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BROWNFIELDS AND THE 50 STATES: ARE STATE

INCENTIVE PROGRAMS CAPABLE OF SOLVING

AMERICA’S BROWNFIELDS PROBLEM?

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERALISM

AND THE CENSUS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

SEPTEMBER 13, 2005

Serial No. 109–113

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director/Communications Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON FEDERALISM AND THE CENSUS

MICHAEL R. TURNER, Ohio, Chairman

CHARLES W. DENT, Pennsylvania

CHRISTOPHER SHAYS, Connecticut

VIRGINIA FOXX, North Carolina

——— ———

WM. LACY CLAY, Missouri

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

JOHN CUADERES, Staff Director

SHANNON WEINBERG, Counsel

JULIANA FRENCH, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on September 13, 2005 ..................................................................... 1

Statement of:

Bartsch, Charles, senior policy analyst, Northeast-Midwest Institute;

Kathleen McGinty, secretary, Pennsylvania Department of Environmental Protection; John Magill, director, Office of Urban Development,

Ohio Department of Development; Douglas P. Scott, director, Illinois

Environmental Protection Agency; and Andrew Hogarth, chief, Remediation and Redevelopment Division, Michigan Department of Environmental Quality .............................................................................................. 7

Bartsch, Charles ........................................................................................ 7

Hogarth, Andrew ....................................................................................... 60

Magill, John ............................................................................................... 22

McGinty, Kathleen .................................................................................... 16

Scott, Douglas P. ....................................................................................... 40

Colangelo, Robert, executive director, National Brownfield Association;

Jonathan Philips, senior director, Cherokee Investment Partners, LLC;

Charles Houder, director of acquisitions, Preferred Real Estate Investments, Inc.; Kevin Matthews, AIG Environmental, director of Association and Environmental Relations; and David Cartmell, president, Kentucky League of Cities .................................................................................. 85

Cartmell, David ......................................................................................... 122

Colangelo, Robert ...................................................................................... 85

Houder, Charles ........................................................................................ 125

Matthews, Kevin ....................................................................................... 115

Philips, Jonathan ...................................................................................... 95

Letters, statements, etc., submitted for the record by:

Bartsch, Charles, senior policy analyst, Northeast-Midwest Institute, prepared statement of ........................................................................................ 10

Cartmell, David, president, Kentucky League of Cities, prepared statement of ........................................................................................................... 123

Chester, Steven E., director, Michigan Department of Environmental

Quality, prepared statement of .................................................................... 62

Colangelo, Robert, executive director, National Brownfield Association,

prepared statement of ................................................................................... 88

Houder, Charles, director of acquisitions, Preferred Real Estate Investments, Inc., prepared statement of .............................................................. 128

Magill, John, director, Office of Urban Development, Ohio Department

of Development, prepared statement of ...................................................... 24

Matthews, Kevin, AIG Environmental, director of Association and Environmental Relations, prepared statement of .............................................. 117

McGinty, Kathleen, secretary, Pennsylvania Department of Environmental Protection, prepared statement of .................................................. 18

Philips, Jonathan, senior director, Cherokee Investment Partners, LLC,

prepared statement of ................................................................................... 98

Scott, Douglas P., director, Illinois Environmental Protection Agency, prepared statement of ........................................................................................ 42

Turner, Hon. Michael R., a Representative in Congress from the State

of Ohio:

Prepared statement of ............................................................................... 4

Prepared statement of the American Society of Civil Engineers .......... 172

(1)

BROWNFIELDS AND THE 50 STATES: ARE

STATE INCENTIVE PROGRAMS CAPABLE OF

SOLVING AMERICA’S BROWNFIELDS PROBLEM?

TUESDAY, SEPTEMBER 13, 2005

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON FEDERALISM AND THE CENSUS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2203, Rayburn House Office Building, Hon. Michael R. Turner

(chairman of the subcommittee) presiding.

Present: Representatives Turner, Foxx and Kanjorski.

Staff present: John Cuaderes, staff director; Shannon Weinberg,

counsel; Juliana French, clerk; Adam Bordes, minority professional

staff member; and Cecelia Morton, minority office manager.

Mr. TURNER. We called to order the meeting of the Subcommittee

on Federalism and the Census. Our hearing is entitled,

‘‘Brownfields and the 50 States: Are State Incentive Programs Capable of Solving America’s Brownfields Problem?’’

A quorum being present, welcome to the Subcommittee on Federalism and the Census’ oversight hearing. This hearing is the

third in a series investigating the issue of brownfields redevelopment and ways to incentivize more aggressive and widespread redevelopment efforts.

In our two previous hearings, the subcommittee heard testimony

describing the magnitude of the problems surrounding brownfields

redevelopment. Additionally, we learned more about the Federal

Government’s response to the issue and the strengths and weaknesses of those efforts.

There are an estimated 450,000 to 1 million brownfields across

our Nation, contributing to community blight, thus lowering property values and decreasing tax revenues. These sites lay abandoned

and unused due to Federal environmental laws and regulations

that encourage abandonment of contaminated property by creating

disincentives for cleanup and redevelopment.

Current Federal law triggers liability for remediation of contaminated properties once landowners have knowledge of the contamination. However, if redevelopment begins, and contamination is

discovered, the owner may be liable for remediation costs. If an

owner abandons the property without disturbing the contamination, remediation costs may be avoided. The net effect of these laws

and loopholes is the encouragement of abandonment of brownfields.

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If we are to achieve our goal of restoring these properties to productive use and redevelopment into centers of economic revitality,

we must craft a Federal response to a federally created problem.

We must fashion that response to complement existing redevelopment programs.

With this knowledge, we move forward today to focus on State

efforts to address the problem. The subcommittee will hear from

representatives from Ohio, Illinois, Michigan and Pennsylvania.

These particular States offer a number of incentive programs to encourage brownfield redevelopment. The incentives range from direct grants to low-interest loans, and various tax incentives, such

as credits, abatements and forgiveness. I look forward to hearing

details on these programs and their effect on brownfield redevelopment.

Last year I, along with Chairman Tom Davis, requested that

GAO study the status of brownfield redevelopment across the Nation. GAO’s report shows that stakeholders are generally positive

about the current Federal efforts to address brownfields, but that

additional incentives such as a tax credit are needed to spur further brownfield redevelopment and really make a difference in

communities across the country. In response to that study, I plan

to introduce legislation similar to H.R. 4480 from last Congress,

the Brownfields Revitalization Act of 2004.

As noted earlier, many States offer tax credits or other tax incentives, but they vary from State to State. A Federal tax credit would

apply to brownfield redevelopment across the board, without narrow tailoring. H.R. 4480 proposed a Federal tax credit of up to 50

percent for qualified remediation expenses of brownfields in certain

poverty-rated areas. Specifically, credits would be available to redevelopment projects where the local government entity included a

census tract with poverty in excess of 20 percent, although the

project need not be located within that tract. Further, the legislation will require that sites must be enrolled in a State voluntary

cleanup program to be eligible for liability protection afforded

under the Brownfields Revitalization and Environmental Restoration Act of 2001.

We have two panels of witnesses before us today to discuss all

of these issues. We look forward to learning more about their various State incentive programs addressing brownfield development

efforts. We will also hear our panelists’ opinions on improving or

complementing their State efforts at the Federal level.

First we will hear from Charlie Bartsch, a senior policy analyst

at the Northeast-Midwest Institute; Kathleen McGinty, secretary of

the Pennsylvania Department of Environmental Protection; John

Magill, director of the Office of Urban Development at the Ohio Department of Development; Douglas Scott, director of the Illinois Environmental Protection Agency; and Andrew Hogarth, chief of the

Remediation and Redevelopment Division at the Michigan Department of Environmental Quality.

Our second panel of witnesses consists of representatives from

the private sector. We will hear from Robert Colangelo, executive

director of the National Brownfields Association; Jonathan Philips,

senior director of Cherokee Investment Partners, LLC; Charles

Houder, director of acquisitions for Preferred Real Estate InvestVerDate 11-MAY-2000 11:14 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 D:\DOCS\25869.TXT HGOVREF1 PsN: HGOVREF1
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ments, Inc.; and finally, Kevin Matthews, director of association &

governmental relations at AIG Environmental.

I look forward to the expert testimony of our distinguished panel

of leaders today, and I thank you for your time.

[The prepared statement of Hon. Michael R. Turner follows:]

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Mr. TURNER. I will now yield to Mr. Kanjorski for his opening

comments.

Mr. KANJORSKI. Thank you, Chairman Turner. I appreciate the

opportunity at the start of this hearing to offer my views about the

brownfields program.

In 2002, Congress took a significant step to remedy the persistent funding problems associated with the cleanup of mine-scarred

lands with the passage of the Small Business Liability and

Brownfields Revitalization Act. Through the course of our debates

over this legislation, we expanded the Environmental Protection

Agency’s definition of the term ‘‘brownfields’’ to include minescarred lands, thus making them eligible for Federal assistance

through an EPA brownfield grant program. As a result, many local

municipalities and nonprofit entities in my district have received

brownfield grants to remediate the environmental contamination,

including mine-scarred lands.

One organization, the Earth Conservancy, was one of the first recipients of a brownfield grant to cleanup the mine-scarred land.

However, I remain concerned that many local entities are not

aware of the funding that this program provides, particularly with

respect to cleanup of mine-scarred lands. In fiscal year 2004, the

EPA received 670 brownfield grant applications; of that number

only 24 proposals were for remediation of mine-scarred lands.

Also, in reviewing the testimony from the Government Accountability Office, I learned that the Brownfield Revolving Loan Program has been severely underutilized. To alleviate this situation,

it is my hope that we can look at ways to expand and strengthen

EPA’s outreach efforts. As a result, I look forward to hearing the

testimony from our witnesses.

I would like to thank Pennsylvania Department of Environmental Protection Secretary Kathleen McGinty for being here to

testify today. I have had numerous experiences with Ms. McGinty

during her prior service in the Clinton administration and find her

to be a creative and rather ingenious individual, so we look forward

to her testimony.

It is my hope that the committee will work to address these

issues and look for solutions to make this program more effective.

In closing, Mr. Chairman, thank you again for the opportunity to

express my initial thoughts on these matters. I yield the balance

of my time.

Mr. TURNER. It is the policy of this committee that all witnesses

are sworn in before they testify. Would our first panel please rise

and raise your right hands.

[Witnesses sworn.]

Mr. TURNER. Please let the record show that all the

witnesses——

Mr. KANJORSKI. Have sworn at us.

Mr. TURNER [continuing]. Have responded in the affirmative.

And we will now start with our witnesses.

Each witness has kindly prepared written testimony which will

be included in the record of this hearing. Each witness has also

prepared an oral statement summarizing their written testimony.

Witnesses will notice that there is a timer with a light on it at

the witness table. The green light indicates that you should begin

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your remarks, and the red light indicates that your time has expired. In order to be sensitive to everyone’s time schedule, we ask

that witnesses cooperate with us in adhering to a 5-minute time allowance for their oral presentation, which will be followed by a

question/answer period by the Members.

We will begin first with Mr. Bartsch. Would you please begin

your testimony, and also, would you help me with your last name,

please.

Mr. BARTSCH. It is Bartsch.

STATEMENTS OF CHARLES BARTSCH, SENIOR POLICY ANALYST, NORTHEAST-MIDWEST INSTITUTE; KATHLEEN

McGINTY, SECRETARY, PENNSYLVANIA DEPARTMENT OF

ENVIRONMENTAL PROTECTION; JOHN MAGILL, DIRECTOR,

OFFICE OF URBAN DEVELOPMENT, OHIO DEPARTMENT OF

DEVELOPMENT; DOUGLAS P. SCOTT, DIRECTOR, ILLINOIS

ENVIRONMENTAL PROTECTION AGENCY; AND ANDREW HOGARTH, CHIEF, REMEDIATION AND REDEVELOPMENT DIVISION, MICHIGAN DEPARTMENT OF ENVIRONMENTAL QUALITY

STATEMENT OF CHARLES BARTSCH

Mr. BARTSCH. Mr. Chairman, and members of the subcommittee,

thank you for the opportunity to testify. And I also want to thank

you, Mr. Chairman, for your efforts on behalf of brownfield revitalization, which is an important issue. I have a more detailed statement for the record, but my focus over the next few minutes is

going to be on the critical intergovernmental foundation of successful brownfield revitalization efforts.

I’m Charles Bartsch, director of brownfield studies at the Northeast-Midwest Institute. For the past years I’ve been tracking Statelevel brownfield initiatives, and I have also worked very closely

with the executive leadership of several of the State chapters of the

National Brownfield Association, including the Ohio chapter, on

these same issues in my capacity as co-chair of its policy advisory

board. And this year, in fact, the NBA devoted its annual Washington, DC, leadership summit to examining the components in an optimum State brownfield program, and we have also provided those

findings for the record.

To get at the question posed in your charge to us as witnesses,

yes, State incentive programs are capable of working toward a solution to America’s brownfield problem, but they must do so in partnership with Federal and local efforts in ways that attract private

investment to these sites. One sector cannot solve the problem on

its own.

All of the research and analysis has reinforced what many of us

have observed over the past decade, namely, that State brownfield

programs continue to evolve and mature. Today more than half the

States have some type of program in place to support brownfield

reuse, and these represent many different but equally effective approaches in place to bring the resources together to meet the diverse challenges of brownfields. They recognize that no specific

type of public, private or intergovernmental partnership and no

single approach fits the financing needs of all brownfield projects.

