Brownfield Redevelopment: Stakeholders Cite Additional Measures  
That Could Complement EPA's Efforts to Clean Up and Redevelop	 
Properties (05-APR-05, GAO-05-450T).				 
                                                                 
Brownfields are properties whose re-use may be hindered by the	 
threat of contamination. Cleaning up and redeveloping these	 
properties can protect human health and the environment, and	 
provide economic benefits. The Environmental Protection Agency	 
(EPA) provides grants to state and local governments and others  
for site assessments, job training, revolving loans, cleanups,	 
and for assisting state efforts. This testimony is based on GAO's
report, Brownfield Redevelopment: Stakeholders Report That EPA's 
Program Helps to Redevelop Sites, but Additional Measures Could  
Complement Agency Efforts (GAO- 05-94, December 2, 2004). GAO (1)
obtained stakeholders' views on EPA's contribution to brownfield 
cleanup and redevelopment, (2) determined the extent to which EPA
measures program accomplishments, and (3) obtained views on	 
options to improve or complement EPA's program. Stakeholders GAO 
surveyed included grant recipients, state program officials,	 
interest groups, real estate developers, and others.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-450T					        
    ACCNO:   A20760						        
  TITLE:     Brownfield Redevelopment: Stakeholders Cite Additional   
Measures That Could Complement EPA's Efforts to Clean Up and	 
Redevelop Properties						 
     DATE:   04/05/2005 
  SUBJECT:   Environmental monitoring				 
	     Federal grants					 
	     Grants to local governments			 
	     Grants to states					 
	     Industrial pollution				 
	     Intergovernmental relations			 
	     Land management					 
	     Performance measures				 
	     Program evaluation 				 
	     Program management 				 
	     Strategic planning 				 
	     Environmental cleanups				 
	     Environmental restoration				 
	     Program goals or objectives			 
	     Stakeholder consultations				 
	     EPA Brownfields Economic Development		 
	     Initiative 					 
                                                                 

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GAO-05-450T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Federalism and the Census, Committee on
Government Reform, House of Representatives

For Release on Delivery

Expected at 10:00 a.m. EDT BROWNFIELD

Tuesday, April 5, 2005

REDEVELOPMENT

  Stakeholders Cite Additional Measures That Could Complement EPA's Efforts to
                       Clean Up and Redevelop Properties

Statement of John B. Stephenson, Director Natural Resources and Environment

GAO-05-450T

[IMG]

April 5, 2005

BROWNFIELD REDEVELOPMENT

Stakeholders Cite Additional Measures That Could Complement EPA's Efforts to
Clean Up and Redevelop Properties

  What GAO Found

Stakeholders said that EPA's Brownfields Program supports the initial
stages of site redevelopment by funding activities that other lenders
often do not, such as identifying contamination and cleaning up sites.
While important, the impact of EPA's funding is difficult to isolate
because it is often combined with funds from other sources. For example,
representatives of a company that combined an EPA loan with city, state,
and other federal agency funds to redevelop a brownfield site near
Seattle, Washington, said that EPA's loan, while small, provided critical
up-front funds for cleanup. Furthermore, while an unknown number of
projects rely solely on private and other federal agencies' funding, EPA
funds often go to sites with more complex cleanups, less desirable
locations, or liability issues. In addition, officials in 10 states
reported that EPA's assistance has been crucial to establishing and
expanding the scope of their voluntary cleanup programs.

EPA's performance measures have provided information on achievements in
some but not all key areas of the Brownfields Program. For example, EPA
has not yet begun reporting data on progress toward cleaning up and
redeveloping sites or assisting state programs. As a result, the agency's-
and the Congress'-ability to determine the extent to which the program is
achieving its goals is limited. Furthermore, EPA has not yet developed
measures to assess the extent to which the Brownfields Program achieves
key outcomes, such as reducing environmental risks. Similarly, EPA's
Inspector General found that the agency's performance measures do not
demonstrate the program's contribution to reducing or controlling health
and environmental risks. After acknowledging the limitations of the
program's performance measures, in fiscal year 2004, EPA began collecting
additional data-such as the number of acres ready for reuse-about
properties under the program and is developing performance measures for
state voluntary cleanup programs.

Stakeholders identified three options for improving or complementing EPA's
Brownfields Program. First, they suggested eliminating the provision in
the Brownfields Act that, in effect, disqualifies from grant eligibility
those landowners who purchased a brownfield site before January 2002.
Second, they suggested changes to the stringent technical and
administrative requirements that they believe have discouraged the use of
revolving loan funds. While EPA officials maintain that the act eased
administrative burdens, stakeholders believe that technical requirements
continue to impede lending. Stakeholders also suggested that EPA give
priority to applicants with proven administrative expertise or to
coalitions that can consolidate administrative functions. Third,
stakeholders believed that a federal tax credit for developers'
remediation costs could attract developers to brownfields sites on a
broader national basis. Although EPA and other organizations were also
generally supportive of a tax credit, we did not analyze the costs and
benefits of such a tax credit or any other potential incentives.

