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78–502 PS 2002

H.R. 2941—BROWNFIELDS REDEVELOPMENT

ENHANCEMENT ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

MARCH 6, 2002

Printed for the use of the Committee on Financial Services

Serial No. 107–59

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa

MARGE ROUKEMA, New Jersey, Vice Chair

DOUG BEREUTER, Nebraska

RICHARD H. BAKER, Louisiana

SPENCER BACHUS, Alabama

MICHAEL N. CASTLE, Delaware

PETER T. KING, New York

EDWARD R. ROYCE, California

FRANK D. LUCAS, Oklahoma

ROBERT W. NEY, Ohio

BOB BARR, Georgia

SUE W. KELLY, New York

RON PAUL, Texas

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

DAVE WELDON, Florida

JIM RYUN, Kansas

BOB RILEY, Alabama

STEVEN C. LATOURETTE, Ohio

DONALD A. MANZULLO, Illinois

WALTER B. JONES, North Carolina

DOUG OSE, California

JUDY BIGGERT, Illinois

MARK GREEN, Wisconsin

PATRICK J. TOOMEY, Pennsylvania

CHRISTOPHER SHAYS, Connecticut

JOHN B. SHADEGG, Arizona

VITO FOSSELLA, New York

GARY G. MILLER, California

ERIC CANTOR, Virginia

FELIX J. GRUCCI, JR., New York

MELISSA A. HART, Pennsylvania

SHELLEY MOORE CAPITO, West Virginia

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

PATRICK J. TIBERI, Ohio

JOHN J. LAFALCE, New York

BARNEY FRANK, Massachusetts

PAUL E. KANJORSKI, Pennsylvania

MAXINE WATERS, California

CAROLYN B. MALONEY, New York

LUIS V. GUTIERREZ, Illinois

NYDIA M. VELA ́ ZQUEZ, New York

MELVIN L. WATT, North Carolina

GARY L. ACKERMAN, New York

KEN BENTSEN, Texas

JAMES H. MALONEY, Connecticut

DARLENE HOOLEY, Oregon

JULIA CARSON, Indiana

BRAD SHERMAN, California

MAX SANDLIN, Texas

GREGORY W. MEEKS, New York

BARBARA LEE, California

FRANK MASCARA, Pennsylvania

JAY INSLEE, Washington

JANICE D. SCHAKOWSKY, Illinois

DENNIS MOORE, Kansas

CHARLES A. GONZALEZ, Texas

STEPHANIE TUBBS JONES, Ohio

MICHAEL E. CAPUANO, Massachusetts

HAROLD E. FORD JR., Tennessee

RUBE ́ N HINOJOSA, Texas

KEN LUCAS, Kentucky

RONNIE SHOWS, Mississippi

JOSEPH CROWLEY, New York

WILLIAM LACY CLAY, Missouri

STEVE ISRAEL, New York

MIKE ROSS, Arizona

BERNARD SANDERS, Vermont

Terry Haines, Chief Counsel and Staff Director

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

MARGE ROUKEMA, New Jersey, Chair

MARK GREEN, Wisconsin, Vice Chairman

DOUG BEREUTER, Nebraska

SPENCER BACHUS, Alabama

PETER T. KING, New York

ROBERT W. NEY, Ohio

BOB BARR, Georgia

SUE W. KELLY, New York

BOB RILEY, Alabama

GARY G. MILLER, California

ERIC CANTOR, Virginia

FELIX J. GRUCCI, JR, New York

MIKE ROGERS, Michigan

PATRICK J. TIBERI, Ohio

BARNEY FRANK, Massachusetts

NYDIA M. VELA ́ ZQUEZ, New York

JULIA CARSON, Indiana

BARBARA LEE, California

JANICE D. SCHAKOWSKY, Illinois

STEPHANIE TUBBS JONES, Ohio

MICHAEL E. CAPUANO, Massachusetts

MAXINE WATERS, California

BERNARD SANDERS, Vermont

MELVIN L. WATT, North Carolina

WILLIAM LACY CLAY, Missouri

STEVE ISRAEL, New York

(III)

C O N T E N T S

Page

Hearing held on:

March 6, 2002 ................................................................................................... 1

Appendix:

March 6, 2002 ................................................................................................... 35

WITNESSES

WEDNESDAY, MARCH 6, 2002

Bartsch, Charles, Director of Brownfield Financing Studies, NortheastMidwest Institute ................................................................................................. 23

Bernardi, Hon. Roy A., Assistant Secretary, U.S. Department of Housing

and Urban Development ...................................................................................... 9

Colangelo, Robert, Executive Director, National Brownfield Association ........... 27

Kalisz, Frederick M., Jr., Mayor, City of New Bedford, Massachusetts ............. 21

Kasko, Charles, Regional Sales Manager, Avis America, on behalf of the

National Association of Home Builders .............................................................. 29

Murphy, John C., Executive Director, National Association for County

Community and Economic Development, on behalf of the National Community Development Association ............................................................................. 26

Reid, Hon. Lydia, Mayor, City of Mansfield, Ohio ................................................ 19

APPENDIX

Prepared statements:

Roukema, Hon. Marge ...................................................................................... 36

Oxley, Hon. Michael G. .................................................................................... 38

Barr, Hon. Bob .................................................................................................. 40

Carson, Hon. Julia ............................................................................................ 41

Israel, Hon. Steve ............................................................................................. 42

Kelly, Hon. Sue ................................................................................................. 43

Bartsch, Charles ............................................................................................... 44

Bernardi, Hon. Roy A. ...................................................................................... 49

Colangelo, Robert .............................................................................................. 53

Kalisz, Frederick M., Jr. .................................................................................. 55

Kasko, Charles .................................................................................................. 60

Murphy, John C. ............................................................................................... 65

Reid, Hon. Lydia ............................................................................................... 68

(1)

H.R. 2941—BROWNFIELDS REDEVELOPMENT

ENHANCEMENT ACT

WEDNESDAY, MARCH 6, 2002

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, COMMITTEE ON FINANCIAL SERVICES, Washington, DC.