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The most hard-to-generalize State incentive programs fall into

four common categories, helping to facilitate real estate transactions and site reuse in various ways, and I want to lay out for

the committee and explain how they can contribute to success.

First, State tax credits, abatements and other incentives are increasingly being applied to brownfield projects. These programs

have worked by helping with a project’s cash-flow, by allowing resources and project revenue to be used for brownfield purposes

such as site cleanup rather than for tax payments.

Most State tax incentives are targeted to offset cleanup costs or

to provide a buffer against increased tax assessments before the

site preparation costs are paid off.

State and Federal tax incentives historically have been used to

channel investment capital and promote economic development in

areas that have needed it, and brownfield targeting is a natural

evolution of this type of program tool, as you have recognized, Mr.

Chairman, through your legislative efforts.

Currently 23 States offer some type of tax incentive, and today

you’re going to hear from some of those States; other examples,

Colorado’s incentives, which have been designed to support smaller

site cleanup. Colorado allows tax credits to offset remediation costs,

50 percent against the first $100,000 in cleanup costs, 30 percent

of the second $100,000, and 20 percent of the next $100,000.

In New Jersey, brownfield site owners can negotiate for tax rebates from the State to allow recovery up to 75 percent of the remediation expenses.

Missouri offers a variety of property income and job creation tax

incentives as part of its brownfield redevelopment program. Site

reusers in Missouri pick from the menu according to their project

needs and package them together, with the total value of the incentives being able to equal the cost of remediation.

And Rhode Island has adopted the State historic preservation tax

credit to complement the existing Federal credit, and the combined

credits there have contributed to a substantial increase in

brownfield activity.

I think what we see is that we need to make sure that State incentives are allowed to work in full partnership with Federal incentives and are not limited or constrained by recapture or penalty

provisions.

Second, States are targeting financial assistance programs directly to promote brownfield reuse. Capital gaps remain the biggest

barrier to brownfield reuse, and 22 States have worked to address

this issue by putting some sort of financing incentives in place such

as loans or grants to reduce initial cash needs. These can be used

to increase the lender’s comfort with projects by offering guarantees to limit their risk of potential losses, or they can ease the borrower’s cash-flow by plugging critical capital holes or offsetting

brownfield costs, and these types of incentives can be critical to

small sites.

Third, States are establishing direct brownfield financing efforts.

Often capitalized with bond proceeds, these programs directly

match resources to needs usually in places where the private sector

may fear to tread. About 14 States have done this, and you will

hear from some of those.

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And fourth, more States are exploring innovative programs to

support the brownfield financing process. About half a dozen programs do this by limiting risks or offsetting critical costs such as

those for site assessments. Most of these programs were enacted as

a way to leverage private investment while limiting public spending, and they represent an important maturation in brownfield

public-private partnerships.

In closing, we know that funding gaps are a primary deterrent

to site and facility reuse; however, creatively crafted and carefully

targeted incentives and assistance can help advance cleanup and

reuse activities and achieve significant community benefits.

In short, governments at all levels can find ways to help overcome reuse challenges; however, brownfield reuse will only succeed

in the long run if State efforts can be complemented by Federal initiatives in a true intergovernmental partnership.

Thanks for the opportunity to speak, and I look forward to your

questions.

[The prepared statement of Mr. Bartsch follows:]

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Mr. TURNER. Ms. McGinty.

STATEMENT OF KATHLEEN McGINTY

Ms. MCGINTY. Thank you, Mr. Chairman, members of the committee, Mr. Kanjorski especially. Very good to see you again. And

thank you for your leadership on greyfields and on all other environmental remediation measures. Very timely attention to this

issue, Mr. Chairman. Pennsylvania is very encouraged by your attention and our ability to share some of our experiences.

First, as we present to you today, we do have a successful program; 10 years into the program we are on the brink of cleaning

up our 2,000th site. What I wanted to do is share a couple of the

key reasons why we have been successful to date, but then to emphasize some of the measures you have pointed to that would be

critical in further building our success.

First, in terms of the four key elements that have built a successful program in Pennsylvania, first and foremost, clear, predictable,

reliable remediation standards that are geared toward the future

land use of the site; second, clear, thorough and effective liability

relief for the successful performance of those cleanup standards;

third, money.

No question that the playing field is still tilting against

brownfields, it is still much easier to develop a greenfield, and

money is key; money in three categories: site assessment, site remediation, but then also especially site infrastructure improvement

so that site is pad ready, ready for redevelopment. That goes beyond just the cleanup of the contamination itself, but looking at

water, looking at utilities, looking at road infrastructure leading to

that site.

Fourth and key, time is money. So the extent to which we can

streamline permitting and put a thumb on the scale for brownfield

redevelopment such that a brownfield either does not need an individual permit, or it would receive priority attention in the permitting process has been a key for us. Those are the things that have

worked to date.

Two key enhancements that have been added to the program in

the last year and a half: first, very important, a Memorandum of

Understanding that we have with U.S. EPA that aims to create one

cleanup policy, which means when Pennsylvania says it is clean

pursuant to EPA’s standards, it is clean for State and Federal liability purposes.

I commend EPA for working with us on this, but I would note

a shortcoming. We do have full and effective liability relief for some

Federal programs once Pennsylvania says it’s clean, but for others

we are still working on it, we’re not there. And more appropriately

or more accurately, our understanding with EPA is a paper processing agreement; in other words, they have undertaken to process

with us in real time their statutes and responsibilities as we do,

too, on priority sites. Very helpful, but we need to make the next

step to full liability relief.

Second is the matter that Mr. Kanjorski pointed to. Pennsylvania

has five sales in abandoned mine sites. For us to redevelop abandoned properties means a greyfield has to be in; that has been a

key enhancement to our program.

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Having said that, what are some of the improvements that we

would look to? First, tax credits, absolutely essential, and I would

highlight a key piece, especially to underwrite the purchase of insurance that can backstop remediation costs. Quick example: A

State-led remediation in Pennsylvania, the cost has skyrocketed as,

for example, what we anticipated at $2 a ton to move soil to the

site, with diesel prices through the roof, we are now looking at $7

a ton to move that same soil to that same site. What was a bankable project, what was a financeable project is now something that

is quite difficult for us to get done. So insurance to backstop those

remediation costs in these days of skyrocketing commodity prices

would be very, very helpful.

Second, some of the bills that have been introduced that offer

tax-exempt financing, tax-free bond financing of brownfield sites,

are key. We have done that at the State level, but frankly we are

pushing up against our State volume cap, and to the extent that

tax-free bond financing opportunity could be shared with the private sector, that would help us very substantially.

Third, grants. In the grant category, we have a very important

program with U.S. EPA. We have benefited greatly from the grant

moneys we have received, but those grant moneys are restricted.

And the particular restriction I would point your attention to is an

inability to use more than 50 percent of that grant money for remediation. That is important for new brownfield programs where

moneys need to be invested in outreach; but for ours, remediation

is key, and we would like to see that money freed up.

And last, they come back to liability relief. If we could move from

what has been an important beginning in our Memorandum of Understanding with EPA to full and effective Federal and State liability relief, that would add the certainty that investors and developers need.

Mr. Chairman, and members of the committee, thank you for the

opportunity to share a few thoughts in this key program.

[The prepared statement of Ms. McGinty follows:]

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Mr. TURNER. Mr. Magill.

STATEMENT OF JOHN MAGILL

Mr. MAGILL. Good morning, Mr. Chairman. I’m John Magill, director of the Office of Urban Development, and on behalf of Governor Bob Taft and Lieutenant Governor Bruce Johnson, director

of the Ohio Department of Development, I thank you for the opportunity to highlight Ohio’s initiatives in brownfield finance and opportunities for Federal, State and private market collaborations.

Over the past 5 years, the State of Ohio has developed one of the Nation’s best brownfield programs, the $200 million Clean Ohio Revitalization Fund. The program, funded by bonds approved by Ohio

voters in November 2000, is serving as a catalyst for the redevelopment of brownfields. Since 2002, Ohio has granted $97 million to

94 projects to cleanup and assessment activities. These 94 grants

are expected to leverage more than $731 million in new investment.

I think it is important to note that Ohio’s successful strategy was

developed from a task force formed to address the challenges facing

the inner core of our cities. Brownfield redevelopment was the No.

1 issue identified by communities during this process.

Ohio’s two goals for investing funds into brownfield projects are

economic benefit and environmental improvement. We also realize

that brownfields are most likely to be successfully converted to a

new use through the free market and decisionmaking at the local

level. The results are new, productive land uses including supermarkets, housing and industrial commercial space. A number of examples: The city of Dayton received over $5 million in grants to

conduct demolition and remediation activities at the former GHR

Foundry and Delphi Harrison properties. Select Tool International

hopes to expand onto a portion of the GHR site, while the remediated Delphi property will be the western boundary of a new downtown technology campus in Dayton.

On the opposite end of the State is Dave’s Supermarket, located in east Akron. The city received a $2.8 million grant for cleanup,

which they used to leverage an additional $10 million for redevelopment. Dave’s Supermarket opened in October 2004, creating

more than 100 new jobs, and is leading to additional development

around the property located in one of the poorest sections of Akron.

Likewise, through a $3 million award, the city of Cleveland was

able to leverage $8 million in private and public funds to clean up

a contaminated site, allowing a local manufacturer, Presrite, to expand and create 50 new manufacturing jobs.

Brownfield successes can change an urban real estate market by

attracting private capital. The acquisition, cleanup and demolition

activities at AC Humko, a former Columbus margarine factory, totaled more than $71⁄2 million, funded in part by a $3 million grant.

Estimated private investment from equity and private markets in

the final development will exceed $50 million for market-rate housing now under construction.

And in Cincinnati, the Polk Building is being renovated and

turned into market-rate apartments ready for occupancy in November. Asbestos contamination made the private sector reluctant to

invest capital in the project, but a $650,000 grant to abate the asVerDate 11-MAY-2000 11:14 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 D:\DOCS\25869.TXT HGOVREF1 PsN: HGOVREF1
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bestos triggered $35 million in new private investment for the renovation activities.

In active markets, brownfield reinvestment is more likely to

occur at a lower public cost and with greater likelihood of success.

Public policy is able in a variety of ways to affect the vibrancy of

a brownfield market. In the 108th Congress, Chairman Turner proposed to allow taxpayers ‘‘a credit against income tax for expenditures to remediate contaminated sites.’’ Ohio believes tax credits

can be a tool to attract additional private sector investment by enabling developers to offset costs by using or assigning credit. That

is why we encourage Congress to continue to explore additional

flexible brownfield tools which are performance-based, enabling

local citizens to seek tangible results.

A combination of private and public resources leads to projects

with an economic and environmental return. In Ohio, we are fortunate to be able to support projects of both State and Federal resources. For example, my office administers a U.S. EPA Brownfield

Revolving Loan Fund. To date, we have made two loans, with two

more expected to close this fall. I would like to acknowledge the

staff of U.S. EPA for their support and flexibility to meet the needs

of our borrowers.

Access to additional sources of Federal dollars through the tax

credits or increased resources at U.S. EPA are crucial to stretching

State funding to undertake additional local projects. I encourage

you to look at these and other tools as you continue your work. On

behalf of the State of Ohio and the Ohio Department of Development, I thank you for your time and effort to identify new ways to

combine State and Federal resources to energize and invigorate

brownfield redevelopment throughout the Nation. Thank you.

[The prepared statement of Mr. Magill follows:]

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Mr. TURNER. Mr. Scott.

STATEMENT OF DOUGLAS P. SCOTT

Mr. SCOTT. Thank you, Mr. Chairman, members of the subcommittee. Good morning. My name is Doug Scott, and I am the

director of the Illinois Environmental Protection Agency. And on

behalf of Governor Rod Blagojevich, I want to thank you, Mr.

Chairman and members of the subcommittee, for holding these

hearings, and also you, Mr. Chairman, for your leadership on this

issue. You have been recognized for that leadership by the National

Brownfield Association as well as a number of mayors, and it is

very well deserved.

Brownfield remediation and land reuse is one of the most important issues facing the urban areas in Illinois, and although it is not

as obvious, it is incredibly important for the nonurban areas as

well. Obviously there is an environmental benefit to cleaning up

areas that have contamination or are abandoned; there is certainly

a community benefit in reclaiming property to put it back into productive use to either support new businesses and generate new tax

revenue, or to become recreational land. There is a benefit to helping to reduce sprawl not just by putting a particular property back

into use, but also by spurring other inner-city development and

protecting farmland.

We have seen in recent years a renaissance of cities, and

brownfield redevelopment certainly augments that trend. And

there is certainly a shared community benefit in helping communities to reclaim properties that were once a symbol of vibrancy in

their community only to become symbols of decay.

I have had the experience of working on a brownfield issue from

a number of perspectives, as a municipal attorney in Rockford

where we dealt with numerous abandoned sites and with a Superfund area that affected 10 square miles of our city; as a State representative where we passed some cleanup legislation that is very

progressive in providing flexibility to risk assessment and shared

cleanup levels; as mayor of Rockford, during which time I served

as chair of the Illinois chapter of the National Brownfield Association; and now as director of the IEPA. As a result, I have developed

an understanding of what I think works and what could spur even

more brownfield development.