United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

Thank you for this opportunity to discuss our work on EPA's Brownfields
Program and potential options for enhancing brownfield redevelopment
efforts. As we reported in December 2004, an estimated 450,000 to 1
million brownfields-sites whose redevelopment or reuse may be complicated
by the presence or potential presence of hazardous substances-sit
abandoned or underused across the country.1 These sites

have remained undeveloped for several reasons, including uncertainty about
the presence of contamination, limited cleanup resources, and fear by the
sites' owners or prospective purchasers that they might be held liable for
cleaning them up. Cleaning up and redeveloping these properties can
improve and protect human health and the environment; increase local tax
bases; and encourage smart growth by slowing the development of
undeveloped, open land. The Environmental Protection Agency (EPA) has the
lead federal role in encouraging and facilitating the cleanup and
redevelopment of brownfield sites. In addition, state and local
governments, commercial lending and real estate development corporations,
and other entities provide funding for brownfields redevelopment-both with
and without EPA's participation.

While EPA has conducted brownfield efforts since 1995, the Congress
established a formal Brownfields Program within EPA in January 2002, by
passing the Small Business Liability Relief and Brownfields Revitalization
Act (Brownfields Act) (Pub. L. No. 107-118). The objectives of EPA's
Brownfields Program are to assess, clean up, and redevelop properties;
leverage job creation; and leverage cleanup and redevelopment funding from
other sources. The Brownfields Act authorizes $200 million annually for
fiscal years 2002 through 2006, to fund EPA grants to state and local
governments and others for site assessments, job training, revolving
loans, and newly created cleanup grants in support of brownfield
revitalization efforts.2 Between fiscal years 1995 and 2004, EPA awarded
over 1,200

1GAO, Brownfields Redevelopment: Stakeholders Report That EPA's Program
Helps to Redevelop Sites, but Additional Measures Could Complement Agency
Efforts, GAO-05-94 (Washington, D.C.: December 2, 2004).

2EPA's site assessment grants provide funding for a grant recipient to
inventory, characterize, assess, and conduct planning and community
involvement related to brownfield sites. EPA also awards brownfields job
training grants to provide environmental training for residents of
brownfields communities. EPA's revolving loan fund grants provide funding
for recipients to make no-or low-interest loans or subgrants for
brownfields cleanup. EPA also awards cleanup grants that provide direct
funding for a recipient to address contamination at brownfield sites.

brownfield grants totaling about $400 million. While the total amount of
EPA's grant funds is relatively small, these grants are intended to
leverage much larger amounts for brownfield cleanup and redevelopment from
other sources. For example, EPA's objective is to leverage $10.2 billion
in cleanup and redevelopment funding from fiscal years 2003 through 2008.
In addition, the act authorizes $50 million in grants to assist states and
tribes in developing and enhancing their environmental response-or
voluntary cleanup-programs to address contaminated sites. Since fiscal
year 2003, EPA has awarded about $100 million in assistance to states and
tribes.

My remarks today are based on our December 2004 report on brownfield
redevelopment and will focus on (1) the views of stakeholders-including
EPA grant recipients, state and local government officials, real estate
developers, interest groups, and others-on the extent to which EPA's
program has contributed to the cleanup and redevelopment of brownfields;
(2) the extent to which EPA measures its brownfields program
accomplishments; and (3) stakeholders' views on potential options for
improving or complementing EPA's program.

For our report, we interviewed officials in EPA's Office of Brownfields
Cleanup and Redevelopment, and other EPA offices; representatives of
industry groups and associations with brownfields expertise; eight
recipients of EPA site assessment, revolving loan, or job training grants
in Colorado, Florida, Minnesota, and Washington State; other local
stakeholders in these states, such as real estate developers, property
owners, attorneys, nonprofit organizations, and other state and local
government officials; and voluntary cleanup program officials in these
four states as well as Alabama, Alaska, Kentucky, Virginia, West Virginia,
and Wyoming. Although we did not identify a sample of stakeholders that
would allow us to generalize our findings to the total population, our
methodology enabled us to obtain a wide range of views on EPA's program
and brownfield issues.

Summary In summary, we found the following:

o  	Stakeholders reported that EPA's Brownfields Program provides an
important contribution to site cleanup and redevelopment by funding
activities that might not otherwise occur. According to these
stakeholders, EPA grants are important in that they fund activities in the
initial stages of brownfield redevelopment and address sites-such as those
with more complex cleanup requirements, less desirable locations, or
liability or

ownership issues-that private lenders and others often do not. In this
regard, EPA's site assessment grants provide seed money for identifying
contamination and estimating cleanup costs, while its revolving loan fund
grants support cleanup activities. While important, the impact of EPA's
funding is difficult to isolate because it is often combined with funds
from other sources. All of the grant recipients we interviewed used EPA
grants in conjunction with funding from other sources to address
brownfield sites, but an unknown number of projects are under way or have
been completed without any EPA funding. Furthermore, officials in all 10
of the states we contacted reported that EPA assistance has been crucial
to establishing and expanding the scope of their voluntary cleanup
programs. They said that without EPA's grants, their voluntary cleanup
programs would not have had the resources to undertake activities such as
compiling state inventories of brownfield sites and performing site
assessments.

