Economic Development Administration: Remediation Activities	 
Account for a Small Percentage of Total Brownfield Grant Funding 
(27-OCT-05, GAO-06-7).						 
                                                                 
The Economic Development Administration (EDA) Reauthorization Act
of 2004 (P. L. 108-373) included a requirement that GAO evaluate 
grants made by EDA for the economic development of brownfield	 
sites. More than 450,000 brownfield sites--properties where	 
redevelopment or reuse may be complicated by real or perceived	 
environmental contamination--are scattered across the United	 
States. This report discusses specifics of grants made by EDA at 
brownfields sites, including (1) the types, extent, and amount of
EDA funds used for remediation activities; (2) the environmental 
standards and agencies involved; and (3) the economic development
activities, standards, and impact.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-7						        
    ACCNO:   A40477						        
  TITLE:     Economic Development Administration: Remediation	      
Activities Account for a Small Percentage of Total Brownfield	 
Grant Funding							 
     DATE:   10/27/2005 
  SUBJECT:   Economic development				 
	     Environment evaluation				 
	     Environmental assessment				 
	     Environmental law					 
	     Environmental legislation				 
	     Environmental monitoring				 
	     Environmental policies				 
	     Federal grants					 
	     Funds management					 
	     Grant administration				 
	     Hazardous substances				 
	     Program evaluation 				 
	     Property						 
	     Brownfields					 
	     Environmental cleanups				 

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GAO-06-7

     

     * Report to Congressional Committees
          * October 2005
     * ECONOMIC DEVELOPMENT ADMINISTRATION
          * Remediation Activities Account for a Small Percentage of Total
            Brownfield Grant Funding
     * Contents
          * Results in Brief
          * Background
          * EDA Has Provided Limited Funding for a Variety of Remediation
            Activities at Brownfield Sites
          * Some EDA Regions Have Developed Processes to Better Ensure
            Compliance with Environmental Remediation Standards
               * Environmental Assessments Document That Projects Comply with
                 Applicable Environmental Laws
               * EDA Works with Federal, State, and Local Environmental
                 Agencies to Ensure That Grant Recipients Comply with
                 Applicable Environmental Laws
               * EDA Grants Do Not Include A Specific Public Participation
                 Requirement
          * Grants Were Used for a Variety of Economic Development Purposes,
            but Data on the Projects' Impact Were Largely Unavailable
               * EDA Grants Supported a Variety of Economic Development
                 Purposes
               * Insufficient Time Has Elapsed to Assess the Economic
                 Development Impact of Brownfield Projects
               * Economic Development Estimates Outlined in Project Proposals
                 Were Not Always Appropriately Verified
          * Conclusions
          * Recommendations
          * Agency Comments and Our Evaluation
     * Objectives, Scope, and Methodology
     * Examples of EDA Grants to Brownfield Projects
     * Comments from Department of Commerce
     * GAO Contacts and Staff Acknowledgments
     * PDF6-Ordering Information.pdf
          * Order by Mail or Phone

                 United States Government Accountability Office

Report to Congressional Committees

GAO

October 2005

ECONOMIC DEVELOPMENT ADMINISTRATION

Remediation Activities Account for a Small Percentage of Total Brownfield Grant
                                    Funding

                                       a

ECONOMIC DEVELOPMENT ADMINISTRATION

Remediation Activities Account for a Small Percentage of Total Brownfield Grant
Funding

  What GAO Found

Remediation activities conducted at EDA-funded brownfield sites appeared
to be incidental to the purpose of the overall project and most often
consisted of the removal and disposal of asbestos containing materials,
underground storage tanks, or lead-based paint. We estimate that
remediation activities were conducted at 54 percent of EDA-funded
brownfield sites from fiscal year 1998 through 2004. Overall, we estimate
that EDA used $4.8 million or about 1.4 percent of its grant funds to pay
for remediation activities at 28 percent of the brownfield sites during
this period. Grantees, former property owners, or other agencies generally
were responsible for most environmental remediation costs at these sites.

EDA regional environmental officers prepare environmental assessments to
document a project's compliance with federal environmental requirements.
In three of six EDA regional offices, we noted that the regional
environmental officer routinely recommended various types of special
conditions be added to grant awards concerning the remediation of
hazardous substances that provide more specific assurance on a project's
compliance with environmental standards. EDA requires grant recipients to
certify that contractors will comply with applicable environmental
requirements and works with federal, state, and local environmental
agencies to ensure compliance.

EDA grants to brownfield sites most often funded infrastructure
improvements, such as upgrades to water and sewer lines, construction of
streets and curbs, or installation of signage and lighting. EDA evaluates
proposed projects competitively based on standard guidelines that
emphasize increased numbers of relatively high-skill, high-wage jobs or
private sector investment; strong leadership and project management
experience; and matching funds from local governments or nonprofits. Data
were not available on the reported economic development impact for most of
the grants that GAO reviewed. Where data were available, the reported
economic development data varied significantly when compared with initial
project estimates for some grants. In some instances, permanent jobs or
private sector investment estimates for proposed projects did not appear
to be verified.

Before and after Photographs of EDA-Funded Business Incubator (Philadelphia, PA)

                 United States Government Accountability Office

Contents

  Letter 1

Results in Brief 4 Background 7 EDA Has Provided Limited Funding for a
Variety of Remediation

Activities at Brownfield Sites 9 Some EDA Regions Have Developed Processes
to Better Ensure

Compliance with Environmental Remediation Standards 15 Grants Were Used
for a Variety of Economic Development Purposes,

but Data on the Projects' Impact Were Largely Unavailable 20 Conclusions
27 Recommendations 28 Agency Comments and Our Evaluation 28

  Appendixes

Appendix I: Objectives, Scope, and Methodology 30 Appendix II: Examples of
             EDA Grants to Brownfield Projects 36 Appendix III: Comments from
                Department of Commerce 41 Appendix IV: GAO Contacts and Staff
                                                           Acknowledgments 45

Table 1:

  Tables

Table 2: Table 3:

Table 4:

Table 5: Table 6: Table 7: Types of Remediation Activities Conducted at
EDA-Funded Brownfield Sites, Fiscal Years 1998-2004 10 EDA's Investment
Policy Guidelines 23 Initial Estimates and 6-Year Data on Jobs Created and
Retained 25 Initial Project Estimates and 6-Year Data on Private Sector
Investment 25 GAO Sample of EDA Grants to Brownfield Sites 31 Grants
Reviewed at EDA Regional Offices 32 95-Percent Confidence Intervals for
Numeric and Percentage Estimates 33

Figure 1: EDA Grants to Brownfield Projects Compared with Total

  Figures

EDA Grants, Fiscal Years 1998-2004 8 Figure 2: Remediation at EDA-Coded
Brownfield Sites, Fiscal Years 1998-2004 11 Figure 3: Analysis of EDA
Funding to Brownfield Sites, Fiscal Years 1998-2004 14

    Page i GAO-06-7 EDA Brownfield Remediation

Contents

Figure 4:  Purposes and Project Goals of EDA Grants with             
              Brownfield Coding                                            21 
Figure 5:  EDA Grant to the City of Atlanta and Northyards Business  
              Park, LLC                                                    36 
Figure 6:  EDA Grant to Philadelphia Authority for Industrial        
              Development                                                  37 
Figure 7:  EDA Grant to City of Chester, Chester, Pennsylvania          38 
Figure 8:  EDA Grants to Greater Kelly Development Corporation,      
              San Antonio, Texas                                           39 
Figure 9:  EDA Grant to FAME Assistance Corporation, Los             
              Angeles, California                                          40 

                                 Abbreviations

CERCLA        Comprehensive Environmental Response, Compensation and       
                 Liability Act                                                
DOD           Department of Defense                                        
DOE           Department of Energy                                         
EDA           Economic Development Administration                          
EPA           Environmental Protection Agency                              
HUD           Department of Housing and Urban Development                  
NEPA          National Environmental Policy Act of 1969                    
OPCS          Operation and Planning Control System                        
REO           Regional Environmental Officers                              

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A

United States Government Accountability Office Washington, D.C. 20548

October 27, 2005

The Honorable James M. Inhofe Chairman The Honorable Jim Jeffords Ranking
Minority Member Committee on Environment and Public Works United States
Senate

The Honorable Don Young Chairman The Honorable James L. Oberstar Ranking
Democratic Member Committee on Transportation and Infrastructure House of
Representatives

This report responds to a requirement in the Department of Commerce's
Economic Development Administration (EDA) Reauthorization Act of 2004 that
GAO evaluate grants made by EDA for the economic development of brownfield
sites.1 Brownfield sites-areas where redevelopment or reuse may be
complicated by real or perceived environmental contamination- including
former industrial and commercial properties, gas stations, and military
sites. More than 450,000 of these sites are scattered across the United
States. Because of the stigma of existing or potential contamination,
brownfield sites often remain unproductive, blighting communities while
developers resort to the use of "greenfields," or open spaces outside of
cities. However, brownfield sites often offer a number of redevelopment
advantages, including competitive locations, established infrastructure,
untapped customer and labor markets, easy access to multiple modes of
transportation, and unique development opportunities, such as historic and
culturally significant buildings. For the past 40 years, EDA has provided
support for the redevelopment of brownfield sites as a core component of
its mission to aid the nation's most economically distressed communities.2

1Pub. L. No. 108-373, S: 603, 118 Stat. 1756, 1769-1770 (2004).