Illinois has a very aggressive brownfield plan, and under Governor Blagojevich has become even more progressive, using economic development funds through the Governor’s Opportunity Returns Program to supplement cleanup, as well as utilizing other

funds to clean additional sites, and providing loans, site assessments and technical expertise.

It has become clear to me that brownfield development at its

heart is a real estate transaction, and just as in any development,

there are associated costs. In these cases, the environmental considerations may be very large, but other costs, such as infrastructure, may be reduced.

It is essential for us to do those things that entice private developments to the sites by providing the conditions and incentives

that make these sites attractive, or at least comparable to greenfield areas. And it is equally clear to me that State and local govVerDate 11-MAY-2000 11:14 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 D:\DOCS\25869.TXT HGOVREF1 PsN: HGOVREF1
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ernments alone can’t make this happen. As I said, our State has

been very proactive on this issue monetarily, including through our

first-in-the-Nation noncapitalized loan program.

In addition to financial help, our efforts have also included comprehensive risk-based remediation process focusing on planned

reuse, as you heard from Pennsylvania; No Further Remediation

letters and a Memorandum of Understanding with U.S. EPA that

says except in very narrow circumstances our NFR letter will also

end Federal involvement; voluntary cleanup program with timely

and effective decisions under well-established procedures; Webbased access to key environmental site data; partnerships with

other government agencies, not-for-profits, trade associations in the

private sector; and site assessment and technical assistance.

And the State and local governments have been very creative in

utilizing all of the myriad resources that they have financially to

try to assist with these sites, but it is pretty clear to me that the

number of sites isn’t being lessened to the rate that any of us

would like to see. Now, it is easy to say that more money is the

answer, but unfortunately it is part of the answer. More grant dollars to States and municipalities to specifically target site assessment, infrastructure and cleanup are needed. More sites have been

put into play, for example, by simply not forcing loan guarantees

of Section 108 and making more grant money available.

In addition, more funds under the Brownfield Revitalization Act

would help tremendously as I’m sure we’re not the only State that

has more sites than we have funds, and more dollars for Superfund

site cleanup that are under the Federal guidelines are also needed.

When I was a legislator, I know we always heard how spending

money in a particular area would save money in the long run, but

I really believe that is true here, through diverted infrastructure

and transportation costs and increased tax revenue. But money is

only part; the rest must come from tax credits and other targeted

incentives to the private sector to bring them into these sites. So

I was very encouraged last year by your efforts, Mr. Chairman,

with H.R. 4480, and would hope that similar efforts would be successful in this Congress.

In addition, efforts such as H.R. 4480 that can be made to make

more certain the lines of liability and possible exposure to future

or reopened claims would help tremendously to make these sites

more insurable and more bankable. In speaking with many developers who work on these sites, one of the major stumbling blocks

is the uncertainty of future liability, which is another factor that

makes it more desirable to locate to greenfields.

Again, on behalf of Governor Blagojevich, I appreciate the opportunity to appear before you, and thank you for your leadership on

this issue. I would be glad to take any questions that you have.

Thank you.

[The prepared statement of Mr. Scott follows:]

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STATEMENT OF ANDREW HOGARTH

Mr. HOGARTH. Good morning, and thank you for your interest in

this huge program that Michigan feels requires a substantial coordinated effort by both local, State and Federal parties.

During the last 10 years, Michigan has done a lot to try to provide incentives to help redevelop brownfields primarily through a

three-pronged approach: The first, providing financial incentives;

the second, State funding to do site cleanup; and the third, a

change in our liability standards. And I will talk about those as

well as identify continuing obstacles that we see existing.

In terms of the financial incentives, we have a Renaissance Zone

Program that has been created to encourage the development of selected areas across the State, and properties in those areas virtually have 100 percent of their real, personal and State and local

income taxes eliminated.

Single business tax credits on a case-by-case basis are provided

to help with the expensive demolition, environmental cleanup and

other remedial actions at specific sites. Since June 2000, this program has awarded more than $273 million in single business tax

credits, which we believe has generated more than $3.8 billion of

private investment in distressed areas.

Tax increment financing. Under Michigan’s Brownfield Redevelopment Financing Act, brownfield redevelopment authorities across

the State are able to capture local taxes and school taxes to reimburse developers for cleanup-related costs. As developers develop a

site and increase the value of their property, the additional increment in tax—not property tax—is captured by the brownfield authorities and used to reimburse the developer for their expenses. Since 1996, more than $300 million in tax increment financing

has been approved for more than 80 projects throughout the State.

In addition to those incentives, the State of Michigan has provided—spends a considerable amount of money directly to do site

cleanup both through grants and loans to communities and by direct spending. Since 1992, we have provided $122 million in grants

and loans for some 300 individual projects. This money is available

to use for site assessments, cleanup costs and demolition.

In addition to the money we provide for grants and loans, we have spent over $585 million in State revenues in the last 17 years

to investigate and clean up and monitor over 1,600 sites. Many of

those sites were sites that have been abandoned and taxed to the

communities.

Probably the biggest impetus to getting contaminated properties

redeveloped in the State of Michigan has been a substantial change

in the liability scheme under Michigan’s cleanup law. In 1995, we

went from a liability situation where anyone that bought a piece

of contaminated property, whether they caused the contamination

or not, being liable for it, to where they would not be liable for it

in the future if they did a baseline environmental assessment. So

a new purchaser or anyone that forecloses on a piece of property,

like a bank, can conduct a baseline environmental assessment prior

to or within 45 days of purchase, occupancy or foreclosure, and that

baseline environmental assessment is intended to describe the existing contamination on the site in a manner that enables new releases to be distinguished from the prior contamination. If this is

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done, and the baseline environmental assessment is submitted to

the State, then the new owner or operator is protected from liability for the existing contamination.

As of 2005, the DEQ has processed 8,600 baseline environmental

assessments. That means there have been 8,600 parcels of property

in the State of Michigan that were contaminated that were transferred to new owners or operators, most of which probably would

have not occurred in the past.

Our cleanup standards are risk-based and land-use-based, which

helps assure that unnecessary cleanup expenditures are not made.

I mentioned at the outset that this requires substantial coordinated

effort. We put substantial effort into working closely with communities. For example, with the city of Detroit, we meet at least bimonthly with staff at high levels of both the city of Detroit and the

State of Michigan, multiple agencies, to identify barriers to redevelopment of specific properties and bring the resources and government decisionmaking to the table that is necessary to help facilitate projects in a hurry. And, in fact, we have directed over $100

million in State funding to city of Detroit projects in the last 10

years.

What obstacles remain? Federal liability continues to be a problem. Many potential property transactions fail due to the inability

of the buyer to resolve liability under RCRA, and to some extent

CERCLA. However, we do have a Memorandum of Agreement with

EPA that says that as long as a developer is in compliance with

the State’s cleanup program, that EPA will, for the most part, take

a hands-off approach. However, the inability of a prospective purchaser to resolve RCRA liability remains a substantial hurdle.

Another obstacle is unrealistic expectations on the part of the developer and the buyer or seller, lack of comprehensive planning by

communities, lack of sufficient site characterization, overwhelming

predevelopment costs, lack of startup funds for small businesses,

and lack of State and local government resources. We will not be

able to provide the funding we have at the State level in the future.

I want to thank you for your interest in this program and applaud your efforts to try to address it at the Federal level.

[The prepared statement of Mr. Chester follows:]

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Mr. TURNER. Well, again, I want to thank each of you for participating and bringing your unique knowledge and expertise, and I

want to thank you for your dedication to what is an important

issue both for your communities and the government, and nationally.

It’s interesting in listening to each of you—and, Mr. Scott, you

are right, at the base you have a real estate transaction that you’re

doing, and I was thinking of all the different elements of expertise

that you must have to do your jobs, and certainly you must have

real estate background, because you have ownership issues, and

you have use issues. You need environmental backgrounds because

you’re dealing with both assessment and remediation; your legal

background, issues of liability, financing issues, not only just the

products that are available, but in dealing with the financial institutions and their comfort level. And then you have, Mr. Hogarth,

what you said was the numerous governmental entities. Of course,

you’ve got numerous laws and regulations, and then after dealing

with all of that, you get to go in and invite the private sector and

encourage them that this really is a doable and easy transaction

when they are not necessarily going to have that expertise. So I

want to congratulate you on what you’re each accomplishing, and

we want to learn from this opportunity.

One of the things that I’m struck about with your expertise is

that we often hear anecdotally that the characterization of these

sites—that when the assessments have occurred, that generally

people are finding them to be less contaminated than suspected.

Also, though, we keep hearing anecdotally that the programs that

are currently in place might not yet be reaching some of the most

difficult sites to develop. So we may only be, in other words, our

process may be so selective that we’re resulting in the selection of

easier sites, and therefore running into less contamination.

I would like if you would each talk about what you’re seeing that

people are experiencing in these programs; as they’re happening in

communities, as they’re happening in States, what are we seeing

in the characterization of sites, and how penetrating are these programs? Are we getting at some of the worst sites? And certainly

that brings into the issue of those sites that have the greatest economic potential.

Mr. Bartsch, we will start with you.

Mr. BARTSCH. I guess I would start by saying what we have seen

nationally by looking at the data from the EPA grant programs is

that about one-third of all sites that are assessed using EPA funds

actually are not contaminated at all, they just look lousy. And

again, it is that perceptual issue there that has really been an inhibitor, and that is really one of the reasons why EPA has been

able to leverage so much private investment, because sometimes it

means only a few thousand dollars for a preliminary assessment to

really show that there is nothing there, and then the redevelopment process can go forward.

I think Mr. Kanjorski hit on a really critical issue in this whole

thing in his opening remarks, and that is there has not been in

many places enough information gotten out to local officials in the

field who are dealing with these sites. I probably do 50 or 60 workshops a year looking at brownfield basics, and there still is a huge

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audience out there that does not really have a full understanding

of the situation that you talked about, Mr. Chairman, where you

really have to pull all these different components together.

I think a really good example of how information is needed can

be found by looking back. The original brownfield expensing tax incentive, which passed in 1997, got virtually no use at all the first

few years. One of the reasons for that was that it was viewed at

complicated; people didn’t understand how it worked, they didn’t

understand the benefits, so as a result it really didn’t get very

much use. I think there is a real need, as part of this process, to

get information out there, which is why I think, again, efforts like

you’re doing are important.

Ms. MCGINTY. Thanks, Mr. Chairman. I wanted to say at the

outset, we all touched on, one way or another, the liability questions. We do need further work there, but I do want to commend

U.S. EPA. They have been terrific to work with and have really

been trying to be quite responsive on all of these issues.

You said, Mr. Chairman, and I agree, these issues are about real

estate transactions, and real estate is about location, location, location. And for us the challenge, as you say accurately, has not been

that the site is too nasty to remediate. Remediation technology has

evolved to the point where those sites can be cleaned up. Rather,

location and the character of the site, which brings us back to the

tax and grant incentives, has been most challenging.

On the small-scale site, those sites are disadvantaged even

though they may be the corner dry cleaner. We have cleaned up

many of them, we know how to do it, it is not that complex. But

the return on investment in redeveloping a site of that size doesn’t

always pencil out for the developer. So again, not the contamination per se, but the ability to have tax and grant and other financial incentives to achieve the kind of return on investment that is

required.

On the large-scale side, the same, at the opposite end of the spectrum where the site is so large, the risk is holding the property for

the length of time that will be required to line up first your anchor

and then your follow-on tenants. And so, again, financial incentives

to bridge that risk gap where a developer is holding a large-scale

property in the attempt to market that property and see developers

come or renters or leasers come back into that property. Thank

you.

Mr. MAGILL. Thank you, Mr. Chairman.

Our perspective would be, first, to follow what Ms. McGinty said,

that local decisionmaking and market conditions affect choices

about the properties that communities will look at. Once that occurs, the conditions on the site will vary. And one key factor is that

most grant programs and loan programs come with a timeline to

invest the dollars and compete the cleanup. More challenging

cleanups with longer schedules, higher complexity, which often has

to deal with groundwater, begin to move off to the side because of

the time to actually complete the work.

So you have developers who have a recognition that time is

money. They’re not looking to work on the most difficult sites, but

sites that have locational advantages, Ms. McGinty touched on,

produce a community benefit, and can be cleaned up on a timely

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and efficient schedule at a reasonable cost, I think are what we are

seeing. And so some of the more challenging sites with the longer

timelines of remediation are not being seen, at least in Ohio and

perhaps in the other States. Thank you.

Mr. SCOTT. I believe the two premises that you had, Mr. Chairman, were that many of the sites are less contaminated than we

thought, and we may not be getting at the worst. And I would

agree with both of those from my experience in Illinois, for a lot

of the reasons that have been said, but part of it also, when you

look at it, location is very important. It will differ in each State depending on where in that State that you are. What is transparent

in terms of the real estate market in downtown Chicago, for example, where there are a number of brownfield sites that have been

redeveloped and have become, you know, magnificent buildings—a

lot of riverfront development, a lot of other things that have been

substantially cleaned up—the real estate market and the cost of

land in the Chicago area make it such that development can be

price-competitive with developing somewhere else, and there isn’t

that much land available in other places.

If you go to other municipalities throughout the State, to Rockford or Springfield or Joliet, it is very different; the cost of land is

much different, the availability of land is much different depending

on where you are in that particular community. And then if you

go to southern Illinois, the economics are completely different than

that. So a lot of sites that otherwise would be cleaned up, or if you

were in Chicago if these sites were there, would be cleaned up very

quickly, get left behind.