o  	The measures that EPA has used to date to gauge Brownfields Program
accomplishments have provided information on achievements in some but not
all key areas of the program. As a result, the agency's-and the
Congress'-ability to determine the extent to which the program is
achieving its goals is limited. First, while EPA has reported the
cumulative number of sites assessed, jobs generated, and amounts of
cleanup and redevelopment funds leveraged by the program, the agency has
not begun reporting data on grant recipients' activities to clean up and
redevelop properties-one of its primary stated objectives. Second, EPA
does not collect data on its assistance to state voluntary cleanup
programs for such activities as compiling inventories of brownfield sites,
performing site assessments, and developing guidance for program
participants. This assistance accounted for about one-third of the total
Brownfields Program funds in each of fiscal years 2003 and 2004. Third,
although EPA's overall mission is to protect human health and the
environment, the agency has not yet developed measures to determine the
extent to which the Brownfields Program helps reduce environmental risks.
Acknowledging these limitations, EPA began collecting additional
information-such as the number of acres ready to be reused-in fiscal year
2004, and is developing performance measures for voluntary cleanup
programs.

o  	Stakeholders identified three potential options for improving or
complementing EPA's Brownfields Program:

o  	First, they suggested eliminating the provision in the Brownfields Act
that, in effect, makes landowners who purchased a brownfield site prior to
January 2002, ineligible for EPA grant funding. Stakeholders asserted that
this clause continues to discourage brownfields

redevelopment by limiting program eligibility.

o  	Second, stakeholders suggested changes to address the underutilization
of revolving loan funds. As of November 2004, grant recipients had loaned
out less than $29 million (about 17 percent) of the $168 million in
revolving loan fund grants awarded by EPA. According to stakeholders, the
stringent technical and administrative requirements to establish a
revolving loan fund have discouraged grant recipients from using the funds
and continue to be the primary impediments to making loans. Additionally,
stakeholders believed that EPA could achieve greater results by giving
priority to applicants with proven administrative expertise or to
coalitions of agencies that could consolidate administrative functions
associated with establishing and managing a revolving loan fund and
thereby produce economies of scale.

o  	Third, stakeholders believed that a federal tax credit allowing
developers to offset a portion of their federal income tax with their
remediation expenditures could complement EPA's program by attracting
developers to brownfields sites on a broader national basis. While EPA and
other organizations with brownfields expertise were also generally
supportive of a federal brownfields tax credit, we did not analyze the
costs and benefits of such a tax credit or any other potential incentives.

To enhance federal efforts to support brownfield clean up and
redevelopment, we recommended in December 2004 that the Administrator of
EPA:

o  	develop additional measures to gauge the achievements of the
Brownfields Program, especially those addressing the program's
environmental and state voluntary cleanup aspects;

o  	weigh the merits of revising the Brownfields Act to eliminate the
provision that prevents pre-January 2002 purchasers of brownfield
properties from qualifying for EPA grant funds, and, if deemed
appropriate, develop a legislative proposal to amend the act;

o  	monitor the brownfield revolving loan fund grants to determine why
they have been underutilized and what, if any, changes are needed to
facilitate use of these funds; and

o  	determine the advantages and disadvantages of giving priority to
entities with revolving loan fund administrative expertise when awarding
grants

and, if found to be beneficial, adopt this as a key criterion for
selecting grant recipients.

EPA agreed with these recommendations and Brownfields Program officials
told us that, since December 2004, the agency has taken a number of steps
to address them. With regard to measuring program achievements, EPA is
finalizing a data collection instrument that will allow the agency to
incorporate the achievements of state voluntary cleanup programs into the
measures it currently reports, such as the number of sites assessed.
Brownfields Program officials also told us that they are working with
other EPA program offices to measure and report the cumulative acres
cleaned up through the agency's overall land revitalization efforts as an
indicator of the agency's efforts to reduce environmental risks.
Concerning our recommendation on the Brownfields Act's eligibility
provision, rather than developing a legislative proposal to amend the act,
EPA included language in its fiscal year 2006 budget request that, if
enacted, would make pre-January 2002 purchasers of brownfield properties
eligible for EPA grant funds.

In response to our recommendations on revolving loan fund grants, EPA
continues to monitor revolving loan grant activity and "deobligate" grants
to recipients who are not lending the funds, according to program
officials, thereby making these funds available for other grants. These
officials also said that the agency has bolstered its efforts to ensure
that revolving loan fund grants are awarded to recipients with the
expertise necessary to administer a fund and, in fiscal year 2006, will
reevaluate and consider strengthening grant proposal criteria assessing
applicants' ability to manage a fund. Finally, EPA officials told us that
the agency awards noncompetitive supplemental funding to some revolving
loan fund grant recipients that have demonstrated their administrative
expertise.