2According to EDA, distress may exist in a variety of forms, including but
not limited to the following: high levels of unemployment, low-income
levels, large concentrations of low-income families, significant declines
in per capita income, substantial loss of population because of the lack
of employment opportunities, large numbers (or high rates) of business
failures, sudden major layoffs or plant closures, trade impacts, military
base closures, natural or other major disasters, or depletion of natural
resources.

Historically, EDA's brownfield redevelopment activities have focused on
sites after assessment and remediation (cleanup of contaminated or
hazardous materials) have taken place. However, EDA has stated that
current statutory authorities allow it to provide support for site
assessment and incidental remediation activities at brownfield sites.

To evaluate the grants made by EDA for the economic development of
brownfield sites, we (1) determined the types of remediation activities
conducted, the extent to which projects funded by EDA at brownfield sites
included remediation activities, and the amount of EDA grant funds used
for those activities; (2) identified the environmental standards applied
to projects, the role of environmental agencies (federal, state, and
local), and the amount of public participation; and (3) identified the
economic development activities conducted, the economic development
standards applied to projects, and the reported economic development
impact.

The EDA Reauthorization Act of 2004 directed GAO to evaluate EDA grants
for the economic development of brownfield sites during the 10 years
before the law came into effect [1994 to 2004]. As agreed with the
committees of jurisdiction, we limited our analysis for this report to the
grants EDA awarded to brownfield sites from fiscal years 1998 through
2004, because EDA did not begin coding these grants in its data systems
with a special brownfield code until 1998. The act also directed GAO to
use the term "brownfield site" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA).
CERCLA defines a brownfield site as real property that is or may be
contaminated by a hazardous substance that could complicate redevelopment
efforts.3 CERCLA does not include, under the brownfield definition, sites
listed on the Environmental Protection Agency's (EPA) National Priorities
List; sites subject to environmental enforcement actions; and sites under
the custody or control of the federal government. However, EDA codes
certain grants as brownfield sites, even though the sites are not included
under the CERCLA definition. These grants are primarily for projects at
former military or Department of Energy (DOE) installations that were
still under the control of the federal government when the grant was made.
In some cases, the federal government transferred ownership of the
brownfield site before the project was completed. As a result, this report
presents separate analyses of (1) all grants EDA coded as brownfield sites
and (2) grants EDA

3Sec. 42 U.S.C. S: 9601(39)(A).

coded as brownfield sites that are specifically included under the CERCLA
definition.

Unlike EPA and the Department of Housing and Urban Development (HUD),
which administer specific grant programs targeted at brownfields site
redevelopment, EDA does not have a specific brownfield program. Instead,
the agency provides grants for brownfield-related activities under three
programs:

     o The Public Works Program empowers distressed communities to
       revitalize, expand, and upgrade their physical infrastructure to
       attract new industry, encourage business expansion, diversify local
       economies, and generate or retain long-term private sector jobs and
       investment. For example, the program has provided grants for
       investment in industrial and business parks, port facilities, and rail
       spurs as well as for the redevelopment of brownfields.
     o The Economic Adjustment Program helps state and local interests design
       and implement strategies to adjust or bring about change to an
       economy. This program focuses on areas that have experienced or are
       under threat of serious structural damage to the underlying economic
       base-for example, from foreign trade competition, the actual or
       threatened closure of a principal industry or company, a catastrophic
       natural disaster, or a terrorist attack.
     o The Defense Adjustment Program, a subset of the Economic Adjustment
       Program, helps communities impacted by base closures, defense contract
       reductions, or both to rebuild and diversify their economies. EDA
       receives funding for this program through direct appropriated funding
       or transfers of funds for defense projects from the Department of
       Defense (DOD) Office of Economic Adjustment.

To meet our objectives, we reviewed the project files for a random sample
of 140 of the 257 construction-related grants that EDA coded as brownfield
sites from fiscal years 1998 through 2004.4 We visited EDA regional
offices in Atlanta, Austin, Chicago, Denver, Philadelphia, and Seattle to
conduct

4According to EDA, regional office staff use the basic CERCLA definition
and professional judgment in coding grants as brownfield sites. As a
result, our estimates regarding the number of brownfield sites where
remediation activities were conducted and the dollar amount and percentage
of EDA funding used for remediation activities might be underestimated if
EDA staff did not properly code certain grants as brownfield sites.

    Page 3 GAO-06-7 EDA Brownfield Remediation

                                Results in Brief

our file reviews. During these reviews, we obtained information on the
remediation activities conducted and the amount of EDA grant funds used
for these activities, economic development activities conducted and
economic development impacts, and amount of public participation in the
projects. We used the 140 construction-related grants in our sample to
make estimates about the entire population of EDA grants coded as
brownfield sites and the subpopulation of EDA grants with brownfield
coding that were included under the CERCLA brownfield definition. We
interviewed officials from EDA to obtain a better understanding of the
economic development and environmental standards applied to projects and
the role of federal, state, and local environmental agencies in the
projects. We also interviewed officials from EPA and HUD for information
about each organization's brownfield redevelopment activities.

We conducted our work from January 2005 through September 2005 in
accordance with generally accepted government auditing standards. Appendix
I contains a detailed description of our scope and methodology.

We found that remediation activities at EDA-funded brownfield sites
appeared to be incidental to the purpose of the overall projects and
included cleanup activities such as the removal and disposal of
asbestos-containing materials, underground storage tanks, lead-based
paint, and contaminated soil. Overall, we estimated that of the 257
construction-related grants with brownfield coding that EDA made from
fiscal years 1998 to 2004, approximately 139 (54 percent) of them included
some kind of remediation activity.5 However, EDA contributed funding for
remediation activities at only an estimated 72 (28 percent) of these
brownfield sites. Grantees, former property owners, or other agencies
generally were responsible for most remediation costs. We also estimate
that of the 257 construction-related grants, 191 (74 percent) met the
CERCLA definition at the time the grants were awarded, and remediation
activities were conducted at 100 (52 percent) of the sites. Further, our
review of a sample of 140 construction-related EDA grants with brownfield

5Estimates based on our sample of EDA grants are subject to sampling
error. Different results could have been obtained with a different sample.
Unless otherwise noted, all percentage estimates in this report have 95
percent confidence intervals of plus/minus 8 percentage points or less.
Other estimates, such as dollar estimates, have 95 percent confidence
intervals that are within plus/minus 50 percent of the estimate itself.
Appendix I contains additional information on the sample design and
reliability of estimates.

Page 4 GAO-06-7 EDA Brownfield Remediation

coding showed that EDA did not provide a significant amount of funding for
remediation activities and that projects funded through the Defense
Adjustment Program generally required more funding for remediation
activities than projects funded through EDA's Public Works or non-Defense
related Economic Adjustment Programs. Total funding for all
construction-related grants with brownfield coding that EDA awarded in
fiscal years 1998 through 2004 was $341.2 million. Of this amount, an
estimated $4.8 million (or about 1.4 percent) was used for remediation
activities, including $3.7 million for remediation activities EDA funded
primarily at former military or DOE sites under its Defense Adjustment
Program and $1.1 million for remediation activities funded through regular
EDA appropriations. Similarly, we estimate that EDA provided about $226
million to brownfield sites that met CERCLA standards and used $3.3
million (or about 1.5 percent) of it for remediation activities, including
$2.3 million for remediation activities under the Defense Adjustment
Program and $1 million for remediation activities funded through Public
Works or non-Defense related Economic Adjustment Programs.