And again, that just underscores what I think everybody has

been saying, that it is so important to try to provide those incentives that make the playing field level. They give the private investors, the private insurance companies, the banks, the others that

have to participate in this the reason to do this particular site as

opposed to just building out into the next greenfield.

Mr. HOGARTH. Our experience is that a major portion of the

brownfield sites are not significantly contaminated. They are contaminated to the point where they exceed residential criteria, but

they don’t represent a hazard that makes them not reasonable to

redevelop. Now, that’s a major portion of the sites.

But I need to point out something about Michigan’s liability

standard that changes the dynamic for a new developer. I mentioned the baseline environmental assessment process, and if someone does a BEA, they don’t have to clean up the site because

they’re not liable for the existing contamination. Well, that makes

the economics much more favorable to the developer. The developer, though, does need to do something in terms of the contamination. They need to not exacerbate it, they need to assure that they

don’t, by virtue of their use of the property, cause any unacceptable

exposures to occur, and they need to take reasonable precautions

about what third parties might do, like trespassers.

Now, often what that means is that someone will come onto a

piece of property, do a baseline environmental assessment, and determine all they have to do to make the property safe to use is

pave it and put their building on it. There may be contamination

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site, but the new owner isn’t responsible for dealing with it. Now,

what that does is it transfers responsibility to public funding when

those hazards need to be dealt with. If we can’t get the liable party

to deal with it, then the State ends up having to address that with

public funds.

Now, that is a step that Michigan took, which is significant,

though, to try to level the playing field more to get more people to

reuse contaminated sites. And of course, there are a lot of sites

that are megasites, if you will, that cost hundreds of millions of

dollars to address, that we don’t think will be able to be redeveloped in our lifetime, but they are few.

Mr. TURNER. Mr. Kanjorski.

Mr. KANJORSKI. This is something that Congress doesn’t pay

enough attention to.

You know, in listening to your various testimonies, it strikes me

that we really have multiple issues here. One is site-specific probably from poor manufacturing, past experiences in major metropolitan areas of the Rust Belt, if you will, and then massive land cleanup, coal lands cleaned up. And I’ve had more of an emphasis on

coal land cleanup simply because the little sites probably do eventually take care of themselves in some way from an economic

standpoint, or at least lead toward that, whereas when you get to

the coal mine cleanup, it becomes astronomical.

My experience is that we are pouring an awful lot of money into

engineering costs. I was thinking of your site assessment. Every

small site assessment I have ever seen, it is almost like Washington lawyers, they start at $100,000 and go up and you really can’t

get an engineering report even on a small cleaning establishment

for minimal amounts of dollars. They’re very expensive propositions.

On coal land cleanup, though, I discovered that, in the Abandoned Mine Program, 34 percent of the cost is being spent for engineering fees, which is horrendous when you think about it, and yet

there is advanced technology out there, GIS systems, that can

bring that cost down by at least a factor of a half, if not more, and

we haven’t utilized it on a national scale.

The other thing I was listening to is that obviously it’s a matter

of money, and I was curious from your experiences how much—you

brought up the point, Mr. Bartsch, that you hold seminars and outreach, but have there been sort of national conventions on this

issue where we get best practices, we look at models?

One of the things that disturbs me the most is we’re creating another Beltway industry; someone needs extraordinary expertise to

know how the hell to get through the Federal system and then the

50 State systems. And not that there is political influence, but, boy,

if there ever were—I should say that to Ohio—if there ever were

an interest in having political influence, I mean, this would be the

ideal area because the developer or the public sector, municipality,

nonprofit organization are just absolutely in the grasp and control

of that decisionmaking process. And it is so convoluted, it seems to

me, that we should step back and try and do a larger overview

problem.

One situation that I ran into—and I put it in the form of a bill—

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development act. And we’ve identified millions of acres in the country, just in my particular part of Pennsylvania about 160,000 acres,

and the western part of Pennsylvania another 400,000 acres, astronomical when you look at it, if you look at it in segments. But if

you compartmentalize it and say, OK, we’re going to view this from

a watershed perspective and do the entire watershed study and

how the effect of the land and the water would be, how you were

consistent.

Now, to accomplish that you need public ownership. You just

have any number—in Pennsylvania, and I think West Virginia is

famous for this, too, coal cutting means our land banks, they basically own very destroyed lands—I think Ohio is like that, too. They

pay next to nothing in taxes, no incentive to move the land out,

and they can wait there until land appreciates as far as they want

to because there is actually no exposure. And if you don’t get the

cooperative effort of everybody within the watershed system, to do

reclamation is almost meaningless. I mean, we are working on a

16,000 acre parcel of land reclamation now, but we have maybe

10,000 other land owned by coal cutters. If they don’t participate,

if they aren’t designed into the system, doing our 16,000 acres really doesn’t accomplish a great deal. Oh, it does in terms of inside

the perimeter, but in terms of the totality of the recovery program,

it doesn’t work.

And I haven’t seen any creativity on how we can put land acquisition together, whether redevelopment authorities should have the

right to condemn, and how large they would have to be, what

would be the authority to do that, what are the prices paid, what

are the incentives.

The other thing I listened to is the use of tax credits, and I was

just thinking up here it is a field day for lawyers and accountants.

I mean, quite frankly, it probably is a very specialized field at this

point with extraordinarily high fees, because who the hell else

knows what to do?

Now, it seems to me that we have to create the funding, and you,

Mr. Scott, pointed out we absolutely need the funding. My mine

reclamation bill does a very simple thing, and it uses tax credits,

except not individual tax credits awarded in States and by the Federal Government. But in totality, we say, look, we want to create

a fund of $20 billion; we’re going to sell it into the market, probably

mostly to insurance companies, give them a tax credit in lieu of interest so they can write it straight off their return—they get a return today of probably 5 percent, thereabouts—and do it over a 30-

year period, and now have a sufficient amount of money in one

fund—now this addresses the coal aspect, coal land reclamation—

and now require any of the participants on the State level or the

local level to create a comprehensive application program. Maybe

in the Commonwealth of Pennsylvania you would have six areas

establishing what they’re going to do with their land, how they’re

going to use it, how long it will take and the purposes for it. They

would go in and get a long-term approved program for site evaluation, for site remediation, for reuse infrastructure, so that you

would be moving from reclamation right into reuse or prospective

reuse with sufficient funding in place for a period of 30 years to

accomplish the end.

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I haven’t seen a lot of support for the bill on a State level; as

a matter of fact, it is somewhat disappointing. I like State and local

leadership, I want to encourage it, but, quite frankly, everybody

having their own little custom-tailored program doesn’t invite for

efficiency. We’ve got to strip away and determine what is the easiest, best and most comprehensive approach, particularly in coal

land. It affects 26 States in the Union.

Our $20 billion fund over 30 years will create enough funds to

reclaim all of the abandoned coal lands in this country over 30

years. It will cost us in loss of tax revenues around $30 billion over

30 years. And in the end you will have a defined site, you will have

a reclaimed site, and you will have utilities and improvements in

infrastructure to make it a usable site.

That, I think, is one approach to coal land reclamation. The individual site remediation, I think we probably need a fund for that,

too, and we could do it on a Federal level using tax credits, but

we’re probably talking about losing no more than $1 billion or $2

billion a year in revenue to the Federal Government. That equates

to 2 days in Iraq. For 2 days in Iraq, we could clean up all the coal

lands in the United States. If you look at it in another way, for actually 3 weeks in Iraq, that would pay for the entire program—not

that we’re going to withdraw from Iraq, but it may be a little bit

of what should go into the equation sometimes as to what’s important.

Now, my experience—and that’s why I complimented all of your

activities—this Earth Conservancy I mentioned in my opening remarks, 16,000 acres of land, we have reclaimed a little over 1,000

acres thus far. We have about 4,000 more to go.

We have never failed to receive more money back for the reclaimed property than the value of the original purchase of the

property and all costs of remediation, because it is being done comprehensively. We are taking land that has $100 an acre value and

in some instances moving up to $100,000 an acre in value, but that

can only be done because we did a total comprehensive program.

Using GIS systems, we know exactly how to go at it. And this is

just a small experiment, 16,000 acres. What we want to take on is

the entire 160,000 acres of the anthracite field. Now, what I am a

little disappointed in, and I understand my good friend Rob is a

progressive Governor, Governor Rendell in Pennsylvania is a progressive Governor, and the Governors want to get involved and the

States want to get involved and they should. But unfortunately by

doing it before we get involved, you are taking leverage away from

us.

The fact of the matter is probably the States should get together

and make the commitment we will put up X number of dollars in

our funding; the only condition is that the Federal Government create a program to match or exceed that, maybe 75–25, something

like that.

I know I am running over, Mr. Chairman, but I traveled the

country about 6 years ago with then-President Clinton, and he

knew my problem. We were working on the new markets initiative

at the time and how that could impact on using land in developing

distressed areas. So we spent a considerable amount of time eating

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pork and drinking beer, and during those sessions we would just

have an open bull session.

So he asked me, he said, ‘‘why haven’t your people fixed that

land?’’ Good question. Why don’t people fix the land? Why don’t the

people in Ohio fix the land? Why hasn’t Illinois fixed that land, or

why hasn’t Michigan fixed that land?

Because the people that live on those lands today didn’t cause

that problem. Most of them, if you look at the makeup of the population, are senior citizens or are a much older part of the population, and, quite frankly, getting to that stage now, your forward

thinking sort of starts to limit because you are not going to be

around 10, 15, 20 years when the project will be completed. So you

ask yourself, why should I pay additional tax costs to repair land

that I won’t even see, that I didn’t cause, I didn’t get any benefit

from, and more than likely my children and grandchildren are in

California, Texas, or Virginia. So you are just not going to do it.

So on a local level there is absolutely no incentive in taxing capacity to clean up the environment.

Now you go up to the State level. I don’t know about Ohio, Illinois, or Michigan. I can tell you in Pennsylvania, if you are in a

hard coal or soft coal area of Pennsylvania, you are not in Philadelphia or Pittsburgh, they just don’t give a damn. They don’t look at

it every day. They don’t live with it every day. It doesn’t really affect their economy. So the largest portion of the tax ratables in the

State have no interest in putting their money there. So the State

has no interest to do it. Although progressive Governors, as Rob,

have tried to move ahead and do these things.

It is a national problem when you analyze this, I think.

Brownfields and the industrial sites are the result of industrialization in the United States 100, 150 years ago, when, like Japan, we

had a growing economy. We didn’t pay a lot of attention to our environment, but Japan went back and cleaned its environment. The

United States abandoned it. It went out and took pristine land. It

is now time that we pay back for our great industrialization by reclaiming these areas.

Second, I guess that these areas tend to be abandoned because

we don’t pay attention. Particularly in the mining area, we don’t

allow oil and gas industries to destroy an awful lot of land. We

have a tremendous fight with the wild natures of Alaska now because we just don’t really want to injure an environment sometimes in order to receive energy. But, hell, when we had the coal

industry, whether it is bituminous or anthracite, we didn’t give a

damn. It was Katy get the door and do anything you wish. And

they did. And they are gone. The coal companies are gone, the people that worked there are gone, the people that live there are too

old to worry about it and aren’t going to live that long, so they

don’t pay attention to it. The State doesn’t want to do it because

they don’t live in the area. It is up to the Federal Government.

This is our payback.

I think we are at a propitious time in America to look at longterm capital spending programs using bonding as opposed to appropriations. If you rely on appropriations, it is who has a hot issue

today. Who would have ever thought that when we left this city in

August, Louisiana, Mississippi, and Alabama were going to be the

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recipients of a couple hundred billions of dollars of aid? It happens,

and it is always just happening. Who would have ever thought we

would be in Iraq for 21⁄2 years? It happens.

It seems to me we have to take this off the appropriation area,

put it onto a capital expenditure level, bond it with bonds and do

it over 30 years, and make it an honest, hard commitment. But

keep it at the local and State level.

I really do believe everything I have ever seen in abandoned

mines when it comes to Federal programs, they really don’t have

the feel. It has to be done on the State and local level. And there

will be differences, but there shouldn’t be differences in the way

laws apply, what benefits are available. And it shouldn’t boil down

to the competitiveness of one State putting a good program, an industry to reuse land in their State in competition with another

State. If we get into that game, we are in a race to the bottom.

Instead, it should be going back to what I said. Look, all of this

land, practically, when you look at it, particularly the coal mining

land and Colorado and the other mining industry problems are a

little different. Their land value is not highly likely to appreciate

for use. But particularly knowing Pennsylvania, if we clean up

Pennsylvania, our land value and reuse value will just explode, and

all of our experience has shown that. I think Illinois and Michigan

and Ohio probably are in that boat.

I would like to urge you, and I know Mr. Turner should take the

lead on this on behalf of the Congress, but there are a few of us

who would be willing to come out and spend a weekend somewhere

really hacking some of this over with people of your standard

across the country to come up with best practices and what we

have to do at our level.

If we have insurance problems or if we have liability problems,

the only reason we have them is, quite frankly, we are not very

bright here, and we only listen when the sound is deafening, and

it is time that you deafen us.

But I think, and my impression of Mr. Turner has been—and I

watched him, he is a junior member, he has a heart for this, he

understands it, he has the experience and the background to do it.