EPA began its efforts to address brownfield properties in 1995 with the
Brownfields Initiative under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA), which was enacted in 1980 in the
wake of discoveries of abandoned hazardous waste sites around the country.
CERCLA authorizes EPA to compel parties responsible for the contamination
to clean up hazardous waste sites; allows EPA to pay for the cleanups,
then seek reimbursement from the responsible parties; and established a
trust fund to help EPA pay for cleanups and related program activities.
Under CERCLA, past and present owners and operators of hazardous waste
sites, as well as generators and transporters of the hazardous substances,
can all be held liable for cleanup costs. CERCLA

  Background

establishes a defense to liability for innocent landowners-that is, owners
who obtain property without knowing it was contaminated despite conducting
"all appropriate inquiries" regarding the present and past uses of the
property and the potential presence of onsite contamination.

Under its Brownfields Initiative, EPA awarded several types of grants in
support of brownfields redevelopment, including, among others:

o  	site assessment grants, which provide funding to inventory,
characterize, assess, and conduct planning and community involvement
related to brownfield sites; and

o  	revolving loan fund grants, which provide funding for recipients to
make no-or low-interest loans for brownfields cleanup.

On January 11, 2002, the Congress amended CERCLA by passing the
Brownfields Act. The act formally established EPA's Brownfields Program
and amended the criteria for establishing the innocent landowner defense.
It also limits liability for two types of parties: (1) contiguous property
owners-persons who own property that may be contaminated by a release of
hazardous substances from a neighboring property-and (2) bona fide
prospective purchasers-persons who purchased the property after the act's
passage on January 11, 2002; did not contaminate the property; and
exercised appropriate care with respect to any hazardous waste found on
the property. Both types of parties must demonstrate that they conducted
all appropriate inquiries into the site's previous ownership and use.3
Under the act, any landowner who acquired a potentially contaminated
property before January 11, 2002, is not eligible for the bona fide
prospective purchaser exemption and accordingly may not be eligible for
brownfields grants. Among other things, the act authorizes EPA to continue
awarding site assessment, revolving loan fund, and job training grants;
authorizes new cleanup grants up to $200,000 to be used directly for
brownfields remediation; and allows a portion of revolving loan fund

3In August 2004, EPA proposed a rule that would establish specific
requirements and standards for conducting all appropriate inquiries into
the previous ownership, uses, and environmental conditions of a property
for the purposes of qualifying for CERCLA liability protection.

grants to be directed to cleanup activities as subgrants that do not have
to be repaid, in accordance with certain statutory restrictions.4

Brownfield grants are currently awarded competitively by regional panels
that evaluate grant proposals against threshold eligibility criteria and
by a national panel that scores and ranks proposals on broader criteria.
EPA has awarded over 1,200 brownfields grants totaling about $400 million
since 1995. Table 1 shows the number of grants and the amount (in nominal
dollars) awarded for each grant type between fiscal years 1995 and 2002
(when the Brownfields Act was passed), and during fiscal years 2003 and
2004.

Table 1: Number and Amount of Brownfield Grants Awarded

                              Dollars in millions

Fiscal years 1995a through 2002 Fiscal year 2003 Fiscal year 2004b Grant
type

Number of grants Amount

Number of grants Amount

Number of grants Amount

                      Site                                           
                assessment     437     $103.1    117    $30.7    155    $37.6 
                 Revolving                                           
                 loan fund     143   117.0        28   30.4       18     20.9 
                   Cleanup     N/A    N/A         66   11.4       92     16.9 
              Job training      57    12.1        10    2         16      2.5 
                    Otherc      97    14.4         -    -          -        - 
                     Total     734     $246.6    221    $74.5    281    $77.9 

Source: GAO analysis of EPA data.

aEPA awarded one site assessment grant in 1993, and two site assessment
grants in 1994, as pilot tests for its Brownfields Initiative.

bFiscal year 2004 numbers and amounts are for grants announced, not
awarded. A small number of these grants may have been awarded after the
end of fiscal year 2004, according to EPA officials.

cThis category includes other types of grants awarded prior to the
Brownfields Act.

The 2002 Brownfields Act also authorizes grant funds to establish or
enhance state and tribal voluntary cleanup programs that encourage private
parties to identify and clean up sites. Some states began to establish
voluntary cleanup programs in the late 1980s to alleviate

4EPA guidance limits the portion of funds that can be used as subgrants to
40 percent of the original grant amount.

