Brownfields Redevelopment Program

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PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET ESTIMATES

1. SUMMARY OF BUDGET REQUEST

The fiscal year 2000 request for the Brownfields Redevelopment Program is $50 million, a $25 million increase over the 1999 appropriation. Brownfields are former vacant or underutilized industrial and commercial properties that may contain low to moderate levels of contamination. An estimated 450,000 brownfields exist, the vast majority of which are located in urban areas. Brownfields redevelopment is critical to economic development and community revitalization, especially in urban areas. While brownfields are often perceived as an environmental problem, they are inevitably barriers to community revitalization. HUD is the principal Federal agency overseeing the Administration’s efforts to revitalize urban communities, and hence is actively working with communities to assist them with the economic redevelopment of brownfields. Brownfields redevelopment is a priority for the U.S. Conference of Mayors (USCM), the National Association of Counties, the Large Urban Counties Caucus and the National Governors Association. HUD is working with these organizations and communities across this Nation to facilitate the clean-up and redevelopment process.

The Brownfields Redevelopment Program provides targeted funds to revitalize vacant, abandoned, or under-utilized commercial and industrial sites, and gives a clear priority to a problem that mayors and other officials across the country have indicated is essential to achieving rapid economic growth. Extensive unmet need in this crucial community development and environmental area remains, and a suitable and sufficient dedicated source of funding will result in necessary community revitalization and job creation which is integrated with the elimination of dangerous environmental hazards. A recent survey by the USCM on brownfields in over 100 cities estimated that brownfields redevelopment could add $205 million to $500 million in additional tax revenue and create 236,000 jobs if the sites were returned to productive use.

Since 1998, this program has made competitive economic development grants in conjunction with Section 108 loan guarantees for qualified brownfields projects. Grants are used to redevelop moderately contaminated industrial or commercial sites. Returning these brownfields sites to productive uses creates permanent jobs, revitalizes urban areas and addresses the economic development needs of communities in and around such sites. A funding level of $50 million is expected to leverage $200 million in Section 108 loan guarantee commitments, which will in turn support the creation or retention of more than 28,000 jobs.

The Taxpayer Relief Act of 1997 provides a 3-year brownfields tax incentive that will reduce the cost of cleaning up thousands of contaminated, abandoned sites in economically distressed areas by permitting clean-up costs to be immediately deducted for tax purposes, rather than requiring the costs to be written off over time. This will serve to encourage redevelopment of these areas, thus making the availability of these grant funds even more critical.

The Brownfields Redevelopment Program supports Strategic Goal #1 "increase the availability of decent, safe, and affordable housing in urban and rural America" and reflects the following Strategic Objective, "Hazards are reduced or eliminated in housing" by eliminating the environmental hazards located in urban areas and replacing them with successful community revitalization projects. This program also supports Strategic Goal #4 "Improve community quality of life and economic vitality" through improving the quality of the environment within urban communities.

Cities are already taking steps to address brownfield redevelopment issues using Community Development Block Grant (CDBG), Economic Development Initiative (EDI) funds and Section 108 guaranteed loans. Some examples are:

• The City of Chicago, IL, is undertaking two brownfield projects using EDI funds and Section 108 loan guarantee funds. The first project, for approximately $20 million, is the acquisition, clearance and preparation of the 138-acre Victory Heights/Maple Park brownfield site. The project will become a new industrial park. Chicago estimates that $4.6 million in annual tax revenues will be received from the redevelopment of Victory Heights.

• A second project in Chicago is an approximately $30 million Section 108 loan and EDI grant funded project under which four sites will be acquired, cleared, and prepared for economic redevelopment.

• Kansas City, MO, has undertaken a brownfield redevelopment project at the Westside Industrial Park using $14.2 million in Section 108 and EDI grant funds to acquire and redevelop an abandoned railroad roundhouse for light commercial and warehouse usage.

The Administration's Brownfield National Partnership, announced in May 1997, brings together the resources of more than 20 Federal agencies to address brownfields clean-up and redevelopment issues in a coordinated approach. Through the National Partnership, HUD is working closely with other Federal agencies to provide communities with the financial and technical assistance necessary to revitalize brownfields. HUD’s principal contribution to this agenda was the commitment of $100 million in brownfields redevelopment grants and the anticipated $400 million or more in Section 108 loan guarantees between 1998 and 2001.

In November 1998, the Department announced awards in the amount of $25 million in Brownfields Economic Development grants and $141 million in Section 108 Loan Guarantees to 23 communities. HUD will award another $25 million in grants and an estimated $150 to $200 million in Section 108 loan guarantees in 1999. The fiscal year 2000 Budget accelerates the initiative in order to quicken the pace of clean-up and redevelopment.