That is a great commodity. He chose this specialty because he has

an interest. So let’s use him. He may be a Republican, but we will

forgive him for that. But let’s use him. But it is not a Republican

or Democrat issue, it is an American issue, and we actually have

a chance to make money for the country and for the people that

live in these various areas and for industry. How can you beat

that?

But we have to do it in some more comprehensive way that

doesn’t benefit private, political, or otherwise or economics flowing

to anyone. Let’s not build a Beltway industry. That would be the

worst thing we could do. I am sure they are starting out there.

There are a lot of good tax lawyers trying to figure out how they

can turn a good dollar by doing this.

Although we want the private sector heavily involved, I think it

will require nonprofit or governmental overall comprehensive planning to get to the scheme, to get to the application of what should

be done.

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In the process of cleaning up land, you are going to clean up

water, too, and when you add the savings and the benefits of those

things, in our little project-by-project attacking of this, it is going

to cost us 5 or 10 times more than it would if we did it comprehensively. So we have the time. Let’s do it right. Let’s make it a war

on anti-environmental activity.

But I happened to have an experience of being on Wall Street

yesterday and meeting with some of the financial people. The first

time in my life I have gotten the impression—I should say the first

time in a decade—they are ready for a progressive era. They now

know that America can’t just live off its droppings, we have to be

inventive. One of the most inventive things—and certainly of great

value—is land. God ain’t making any more. So it is up to us to

make it or return it to its status of good use.

So I want to compliment you all. I didn’t have particular questions. I was going to ask a question of Ms. McGinty, to have her

have a chance to show her brilliance, but I will save that for another day.

Mr. TURNER. Thank you for your comments and thank you for

your passion on this. I certainly look forward to working with you

on this issue.

Mr. BARTSCH. Mr. Chairman, can I make a couple of observations

on Mr. Kanjorski’s comments, because I think what is really critical when we are talking about shaping brownfield programs and

strategies, he was talking about a 16,000-acre mine site, and many

of us were talking about quarter-acre gas stationsites, and we have

named two sites. The real challenge is how do you structure something that really meets this?

I think what you need to do is really have flexibility to allow

locals in the private sector to package grants and loans and bond

proceeds and things like this together in a way that really works

best for them to make this happen, to really do this.

Also from the State perspective, Mr. Kanjorski mentioned the

role of new technologies, and there is no better place for new technology to gain acceptance in the marketplace than working through

a State volunteer cleanup program to get it into the mix.

Second, I think in support, I would throw railroads into the mix

as well as mines. We need to come up with ways that may not be

conventional environmental ways to get those folks to the table,

and it may be things like more rigorous enforcement of SarbanesOxley or things like that.

Third is we are thinking about these incentive programs. There

has never been an issue that has yielded more return on the public

investment than the brownfields funding.

Fourth, I just wanted to mention to the committee that EPA,

along with about two dozen other organizations, sponsors an annual brownfield conference which will be held this year in Denver,

November 2nd to 5th. It is free. Please encourage your constituents

to go. Several thousand people will get together to share information on best practices, on new technologies and on strategies, and

it is really a good opportunity to get at some of the informational

concerns that we have all talked about.

Thank you.

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Mr. TURNER. The environmental tax credit bill, which I drafted

and am working on the redraft for this Congress, has in it a mechanism for release of liability; the concern being that in setting up

a tax credit program, we don’t want it to be a revolving loan fund

or result in just numerous lawsuits for recovery of the tax credits.

We put the tax credits out and apply them for cleanup. We want

to make certain that those are a subsidy and a gap filler.

But also we were hoping that we would provide an incentive for

the past owners to come to the table, where in my experience from

what I have seen so far generally, even if you have a successful

brownfield cleanup, that still we haven’t reached out and successfully brought those individuals to the table.

In looking at ways to structure liability relief, a suggestion has

been made that the tax credit bill have as its liability relief mechanism a requirement that the parties enter the State voluntary

cleanup programs; that in those State voluntarily cleanup programs, there is a bar of enforcement by EPA; and that what we

would merely do is hook into those liability relief provisions.

So, for example, what we would have is a tax credit that would

be administered by the State development agencies, as the low-income housing tax credit is, and that in the application that there

would be preferential points that are provided to project that include the past polluter, the individual who has past liability, and

the requirement that the redevelopment go through the State voluntary cleanup program, which would then, through the 2001 act,

include the bar of enforcement by EPA.

So as each of you have experience in the issue of these State voluntary cleanup programs, I would like your positions and opinion

as to whether or not that would be an effective liability release,

since what we have found in trying to fashion this tax credit, when

we put a liability release in it, we find that people either react very

negatively to a whole new release package being created, or are

very concerned as to what its limitations and scope will be.

If the State voluntary cleanup program bar of enforcement release is sufficient, if you are finding it is successful in giving people

the confidence to enter into a program, then we wouldn’t have to

reinvent the wheel, we would be able to hook into this.

Kathleen, in your comments you said there is insufficient liability relief in the programs you currently have. So I am interested

in your comments.

Ms. MCGINTY. Thank you very much, and I think the direction

you are going is really encouraging. So let me be a little more precise in terms of where we do have full and effective liability relief

and where we need further work.

Where we have full and effective—and maybe where each of us

has a memorandum with EPA—is with regard to CERCLA and

Superfund liability. Where Pennsylvania is the only State in the

Nation with a further MOA with EPA is with regard to RCRA and

TSCA liability. And there, this is the way that breaks down.

For a substantial part of RCRA liability, EPA has granted us in

this MOA full liability relief upon successful completion of the

State voluntary program, just as you say. However, where, for example, there is groundwater contamination, or where, for example,

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nation—in other words, the contaminant stays, but you block it off

so that a human or sensitive ecosystem is not exposed—in those

cases, to date anyway, EPA retains further enforcement authority.

With regard to TSCA, since that is the bravest new world, if you

will, again we thank EPA for putting that on the table with us in

our MOA, but so far it is procedural. EPA has committed that they

will process the TSCA liability piece as we process the State, the

CERCLA, and those pieces of RCRA which EPA has not retained

overriding authority on.

So it is further closing out on RCRA and getting a formula together where TSCA also can be satisfied upon completion of the

State voluntary program. That is the new universe we need to get

into, which is the subject of our MOA, but where we are still working to make it real, and to really have one cleanup program.

The last thing I would just say, I want to pick up on your point

about further points if you have the original party with liability at

the table, the original responsible party, and come back to Mr.

Kanjorski’s point.

At least in a State like Pennsylvania, and I think with my rust

belt colleagues here it is similar——

Mr. TURNER. It is an impressive lineup.

Ms. MCGINTY. But we are sunny personalities even if we are

from the rust belt. Companies are long gone. I can assure you

where there is a viable responsible party anywhere still in the mix,

we do go vigorously after them. So the point is where there is a

responsible party, to bring them to the table. But I just wanted to

caution not to hold it against us——

Mr. TURNER. It is set up if they exist, if there is one.

Ms. MCGINTY. Thank you very much.

Mr. TURNER. Thank you. John.

Mr. MAGILL. The suggestion that follows the program mirrors

what we do with the Ohio revitalization fund. All of our projects

have to go through a State regulatory program so there is a performance-based outcome to be able to hang onto the grant. You perform or the community would have to repay the grant. So I think

the key to this is that it is performance-based. I think this is really

important in this particular industry. It demonstrates the citizens

can get it done and get approved.

From our perspective, I think this is a good place to start because it is known; and the point has been made by other members,

do not reinvent the wheel and create new mechanisms. It also then

allows for a piloting operation. If it fails, you can make changes.

You don’t create something new and tinker with that.

The only caveat would be that in some States that the voluntary

cleanup program does not cover all cleanups. Brownfields are a

wider perspective. We would look forward to working with the subcommittee in the direction to try to make sure to try to capture all

brownfields. We could look at RCRA and some of the other sites

and not only get after the traditional ones.

Mr. SCOTT. I think it is going in exactly the right direction, because as has already been said by my colleagues here, this is pretty

much what we do already. To get somebody into the program that

each of us have, although there are some differences, you pretty

much have to go through the voluntary site program, and that is

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already set up, and there are MOUs with EPA to enable us to do

that. So I think, as John said, it will help greatly because you really are just plugging in a new piece to something that exists, rather

than creating a new program.

So I think it is heading in the right direction, with, as has already been said, the admonition it is going to need to encompass

more than most of our MOUs do right now. In order for it to accomplish all of the things we are trying to do, that we are trying to

do and that you are trying to do, it is going to need to be a little

bit more broadly based than the MOUs have been to date.

Mr. HOGARTH. I don’t have much to add to that. The devil is in

the details, and we would certainly be willing to assist with further

detailed review and comment as you move forward.

Mr. TURNER. Thank you.

Mr. BARTSCH. I would just add that I think that is a good approach, again, with the reasons given already to be looked at. Each

State has a program in place, and I think what we saw after the

passage of the national brownfields law a couple of years ago, the

States will be able to then change to better fit the Federal structure that is laid out.

What is good about using the State voluntary cleanup programs,

I think from sort of an environmental perspective, is it really does

provide a recognized mechanism to provide some assurance to the

community at large that these things are proceeding properly.

Mr. TURNER. Thank you. I want to give each of you an opportunity to add anything to the record if you would like at this point.

If there is a question we didn’t ask you or something you would

like to respond to or any additional comments you have, to give you

an opportunity for any closing statements, if any of you have to.

Mr. BARTSCH. I would just like to again thank the subcommittee

for pursuing this. I think that I have been doing community development issues for a long time, and I have not seen one where sort

of the environmental overlay on the economic development process

has been so significant. Brownfields, as we have said, really are

real estate transactions that happen to have an environmental

twist to them, and our challenge is really working to structure programs that fit all of these different situations.

So, again, I encourage you to continue with your efforts, and as

you do that, just to make sure they can be as flexible as possible

to address as many different needs as possible.

Ms. MCGINTY. Thank you. Just two quick points, both of which

derive from Mr. Kanjorski’s remarks.

First, in terms of transaction costs and reducing some of the

analysis that goes into these cleanup programs, we have instituted

an initiative whereby the State will defer to a cleanup program for

smaller, less complicated sites, if it is PE certified, if you have a

professional engineer, a professional geologist, certifying to the

cleanup. We do not do iterative reviews. We ultimately decide if it

meets our standard, but we do not do the iterative engineering reviews. I share that for your consideration.

The second and last thing I would just pick up on, and we

haven’t really mentioned it here but it is inherent in the idea of

a 30-year bond or patient capital, long-term capital. One of the

things about these programs and these cleanups is once you have

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the containment structure in place, it is forever and for always,

amen. You need to know that those dollars will be there today, tomorrow, and well into the future so that the community and we all

have the confidence that contaminant not only today, but 30 years

from now, is still contained, that there has been no breach of the

containment structure, etc. So the idea of long-term, patient capital

could be very, very important to maintaining the integrity of

brownfield remediation programs.

Mr. MAGILL. Thank you again, Chairman Turner, members of

the community, for your interest in brownfields. I would only add

that the programming needs to remain, I think, flexible with the

local and particularly private market orientation because, at the

end of the day, the private capital resources dwarf our ability to

generate government investment; and if they can be attracted to

brownfields, they will help us finance the cleanup, construction, resulting in the new jobs or the parks, and, as Mr. Scott referenced,

invigorate the local communities, whether they are rural or urban.

Thank you.

Mr. SCOTT. Thank you again, Mr. Chairman, and members of the

subcommittee. I also wanted to say a couple of things about what

I thought were the very good remarks by Mr. Kanjorski.

We too have an interest in mining cleanup, as well as in clean

coal technology and the continued use of coal for an energy source,

and have done a lot of things toward that regard in the last couple

of years.

I think that from our standpoint, if you are going to do something more comprehensive on a national level with respect to

mined lands, I think that would be a fantastic thing to be able to

do. I think you would help to drive down the transaction costs that

are associated with engineering, with legal fees, with financial fees

that are associated with that. I think that is a benefit. But also a

comprehensive plan to try to get at all of those, I think would be

very good.

In terms of best practices or in help to develop any long-range

plan, Mr. Bartsch mentioned there are other ongoing brownfields

conferences. The State of Illinois—and I am sure all my colleagues

do this as well—are continually reaching out to both the public and

private sector, plus we have organizations like the National

Brownfields Association which is doing that.

But in terms of if this was an offer, I will take you up on it. The

suggestion that we sit down with other members who have an interest in this, myself and colleagues from Illinois and from other

States, I would be more than happy to do that and would just

make that offer to you; that anytime that is something you would

like to explore, Mr. Chairman or Mr. Kanjorski or other Members,

I would be more than happy to do that.

Mr. HOGARTH. I would just like to mention one piece of the puzzle that didn’t get much attention today, and that is leaking underground storage tanks. Just in Michigan, we have 4,200 sites that

are orphaned leaking underground storage tank sites. That is the

places where the liable party is gone, bankrupt. That 4,200 sites

we calculate represents a need of about $11⁄2 billion, with a ‘‘b,’’

just in Michigan to appropriately address them. They are spread

all over the State, largely in urban areas, sometimes four corners

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at an intersection, and they pose a significant part of our

brownfield problem. We have only been getting about $1 million a year out of the

Federal trust fund to deal with these sites. So anything you can do

to help address that problem would help the States.

Mr. KANJORSKI. Do you move in and drain the containers or do

they still contain the pollutants?