EDA is required to ensure that environmental assessments of its brownfield
projects comply with all federal environmental statutes and regulations.
In turn, EDA requires that grant recipients certify that their contractors
and subcontractors will comply with all applicable environmental laws and
regulations and works with federal, state, and local environmental
agencies to ensure that these requirements are met. EDA regional
environmental officers (REO) prepare an environmental assessment to
document a project's compliance with federal environmental requirements.
As part of the assessment, the REO evaluates whether the project site
contains any hazardous substances that might require remediation, using
documentation submitted by grant applicants. We noted that three of the
six REOs (in Atlanta, Chicago, and Seattle) routinely recommended adding
special conditions to grant awards that grant recipients provide evidence
to the government that hazardous substances had been remediated in
accordance with environmental standards not identified in the standard
terms and conditions of the awards. The REO in EDA's Chicago office told
us that special conditions, while not required, provided EDA with more
specific assurance that a project complied with standards for the
remediation of hazardous substances. EDA does require that grant
applicants provide evidence that the public is aware of proposed projects,
but does not impose a specific public participation requirement for
grants. For most of the grants we reviewed, we found evidence that efforts
were being made to inform the public of proposed projects through venues
such as newspaper articles, public meetings, and public notices.

EDA brownfield grants were used for various economic development purposes,
most often for infrastructure improvements and building demolition or
renovation that resulted in the development of industrial and business
parks, business incubators, training facilities, and tourism and
recreation facilities. EDA evaluates proposed construction projects
competitively based on standard investment policy guidelines that
emphasize increased numbers of relatively high-skill, high-wage jobs or
private sector investment, strong leadership and project management
experience, and matching funds from local governments or nonprofits. EDA
grant applicants are required to demonstrate how proposed projects will
meet or exceed these guidelines. We found that data were not available on
the reported economic development impact for most of the grants that we
reviewed because the projects either had not been completed or had not
been completed long enough to establish results. However, the reported
economic development data that were available sometimes varied
significantly from the initial project estimates. Further, while regional
staff are required to verify permanent job and private sector estimates,
we found that in some instances the estimates for proposed projects did
not appear to be verified. For example, one EDA grant we reviewed for the
development of a biotechnology center estimated that the project would
generate 400 permanent jobs. But this estimate included 300 students who
were expected to graduate from the center within 5 years and whose jobs
would therefore not be a direct result of the project.

To better ensure that remediation activities are conducted in accordance
with applicable regulations and to obtain better economic development
impact data, this report recommends that the Secretary of Commerce (1)
require all EDA regional offices to use special conditions concerning the
remediation of hazardous substances and (2) ensure that EDA staff verify
the estimated jobs and private-sector investment for proposed projects.

In commenting on our draft report, the Deputy Secretary of Commerce wrote
that the report accurately reflects EDA's role in supporting brownfield
revitalization projects and that remediation activities are a small part
of EDA's activities. Two of the comments addressed our recommendations.
The first stated that adding special conditions would not change grantees'
and EDA's obligations to ensure that projects comply with applicable laws
and regulations. However, we found that half of EDA's regional offices
were using special conditions with some success and believe it would be
beneficial if all EDA regional offices adopted this best practice. The
second comment questioned our recommendation that verification of
projected jobs and private investment in initial applications

                                   Background

be strengthened, noting that the data for completed projects after 6 years
were too limited. This recommendation is based on our findings that some
initial estimates did not appear to be effectively substantiated. We
continue to believe that substantiating these estimates would help EDA
make more accurate funding decisions and increase the chances of EDA
funding projects with the greatest potential impacts.

EDA was established in 1965 within the Department of Commerce to generate
jobs, help retain existing jobs, and stimulate industrial and commercial
growth in economically distressed areas of the United States.6 EDA
fulfills its mission through grants to state and local governments, Indian
tribes, educational institutions, nonprofit organizations, and others. EDA
grants, including those in support of brownfield redevelopment, are
intended to create wealth and minimize poverty by promoting a business
environment that attracts private capital investment and creates
relatively higher-skill, higher-wage jobs.

EDA grants to sites coded as brownfields represent a small portion of the
agency's total grants portfolio. EDA awarded 363 grants totaling $358.8
million to sites coded as brownfields (including construction and planning
grants) from fiscal years 1998 through 2004. EDA grants to sites coded as
brownfields represented 13.6 percent of the $2.6 billion of the agency's
total grants portfolio of 6,826 grants EDA awarded during this period
(fig. 1).

6Public Works and Economic Development Act of 1965, Pub. L. No. 89-136, 79
Stat. 552 (1965) codified at 42 U.S.C. S: 3121 et seq.

Page 7 GAO-06-7 EDA Brownfield Remediation

Figure 1: EDA Grants to Brownfield Projects Compared with Total EDA
Grants, Fiscal Years 1998-2004 Number of projectsDollars in millions1,200
500

    1,000

400

800 300

600

200 400

100

200

0

0 19981999 2000 2001 2002 2003 2004

Total EDA investment projects

Brownfield projects

All investment dollars

Brownfield investment dollars

Source: GAO analysis of EDA data.

In 1998, EDA began coding grants to brownfield sites with a special
initiatives code, 1 of more than 100 such codes EDA uses to categorize its
grants.7 EDA generally uses the same CERCLA definition of a brownfield
site as EPA, but it also codes as brownfield sites some venues that are
not included under the CERCLA definition of a brownfield site, primarily
former military or DOE installations that are still under the control of
the federal government at the time the grant is awarded. Under its current
statutory authorities EDA can make grants to these sites without requiring

7For example, EDA has also developed special initiative codes for
eco-tourism, enhanced regional competitiveness, the Alaska fisheries
disaster of 1998, and Hurricane Floyd in 2001.

Page 8 GAO-06-7 EDA Brownfield Remediation

  EDA Has Provided Limited Funding for a Variety of Remediation Activities at
  Brownfield Sites

that the grant recipient have title to the property.8 In such cases, EDA
generally requires that the grant recipient provide evidence that the
property will be transferred at a future date or obtain a leasehold
interest in the property until it transfers.

EDA has six regional offices across the United States that administer its
grant programs. Each regional office accepts preapplication investment
proposals from prospective grantees. Based on established regulations, EDA
regional officials encourage only those investment proposals that will
significantly benefit areas experiencing or threatened with substantial
economic distress to continue with the application process. Before
receiving a grant, an entity must submit a preapplication proposal to an
EDA regional office responsible for that area. After preliminary reviews
by various EDA regional office staff, each preapplication proposal is
considered by the regional Investment Review Committee, which consists of
the division chiefs and other regional office staff, to ensure that the
entity is eligible to receive funds and that the project is likely to
provide benefits meeting EDA's criteria. The committee decides whether the
entity should be invited to submit an application, but EDA headquarters
reviews the committee's recommendation action for quality assurance. Grant
funds are awarded upon completion of the application.

We found that remediation activities at brownfield sites typically
included the removal and disposal of materials containing asbestos,
underground storage tanks, lead-based paint, and contaminated soil.
Generally, these activities have been a small part of much larger projects
that involved infrastructure improvements, renovations of buildings, or
complete demolition of existing structures that do not meet current
building codes. Overall, we estimate that remediation activities were
conducted at about half of the 257 construction-related grants that EDA
coded as brownfield sites from fiscal years 1998 through 2004. EDA
provided funding for remediation activities at only about a quarter of the
sites, using an estimated 1.4 percent of its funding to pay for these
activities because these costs were generally covered by grantees, former
property owners, or other agencies. Our estimates showed similar
percentages for the subset of brownfield sites meeting CERCLA standards
and indicated that EDA spent more for remediation activities on projects
funded through the Defense

842 U.S.C. S: 3142.

Adjustment Program than for projects funded through its other programs
(Public Works or non-Defense related Economic Adjustment Programs).

Although remediation activities took a variety of forms, removing and
disposing of materials containing asbestos was the primary activity (table
1).

Table 1: Types of Remediation Activities Conducted at EDA-Funded
Brownfield Sites, Fiscal Years 1998-2004

Remediation activity conducted              Estimated percent of projectsa 
Asbestos abatement                                                      84 
Underground storage tank removal                                        35 
Lead-based paint abatement                                              17 
Otherb                                                                  46 

Source: GAO analysis of EDA data.

aPercentages do not add to 100 percent because some projects required
multiple types of remediation.

bOther remediation activities included removing and disposing of
contaminated soil or polychlorinated biphenyl materials and cleaning up
contaminated groundwater.

EDA officials said that remediation activities were often necessary to the
redevelopment of brownfield sites. For example, asbestos-containing
materials are often found in buildings constructed before 1970 and must be
removed if the structures are to conform to EPA standards. EPA has
regulated the use of asbestos since 1973 through various laws such as the
Clean Air Act and the Toxic Substances Control Act.9

On the basis of our sample of 140 EDA grants made to brownfield sites
between 1998 and 2004, we estimated that remediation activities were
conducted at 54 percent of the sites EDA coded as brownfields and at 52
percent of the sites that met the CERCLA definition. We also estimated
that EDA provided funding for remediation at 28 percent of all the sites
coded as brownfields (fig. 2).