  Stakeholders Reported That EPA's Program Enables Brownfield Redevelopment That
  Might Not Otherwise Occur

concerns that liability under federal and state hazardous waste cleanup
laws was hindering brownfield cleanups. All 50 states now have voluntary
cleanup programs, although these programs vary considerably in scope and
breadth. The 2002 Brownfields Act authorizes EPA to provide $50 million
for each of fiscal years 2002 through 2006, to support state or tribal
programs. In 2003, EPA distributed almost $50 million among the 50 states,
30 tribes, the District of Columbia, and the Virgin Islands to develop or
enhance their programs' infrastructure and capabilities. The Congress
appropriated $50 million in funding for state and tribal voluntary cleanup
program grants for fiscal year 2004.

Stakeholders told us that EPA's Brownfields Program contributes
significantly to grant recipients' redevelopment efforts by providing seed
money to identify contamination and estimate cleanup costs and by
supporting cleanup activities.5 By funding site assessments and cleanups,
EPA supports activities that private lenders and other government programs
often do not fund, according to stakeholders. In this regard, a revolving
loan fund grant recipient in Washington State told us that the banking
industry generally is reluctant to lend money for brownfields projects
because of the high risks involved. Consequently, EPA is an important-and
sometimes the only-funding source for the critical assessment and cleanup
activities in the initial stages of redevelopment. Stakeholders also told
us that EPA's grant funds are important to brownfields redevelopment
because they are often applied to sites with (1) more complex cleanup
requirements, (2) less desirable locations, or (3) liability or ownership
issues that make them less likely to be redeveloped by private or other
governmental investors alone.

Although stakeholders believed that EPA's contribution is important, all
of the grant recipients we interviewed told us that they often combined
funding from many sources to clean up and redevelop brownfields, using
EPA's grants in conjunction with funds from other federal, state, and
local sources. For example, a Colorado real estate developer with whom we

5These stakeholders included a nonprobability sample of eight EPA
brownfields grant recipients, as well as real estate developers, property
owners, attorneys, and nonprofit organizations, which the grant recipients
identified, and several industry groups and associations representing
state and local governments with brownfields expertise that we identified.
Some stakeholders did not offer a response to our open-ended questions on
various issues, while others offered more than one response. We did not
determine the extent to which stakeholders agreed or disagreed with any
particular response offered by other stakeholders.

spoke combined an EPA brownfields revolving loan, a substantial company
equity investment, several commercial loans, bonds, and other financing to
fund a mixed-use project that will include retail shops and housing units.
Although EPA's program makes an important contribution to some brownfields
projects, an unknown number of other projects are under way or have been
completed using funds solely from other public and private sources without
any EPA assistance. An official with the Northeast-Midwest Institute-a
nonprofit, nonpartisan research organization for the Northeast and Midwest
states-emphasized that, while EPA and other federal programs provide key
support for brownfields redevelopment, the number of brownfield sites far
exceeds the number of properties that could be addressed by available
federal resources. Similarly, in its September 2003 report on the
Brownfields Program, EPA stated that while there remain hundreds of
thousands of brownfield sites across the country that could be put to
better use, the sheer enormity of the problem far outstrips all available
federal resources.

The state officials we contacted also reported that EPA brownfields
assistance is crucial to establishing and expanding the scope of their
voluntary cleanup programs. Program officials from 4 of the 10 states we
contacted-Kentucky, Virginia, West Virginia, and Wyoming-reported that
EPA's funds keep their voluntary cleanup programs operating and that their
programs would not exist without this assistance. State officials from
Colorado and Minnesota commented favorably on the flexibility that EPA's
funding provides their state programs. In this regard, officials from all
10 states said that their programs would not be able to accomplish a
number of key activities without EPA's assistance, such as compiling state
inventories of brownfield sites, performing limited brownfields site
assessments, and developing needed guidance and information for program
participants. For example, state officials overseeing Alabama's program
said that EPA's funding allowed the program to hire additional staff,
provide training, and develop an inventory and public record of brownfield
sites. Similarly, Colorado program officials noted that, without EPA's
funding, the state's program would not be operating at its current service
level and would not have undertaken activities such as preparing cleanup
guidance to deal with the state's growing problem of contamination from
illegal methamphetamine drug laboratories.

  EPA's Current Performance Measures Are Not Sufficient For Effective Program
  Oversight and Decision Making

The performance measures that EPA reports to the Congress regarding its
brownfield activities do not fully address the program's central
objectives, thereby limiting both the agency's and the Congress' ability
to determine the extent to which the program is achieving its goals.
According to EPA, the specific objectives and goals for the Brownfields
Program are to (1) assess, clean up, and redevelop 9,200 properties; (2)
leverage $10.2 billion in cleanup and redevelopment funding; and (3)
leverage 33,700 jobs. In its fiscal year 2003 annual report, EPA reported
to the Congress on the cumulative (1) sites assessed, (2) jobs generated,
and (3) cleanup and redevelopment funds leveraged. However, EPA did not
report the number of properties cleaned up or redeveloped under the
program. In addition, EPA's performance measures do not provide
information on the impact of EPA's funding to state voluntary cleanup
programs, which comprised about one-third of the total Brownfields Program
funds in each of fiscal years 2003 and 2004. Moreover, while EPA's
objective to assess, clean up, and redevelop properties addresses the
environmental impact of the program, its measures do not allow the agency
to determine the extent to which the program helps reduce environmental
risks, a key agency goal. In 2002 and 2004, the EPA Inspector General
reported that while the Brownfields Program's current performance measures
may provide information on economic outputs and activities, the measures
do not provide information on how risks to human health and the
environment will be reduced or controlled.6 Furthermore, we testified in
July 2004 that EPA is not consistently ensuring that its grants-such as
those awarded under the Brownfields Program-are clearly linked to
environmental results.7