Mr. HOGARTH. Well, in most cases, the tanks have been emptied.

It is the material that has already leaked out into the ground, the

soil, and the groundwater that poses the remaining hazard. Sometimes it is a significant hazard.

Mr. KANJORSKI. I had one in my district that we spent $30 million on, just one site.

Mr. TURNER. As we turn to our second panel, I want to acknowledge that although my hometown is Dayton, OH, and my district

is in Ohio, my family roots are in Kentucky. And we have the

mayor of Maysville, KY, David Cartmell, who is also the president

of the Kentucky League of Cities, and, with Mr. Kanjorski’s approval, we are going to add him to our second panel.

I would like to call for that panel. We will take a short recess.

[Recess.]

Mr. TURNER. We will reconvene as we prepare for the second

panel. We are going to begin with Robert Colangelo, executive director, National Brownfield Association. Robert, I appreciate your

being here.

I was reminded I did not swear you in. As you know, it is the

policy of this committee that the witnesses be sworn in prior to

their testifying. If you would please rise and raise your right

hands.

[Witnesses sworn.]

Mr. TURNER. Let the record show that all the witnesses have responded in the affirmative. I think each of you will recall from

when we began panel I that you have on the table a light system.

Green is when you are to begin your comments, red is when you

to are to end your comments. Each of you has been provided a 5-

minute time period. We appreciate the fact you have provided us

with written testimony and that you have an oral summary of your

testimony. We will end with a question and answer period.

Robert.

STATEMENTS OF ROBERT COLANGELO, EXECUTIVE DIRECTOR, NATIONAL BROWNFIELD ASSOCIATION; JONATHAN

PHILIPS, SENIOR DIRECTOR, CHEROKEE INVESTMENT

PARTNERS, LLC; CHARLES HOUDER, DIRECTOR OF ACQUISITIONS, PREFERRED REAL ESTATE INVESTMENTS, INC.;

KEVIN MATTHEWS, AIG ENVIRONMENTAL, DIRECTOR OF ASSOCIATION AND ENVIRONMENTAL RELATIONS; AND DAVID

CARTMELL, PRESIDENT, KENTUCKY LEAGUE OF CITIES

STATEMENT OF ROBERT COLANGELO

Mr. COLANGELO. Mr. Chairman, it has been an honor and privilege to work with you to battle blight and really bring these properties back responsibly to redevelopment. It is also a pleasure to

address the honorable members of the subcommittee, and we apVerDate 11-MAY-2000 11:14 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6633 D:\DOCS\25869.TXT HGOVREF1 PsN: HGOVREF1
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preciate your interest in improving State financial incentive programs related to the complex issue of brownfield redevelopment.

I come here today offering two perspectives, one as the founder

of a private development company that has successfully redeveloped more than 1 million square feet of brownfield property in the

Chicago area, and the other as the executive director of a nonprofit

organization dedicated to the responsible redevelopment of

brownfields, the National Brownfield Association, where we have

more than 900 members from the public and private sector that are

really the experts in the industry that are dedicated to bringing

these properties back to responsible use.

My experience as a private sector developer is that State

brownfield programs provide liability relief, financial incentives,

and technical assistance. Most developers who purchase and prepare properties have come to rely heavily on the liability relief offered through State voluntary cleanup programs.

One of the strongest liability reliefs is provided by the Illinois

EPA through its No Further Action letter. These comfort levels provide a defined level of liability relief to developers who have responsibly remediated sites and it gives them the ability to secure

debt financing for these brownfield projects.

Technical assistance and financial incentives, while great ideas,

are often impractical for most private development. The Ohio Clean

Revitalization Fund is an example of a program that does work.

Developers often consider incentives as an afterthought because of

the perceived or real difficulties in securing them, the small

amount of assistance typically available within a program in relation to the project cost and the time required to secure these funds.

It is my experience that most financial incentives go directly to

cities or nonprofit development corporations and the limited

amount of program funds that is available to the private sector

often requires an intense investment of time and the use of expensive consultants to help navigate through the program eligibility

requirements and the application process. Most traditional developers will pass on a brownfield site rather than take a chance on

a project that will only work if government incentives are provided.

Two incentive programs that I have personally found that work

well are tax increment financing and State tax credit programs.

These incentives are attractive enough to convince private sector

developers and investors to take a risk on the brownfield project.

The use of brownfield tax credit programs has worked well both in

New York, Michigan, and other States.

As time goes on, fewer easy-to-develop brownfield sites are available. Increasingly, cities are left with the harder, more complicated

brownfield sites, and these sites will require meaningful government incentives to attract private sector investment and developer

interests. The challenge to every government agency is to strike a

balance, to be developer friendly, without being overly incentiverich.

Brownfield sites by their definition require incentives to bring

them to par with unimpaired properties. For government incentives

to be meaningful to the private sector, programs should be easy to

understand and administer, apply to a wide type of projects, allow

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flexibility in the use of funds, provide meaningful funding amounts,

and allow for unused funds to be transferred or refunded.

Chairman Turner, I personally commend your efforts to look for

financial incentive solutions, and I support legislation which would

create a Federal brownfield tax credit and that would allow for

demolition and remediation expenses to earn a Federal tax credit.

Putting my other hat on as executive director of the NBA, I

would like to introduce our recently completed analysis of State

voluntary and brownfield cleanup programs. This could be a possible resource to you. Mr. Kanjorski, you asked about some resources and analysis of programs, and this paper was completed by

the NBA as a result of our Brownfield Leadership Summit held in

Washington, DC, in May 2005. In there we looked at all the State

programs and made some key recommendations and we highlighted elements of different State programs that work. So we encourage you to look at this.

What we found is that although no single State has developed a

‘‘best program,’’ many States have been very creative in developing

specific program elements that work well. When designing incentive programs, we encourage you to consider the recommendations

provided in this paper.

Again, Members of Congress are to be commended for their willingness to consider and promote new financial incentives that attract private sector investment to these properties. And I thank the

committee for the opportunity to speak and look forward to your

questions. Thank you.

Mr. TURNER. Thank you.

[The prepared statement of Mr. Colangelo follows:]

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STATEMENT OF JONATHAN PHILIPS

Mr. PHILIPS. Mr. Chairman, members of the committee, my name

is Jonathan Philips and I am senior director of Cherokee Investment Partners. As you may recall, I testified before the subcommittee on April 5th regarding the effectiveness of Federal brownfield

programs, and I feel honored to add my testimony today by addressing our experience with State programs. Thank you for this

opportunity.

Cherokee is the world’s largest and most active firm specializing

in brownfield revitalization. Since inception, we have acquired hundreds of impaired properties. Our objective is to transform these

sites into productive, sustainable, and liability-free assets. As a result, communities have enjoyed safer, less polluted environments,

increases in jobs and tax revenues, and a vast reduction in sprawl.

We can tell you firsthand that well-designed State programs are

a critical component of this Nation’s efforts to revitalize lands. We

also believe they are not sufficient to solve this Nation’s brownfield

problem in our lifetime.

In my written testimony, I highlight a number of innovative

State programs and also reference a number of excellent surveys

of them, some of which were conducted with the help of some of

my fellow panelists. In the interest of time, I will not repeat that

information here today.

Given the diverse tools offered by various States, tax credits, voluntary cleanup programs, tax increment financing and the like, one

might mistakenly think that we should have the brownfield problem solved. However, as you know, there are at least 450,000 to 1

million brownfields in this country and only 16,000 sites, less than

4 percent, have been redeveloped or are currently in the process of

redevelopment through State and voluntary cleanup programs.

To further illustrate this point, I am pleased to share some internal data from our periodic review of our activity and that of others

in our field.

Of the Nation’s many sites, we typically focus on a prescreened

subset of roughly 450 over a 2-year period and then select as many

as 10 for investment. Two years later, when we research those remaining 440 sites, we can consistently find that not more than 5

to 10 have been chosen for investment by others. Frequently, that

number is much lower. Please consider this data. The private sector invests in fewer than 5 percent of our prescreened sites, leaving

430 to sit idle indefinitely.

Our data confirms what we all know: Despite existing programs,

the vast majority of this Nation’s brownfields, not just the

prescreened ones, remain unattractive to investors.

Last April, I encouraged this committee to think about sites plotted on an economic continuum with two halves, sites underwater

and above water. An economically underwater site is one that the

market ignores given the risk-reward calculus.

An above-water site is likely to be revitalized by the private sector without assistance. Along this continuum are sites that fall

barely below water. These are sites that have a shot at being redeveloped during a favorable economic upturn or with a slight nudge

from an incentive program.

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Unfortunately, most brownfields are clustered toward the underwater side of the continuum, many considerably so. Without significant public assistance, these sites may never be touched by the private sector, which raises a critical point: These terms, underwater

and above water, simplistically exclude all but the internal cost-reward of a developer. They do not reflect beneficial public

externalities brought by transformation, such as less pollution, improved health, more jobs, reduced sprawl and increased tax revenues, each of which can and should be present value monetized on

the local, State and Federal levels and used to aggressively stimulate reclamation, much as Mr. Kanjorski and others have discussed

already in terms of long-term bonding. TIFs do a good job of this.

A mission of government then must be to target that group of

sites that are both underwater from a market perspective and

above water from a public perspective. Fortunately, we have models that can show us the way forward. One example is the tax credit for rehabilitating historic structures that Congress created in

1976. It has stimulated more than $33 billion in private investment, with over 325,000 housing units, of which 75,000 are for low

and moderate-income families.

I believe that this Federal model has been successful for two reasons: First, it is uniform across the Nation, and; second, it works

in tandem with State programs to drive more historic sites from

underwater to above-water status. Given this, doesn’t it make

sense to think about applying the successive tax credits to

brownfields?

Chairman Turner’s brownfield proposal creates a transferable

tax credit for eligible costs at qualified sites. Critically, this credit

could be leveraged early in a project, thus allowing a pioneering developer to attract some of the riskiest capital with the equity created by the forward sale of the credit.

For investors the impact is real, as they would be able to delay

a portion of their equity investment, thus boosting rates of return

and more easily attracting debt and equity.

In this sense, Chairman Turner’s proposal tracks the historic

credit model. The existence of such a credit would allow us and others to consider sites that are below water from a private perspective but above water from a public benefit perspective. A credit

would be a logical extension adopted, such as a 2001 brownfield

law, section 198 expensing, and the recently passed bill that was

cosponsored by many, including Chairman Turner.

A national transferable credit would be a powerful and fitting

complement to State efforts. After all, as a friend once told me, you

don’t fight a forest fire with a water pistol.

Nearly every Member of Congress has the misfortune of

brownfields in their districts. Together we can transform these

sites and build healthy communities with robust job and tax bases

and strong economies.

We look forward to continuing to work with members of this committee, and Congress as a whole, to explore new ways to accelerate

cleanups. Please do not hesitate to call upon us as both a resource

for these legislative endeavors and for assistance with specific sites

that are in need of targeted assistance.

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Mr. Chairman, members of the committee, it has been an honor

and privilege to testify here today. I am happy to answer any questions you have.

[The prepared statement of Mr. Philips follows:]

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STATEMENT OF KEVIN MATTHEWS

Mr. MATTHEWS. Mr. Chairman and members of the subcommittee, thank you for inviting AIG Environmental to testify on State

incentive programs for brownfields. I am Kevin Matthews, and I

serve as director of government relations for AIG Environmental.

AIG Environmental is a division of the American International

Group. AIG’s general insurance operation includes the largest underwriters of commercial and industrial insurance in the United

States and the most extensive property casualty network.

AIG environmental pioneered the use of environmental insurance

and has 25 years of experience underwriting environmental at-risk

and is currently the Nation’s leading provider of environmental insurance. We view ourselves as a solutions company as we work to

provide innovative approaches to handle environmental liability

and cleanup issues.

Throughout our history we have developed new insurance products to respond to new and emerging risks for both the public and

private sectors.

Environmental insurance is not the silver bullet for brownfields

redevelopment. However, it is one of the tools in the tool chest that

helps lead to successful cleanup and redevelopment because it has

often helped address some of the greatest concerns of brownfields

redevelopment: environmental liabilities and uncertainties concerning cleanup.

We are here today to focus on State programs that utilize environmental insurance to advance the cleanup and reuse of

brownfields. The three States we work most closely with in these

programs are Massachusetts, Wisconsin, and California. I will

speak about the Massachusetts approach. The other States are covered in my written testimony.

The one thing I would like to leave you with is for every $1 that

the Commonwealth of Massachusetts spends on environmental insurance, they get $458 in return in private investment. Keep that

in mind as we go forward.

The Massachusetts Brownfield Redevelopment Access to Capital

Program [MASSBRAC], was created by the Commonwealth to provide a pool of funds to be used to guarantee loans made to developers who agreed to clean up and reuse brownfields. What was

quickly learned by Mass Business is that capital is available for

brownfields. However, what stymied brownfields redevelopment

was the fear of environmental liability from a historic contamination and the concerns that cleanup costs would exceed the cleanup

cost estimate.

The staff of Mass Business took it upon themselves to determine

if tools were available that could address such concerns and spur

redevelopment. What they discovered was that environmental insurance could address these issues. So Mass Business entered into

a contract with AIG Environmental where member companies of

AIG would provide site owners or developers pollution legal liability insurance and cleanup cost cap insurance at prenegotiated rates

and coverage. Mass Business would subsidize the premium cost of

insurance to qualified developers. The subsidies ranged from 25

percent to 50 percent of the insurance premium costs.