9Clean Air Act, Pub. L. No. 88-206, as amended, codified at 42 U.S.C. S: 7401 et
seq. and Toxic Substances Control Act, Pub. L. No. 94-469, as amended, codified
                          at 15 U.S.C. S: 2601 et seq.

                  Page 10 GAO-06-7 EDA Brownfield Remediation

    Figure 2: Remediation at EDA-Coded Brownfield Sites, Fiscal Years 1998-2004

      Number of sites

300

257

250

191

200

150

100

50

0 All CERCLA- defined

      Type of brownfield site

Estimated brownfield sites that did not include remediation activities

Estimated brownfield sites that included remediation activities

Estimated brownfield sites for which EDA funds were spent on remediation
activities

Source: GAO analysis of EDA data.

EDA officials said that they generally tried to limit the amount of grant
funds that were used for remediation activities, per an EDA Directive
effective July 1992 and later clarified in a memorandum from the Acting
Assistant Secretary of EDA in June 2000, which states that EDA typically
participates in hazardous waste cleanups as part of a larger economic
development project, but not as the principal activity of the EDA funded
activity. As previously stated and further shown in the examples presented
below, we generally found this to be true for the projects we reviewed.
EDA officials explained that they were in business to redevelop blighted
areas in order to create higher paying jobs and promote private investment
and that remediation was an incidental EDA activity. They noted that
former property owners or other federal agencies, such as EPA or HUD that
have specific brownfield grant programs, should help fund remediation at
sites requiring a significant amount of environmental cleanup. Specific
examples where EDA funded remediation activities that appeared to be
incidental to the larger projects include the following:

     o A project in Cumberland, Maryland, funded in 2002, that met the CERCLA
       definition of a brownfield site required environmental remediation
       work to renovate an existing building for use as a micro-enterprise
       business incubator and training facility. From EDA's investment of
       $900,000 in the project, about 2 percent of EDA's funds were used to
       remove asbestos and lead paint found throughout the building being
       renovated.
          * A 1999 project in Atlanta, Georgia that met the CERCLA definition
            of a brownfield site received EDA grant funds to help construct a
            proposed business park, including a roadway, and a water line and
            sanitary sewer line. During the project, the contractors
            discovered the buildings scheduled for demolition contained
            asbestos, and the soil underneath the path of the road was
            contaminated with lead and petroleum. EDA agreed to participate
            only in cleanup activities associated with demolition of the
            buildings that were in the footprint of the EDA improvements
            (asbestos and removal of contaminated soil). Of EDA's investment
            of $1.2 million, about 7 percent of the funds were used for
            remediation.
          * Other federal agencies and grantees played a larger role than EDA
            in cleaning up some sites:
     o EDA provided $1.57 million to the Lawrence Economic Development
       Corporation in 2002 for infrastructure improvements (water lines,
       sanitary sewers, and roads) to a brownfield site in South Point, Ohio,
       that was listed on EPA's National Priority List. EDA's project,
       located on about one-third of this Superfund site, required removing
       contaminated soil, burying the soil onsite, and covering it with a
       clay cap. EDA did not provide any funding for these remediation
       activities. Instead, the previous owner paid about $1 million for the
       remediation. The federal and state EPAs were responsible for
       monitoring the remediation. Although the site was completely
       remediated, it did not meet the CERCLA definition for a brownfield
       site because it remains on EPA's National Priority List since EPA
       plans to continue performing groundwater testing for an extended
       period of time, possibly another 20 years.
     o In 2000, EDA provided $1.1 million funding through the Defense
       Adjustment Program to develop infrastructure (storm drains, new
       streets and sidewalks, street lights, sewer lines, and water lines)
       for an industrial park in Pomona, California. This site required
       removal of asbestos, underground storage tanks, and lead paint.
       Because the project was located on the former Naval Industrial Reserve
       Ordnance Plant and the Navy still legally owned the land, the Navy
       paid for all remediation costs. The California Department of Toxic
       Substance Control provided documentation to EDA that it had provided
       regulatory oversight for the necessary remediation activities. This
       project did not meet the CERCLA definition of a brownfield site since
       the land was still owned by the Department of the Navy.

Appendix II contains additional details on the Atlanta project and
examples of remediation at other EDA sites coded as brownfields.

Overall, we found that of the $341 million EDA provided to sites coded as
brownfields from fiscal years 1998 through 2004, an estimated 1.4 percent
of its funding, or $4.8 million, was used for remediation activities.
Similarly, of the estimated $226 million for sites coded as brownfields
meeting the CERCLA definition, we estimate that EDA used about 1.5
percent, or $3.3 million, of its funding for remediation activities (fig.
3).

Figure3: Analysis of EDA Funding to Brownfield Sites, Fiscal Years
1998-2004 Estimated grant funds (in millions)

                                 All Brownfield

                          sitesmeetingCERCLA criteria

Public Works or non-Defense related Economic Adjustment Program funding
Defense Adjustment Program funding

Source: GAO analysis of EDA data.

We also analyzed EDA grant funds spent on remediation activities through
regular EDA appropriations and appropriated or transferred DOD funding.
EDA receives direct appropriated or transferred funding under the Defense
Adjustment Program for projects at former military or DOE installations
that have closed and are in the process of being redeveloped. These sites
often require extensive remediation. Our analysis demonstrated that EDA
has spent more for remediation activities on projects funded through the
Defense Adjustment Program than for projects funded through its Public
Works or non-Defense related Economic Adjustment Programs-$3.7

million and $1.1 million, respectively (fig. 3). From fiscal years 1998
through 2004, EDA received $135 million in direct-appropriated or
transferred funding for construction-related projects under the Defense
Adjustment Program, or about 40 percent of the total grant funding
provided to sites coded as brownfields during this period.

Our sample of 140 grant awards contained 46 grants funded through the
Defense Adjustment Program. For seven of these grants, more than 10
percent of the funding was designated for remediation activities,
including two grants made to brownfield sites that were included under the
CERCLA definition at the time the grants were awarded. For one of these
grants, $1.46 million or 29 percent of the funding was earmarked for
remediation activities (see the Philadelphia case study in app. II). For
projects funded through direct appropriations under the Defense Adjustment
Program, EDA has the discretion to choose and administer the projects in
accordance with their Economic Adjustment Program authority. However,
according to EDA officials, the majority of EDA projects in the Defense
Adjustment Program are undertaken with transferred funding pursuant to a
memorandum of understanding between EDA and DOD's Office of Economic
Adjustment. The officials added that these projects are often funded
pursuant to a targeted DOD appropriation, and EDA is generally left with
little or no up-front decisional authority over which projects should
receive funding. In addition, the officials stated that in these projects,
DOD's Office of Economic Adjustment provides EDA with a general framework
for the project; and EDA, which primarily serves as the grant
administrator, works directly with the grantee to establish the specific
scope of work and controls the disbursement of funds for eligible
expenses.

EDA is required to ensure that environmental assessments of its projects

  Some EDA Regions

coded as brownfields comply with various federal environmental
requirements. EDA relies on federal, state and local environmental
Processes to Better agencies to ensure that grant recipients and their
contractors and

subcontractors comply with applicable environmental standards. REOs
prepare environmental assessments to document compliance with federal with
Environmental environmental requirements and determine whether the project
site contains any hazardous substances that might require remediation. We

noted that the REOs at three of EDA's six regional offices routinely

recommended adding special conditions to grant awards concerning the

remediation of hazardous substances in order to provide EDA with more

specific assurance that projects were complying with environmental

    Environmental Assessments Document That Projects Comply with Applicable
    Environmental Laws

standards. We also noted that while EDA requires grant applicants to
provide evidence that the public is aware of proposed projects, it does
not have a specific public participation requirement.

Under the National Environmental Policy Act of 1969 (NEPA), EDA generally
evaluates the likely environmental effects of brownfield projects it is
proposing using a relatively brief environmental assessment or, if the
action will be likely to significantly affect the environment, a more
detailed environmental impact statement.10 These environmental assessments
are conducted in accordance with federal environmental statutes and
regulations.11 To document a project's compliance with this act and other
federal environmental requirements, REOs prepare environmental assessments
to help ensure that adverse environmental impacts are mitigated or avoided
to the extent possible. As part of the assessment, the REO reviews
documentation from grant applicants to determine whether any hazardous
substances are present at the project site that may require remediation
activities. For example, grant applicants are required to certify on the
Applicant Certification Clause (Form ED-536) whether a project site is
contaminated by toxic or hazardous substances. The form includes questions
related to the presence of asbestos-containing material, underground
storage tanks, equipment (such as electrical transformers) containing
polychlorinated biphenyls, and other hazardous substances. Grant
applicants are also required to submit copies of any environmental surveys
or inspection reports conducted for the project site and documentation
from any investigations by federal, state, or local environmental agencies
that are related to it.