Other key components of the President’s Brownfields agenda included Environmental Protection Agency (EPA) funding for assessment, clean-up and job training, and tax incentives that would allow businesses to "expense" brownfield costs. Under the fiscal year 1999 extension of the President’s Brownfields Initiative, the Environmental Protection Agency received $90 million to make grants to approximately 100 communities for site assessment and redevelopment planning, as well as for capitalizing revolving loan funds to finance clean-up efforts at the local level. To assure that HUD’s and EPA’s brownfields efforts are coordinated, a Memorandum of Understanding (MOU) pledging full cooperation between the agencies in the development and implementation of urban brownfields initiatives was signed in September 1996. The MOU commits the agencies to work together to develop and implement strategies that revitalize and return urban brownfields to productive use.

The Administration’s initiative recognizes that Federal environmental laws reflect liabilities which discourage new economic activities on these environmentally hazardous sites. Communities must now address these new requirements when carrying out economic redevelopment efforts in areas that have low or moderate amounts of contamination from prior industrial uses. The lack of clean up funds has been ranked a top impediment by cities. Because these costs and related obstacles of redeveloping brownfields were not anticipated by communities, they have neither the resources nor the proven capability to address these sites. As a result, economic redevelopment often excludes these areas which otherwise could become significant parts of local economic development strategies.

2. CHANGES FROM 1998 ESTIMATES INCLUDED IN 1999 BUDGET No obligations were made in 1998. Awards in the amount of $25 million were announced in November 1998. In addition, because there were no obligations in 1998, planned outlays did not occur.

3. CHANGES FROM ORIGINAL 1999 BUDGET ESTIMATES The fiscal year 1999 Budget requested $50 million for Brownfields Redevelopment. The current Estimate reflects the appropriated level of $25 million.

EXPLANATION OF INCREASES AND DECREASES

The fiscal year 2000 proposal of $50 million is a $25 million increase over the 1999 appropriation. Federal assistance is critical for the redevelopment of formerly contaminated brownfields sites. The entire amount is expected to be obligated in fiscal year 2000. Outlays are expected to increase by $10.5 million over 1999, reflecting both the spend-out of multiple years of previous funding and the higher appropriated amount in 2000.

PROGRAM DESCRIPTION AND ACTIVITY

1. Legislative Authority. Brownfields grants are Economic Development Grants, which are authorized by Section 108(q) of the Housing and Community Development Act of 1974, as amended.

2. Program Area Organization. This program makes competitive economic development grants in conjunction with Section 108 loan guarantees for qualified brownfields projects. Grants are used to redevelop brownfields so that the areas can be returned to productive, job-creating uses and to address the economic development needs of communities in and around such sites. Economic Development grants are used to enhance the security of Section 108 guaranteed loans or to improve the feasibility of proposed projects, and to support business development activities. Section 108 loan guarantees enable communities to borrow funds from the private market and repay loans over time. It is estimated that this commitment of $50 million in grant funds will result in applications for at least $200 million in new Section 108 loan guarantees.

HUD’s role in the Brownfields initiative is to help communities in the economic redevelopment of formerly contaminated sites by providing grant funds and loan guarantees. HUD is particularly well-suited to do this due to the fact that we have experience working with communities across the nation on a wide variety of community and economic development programs under the Community Development Block Grants (CDBG) and Section 108 Loan Guarantee programs. However, a separate dedicated source of funding is needed for this program given the large number of competing demands for CDBG funding as well as the large number of sites to be redeveloped. HUD has the expertise and ability to help cities implement brownfields redevelopment programs, and will coordinate with the EPA in Washington and in the Field.

a. Eligible Recipients. Eligible recipients include Community Development Block Grant (CDBG) entitlement communities and non-entitlement communities.

b. Allocation of Funds. Grants are made on a competitive basis in accordance with Section 108(q) selection criteria, including: (1) level of distress in the community to be served and in the jurisdiction applying for the assistance; (2) financial need for the assistance; (3) quality of the proposed plan and capacity of the applicant; and (4) extent to which the applicant is operating a brownfields program and is working with appropriate environmental regulatory agencies. The grant process will coordinate the Department's efforts with those of the EPA, reflecting the joint partnership goal of restoring brownfield sites to safe and productive uses.

c. Eligible Activities. Eligible brownfields redevelopment activities are CDBG-eligible activities that support the cleanup and economic redevelopment of targeted brownfield sites. These include: (1) assistance to private, for-profit entities for economic development projects; (2) acquisition of property; (3) clearance, demolition, removal and rehabilitation of buildings and improvements; (4) rehabilitation of buildings or construction of real property improvements carried out by public or private nonprofit organizations; (5) infrastructure improvements, including construction, reconstruction or installation of public and other site improvements; and (6) the investigation and clean up of environmental contaminations in connection with any of these eligible activities.

STATUS OF FUNDS

Balances Available

a. Unobligated Balances. The following table compares the program obligations with funds available by year.

b. Obligated Balances. The status of obligated balances is as follows: