, and I again 
encourage you that there is a good group of people that are 
very dedicated.
    Mr. Kanjorski. I'm impressed.
    Mr. Turner. Well, Mr. Kanjorski, I look forward to working 
with you on this. We've had discussions before about the 
brownfield spill, and also your mining and reclamation efforts, 
and your bill and the funding mechanism that you use with 
respect to bonding. I look forward to working with you on that 
because this is obviously something that is important to both 
our States, and it is important to have a bipartisan effort to 
address this.
    And, Mayor, I also want to congratulate you. It is 
interesting, I think, these days that when people run for local 
government, they think in terms of services and police and 
fire, and not the need to become local developers. But with 
these issues of brownfields, really the future of our 
communities, what they're going to look like, really require 
people to step up like you have with the expertise to take on 
projects that are a little bit more complex to make them 
happen, because the private sector really at this point does 
not have the tools yet to do it. So I commend you for that.
    And I want to ask you all the last question, which was the 
same question that I asked the first panel with respect to the 
voluntary cleanup programs on the State level. As I discussed 
with the brownfields bill, the tax credit bill that I have been 
working on, the liability release provisions within it, we are 
looking now to hook that into the voluntary cleanup program 
rather than have language in the bill that would provide a 
separate release and some angst to individuals as to how that 
might be applied.
    We heard from the representatives from the States as to how 
the volunteer cleanup program liability or bar of enforcement 
from the Federal EPA has worked effectively for them with some 
caveats of RCRA and TSCA as an area where it would need to be 
expanded or nailed down between their State and U.S. EPA.
    Each of you having experience in the area of the 
remediation, I would like your thoughts as to a tax credit 
program that requires the recipients to participate through the 
volunteer cleanup program and its effectiveness.
    Robert.
    Mr. Colangelo. Thank you.
    First of all, I would like to state that brownfields are 
really a balance, and it's a balance between four stakeholder 
groups, property owners, developers and investors, service 
professionals and government. And I'd really like to commend 
government both at the legislative level as well as the Federal 
agencies, U.S. EPA, and the State and local government, who 
really come together to work together to try to make the 
process quicker, because that's the big hindrance to the 
private sector; it's time. It's also a balance between buyers 
and sellers.
    What you see right now in many State voluntary cleanup 
programs is that you have two levels of liability relief. The 
buyer can get out of--or has very defined liability relief, but 
the original contaminator can't get out of that liability 
relief. What you propose, I think, starts to address that 
issue, and what I think it would do, personally, is it is going 
to allow companies to be more apt to clean up these sites, and 
you're going to put a larger supply of developable properties 
onto the marketplace.
    The NBA, in our last leadership summit, wrote a white paper 
on what we can do to bring more corporate brownfield properties 
to market, and we found that corporate America owns more than 
43 percent of these industrial commercial properties, and the 
No. 1 concern they have is getting out of the liability relief.
    So I commend these States on these voluntarily cleanup 
programs that have come a long way, and I think what you are 
proposing takes it the next step further. And again, making 
sure that they're responsibly cleaned up, I think, puts the 
controls to keep the balance in the system that we've created.
    Mr. Turner. John.
    Mr. Philips. Thank you.
    Just a couple of comments on indemnification. We offer that 
as part of our program. We indemnify our sellers, and we do 
that not just because of our funds, but we do that with 
backstopping it with companies like AIG Insurance. We are one 
of the largest buyers of environmental insurance perhaps in the 
world, and we think that it's very important to provide this 
kind of comfort to sellers or even potentially responsible 
parties. And we think it's important that you're thinking about 
this issue in the bill. It could have easily have just been a 
tax credit piece of legislation without the liability 
component, and this is very important.
    Second, in our experience at Cherokee, we do take many of 
our sites through the voluntary cleanup program anyway, and we 
think that as time has gone on, and more have been adopted 
throughout the States, and the 50 States, we have seen that it 
has become a more popular route. And it seems to me to be an 
intriguing option to help integrate States into the process of 
the Federal tax credit to sort of provide a requirement that 
one goes through the State voluntary cleanup program. I think 
it has many attractive elements.
    Mr. Matthews. We encourage all of our States to go through 
the voluntary cleanup programs. We are familiar enough with 
them now, and each individual State that we do it, the best way 
to go, makes it more predictable, better for us to underwrite.
    In terms of the environmental liability, you have opened 
the Pandora's box to where a lot of people either consider 
environmental liability to either be religion or business. We 
consider it to be business. We think there are ways to actively 
structure different approaches to put the environmental 
liability back in a box and deal with it. We've done it at the 
most complicated Superfund site in the United States where the 
U.S. EPA gave a full release of liability to the single 
responsible party at that site because they designed the 
appropriate structure to move forward with. Cherokee, 
Preferred, a lot of other companies, that's how they do it now. 
Environmental liability is just simply a business; you 
structure a program and you move forward.
    Having other people see it that way is very difficult, but 
as more and more of them see the examples put before us--and 
that's why we're glad you have us here so we can say, we've 
done it here, we've done it here, we've done it here, this is 
routine business, you can move this forward. The NBA's white 
paper is an excellent source of information about why this is a 
problem, why not moving environmental liability to business 
practice and keeping it as something that--you know, if you 
look back to CERCLA, CERCLA was a liability statute, but it was 
really passed to a lot of extent to punish companies who 
contaminated property. Well, we are kind of beyond that now; 
now is a chance to move forward and put sites back into reuse 
that are part of the unintended consequences of CERCLA. And so 
the more we can do that, the more opportunities you give us--
and that is why we are willing to work with you on your bill to 
say here is a way to design this so that those environmental 
liabilities are covered and addressed and are backstopped by 
all types of financial instruments that are out there.