In three regional offices (Atlanta, Chicago, and Seattle), we noted that
REOs routinely recommended adding special conditions on the remediation of
hazardous substances to grant awards. For example:

10NEPA, Pub. L. No. 91-190, as amended, codified at U.S.C. S:S: 4321 et
seq.

11These statutes and regulations include, among others, CERCLA (Pub. L.
No. 95-510, as amended, codified at 42 U.S.C. S:S: 9601 et seq.); the Safe
Drinking Water Act of 1974 (Pub. L. No. 92-523, as amended, codified at 42
U.S.C. S:S: 300f et seq.); the Clean Air Act (Pub. L. No. 88-206, as
amended, codified at 42 U.S.C. S:S: 7401 et seq.); and the Resource
Conservation and Recovery Act of 1976 (RCRA) (Pub. L. No. 94-580, as
amended, codified at 42 U.S.C. S:S: 6901 et seq.).

     o In 1998, EDA attached a special condition to a $668,500 grant made to
       the city of Cleveland, Ohio and the Shorebank Enterprise Group for the
       renovation and expansion of an existing business incubator building to
       be used by new and emerging companies at a brownfield site that met
       the CERCLA definition. The condition stipulated that before the
       project closed and EDA made the final disbursement, the recipient
       would provide evidence satisfactory to the government that all
       asbestos had been disposed of in a manner that complied with
       applicable state and federal regulations.
     o In 1999, EDA attached a special condition to a $750,000 grant to the
       city of Marquette, Michigan for infrastructure improvements to
       facilitate business revitalization in the central business district,
       including the replacement of water mains, sanitary sewer mains,
       sidewalks, and curbs at a brownfield site that met the CERCLA
       definition. The condition stipulated that the recipient agreed to
       remediate any soils found to contain regulated levels of contamination
       as defined by the Michigan Department of Environmental Quality, using
       procedures approved by the department.
     o In 1999, EDA placed another condition on a $1,085,200 grant to Lenoir
       City and Loudon County Tennessee for the demolition of existing
       structures and construction of a new two-story building in the central
       business district at a brownfield site that met the criteria in
       CERCLA. The purpose of the new building was to house a satellite
       campus that included a community college, career center, city library,
       and business development center. This special condition required the
       recipient to furnish evidence satisfactory to the government that all
       asbestos and lead-based paint materials had been removed or contained
       from the property before construction started, in accordance with the
       National Emission Standards for Hazardous Air Pollutants and other
       appropriate standards and regulations.

The REO at EDA's Chicago regional office told us that special conditions
concerning the remediation of hazardous substances provided EDA with more
specific assurance that a project would comply with environmental
standards not identified in the standard terms and conditions of EDA grant
awards. The Chicago REO also told us that special conditions could be used
to protect the government from liability if individuals were injured by
exposure to hazardous substances at EDA-funded brownfield sites. The
Chicago REO added that while such conditions were not required, they

    EDA Works with Federal, State, and Local Environmental Agencies to Ensure
    That Grant Recipients Comply with Applicable Environmental Laws

were useful in emphasizing the grant recipient's responsibilities for
site-specific environmental issues.

EDA's Seattle regional office routinely attaches specific assessments and
additional documentation requirements of environmental hazards to Defense
Adjustment Program project deeds. According to the Seattle office's
regional counsel, while the environmental restrictions are often benign
and unobtrusive, they promote efficiency by calling attention to the
restrictions and placing the onus on the grantee to meet the additional
requirements in the deed. The REO at EDA's Denver regional office also
agreed that special conditions concerning the remediation of hazardous
substances were more effective than EDA's standard terms and conditions,
although we did not identify any grants to which the Denver REO attached
such conditions. According to officials at EDA headquarters, as part of
its due diligence under NEPA and depending upon the project facts and
timing for remediation, the agency may make its financial assistance
conditional on the grantee's providing evidence that a remediation plan
has been approved at the state level or of actual compliance with a state
process.

As we have seen, EDA requires grant recipients and their contractors and
subcontractors to comply with all applicable federal, state, local, and
territorial environmental laws as part of the standard terms and
conditions of its grant awards. EDA works with environmental agencies at
all levels of government to ensure that grant recipients comply with
environmental requirements, but state environmental agencies (along with
EPA) generally take the lead in ensuring such compliance. For example:

     o In 2000, EDA funded a project in Kansas City, Missouri to demolish
       blighted structures, rehabilitate combined sewer lines, and replace
       catch basins at an existing industrial park site. This site also met
       the criteria of a brownfield under CERCLA. About 9 percent of the $1
       million awarded to the project was used for the removal of material
       containing asbestos found in the structures. The project file showed
       that the Missouri Department of Natural Resources issued a permit to
       the firm that completed the asbestos remediation in accordance with
       the state's asbestos regulations.
     o EDA funded another project that met the criteria of a brownfield under
       CERCLA in Newport, Rhode Island in 2002, for infrastructure and site
       work on a former naval housing site that was being redeveloped as a
       community college, preschool program, and office complex. EDA

    EDA Grants Do Not Include A Specific Public Participation Requirement

funded $26,394 of the remediation costs for soil contaminated with arsenic
(about 3 percent of the $1 million awarded to the project). The project
file showed that the Rhode Island Department of Environmental Management
provided oversight of the cleanup of the contaminated soil to ensure
compliance with the state policy for the remediation of arsenic
contaminated soil.

We found that EDA required grantees to provide evidence of any efforts
they had made to ensure that the public was aware of proposed projects,
but it does not have a specific public participation requirement. Grantees
could use newspaper articles, public meetings, or public notices as
evidence of public awareness efforts. We found this type of evidence in
the project files for an estimated 81 percent of the projects coded as
brownfields. In some cases, the public might have been aware of projects,
but we did not find evidence that grantees had tried to disseminate
information in the project files; in some cases, EDA officials could not
locate the evidence. EDA also requires grant applicants to fully describe
any public controversy surrounding or objections to the proposed project,
including the steps that were taken to resolve any issues, and submit a
copy of the transcript if formal public hearings were held. Our analysis
showed that most of the projects were not controversial and that public
hearings were held for an estimated 27 percent of the projects with
brownfield coding. For example:

     o A project funded in 2002 in Trenton, New Jersey involved moving
       industrial park businesses from a flood prone industrial area to a
       flood protected area. The property contained asbestos, underground
       storage tanks, and contaminated soil, but much of the remediation had
       been done prior to this EDA grant.12 The project met the criteria of a
       brownfield site in accordance with CERCLA. According to the
       environmental assessment, the project was discussed at open city
       council meetings, and EDA officials said that they were not aware of
       any objections to the project.
     o Another project funded in 1998 in Los Angeles, California involved
       converting an abandoned four-story building into a business incubator.
       The project met the criteria of a brownfield site in accordance with

12A second grant for this project was made in 2003 to cover asbestos
remediation costs of which EDA funded $454,055 or 60 percent of the total
estimated costs.

Page 19 GAO-06-7 EDA Brownfield Remediation

  Grants Were Used for a Variety of Economic Development Purposes, but Data on
  the Projects' Impact Were Largely Unavailable

CERCLA. EDA spent less than $100,000 of a $1.8 million grant on
remediation. The project details were posted in the California Areawide
Clearinghouse, a biweekly public review and comment process, and sent to
the Southern California Association of Governments. The project also
received widespread newspaper coverage.

        * A project funded in 2002 in Boston, Massachusetts involved
          renovating an industrial building in a shipyard and purchasing a
          boat lift to help attract new business. The project met the
          criteria of a brownfield site in accordance with CERCLA. At the
          time of our review, EDA had spent just over $1,000 of a $1 million
          grant on asbestos removal. According to the project file, public
          hearings were not held on this specific grant, but over 20 public
          meetings were held on planned renovations of the entire shipyard
          over a 3-year period. The file also documented that there was no
          controversy involving the project.
        * We found that EDA brownfield grants were used for various economic
          development purposes that resulted in the creation of industrial
          and business parks, business incubators, training facilities, and
          tourism and recreation facilities. The guidelines EDA uses to
          evaluate proposed projects emphasize a variety of factors,
          including the following:
     o The number of relatively higher-skill, higher-wage jobs the project
       will generate;
     o private sector investment in the project;
     o strong leadership skills and project management experience; and
     o the amount of matching funds that are available from local governments
       or nonprofits.

We found that data were not available on the reported economic development
impact for most of the grants that we reviewed because the projects either
were not complete or had not been completed long enough to establish
results. However, we found during a review of project files that some
estimates of the permanent jobs or private-sector investment a project
would create did not appear to have been properly verified.