Recognizing the limitations of its performance measures and supporting
data, EPA is taking steps to obtain and report additional information that
may better measure Brownfields Program accomplishments. In August 2002,
EPA initiated an internal work group to develop a data collection
instrument to gather information from site assessment, cleanup, and
revolving loan fund grant recipients beginning in fiscal year 2004. EPA
officials believe that this instrument will provide them with more
detailed

6EPA, Office of Inspector General, Observations on EPA's Plans for
Implementing Brownfields Performance Measures, 2002-M-00016 (Washington,
D.C.: May 24, 2002) and Substantial Progress Made, But Further Actions
Needed in Implementing Brownfields Program, 2004-P-00-20 (Washington,
D.C.: June 21, 2004).

7GAO, Grants Management: EPA Continues to Have Problems Linking Grants to
Environmental Results, GAO-04-983T (Washington, D.C.: July 20, 2004).

information on such factors as common contaminants and property size, and
will allow the agency to better measure the direct economic and
environmental impact of EPA's activities on a property-specific basis. EPA
officials anticipate that these data will provide a better measurement of
program results, and they plan to conduct further evaluations after a full
year of data collection to determine whether and how to use the data to
develop environmental indicators. EPA also has efforts under way that may
assist the agency in developing performance measures to gauge the impact
of its funding for voluntary cleanup programs. In 2004, EPA formed a work
group of state and tribal officials that analyzed methods that states
currently use for measuring their programs. EPA officials told us that the
work group is now developing performance measures for EPA's assistance to
voluntary cleanup programs that could be implemented by the end of fiscal
year 2005.

A recent review by the Office of Management and Budget (OMB) has also
prompted EPA to take steps to develop measures that provide a more
comprehensive picture of the Brownfields Program's impact. In February
2004, OMB completed an EPA Program Assessment and Rating Tool review-a
systematic method of assessing the performance of program activities,
focusing on their contribution to an agency's achievements of its
strategic and program performance goals.8 According to the Director of
EPA's Office of Brownfields Cleanup and Redevelopment, OMB recently
approved a performance indicator that will be used in future OMB reviews
and will enable OMB to compare the efficiency of the Brownfields Program
with other federal programs, and could also be incorporated into the
program's strategic plan and annual performance report.9 Finally, EPA's
fiscal year 2005 annual performance plan included additional

8EPA and other federal agencies are required under the Government
Performance and Results Act (GPRA) to develop strategic plans covering at
least 5 years and submit them to the Congress and the Office of Management
and Budget. GPRA also requires agencies to set annual performance goals
and to prepare annual reports setting forth the performance measures and
the agency's actual program performance as compared with the annual goals.
OMB developed a Program Assessment and Rating Program for federal agencies
in 2002 to improve program performance and better link performance to
budget decisions.

9OMB also directed EPA to modify its currently reported measures to
provide more accurate information about the program's impact. EPA agreed
to qualify two of its Brownfields Program performance measures-jobs
generated and cleanup and development funds leveraged-by indicating that
the EPA investment "enabled" the outcome. OMB believed that this addition
(1) recognized that other entities were involved in the creation of jobs
and the leveraging of funds on brownfield projects and (2) impacted these
measures.

  Stakeholders Identified Changes That Could Enhance Existing Federal Brownfield
  Redevelopment Efforts

information that more closely links the program to the goals of its
strategic plan. The plan added a new measure that tracks the number of
cleanup grants awarded and added a targeted goal-60 properties-for the
"properties cleaned up" measure that was included in the previous annual
plan without such a goal. This latter measure potentially addresses the
program's environmental impact. While incorporating this measure and goal
as well as efforts to collect additional information are steps forward in
measuring the agency's progress in achieving the program's goals and
objectives, EPA must ensure that its data collection efforts address the
program's central activities and that, once collected, it uses these data
to inform the Congress on program results.