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The program has led to rapid growth in the Massachusetts

brownfield program. Here are the results as provided by Mass

Business. The number of sites in the program totals 259. The dollar value of the sites cleaned up is $145 million. The investment

in loans created out of this is $2.1 billion. The number of jobs created is 25,000. The amount of money the Commonwealth of Massachusetts has spent on environmental insurance is $4.8 million.

That ratio is $1 for every $458 in return.

What MASSBRAC did was address the concerns with regard to

environmental liability issues by making two AIG environmental

insurance policies available to MASSBRAC program participants.

These environmental insurance policies, pollution legal liability and

cleanup cost cap insurance, are detailed in my written statement.

AIG Environmental is extremely proud to have participated in

this program since its inception. We are just as proud of the results

we have achieved in the Commonwealth. In fact, the greatest success was last year the U.S. EPA Region I Phoenix Award winner

was one of our insureds in the Commonwealth of Massachusetts.

Fortunately, Congress had the foresight in the 2002 brownfield

law to allow EPA grant recipients to use funds from those grants

to purchase environmental insurance. Therefore, local and State

governments and qualified nonprofits can use EPA brownfield

funds to offset the cost of establishing State or local environmental

insurance programs or using the grants for specific brownfields

transactions.

AIG Environmental is extremely proud of our role in brownfield

transactions. We truly enjoy working at all levels of government to

make brownfields redevelopment a reality. One of our greatest joys

was when the Atlantic Station project in Atlanta, GA, was selected

as the National Phoenix Award winner in 2004. AIG Environmental companies were intimately involved in this project at numerous levels, and we take great pride in our contribution of making that section of Atlanta come alive again.

Again, environmental insurance is just one of the tools utilized

in brownfields redevelopment. Perhaps its use is one of the best

leveraging tools available. State programs that have used this tool

have been proven very successful, and we look forward to working

with this committee and the chairman to assist in developing legislation that will allow States to take advantage of similar programs.

Thank you. I will be happy to answer any questions you might

have.

[The prepared statement of Mr. Matthews follows:]

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STATEMENT OF DAVID CARTMELL

Mr. CARTMELL. Mr. Chairman and members of the committee,

thank you so much for letting me speak on such short notice. I am

here today wearing three hats. I am a developer, not in the developer sense, but I come from a city that has done brownfield developments. I am the mayor of Maysville, KY, a city of multiple

brownfield issues. I am the president of the Kentucky League of

Cities, which has taken the lead in the redevelopment of Kentucky

cities, and I am the chairman of the executive committee of the

newly formed National Brownfields Association Chapter in Kentucky.

Maysville is a small city of 9,000, but we have 10,000 jobs. I

come from a town built on sin, whiskey, tobacco, and hemp. But it

is the milk that did us in, because we had Carnation, and we have

a condensary that condensed all the milk in Ohio and Kentucky,

and consequently through the lead process and canning process it

contaminated virtually half of our city.

Through a partnership with the Kentucky EPA and Federal

EPA, we cleaned this site. The city acquired this site from Nestle,

or from its predecessor—or successor, Silgan. We cleaned the site.

We won the Kentucky Earth Day Award for 2005, but as of today

we have not received a clean bill of health from the EPA. This is

ongoing for 10 years. This is our 10th year.

It is difficult for us, simply because there is a new company from

New Jersey located there with 100 employees that wishes to purchase. They will not purchase without the clean bill of health.

Moreover, with each administration change, there is a change of

interpretation of rules. In addition to this, Maysville has 31 tobacco

warehouses abandoned, an abandoned hospital with a $1.3 million

asbestos cleanup bill, and multiple cotton mills and other factories.

It is a disappointment that Kentucky received no EPA grants this

last funding cycle, even though there were multiple applications.

Personally, as a city, we have used every smart growth tool

available to us. We have planning and zoning, we have stopped

growth beyond our urban services boundary. But we need help with

streamlining this process. We do need the targeted incentives, we

need Chairman Turner’s tax incentives, we need help to cope with

the future liabilities, and we need a timely release on liability.

Mr. Chairman, I would like to thank you for pursuing this interest so vital to the redevelopment of our cities, and thank you for

letting me speak today.

[The prepared statement of Mr. Cartmell follows:]

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STATEMENT OF CHARLES HOUDER

Mr. HOUDER. My name is Charlie Houder. I am the director of

acquisitions for Preferred Real Estate Investments. I want to thank

the committee for the opportunity to be here today, and also want

to thank Mr. Colangelo of the NBA for his efforts in this regard

and for at least bringing me here today. When I first spoke to him,

I contacted him about playing point guard for the 76ers, and then

realized the NBA stood for something else and I realized we had

other things to talk about; namely, brownfields.

Preferred Real Estate Investments is a private real estate developer. We are a for-profit company first and last. We are not a

brownfields developer in the sense that we seek properties that are

contaminated to focus our development efforts on. However, we do

have a major development focus on infill sites and large corporate

surplus sites around the country, and invariably they bring along

with them environmental liability. So over the 20-years history of

the company, we have by necessity developed an expertise in being

on the very front lines of dealing with environmental liabilities.

I am also a big believer in the fact that pictures speak 1,000

words. In my business, in my day-to-day work, it is much more conversational than presentational, so I thought the best way to kind

of work through some of these examples is to show pictures of what

we are actually here talking about. And what we are actually here

talking about, especially in the context of what I do, is specific

sites. Yes, contaminated sites, yes, but what these sites lead to.

And the purpose behind cleaning them up—and this speaks to

Mr. Kanjorski’s comments—is that there are communities that are

beholden to these sites and that rely on the land that oftentimes

comprises a large majority of the city or town or neighborhood that

these sites are located in. And I thought we could walk through a

couple examples as a way of illustrating the import of what we are

talking about here today.

This is an example of some of the companies that we have done

business with over the last 20 years. I think one of the common

themes underlying everything that we talk about here today is paying attention to the corporate owner of real estate and the corporate seller. These are cases where the corporate owner is well

known; the corporate site that they own, that they may have

mothballed or put into minimal use is well known; but the problem

is that because of a lack of regulatory certainty and because of all

of the minefields, perceived or otherwise, that pertain to taking environmentally challenged problems through a transaction, they

refuse to put them back into productive use.

These are a few examples of companies that have taken that leap

and worked through that maze, sometimes minefield, of working

with a private developer to bring properties back into productive

use.

This site I am going to focus on in particular is a former PECO

site. PECO stands for Philadelphia Electric Co. It is a subsidiary

of Exxon which is based in Chicago. This was a former power plant

on the banks of the Delaware River, just south of Philadelphia, PA.

It is located in Chester, PA, which historically was a heavy manufacturing town.

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This power plant was built and designed by the same architect

that designed Union Station in Washington. It was built at a time

when power plants were designed to be monuments to their product, to convince people of the certainty and reliability of the energy

that they provided. Over time, this power plant provided the energy that built most of the ships for the World War II war effort

and fueled all of the industry along Chester’s waterfront. Over

time, it became functionally obsolete. The buildings and industry in

Chester became obsolete and moved offshore or simply closed down.

As a result, Chester as a community essentially closed down.

Largely a minority community, the typical social ills crept in:

crime, educational problems, AIDS, poverty and every other social

ill you can imagine.

When we came to this site, PECO had brought in every expert

in the United States to figure out what to do with this site. It is

an 80-acre piece of ground right on Chester’s waterfront. Every expert in the world told them, ‘‘the only functional use for this is to

knock it down. Even if you were able to do something with the

property, what would you have? There is simply no market for it.’’

We took a different approach. We thought that it could be the

linchpin of a major economic redevelopment on the Chester waterfront, so we undertook in partnership with the Pennsylvania DEP

and the EPA what was at the time the most complex demolition

project in the United States. It involved a major rehabilitation of

the environmental condition of the site and a major deposition and

rehabilitation of the interior portions of the site.

Over the 4-year course of the project, it was redeveloped into an

office building. It is now fully leased to the likes of Wells Fargo and

a software company. It has created 2,000 jobs in a city where, when

we started this project, there were a total of 3,000 jobs. I think it

speaks highly to the fact that targeted environmental efforts, with

State and certainly Federal cooperation in conjunction with private

developers, can lead to a dramatic resurgence of an entire community.

This one building has led to an entire rejuvenation of the Chester

waterfront. This is what it looked like once the building was complete. This is a master plan. You will see the small blue square at

the bottom left is the original building. This has given rise to a

major redevelopment of retail, residential, and further commercial

redevelopment of the Chester waterfront.

This is just some examples of what the original turbine hall

looked like and how it was basically gutted and new office space

created.

I think this speaks volumes to the import of why we are here

today. This project was done utilizing Federal tax credits, historic

tax credits, and I think those programs and programs like that

work very well in making projects like this work.

Some further examples of the interior once it was redone. This

is another quick example.

I am going to run through a couple of other case studies of

projects that were done. This is a former Bud plant in Philadelphia. Again, a large contaminated site where there was an even

greater perception of contamination than there actually was.

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This is in a former American Standard plant, a former toilet factory in Hamilton, NJ. Again, a contaminated site that worked with

the public and private partnership, and again with the corporate

seller, convincing the corporate seller to come to the table to effect

a sale.

Texas Instruments in Attleboro, MA. Again, an old dilapidated,

functionally obsolete surplus corporate site that, working with

Texas Instruments, we were able to navigate through environment

concerns.

Last, a former Ingersoll Rand site in Phillipsburg, NJ, where Ingersoll Rand had the belief in the town and worked with us to help

navigate through the environmental questions.

I will conclude my testimony with that and look forward to answering any specific questions.

[The prepared statement of Mr. Houder follows:]

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Mr. TURNER. In listening to the various State programs, one of

the things that I think is interesting about their assistance is that

there are some programs that provide recapturing grants, revolving

loan funds, etc.; others provide direct subsidy, it is not recoverable.

It seems to me that in many of these sites that the gap—the subsidy is needed in a manner that is not recoverable. That means

that these sites are not going to be, even when they’re remediated—that the process of acquiring the property and remediating

the property when compared to the cleaned value prior to complete

redevelopment is still going to be a negative proposition. In other

words, you’re still going to have a negative value when you add in

the cost of acquisition and remediation prior to the redevelopment.

And you have, each of you, experience in a number of different

redevelopment projects. In the tax credit bill that I have brought

forward, it is a straight subsidy. We’re not seeking to recover the

funds. Do you think that is an essential element, as we look to a

broader scheme, to redevelop the brownfields? Mr. Colangelo.

Mr. COLANGELO. Mr. Chairman, yes, I do. I think one of the most

difficult things to secure is your debt financing on a project, and

through this tax credit bill, I think it would bring additional comfort to banks and the lending community so that you would have

lesser lines on equity. So I think that a tax credit bill could clearly

be a catalyst to encourage some more of the banking industry to

get involved with these brownfield sites.

Mr. PHILIPS. Mr. Chairman, I would echo Mr. Colangelo’s comment as well, and also point out that a number of people, not just

on this panel, but previously on the first panel, had suggested that

smaller sites were more problematic perhaps because they received

less attention and they were lower-profile sites. And if you think

about a tax credit, that can be—again, as I mentioned in my oral

testimony, it could be a forward sale situation where you can create

equity, and that chunk of equity could then be leveraged to either

attract more equity or to attract debt capital, and that is critical

to everybody, but clearly to a smaller entity because what it does

is it doesn’t start the clock of the return investment until—or at

least a portion of it until you deploy that capital later in the

project. So that is critical.

And I just wanted also to point out similarly the recapture issue

and sort of providing a subsidy versus providing something that

has to be returned or recaptured, such as the BDI program—the

Economic Development Industry program, I should say—is it

worked before. It has worked in the historic preservation tax credit.

I was speaking to a developer just recently who has purchased

a site, purchased a site in Durham, NC. We’re headquartered in

Raleigh, NC, and we’re apparently right down the street, and the

site was purchased for $14 million. The site would have never been

touched. It was an old tobacco warehouse; it would never have been

touched had it not been for the historic tax credit. The entity rehabilitated the site, sold the site for—when you think about all the

soft costs and the hard costs and everything combined and the interest payments, the debt service—for less than $14 million, but,

because of the credit, was able to make it a viable project.

Those are the kind—when I talk about above-water versus underwater sites in my testimony, this is what I’m talking about.

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There is a gap where there is huge public benefit, but for the developer, to the investor they still are viewed as under water because

they can’t monetize or commodify those public benefit externalities.

And I would encourage you to continue on your mission to pursue

the tax credit for that reason as well.

Mr. MATTHEWS. In our experience with several States that have

environmental insurance programs, there are those who do credits

and those who do subsidies. The subsidies are far more successful.

As a matter of fact, you can directly see it in Massachusetts. When

they first opened the program, they offered a 50 percent subsidy toward the premium of environmental insurance. Due to budget cutbacks, they had to reduce that subsidy to 25 percent at one point

in time. The number of sites coming into the program dropped by

50 percent when they cut the subsidy by that amount, so it is directly corollary.

In States where there is just a tax credit available, we see much,

much smaller activity, I mean substantially less activity in that

market.

Mr. TURNER. Mr. Cartmell.

Mr. CARTMELL. Our success has been, in taking the State subsidy, which we have through a renaissance program, doing the

project ourselves and then selling it to a developer. So certainly

even for us the subsidy was the defining factor for us to complete

the project.