    EDA Grants Supported a Variety of Economic Development Purposes

For our analysis, we reviewed EDA grants to sites coded as brownfields to
determine the grants' purposes and project goals. We found that the most
common purpose of EDA grants to brownfield sites was to make
infrastructure-related improvements, such as upgrading water and sewer
lines, constructing streets and curbs, and installing signage and
lighting. EDA's development activities supported a variety of projects.
Figure 4 shows the most common purposes of EDA grants, along with the
goals or types of projects-most commonly industrial parks and other
commercial developments-that were planned for former brownfield sites.

Figure 4: Purposes and Project Goals of EDA Grants with Brownfield Coding

Source: GAO analysis of EDA data.

aPercents do not sum to 100 because some of the projects had more than one
purpose, goal, or both.

bOther purposes included transportation development, financial assistance,
and waste water treatment upgrades. cOther project goals included
providing low-income housing and upgrading transportation.

When eligible grant applicants submit preapplication proposals for
construction projects, EDA must first determine whether the project area
is eligible for assistance.13 Project areas eligible for EDA assistance
generally include those that have one of the following:

     o an unemployment rate at least 1 percentage point higher than the
       national average for the most recent 24-month period for which data
       are available;
     o per capita income that is 80 percent or less of the national average
       for the most recent period for which data are available; or
     o a special need, as determined by EDA, arising from actual or
       threatened severe unemployment or economic adjustment problems
       resulting from severe short-term or long-term changes in economic
       conditions.14

After determining that a project area is eligible for assistance, EDA
evaluates project proposals competitively, based on five investment policy
guidelines (See table 2). These guidelines are intended to focus on
results rather than processes and encourage investment in U.S. communities
based on risk and the expected return on the taxpayer's investment. EDA's
investments through these guidelines also aim to attract private sector
investment, have a higher probability of success, and ultimately result in
an environment where relatively high-skill, high-wage jobs are created.

13Eligible applicants for, and eligible recipients of, EDA financial
assistance include Economic Development Districts; Indian tribes or
consortia of Indian tribes; states; cities or other political
subdivisions; institutions of higher education or consortia of
institutions of higher education; public or private nonprofit
organizations or associations acting in cooperation with officials of a
political subdivision of a state. EDA is not authorized to provide grants
directly to individuals or to other for-profit entities seeking to start
or expand a business.

14A special need can include substantial outmigration or population loss;
underemployment (the employment of workers at less than full time or at
less skilled tasks than their training and abilities permit); military
base closures or realignments, defense contractor reductions-in-force, or
DOE defense-related funding reductions; natural or other major disasters
or emergencies; extraordinary depletion of natural resources; closure or
restructuring of industrial firms that are essential to area economies; or
destructive impacts of foreign trade.

Table 2: EDA's Investment Policy Guidelines

                    Investment policy guidelines Description

Be market based and results driven Investments should capitalize on a
region's competitive strengths and positively move a regional economic
indicator measured on EDA's Balanced Scorecard-for example, by increasing
the number of relatively high-skill, high-wage jobs; increasing tax
revenue; or increasing private-sector investment in the local community.

Have strong organizational leadership Projects need to demonstrate strong
leadership capabilities, relevant project management experience, and a
significant commitment of human-resources talent to ensure their success.

Advance productivity, innovation, and entrepreneurship Projects should
embrace the principles of entrepreneurship, enhance regional clusters and
leverage and link technology innovators and local universities to the
private sector to create the conditions for greater productivity,
innovation, and job creation.

Look beyond the immediate economic horizon, anticipate economic Any
investment must be part of an overarching, long-term

changes, and diversify the local and regional economy comprehensive
economic development strategy that enhances a region's success in
achieving a rising standard of living by supporting existing industry
clusters, developing emerging new clusters, or attracting new regional
economic drivers.

Demonstrate a degree of commitment Projects should exhibit (1) high levels
of local-government or nonprofit matching funds and private sector
leverage; (2) clear and unified leadership and support by local elected
officials; and (3) strong cooperation among the business sector, relevant
regional partners, and local, state, and federal governments.

Source: EDA.

EDA currently gives further priority to proposed projects that enhance
regional competitiveness and support long-term development of the regional
economy. EDA considers the following as strategic investments that enhance
regional competitiveness and support long-term development of the regional
economy, including projects that

     o upgrade core business infrastructure, including transportation,
       communications, and specialized training programs;
     o implement regional strategies that involve all stakeholders and
       support regional benchmarking initiatives;
     o encourage institutional collaboration, reflect strong leadership
       commitment, and encourage a formalized structure to maintain
       consensus;
     o cluster development establishing research and industrial parks that
       encourage innovation-based competition and recruitment efforts;

    Insufficient Time Has Elapsed to Assess the Economic Development Impact of
    Brownfield Projects

     o help communities plan and implement economic adjustment strategies in
       response to sudden and severe economic dislocations;
     o support technology-led economic development, and reflect the important
       role of linking universities and industry and technology transfers;
       and
     o advance community and faith-based social entrepreneurship in
       redevelopment strategies for areas of chronic economic distress.

Given its funding resources, EDA invites successful project proposals to
submit full applications.

We found that insufficient time had elapsed to assess the economic
development impact of most of the grants that we reviewed, either because
the projects had not been completed or had not been completed long enough
to establish results. EDA has two primary measures of the economic
development impact of construction-related projects-(1) the number of
permanent jobs a project creates or retains and (2) the amount of
private-sector investment that a grant generates. Because the typical
project is completed 3 years after the grant is awarded, EDA monitors
performance results at 3, 6, and 9 years after the award. Data for jobs
created after 3 years were available during our review for 32 percent of
the 257 construction-related grants that EDA coded as brownfield sites,
while data for jobs created after 6 years were available for 11 percent.
Data on private-sector investment generated 3 years after grants were
awarded were available for 25 percent and after 6 years for 9 percent of
the grants. EDA officials stated that the most reliable data on economic
development impact are those from 6- and 9-year evaluations.

EDA officials said that they relied to a certain extent on applicants'
estimates of job creation and private investment in determining whether to
fund a brownfield project. To evaluate the initial estimates, we compared
12 of the 140 grants that had both data on estimated job creation in the
original application with data on job creation at the 6-year evaluation.
Because of the limited data, we were not able to project our results to
all construction-related projects coded as brownfields. For the 12 grants
that had both types of information, we found that the reported jobs
created or retained differed substantially from the initial project
estimates for more than half of the grants (table 3).

     Table3: Initial Estimates and 6-Year Data on Jobs Created and Retained

Project               Initial project estimate Reported jobs after 6 years 
1                                          150                           7 
2                                          800                          24 
3                                          620                         478 
4                                          725                          35 
5                                          115                         163 
6                                        1,500                          60 
7                                           72                       1,234 
8                                          400                         180 
9                                          100                          49 
10                                         100                         290 
11                                          23                          77 
12                                         100                         290 

Source: GAO analysis of EDA data.

We also compared 6 of the 140 grants that had both estimates of private
sector investment in the original applications with data on such
investment at the 6-year evaluation. We found that the reported private
sector investment 6 years after grant approval differed substantially from
the initial investment estimates for most of the grants (table 4).

Table 4: Initial Project Estimates and 6-Year Data on Private Sector Investment

                                                      Reported private sector
Project                  Initial project estimate investment after 6 years 
1                                     $30,000,000                  $30,000 
2                                         230,000                  750,000 
3                                       1,526,439                  932,685 
4                                       2,000,000                1,794,000 
5                                       1,600,000                5,577,264 
6                                      15,000,000               10,000,000 

Source: GAO analysis of EDA data.

We did not try to determine whether a direct causal relationship existed
between the grants EDA made to brownfield sites and the reported economic
development. However, as we have noted in prior reports, we

Page 25 GAO-06-7 EDA Brownfield Remediation

    Economic Development Estimates Outlined in Project Proposals Were Not Always
    Appropriately Verified

believe that attempting to quantify the gains from economic development
programs is difficult. Determining that a causal relationship exists would
require (1) documenting improvement in the targeted area, (2) linking
specific elements in the program to the economic changes, and (3)
measuring the growth stemming from other influences on the region's
economy in order to isolate the impact that could be attributed to EDA's

15

program.