    Mr. Cartmell. I would just like to echo what Mr. Matthews 
said, that anything that will let industry see the--hastens the 
process and lets them see the light at the end of the tunnel, I 
think, is beneficial.
    Mr. Turner. Charles.
    Mr. Houder. I echo the comments made earlier. I think 
making the tax credits part of a voluntary cleanup program 
makes perfect logical sense, and responsible developers are 
going to be doing that anyway. So I think it makes sense to do 
that.
    And to echo what Robert said, I think the other critical 
piece is to provide some path for the corporate seller, to not 
leave them out of the equation--or the seller, corporate or 
otherwise--simply because that so often is the last stumbling 
block that cannot be overcome.
    And then with respect to what Mr. Matthews was saying, I 
think that part of this, you know, certainty and, I guess, 
legislative certainty to take this out of the realm of religion 
and to make it firmly on a business footing. I think the more 
expedited these things can be as, and as people see that 
environmentally contaminated sites are put quickly back into 
productive use helps, I think, sort of tone down some of the 
emotion that sometimes goes along with these sites.
    Mr. Turner. I want to give you an opportunity for any 
closing comment for things that have not been raised.
    Mr. Colangelo. Again, I want to commend you. What Congress 
may not realize that they have done is they have created an 
industry. It is called the brownfield industry and 10 years ago 
it was a collection of a bunch of crazy people thinking they 
could buy these contaminated properties. And now, by our best 
estimates, there are between 5,000 to 10,000 people that make 
their livelihood redeveloping brownfields, and these jobs 
aren't going to go offshore. These jobs are jobs that are going 
to stay in the country. This is a very highly specialized field 
where you need experts like this from both the public and 
private sector to take these old factories that house jobs that 
stayed here to redevelop these and put those back to use.
    And so I think anything the government can do to provide 
any type of seed funding in the form of incentives to attract 
the large amount of private sector dollars will just help the 
brownfield industry grow and create a work force that is going 
to stay here. So thank you.
    Mr. Philips. Thank you very much for having us. I really 
appreciate you giving this hearing, and I wanted to thank the 
staff as well for doing such an excellent job in coordinating 
all of us and our testimonies.
    I would just leave you with a final thought, which is to 
consider the real estate market that we find ourselves in 
around the country. I mean, a lot of people have expressed 
different opinions on how many brownfields are out there and 
how many brownfields--what is the subset of brownfields that 
are still attractive; are they minimally contaminated; are they 
considerably contaminated? In today's real estate market, the 
hottest, perhaps, that it has been certainly in our lifetimes, 
the sites that are not being developed now, I would venture to 
say that they're not going to be developed for a long time. 
They need help. The low-hanging fruit is not there, it's gone, 
and these efforts, the consideration especially now of 
innovative solutions like you're proposing, Chairman Turner, 
are very well appreciated, and we want to thank you very much 
for that.
    Mr. Matthews. Thank you for the opportunity to be here. I 
think the one thing to always keep in mind is flexibility. 
Every brownfield is a little different, and being overly 
prescriptive only leads to problems down the road. But allowing 
the public sector and the private sector to work together 
within a framework that allows them to get creative where they 
need to be creative is critical to moving forward with a 
variety of brownfields that are still out there today.
    Mr. Cartmell. The majority of brownfields being--
numberwise--being located in the city, I just want to thank you 
for the opportunity to listen to us, for hearing us. Thank you.
    Mr. Houder. And I thank you, too, for the opportunity. You 
know, if you think about brownfields, it definitely has the 
potential or I think is one of the silver bullet issues, 
economic issues in the United States; because if you think in 
terms of other crises, energy crises, infrastructure crises, 
the rejuvenation and rehabilitation of these key infill urban 
and suburban sites has the potential to greatly reduce those 
other problems.
    And so I commend you for your efforts on this, and thank 
you, because I think this is one of probably the greatest 
examples of the best work government can do is taking on things 
that are under most people's radar screens that are relatively 
complicated, but at the end of the day have the greatest impact 
on people's day-to-day lives. So thank you.
    Mr. Turner. We have a statement from the American Society 
of Civil Engineers which will be entered into the record.
    [The information referred to follows:]

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    Mr. Turner. And before we adjourn, I would like to thank 
our distinguished witnesses for their participation today, and 
I appreciate your willingness to share your knowledge, 
experiences, and thoughts.
    I would also like to thank my colleagues for their 
participation today. We had numerous State-created solutions to 
the issues of brownfields remediation and redevelopment 
highlighted today. These programs have successfully 
incentivized redevelopment efforts across the Nation; however, 
we also heard State programs, while helpful, also have 
limitations. According to landowners and developers. The two 
largest impediments to redevelopment of brownfields are 
liability and the high cost of redevelopment. As we have heard 
from numerous stakeholders, a tax credit for remediation costs 
would go a long way toward encouraging more aggressive 
redevelopment of these blighted properties.
    Again, I want to thank our witnesses for their time today, 
and in the event that there are any additional questions that 
we did not have time for today, the record will remain open for 
a period of 2 weeks for submission of additional questions and 
answers.
    I thank you, and we stand adjourned.
    [Whereupon, at 12:23 p.m., the subcommittee was adjourned.]

                                 
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