Stakeholders suggested three options for improving or complementing EPA's
Brownfields Program.10 First, stakeholders believed that revising a
restrictive provision of the Brownfields Act could expand the number of
eligible grant applicants. The act effectively limits grant eligibility to
parties who purchased their property after January 11, 2002.11 The
stakeholders we interviewed suggested that EPA's Brownfields Program could
have a broader impact if those who purchased property prior to January 11,
2002, were also eligible to receive brownfields grants. Representatives of
three of the organizations with brownfields expertise mentioned that many
local governments that were actively addressing brownfields by acquiring
these sites before the law was enacted have been penalized by the act's
eligibility date. EPA brownfields officials and a coalition of groups with
brownfields expertise reported that EPA rejected a number of brownfield
grant applications in fiscal year 2003, and other applications were never
submitted, largely because of the eligibility date. Although the
Consolidated Appropriations Acts for Fiscal Year 2004 and Fiscal Year 2005
temporarily suspended the eligibility date for each respective fiscal
year, all of the stakeholders we spoke with who raised this issue believed
that the date will continue to limit program eligibility- and, thereby,
the program's support of brownfields redevelopment-until it is permanently
revised. The Director of EPA's Office of Brownfields

10These stakeholders included representatives of eight land developers and
other private companies and four organizations with brownfields expertise.

11The act states that responsible parties are not eligible for brownfields
grants. The current owner of a contaminated property is generally
considered to be a responsible party. However, persons who purchased
property after January 11, 2002, may be considered bona fide prospective
purchasers, who are not generally responsible parties.

Cleanup and Redevelopment supports removing the eligibility date from the
requirements for obtaining prospective purchaser liability protection,
noting that the act's other requirements for obtaining prospective
purchaser liability protection are sufficient without specifying the date
of acquisition.

Second, almost one-half of the stakeholders we contacted suggested changes
to address the underutilization of revolving loan fund grants. As of
November 1, 2004, recipients of revolving loan fund grants had loaned
about $28.6 million (about 17 percent) of the $168 million in such grants
that EPA had awarded up to that date. EPA data show that, of the 154
active grants, 47 grant recipients had made 67 loans for brownfields
projects and the remaining grant recipients had made no loans. Reacting to
this situation, EPA began rescinding revolving loan fund grants from
communities that had not used them and "deobligated" about $12 million in
revolving loan funds, thereby making them available to make other
grants.12 Furthermore, the Senate Committee on Appropriations expressed
disappointment in the revolving loan component of EPA's Brownfields
Program, noting in the report accompanying EPA's fiscal year 2004
appropriations bill that only a small percentage of grant recipients had
made loans, resulting in only a small number of completed brownfield site
cleanups over the life of the program.13 In response to these concerns,
EPA officials told us that the Brownfields Act's provision allowing a
portion of loan funds to be awarded to brownfield projects in subgrants
that do not have to be repaid will bring renewed interest in the loans.14
EPA also told us the act eased the administrative burden on grant
recipients by no longer

12Thirty grants were expected to be deobligated by the end of calendar
year 2004, and 44 additional grants were expected to be reissued under the
new requirements in the act by this date.

13EPA officials stated that informally collected information obtained as
of November 1, 2004, suggested that cleanups have been completed at 37
brownfield sites, are ongoing at 19 others, and 3 more are about to get
under way. They explained that since EPA brownfield funds generally
represent only a portion of ongoing cleanup activities, recipients may
delay reporting progress until such time as all site cleanup activities
are completed.

14EPA guidance allows up to 40 percent of revolving loan fund grant
dollars to be distributed as subgrants to provide direct assistance for
brownfield cleanups.

requiring their full adherence to CERCLA National Contingency Plan
requirements.15

According to five revolving loan fund grant recipients and a number of
developers, however, other technical and administrative requirements have
also discouraged grant recipients from using the funds. Managing a
revolving loan fund requires a government or nonprofit entity to perform
many of the functions of a commercial lending institution, including
establishing interest rates and collateral requirements; processing and
approving loans; and collecting loan payments. While factors such as the
availability of low-interest private loans play a role in the number of
loans made, revolving loan fund grant recipients told us that staff time
and expertise are key to making these loans. Representatives of eight
stakeholder groups indicated that EPA could achieve greater results with
revolving loans by giving priority to applicants with proven expertise or
to coalitions of agencies that can consolidate administrative functions
and thereby produce economies of scale. Specifically, stakeholders
reported that grant recipients with in-house technical expertise, who
partnered with other agencies with expertise, or that hired contractors to
obtain technical expertise were better positioned to set up a fund because
they were able to gain access to financial expertise or experience in
administering other revolving loan funds. For example, the Department of
Environmental Services in Hennepin County, Minnesota, contracted with a
nonprofit organization that specializes in servicing loans to manage its
fund. Hennepin County has made four loans totaling over $1.7 million to
local brownfield projects.