We found that in some cases project proposals that provided estimates of
the potential jobs or investment did not appear to have been verified.
Grant applicants are required to estimate both the number of permanent
jobs their project will create or retain and the amount of private sector
investment the proposed projects will generate, including jobs directly
related to the project. Regional office staff are required to verify the
estimates before the projects begin, but we found instances in which
verification appeared to have been insufficient. For example:

     o In 1999, EDA awarded a $1.39 million grant to the city of Laredo,
       Texas, for the construction of a bridge overpass and road to connect
       an existing industrial brownfield site to an interstate highway. The
       bridge overpass was designed to span existing railroad tracks in order
       to prevent collisions between trains and tractor-trailers traveling
       from the industrial site. EDA project summary documents indicated that
       the project would retain an estimated 1,500 jobs at the industrial
       site. However, the project file contained no documentation suggesting
       that the existing tenants would vacate the industrial site if the
       bridge overpass and road were not constructed.
     o In 2002, EDA awarded a $3 million grant to the Research Corporation of
       the University of Hawaii to help the School of Medicine construct a
       biotechnology center for technology transfer at a brownfield site and
       to acquire equipment for the center. EDA project summary documents
       indicated that the center would generate an estimated 400 permanent
       jobs. However, this estimate included 300 students who were expected

15GAO, Economic Development: Limited Information Exists on the Impact of
Assistance Provided by Three Agencies, GAO/RCED 96-103, (Washington, D.C.:
Apr. 3, 1996) and Economic Development: Observations Regarding the
Economic Development Administration's May 1998 Final Report on Its Public
Works Program, GAO/RCED 9911R (Washington, D.C.: Mar. 23, 1999).

Page 26 GAO-06-7 EDA Brownfield Remediation

to graduate from the center within 5 years-indirect jobs that should not
have been included in the permanent jobs estimate.

o  In 1998, EDA awarded a $2.25 million grant to the Fitzsimons
Redevelopment Authority in Denver, Colorado for the construction of 50,000
square feet of interior space in a bioscience park center at a brownfield
site-the second grant this project had received (the first was used to
construct the building). EDA project summary documents indicated that an
estimated 100 jobs would result from the project. However, the EDA project
summary documents for the first grant also used the same permanent jobs
estimate, so that the same jobs appear to have been counted twice.

Officials at some EDA regional offices said that they did not have the
capacity or resources to verify the permanent jobs or private sector
investment estimates submitted by grant applicants for proposed projects.
Instead, they relied largely on their professional judgment and past
knowledge and experience when reviewing permanent job and private-sector
investment data for proposed projects. However, by not effectively
substantiating the data applicants supply, EDA may not be funding those
projects with the greatest potential economic development impact.

We found that, overall, EDA grants were being used for a variety of

  Conclusions

economic development activities that resulted in the reclaiming of former
brownfield sites. Although we could not measure the precise economic
impact of these projects, potentially, they serve a purpose that is
difficult to quantify in reclaiming previously blighted land and
structures and reducing the need to further develop rapidly disappearing
"greenspace." During our review, we found (1) best practices that could
usefully be emulated and (2) a lack of appropriate verification procedures
during the grant application process, as follows:

        * Grant recipients and their contractors and subcontractors must
          comply with all applicable environmental laws as part of the
          standard conditions of EDA grant awards. We noted that REOs at
          three of EDA's six regional offices routinely recommended adding
          special conditions to grants involving the remediation of hazardous
          substances that emphasized the need to comply with any
          environmental standards that the grant might not specifically
          identify in the standard terms and conditions of EDA grant awards.
          These special conditions help ensure
        * that projects comply with all environmental standards, promote
          efficiency, and help limit any potential liability to the
          government.
        * Although EDA processing procedures require that regional office
          staff verify the estimated permanent jobs and private sector
          investment for proposed projects, we found instances in which these
          estimates appeared out of line but were not questioned by EDA
          staff. Substantiating these estimates would help EDA make more
          accurate funding decisions, based on more accurate job forecast and
          investment information, and would likely increase the chances of
          EDA funding projects with the greatest potential impact.
        * We recommend that the Secretary of Commerce direct EDA to take the
          following two actions:
     o implement a standard procedure that would require regional offices to
       add a special condition to grants for brownfield sites where
       remediation of hazardous substances is required stipulating that the
       grant recipient provide evidence that remediation has been conducted
       in accordance with all applicable federal, state, and local
       regulations-including those not mentioned in the standard EDA grant
       forms--and
     o ensure that regional staff verify estimated jobs and private-sector
       investment for proposed projects by following existing guidelines or
       creating new ones, as necessary.

                                Recommendations

Agency Comments and Our Evaluation

We provided the Department of Commerce with a draft of this report for
review and comment. The Deputy Secretary provided written comments that
are presented in appendix III. The letter stated that the report
accurately reflects EDA's role in supporting brownfield revitalization
projects and that remediation activities are a small part of EDA's
activities. The letter also included technical comments, which have been
incorporated in this report, where appropriate. Two of the technical
comments dealt with our recommendations.

We recommended that EDA require regional offices to add a special
condition to grants for brownfield sites that grantees provide evidence
that remediation has been conducted in accordance with all applicable
federal, state, and local regulations. The Deputy Secretary noted that
adding a special condition did not change a grantee's and EDA's
overarching obligation to ensure that a project complies with all
applicable laws and requirements. However, we found that three of EDA's
six regional offices were routinely using such special conditions as a
best practice. Officials in the regions implementing the practice told us
that the special conditions

(1) provided more specific assurances that projects were complying with
environmental standards, (2) helped protect the government from liability
if individuals were injured, and (3) promoted efficiency by placing the
onus on the grantee to meet additional requirements. Given these benefits,
we believe it would be beneficial if all six EDA regional offices adopted
the practice.

The Deputy Secretary also questioned our recommendation that regional
staff increase efforts to verify estimated jobs and private sector
investment for proposed projects, because our sample size of projects with
6-year data was too small. We agree that the data do not allow for
projections to all construction-related projects coded as brownfields.
However, our recommendation was based on the fact that EDA's processing
procedures required EDA regional staff to verify these estimates before
construction began. We found examples of approved estimates that did not
appear to be effectively substantiated by EDA staff. Verifying these
estimates could help ensure that EDA funds those projects with the
greatest potential impact.

We will send copies of this report to the Secretary of Commerce, relevant
congressional committees, and other interested parties and will make
copies available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions regarding this report, please
contact me at (202) 512-4325 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. GAO staff who made key contributions to this
report are listed in appendix IV.

William B. Shear

Director, Financial Markets and Community Investment

Appendix I

                       Objectives, Scope, and Methodology

To evaluate the grants made by EDA for the economic development of
brownfield sites, we (1) determined the extent to which brownfield
projects funded by EDA grants included remediation activities, the types
of remediation activities conducted, and the amount of EDA grant funds
used for those activities; (2) identified the environmental standards that
applied to EDA projects, examined the role of federal, state, and local
environmental agencies, and the amount of public participation in the
projects; and (3) identified the economic development standards that
applied, the economic development activities conducted, and the reported
economic development impact for the projects.

To meet our objectives, we obtained data from EDA on all grants awarded
from fiscal years 1998 through 2004 that were coded as brownfield sites.
For each grant, we obtained the following information from the database
that EDA uses to track its grants:

     o grant recipient's name,
     o fiscal year the grant was awarded,
     o project number,
     o grant amount,
     o funding source,
     o investment type,
     o general project description,
     o state investment amount,
     o jobs created or retained 3 years after approval,
     o jobs created or retained 6 years after approval,
     o private investment generated 3 years after approval, and
     o private investment generated 6 years after approval.

We selected a sample of 140 (54 percent) of the 257 construction-related
grants EDA awarded that were coded as brownfield sites. As table 5 shows,

Appendix I Objectives, Scope, and Methodology

our sample consisted of the 32 grants EDA awarded in fiscal year 2002
(regardless of grant amount), the 17 grants EDA awarded from fiscal years
1998 through 2004 for amounts greater than or equal to $2.5 million
(excluding 2002), and a random sample of 91 grants EDA awarded from fiscal
years 1998 through 2004 for amounts less than $2.5 million (excluding
2002).

             Table 5: GAO Sample of EDA Grants to Brownfield Sites

                               Public Works/other
                             nondefense economic Defense      
                                      adjustment adjustment    Total   Sample 
Grants awarded in 2002                                             
(any amount)                               32            0      32      32 

Grants awarded from 1998 to 2004 (excluding 2002)

Amount < $2.5 million Amount <$2.5 million 146 6   62 11   208 17   91 17  
Total                                          184   73      257       140 

Source: GAO analysis of EDA data.

For each grant in our sample, we reviewed the project file maintained by
EDA regional offices to determine (1) whether the project site was
included under the CERCLA definition of a brownfield site at the time the
grant was awarded,1 (2) the specific remediation activities conducted at
the project site and amount of EDA grant funds used for these activities,2
(3)

1CERCLA defines brownfield sites as areas where redevelopment or reuse may
be complicated by real or perceived environmental contamination but
generally excludes the following: (1) sites that are on EPA's National
Priorities List or subject to environmental enforcement actions; (2) sites
under the jurisdiction, custody, or control of the federal government; (3)
sites contaminated with polychlorinated biphenyls that are subject to
remediation under TSCA; and (4) sites that have had cleanup activity
funded by the Leaking Underground Storage Tank Trust Fund.