Mr. TURNER. Mr. Houder.

Mr. HOUDER. I think, as was mentioned by the former panel,

typically when it comes to incentives, the size of the incentives that

can be offered by the Federal or State government, at least in our

experience with the size of the sites that we basically develop, are

typically not the difference maker in us deciding whether a site

works or doesn’t work, with the exception of tax credits. Tax credits, certainly the historical tax credit program has been a difference

maker. That is probably the single incentive program that has the

ability to tip the scale in undertaking a development project.

Mr. TURNER. Mr. Kanjorski.

Mr. KANJORSKI. Well, it has certainly been worthwhile to hear

your experiences. I’m glad to see there is a very sophisticated insurance program out there. I’m certainly going to take it back to

my district and see that we utilize it. So we’re going to get you

more business.

Mayor, it is always great to see local leadership like yours come

forward and tackle these tough problems. Unfortunately, the experience of many people that are in public life doesn’t lend them to

your facility to do that, so it is great to see you here. And Kentucky

has to be better off. I’ve gone through major parts of Kentucky; I

know you have the same problems we have in Pennsylvania.

On your reconstruction, I’m going to get your card; I have a couple of sites.

And, Mr. Philips, you obviously are one of the sophisticated industries now that we have grown up in this field, so it would be

very helpful for you to be very close to Mr. Turner in structuring

this to see how we can tailor it in the best financial way to attract

the private market.

Mr. PHILIPS. Not part of any Beltway industry, I promise.

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Mr. KANJORSKI. If you do that, I will kill you.

And, Mr. Colangelo, you obviously come with a developer’s experience, and now the national perspective of what is happening.

I’m going to walk away from this hearing more optimistic than

I thought I would when I came to it, so I just want to congratulate

you all, thank you for coming in. And then, again, thank Mr. Turner for a real enlightened presentation here and some real thought

on his side to get something done creatively in Congress. It doesn’t

call for great national headlines, but Mr. Turner’s actions here are

the type of things that really spell well for the Congress, because

over the long run it accomplishes far more than longshots.

Mr. MATTHEWS. Mr. Kanjorski, if I might add, specifically in

Pennsylvania, Representative—Senator Erickson and Representative Frankel from the State legislature have both introduced legislation to establish a program similar to Massachusetts; and it is

currently moving through the house and senate at this point in

time.

Mr. KANJORSKI. If you would get me that thing, I would be happy

to write a letter to the members of the legislature to support it.

Mr. MATTHEWS. Thank you.

Mr. COLANGELO. And, Mr. Kanjorski, I also wanted to mention

that Pennsylvania was one of the founding members of the National Brownfield Association, and we are happy to announce that

we are just launching our Pennsylvania chapter this month, and

we would like to invite you to our inaugural reception in Harrisburg. And Pennsylvania has long been a leader in this, and I do

encourage you to be optimistic. There’s members like this from the

public and private sector all along the country that are really dedicated to responsibly—and I mean responsibly—cleaning these up

right, but making sure they provide economic benefit. And we’ve

had the privilege of working with Congressman Turner on this

issue, and I again encourage you that there is a good group of people that are very dedicated.

Mr. KANJORSKI. I’m impressed.

Mr. TURNER. Well, Mr. Kanjorski, I look forward to working with

you on this. We’ve had discussions before about the brownfield

spill, and also your mining and reclamation efforts, and your bill

and the funding mechanism that you use with respect to bonding.

I look forward to working with you on that because this is obviously something that is important to both our States, and it is important to have a bipartisan effort to address this.

And, Mayor, I also want to congratulate you. It is interesting, I

think, these days that when people run for local government, they

think in terms of services and police and fire, and not the need to

become local developers. But with these issues of brownfields, really the future of our communities, what they’re going to look like,

really require people to step up like you have with the expertise

to take on projects that are a little bit more complex to make them

happen, because the private sector really at this point does not

have the tools yet to do it. So I commend you for that.

And I want to ask you all the last question, which was the same

question that I asked the first panel with respect to the voluntary

cleanup programs on the State level. As I discussed with the

brownfields bill, the tax credit bill that I have been working on, the

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liability release provisions within it, we are looking now to hook

that into the voluntary cleanup program rather than have language in the bill that would provide a separate release and some

angst to individuals as to how that might be applied.

We heard from the representatives from the States as to how the

volunteer cleanup program liability or bar of enforcement from the

Federal EPA has worked effectively for them with some caveats of

RCRA and TSCA as an area where it would need to be expanded

or nailed down between their State and U.S. EPA.

Each of you having experience in the area of the remediation, I

would like your thoughts as to a tax credit program that requires

the recipients to participate through the volunteer cleanup program

and its effectiveness.

Robert.

Mr. COLANGELO. Thank you.

First of all, I would like to state that brownfields are really a balance, and it’s a balance between four stakeholder groups, property

owners, developers and investors, service professionals and government. And I’d really like to commend government both at the legislative level as well as the Federal agencies, U.S. EPA, and the

State and local government, who really come together to work together to try to make the process quicker, because that’s the big

hindrance to the private sector; it’s time. It’s also a balance between buyers and sellers.

What you see right now in many State voluntary cleanup programs is that you have two levels of liability relief. The buyer can

get out of—or has very defined liability relief, but the original contaminator can’t get out of that liability relief. What you propose,

I think, starts to address that issue, and what I think it would do,

personally, is it is going to allow companies to be more apt to clean

up these sites, and you’re going to put a larger supply of developable properties onto the marketplace.

The NBA, in our last leadership summit, wrote a white paper on

what we can do to bring more corporate brownfield properties to

market, and we found that corporate America owns more than 43

percent of these industrial commercial properties, and the No. 1

concern they have is getting out of the liability relief.

So I commend these States on these voluntarily cleanup programs that have come a long way, and I think what you are proposing takes it the next step further. And again, making sure that

they’re responsibly cleaned up, I think, puts the controls to keep

the balance in the system that we’ve created.

Mr. TURNER. John.

Mr. PHILIPS. Thank you.

Just a couple of comments on indemnification. We offer that as

part of our program. We indemnify our sellers, and we do that not

just because of our funds, but we do that with backstopping it with

companies like AIG Insurance. We are one of the largest buyers of

environmental insurance perhaps in the world, and we think that

it’s very important to provide this kind of comfort to sellers or even

potentially responsible parties. And we think it’s important that

you’re thinking about this issue in the bill. It could have easily

have just been a tax credit piece of legislation without the liability

component, and this is very important.

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Second, in our experience at Cherokee, we do take many of our

sites through the voluntary cleanup program anyway, and we think

that as time has gone on, and more have been adopted throughout

the States, and the 50 States, we have seen that it has become a

more popular route. And it seems to me to be an intriguing option

to help integrate States into the process of the Federal tax credit

to sort of provide a requirement that one goes through the State

voluntary cleanup program. I think it has many attractive elements.

Mr. MATTHEWS. We encourage all of our States to go through the

voluntary cleanup programs. We are familiar enough with them

now, and each individual State that we do it, the best way to go,

makes it more predictable, better for us to underwrite.

In terms of the environmental liability, you have opened the Pandora’s box to where a lot of people either consider environmental

liability to either be religion or business. We consider it to be business. We think there are ways to actively structure different approaches to put the environmental liability back in a box and deal

with it. We’ve done it at the most complicated Superfund site in

the United States where the U.S. EPA gave a full release of liability to the single responsible party at that site because they designed the appropriate structure to move forward with. Cherokee,

Preferred, a lot of other companies, that’s how they do it now. Environmental liability is just simply a business; you structure a program and you move forward.

Having other people see it that way is very difficult, but as more

and more of them see the examples put before us—and that’s why

we’re glad you have us here so we can say, we’ve done it here,

we’ve done it here, we’ve done it here, this is routine business, you

can move this forward. The NBA’s white paper is an excellent

source of information about why this is a problem, why not moving

environmental liability to business practice and keeping it as something that—you know, if you look back to CERCLA, CERCLA was

a liability statute, but it was really passed to a lot of extent to punish companies who contaminated property. Well, we are kind of beyond that now; now is a chance to move forward and put sites back

into reuse that are part of the unintended consequences of

CERCLA. And so the more we can do that, the more opportunities

you give us—and that is why we are willing to work with you on

your bill to say here is a way to design this so that those environmental liabilities are covered and addressed and are backstopped

by all types of financial instruments that are out there.

Mr. CARTMELL. I would just like to echo what Mr. Matthews

said, that anything that will let industry see the—hastens the process and lets them see the light at the end of the tunnel, I think,

is beneficial.

Mr. TURNER. Charles.

Mr. HOUDER. I echo the comments made earlier. I think making

the tax credits part of a voluntary cleanup program makes perfect

logical sense, and responsible developers are going to be doing that

anyway. So I think it makes sense to do that.

And to echo what Robert said, I think the other critical piece is

to provide some path for the corporate seller, to not leave them out

of the equation—or the seller, corporate or otherwise—simply beVerDate 11-MAY-2000 11:14 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00173 Fmt 6633 Sfmt 6633 D:\DOCS\25869.TXT HGOVREF1 PsN: HGOVREF1
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cause that so often is the last stumbling block that cannot be overcome.

And then with respect to what Mr. Matthews was saying, I think

that part of this, you know, certainty and, I guess, legislative certainty to take this out of the realm of religion and to make it firmly

on a business footing. I think the more expedited these things can

be as, and as people see that environmentally contaminated sites

are put quickly back into productive use helps, I think, sort of tone

down some of the emotion that sometimes goes along with these

sites.

Mr. TURNER. I want to give you an opportunity for any closing

comment for things that have not been raised.

Mr. COLANGELO. Again, I want to commend you. What Congress

may not realize that they have done is they have created an industry. It is called the brownfield industry and 10 years ago it was a

collection of a bunch of crazy people thinking they could buy these

contaminated properties. And now, by our best estimates, there are

between 5,000 to 10,000 people that make their livelihood redeveloping brownfields, and these jobs aren’t going to go offshore. These

jobs are jobs that are going to stay in the country. This is a very

highly specialized field where you need experts like this from both

the public and private sector to take these old factories that house

jobs that stayed here to redevelop these and put those back to use.

And so I think anything the government can do to provide any

type of seed funding in the form of incentives to attract the large

amount of private sector dollars will just help the brownfield industry grow and create a work force that is going to stay here. So

thank you.

Mr. PHILIPS. Thank you very much for having us. I really appreciate you giving this hearing, and I wanted to thank the staff as

well for doing such an excellent job in coordinating all of us and

our testimonies.

I would just leave you with a final thought, which is to consider

the real estate market that we find ourselves in around the country. I mean, a lot of people have expressed different opinions on

how many brownfields are out there and how many brownfields—

what is the subset of brownfields that are still attractive; are they

minimally contaminated; are they considerably contaminated? In

today’s real estate market, the hottest, perhaps, that it has been

certainly in our lifetimes, the sites that are not being developed

now, I would venture to say that they’re not going to be developed

for a long time. They need help. The low-hanging fruit is not there,

it’s gone, and these efforts, the consideration especially now of innovative solutions like you’re proposing, Chairman Turner, are

very well appreciated, and we want to thank you very much for

that.

Mr. MATTHEWS. Thank you for the opportunity to be here. I

think the one thing to always keep in mind is flexibility. Every

brownfield is a little different, and being overly prescriptive only

leads to problems down the road. But allowing the public sector

and the private sector to work together within a framework that

allows them to get creative where they need to be creative is critical to moving forward with a variety of brownfields that are still

out there today.

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Mr. CARTMELL. The majority of brownfields being—

numberwise—being located in the city, I just want to thank you for

the opportunity to listen to us, for hearing us. Thank you.

Mr. HOUDER. And I thank you, too, for the opportunity. You

know, if you think about brownfields, it definitely has the potential

or I think is one of the silver bullet issues, economic issues in the

United States; because if you think in terms of other crises, energy

crises, infrastructure crises, the rejuvenation and rehabilitation of

these key infill urban and suburban sites has the potential to

greatly reduce those other problems.

And so I commend you for your efforts on this, and thank you,

because I think this is one of probably the greatest examples of the

best work government can do is taking on things that are under

most people’s radar screens that are relatively complicated, but at

the end of the day have the greatest impact on people’s day-to-day

lives. So thank you.

Mr. TURNER. We have a statement from the American Society of

Civil Engineers which will be entered into the record.

[The information referred to follows:]

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Mr. TURNER. And before we adjourn, I would like to thank our

distinguished witnesses for their participation today, and I appreciate your willingness to share your knowledge, experiences, and

thoughts.

I would also like to thank my colleagues for their participation

today. We had numerous State-created solutions to the issues of

brownfields remediation and redevelopment highlighted today.

These programs have successfully incentivized redevelopment efforts across the Nation; however, we also heard State programs,

while helpful, also have limitations. According to landowners and

developers. The two largest impediments to redevelopment of

brownfields are liability and the high cost of redevelopment. As we

have heard from numerous stakeholders, a tax credit for remediation costs would go a long way toward encouraging more aggressive redevelopment of these blighted properties.

Again, I want to thank our witnesses for their time today, and

in the event that there are any additional questions that we did

not have time for today, the record will remain open for a period

of 2 weeks for submission of additional questions and answers.

I thank you, and we stand adjourned.

[Whereupon, at 12:23 p.m., the subcommittee was adjourned.]

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