In the same vein, grant recipients said that coalitions that consolidate
administrative functions and pool revolving loan fund grants were able to
take advantage of economies of scale by making more loans once they had
made the up-front administrative investment to establish the fund. Nine
grant recipients and other stakeholders told us that EPA's grants were not
large enough to justify the time and effort required to establish a fund

15Prior to 2002, EPA-funded brownfields cleanups were subject to the
National Contingency Plan (NCP)-CERCLA regulations that provide EPA's
blueprint for how to respond to hazardous substance releases. Under the
2002 Brownfields Act, an NCP provision applies to EPA-funded brownfields
cleanup only if EPA determines the provision is relevant and appropriate
to the Brownfields Program. While EPA regions will determine the terms and
conditions applicable to each grant, EPA expects that grant recipients
will receive increased flexibility as a result of the new provision. EPA,
however, retains certain requirements in order to ensure environmental
cleanups protect public health and the environment.

because it is frequently depleted after one or two loans are made. The 67
loans made to date range from $50,000 to $1.95 million, with an average
loan amount of about $420,000. The act limits revolving loan fund grants
to $1 million, and many grants have been funded at less than this amount.
However, EPA grant guidelines allow coalitions of eligible entities to
apply together to receive funds of up to $1 million each. For example,
five entities could jointly apply and each receive up to $1 million, for a
total of up to $5 million for the coalition. In selecting grant proposals,
EPA currently evaluates grant applicants' ability to manage a fund as 1 of
10 ranking criteria, allocating it a maximum of 10 points out of a
possible 120 points.16 While EPA's fiscal year 2005 grant proposal
guidelines require a description of previous experiences managing federal
funds and a plan for managing the loan fund in accordance with prudent
lending practices, EPA's draft guidance to regional offices does not
require grant applicants to discuss the expertise or resources they will
rely on to implement prudent lending practices. We did not evaluate EPA's
grant selection or award process.

Finally, stakeholders generally supported a federal brownfields tax
credit, which would allow developers to offset a portion of their federal
income tax with remediation expenditures, to complement EPA's Brownfields
Program and encourage brownfields redevelopment. All of the stakeholders
we spoke with about such a tax credit believed that it could attract
developers to brownfield sites on a broader national basis and enhance the
federal, state, and local brownfields redevelopment efforts currently
under way. One stakeholder noted that while brownfields redevelopment is
still a small and specialized real estate market, a federal tax credit
could attract new developers and investors to these projects. At least 10
developers and 5 state or local government officials also said that other
similar federal tax credits, such as the federal low-income housing and
historic rehabilitation credits, have proven effective in stimulating

16In addition to management capabilities, EPA evaluates (1) the grant
proposal budget; (2) the community's need for brownfields redevelopment;
(3) the process for selecting loan or subgrant recipients; (4) the target
market and business plan for making loans and subgrants; (5) the
sustainable reuse of projects; (6) the creation or preservation of public
or greenspace; (7) community involvement activities; (8) the reduction of
threats to human health and the environment; and (9) the leveraging of
additional funding resources. According to EPA officials, the grant
proposal budget, target market and business plan, and the leveraging
additional resources criteria also provide an assessment of applicants'
ability to manage the grant.

Conclusions

redevelopment.17 The U.S. Conference of Mayors and other organizations
told us that a federal tax credit has tremendous potential to foster new
brownfield redevelopment. Furthermore, a brownfields redeveloper in
Minnesota suggested that a federal tax credit would be most effective if
the credit were directed to brownfield projects with more complex
contamination, liability, or cleanup issues that would be less likely to
be redeveloped without federal aid. Nevertheless, while stating that a
credit could be beneficial, three stakeholders voiced concern about a tax
credit's potential impact on federal revenue. EPA's Brownfields Program
Director generally supported a federal brownfields tax credit as an
incentive to new brownfields redevelopment. We did not analyze the costs
and benefits of such a tax credit or any other potential incentives.

Although stakeholders we contacted acknowledged that EPA's contribution to
brownfields revitalization is significant, the agency has not fully
measured or reported to the Congress on the extent of this contribution.
This information is needed both for EPA to improve the effectiveness of
the program and the Congress to improve congressional decision making and
oversight. While EPA has collected and reported data on some of the
program's achievements, further action is needed to ensure that both the
agency and the Congress have sufficient information on program results,
particularly with regard to its assistance to state and tribal voluntary
cleanup programs and impacts on environmental risks. EPA has initiated
efforts to obtain additional data, but the agency must ensure that these
efforts address the program's central activities and that, once collected,
it uses these data to inform the Congress on program results. Although
stakeholders we contacted praised EPA's program, they identified a number
of limitations that, if addressed, could improve the program. However,
while it appears that these suggestions might potentially enhance
brownfield efforts, a careful review of their implications is warranted
before EPA or the Congress takes action to implement them.

17The federal low-income housing tax credit provides an owner of newly
constructed or renovated rental housing, who sets aside a specified
percentage of units for low-income persons for a minimum of 15 years, with
a tax credit over a 10-year period. The federal historic rehabilitation
tax credit provides the owner of a certified historic structure with a tax
credit equal to 20 percent of the amount of qualified rehabilitation
expenditures.

Mr. Chairman, this concludes our prepared statement. We would be happy to
respond to any questions that you or Members of the Subcommittee may have.

Contacts and For further information about this testimony, please contact
me at (202) 512-3841. Richard P. Johnson, Kirk Menard, Joanna Owusu, and
Vincent P. Acknowledgments Price made key contributions to this statement.

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