2To determine the amount of EDA funding used for remediation activities
for each grant, we multiplied the total cost of any remediation activities
conducted by EDA's share of the total project costs. For a small number of
grants in our sample, the project file did not contain documentation that
enabled us to determine actual remediation costs. For example, these costs
were included on invoices submitted by contractors as part of budget line
items, such as demolition or construction. For grants for which actual
remediation costs were not available, we used estimates provided by EDA
regional office staff.

Appendix I Objectives, Scope, and Methodology

the economic development activities conducted and proposed economic
development impact of the projects, and (4) the amount of public
participation in the projects. We reviewed the individual project files
because EDA does not maintain specific information on funding of
remediation activities at brownfield sites in its automated database.

To ensure that the file reviews were performed uniformly, we used a
Web-based, data-collection instrument to gather information about each
project's brownfield classification, economic development activities,
project costs, and remediation activities. To determine the purposes and
project goals of the grants, two GAO analysts each performed an
independent content analysis of information contained in project files. In
cases where their results differed, the analysts obtained additional
information from the project and redid the analysis until both analysts
reached a consensus on each of the project's purposes and goals. Table 6
shows the number of grants in our sample at EDA's regional offices.

                Table 6: Grants Reviewed at EDA Regional Offices

Regional office location                        Number of grants in sample 
Atlanta                                                                 26 
Austin                                                                   9 
Chicago                                                                 21 
Denver                                                                  16 
Philadelphia                                                            55 
Seattle                                                                 13 
Total                                                                  140 

Source: GAO analysis.

We used the 140 construction-related grants in our sample to generate
separate estimates about the entire population of EDA grants coded as
brownfield sites and the subpopulation of EDA grants included under the
CERCLA brownfield definition. Our confidence in the precision of the
results from this sample is expressed in 95-percent confidence intervals,
which are expected to include the actual results in 95 percent of samples
of this type. We calculated confidence intervals based on methods that are
appropriate for our sample. All percentage estimates have 95-percent
confidence intervals of within plus or minus 8 percentage points of the
estimated percentage. All numerical estimates other than percentages, such
as dollar estimates or totals, have 95-percent confidence intervals of

                 Appendix I Objectives, Scope, and Methodology

within plus or minus 50 percent of the estimate itself. Table 7 summarizes
the 95-percent confidence intervals for the numeric and percentage
estimates presented in this report.

 Table 7: 95-Percent Confidence Intervals for Numeric and Percentage Estimates

                                             Estimate Lower bound Upper bound 
Estimates for all Brownfield sites                             
Number of brownfield sites that included                       
remediation                                                    
activities                                 139             123         156 
Percentage of brownfield sites that                            
included remediation                                           
activities                                 54%             48%         61% 
Number of brownfield sites where EDA                           
contributed funding                                            
toward remediation activities               72              58          87 
Percentage of brownfield sites where                           
EDA contributed                                                
funding toward remediation activities      28%             22%         34% 
Amount of EDA funds used for            $4,807,000 $3,622,000   $5,992,000 
remediation activities                                         
Defense Adjustment program funding      3,731,000   2,617,000    4,845,000 
Public Works or nondefense related                             
Economic Adjustment                                            
Programs                                1,076,000      574,000   1,578,000 
Percentage of EDA funds used for          1.41%          1.06%       1.76% 
remediation activities                                         
Brownfield sites that met the                                  
Brownfield criteria defined in CERCLA                          
Number of brownfield sites that met the                        
brownfield criteria                                            
defined in CERCLA                          191             177         205 
Percentage of brownfield sites that met                        
the brownfield criteria                                        
defined in CERCLA                          74%             69%         80% 
Number of Brownfield sites that                                
included remediation                                           
activities                                 100              84         116 
Percentage of brownfield sites that                            
included remediation                                           
activities                                 52%             45%         60% 
Percentage of brownfield sites where                           
EDA contributed                                                
funding toward remediation activities      28%             21%         35% 
Amount of EDA funds used for            $3,336,000 $2,492,000   $4,181,000 
remediation activities                                         
Defense Adjustment program funding      2,305,000   1,598,000    3,012,000 
Public Works or nondefense related                             
Economic Adjustment                                            
Programs                                1,031,000      530,000   1,533,000 
Percentage of EDA funds used for          1.48%          1.11%       1.84% 
remediation activities                                         

Source: GAO analysis of EDA data.

Note: All dollar amounts are rounded to thousands.

To identify the environmental standards that applied to projects; the
roles of federal, state, and local environmental agencies; and the amount
of

Page 33 GAO-06-7 EDA Brownfield Remediation Appendix I Objectives, Scope,
and Methodology

public participation in the projects, we reviewed information on the
environmental requirements for federal agencies, EDA policies and
procedures for complying with these requirements, and the environmental
requirements included in the standard terms and conditions of EDA grant
awards. We also discussed the roles of federal, state, and local
environmental agencies in projects with officials at EDA headquarters and
regional offices. In addition, we reviewed EDA's grant requirements
related to public participation for proposed projects.

To identify the economic development standards applied to projects, we
reviewed information on the economic development standards that EDA used
to evaluate proposed projects. We also discussed the application of these
standards with officials at EDA headquarters and regional offices. In
addition, we reviewed prior GAO reports about the impact of the economic
development assistance provided by EDA.3

Our analysis of EDA grants was limited to a sample of grants provided to
brownfield sites. EDA's grants to sites coded as brownfields represented
only 13.6 percent of the total amount of funding that it awarded from
fiscal years 1998 through 2004. Therefore, we could not evaluate the
overall effectiveness of EDA's grant programs or determine how EDA applies
its criteria to the broader universe of grant applications. In addition,
we did not analyze the preapplication process, which, includes an
evaluation and recommendations by EDA's regional investment review
committees.

To report on the economic development impact related to EDA-funded
brownfield projects, we relied on data contained in the project files for
estimates of jobs created and private-sector investment. We also reviewed
EDA's database of information on the actual numbers of jobs created at 3
and 6 years after the grants were funded and private-sector data. However,
we did not verify the accuracy of the estimates or actual data reported.

In assessing the reliability of EDA's data, EDA officials, who were
knowledgeable about the Operations Planning and Control System (OPCS)
database used to track its grants, provided information to us; including
the OPCS user manual. To increase our confidence in the reliability of
EDA's grants data, we also compared the information that we obtained from
EDA's database with source documents in the project file for each of the

3GAO/RCED-96-103, GAO/RCED-99-11R.

Appendix I Objectives, Scope, and Methodology

grants in our sample. We concluded that EDA's data were sufficiently
reliable for the purposes of our report.

We also interviewed officials from the Department of Housing and Urban
Development and EPA and reviewed documentation about each organization's
brownfield program.

Our work was performed in Atlanta, Austin, Chicago, Denver, Philadelphia,
San Antonio, Seattle, and Washington, D.C. We conducted our work between
January 2005 and September 2005 in accordance with generally accepted
government auditing standards.

Appendix II

Examples of EDA Grants to Brownfield Projects

  Figure 5: EDA Grant to the City of Atlanta and Northyards Business Park, LLC

                     Sources: GAO (analysis); EDA (photos).

Appendix II Examples of EDA Grants to Brownfield Projects

    Figure 6: EDA Grant to Philadelphia Authority for Industrial Development

                     Sources: GAO (analysis); EDA (photos).

Appendix II Examples of EDA Grants to Brownfield Projects

         Figure 7: EDA Grant to City of Chester, Chester, Pennsylvania

                     Sources: GAO (analysis); EDA (photos).

Appendix II Examples of EDA Grants to Brownfield Projects

  Figure 8: EDA Grants to Greater Kelly Development Corporation, San Antonio,
                                     Texas

                                  Source: GAO.

Appendix II Examples of EDA Grants to Brownfield Projects

  Figure 9: EDA Grant to FAME Assistance Corporation, Los Angeles, California

         Sources: GAO (analysis); FAME Assistance Corporation (photos).

                                  Appendix III

                      Comments from Department of Commerce

Appendix III Comments from Department of Commerce

Appendix III Comments from Department of Commerce

Appendix III Comments from Department of Commerce

Appendix IV

                     GAO Contacts and Staff Acknowledgments

William B. Shear, (202) 512-4325, [email protected]

  GAO Contacts

In addition to those named above, Andy Finkel, Assistant Director;

  Staff

        Marshall Hamlett, Analyst in Charge; Carolyn Boyce; Mark Braza; Tania
     Calhoun; Emily Chalmers; Marc Molino; Roberto Pinero; George Quinn; Mark
               Ramage; and Rhonda Rose made key contributions to this report.

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