The subcommittee met, pursuant to call, at 10:05 a.m. in room

2128, Rayburn House Office Building, Hon. Marge Roukema,

[chairwoman of the subcommittee], presiding.

Present: Chairwoman Roukema; Representatives Kelly, Oxley,

Miller, Grucci, Tiberi, Frank, Carson, Jones, Capuano, Clay, Israel,

and C. Maloney of New York.

Chairwoman ROUKEMA. May I have your attention? I apologize

for the delay here, but I believe that we should wait a few more

minutes. I am told that some Members on the Democratic side of

the panel will be here, but let’s be patient and have another

minute or two or three, hopefully before we get started. Thank you,

I appreciate your patience.

The hearing will come to order. I will open the hearing with

opening statements and then greet the panelists and introduce

those panelists. I certainly thank all of you for coming today and

I would hope that other Members will be here. I know there is intense interest on this legislation. It’s not highly controversial, but

there is intense interest, not only on a regional basis, but across

the country, and I want to especially state that it’s important for

the State of New Jersey, but that’s only one of 50. But I will be

working with all of you to deal with the problems, the technicalities, not the problems, but the technicalities as they may arise.

This hearing today on H.R. 2941, Brownfields Redevelopment

Enhancement Act, was introduced by our colleague and panel

member here, Congressman Gary Miller from California, and we do

appreciate his leadership here.

Today, local communities and States are eagerly looking for ways

to clean up and redevelop their brownfield sites and certainly it’s

an idea whose time has come and perhaps overdue. It’s incredible

to think that there are an estimated 500,000 brownfields in existence today across the country. That’s a horrific number, a number

that you can hardly comprehend. But the brownfield sites are sites

where redevelopment is complicated by potential environmental

contamination, but that are less seriously contaminated than those

that are covered under the Superfund Act. And may I just say parenthetically here I am a strong environmentalist and certainly in

2

a State like New Jersey I am strong, so I don’t want anything here

to be considered as anti-environmental. We have to be intelligent

about how we deal with this subject and protect all sides of the

issue.

No matter how these areas are classified, there are possible

health hazards and eyesores in the communities that can be

cleaned up, but redevelopment of these sites will go a long way toward revitalizing the communities around. And as I say, they are

not mutually exclusive. It’s our job here in this legislation to accommodate and get the best of both worlds so to speak.

While some States have established programs to encourage

brownfields cleanup and redevelopment, the liability involving the

sites remain controlled by the strict standards of the Superfund

law. Investors and developers have therefore been reluctant to purchase brownfield sites out of concern that they will become entangled in legal disputes and be forced to pay for the unexpected

cleanups.

On January 11th of this year, President Bush signed the Small

Business Liability Relief and Brownfields Revitalization Act, which

provides for up to $200 million a year to States, local governments

and Indian tribes for brownfield cleanups. That legislation more

than doubles the $92 million spent annually for cleanups up to this

point.

The liability measure within the bill—now this is important—the

liability measure within the bill protects the new owners of restored brownfields from having to pay any future cleanup costs.

The legislation also calls for the creation of a public record of

brownfield sites and encourages community involvement in cleanup

and reuse. It authorizes $50 million a year for grants to local and

State governments to start and enhance brownfield programs.

While this bill that was signed by the President has been widely

hailed as a valuable step forward. H.R. 2449, the legislation under

review today, is complementary and supplementary legislation

which addresses another facet of the brownfields redevelopment

needs. H.R. 2941, introduced again by our colleague, Congressman

Miller of California, focuses on providing access to capital for local

entities that traditionally have had trouble obtaining financing for

brownfield redevelopment activities. Most notably, this bill authorizes appropriations for BEDI, Brownfields Economic Development

Initiative. This program, for the first time, eliminates the requirement that local governments obtain Section 108 loan guarantees as

a condition for receiving the BEDI grant funding.

Delinking brownfields economic development initiative grants

from Section 108 loan guarantees is important because some cities,

some small cities, that is, have great difficulty in securing and are

unable to secure those guarantees, the Section 108 guarantees. The

current requirement that cities must leverage their CDBG funds in

order to receive brownfields grants has discouraged many of our

smaller communities from applying for the grants.

H.R. 2941 takes at least two other important steps. First, the bill

authorizes appropriation for BEDI program for the first time, and

second the bill establishes what’s known as the quote: ‘‘Pilot Program for National Redevelopment of Brownfields.’’ This will enable

the HUD Secretary, and I would hope that our representative from

3

HUD here, Mr. Bernardi, will help me understand this need here,

will enable the HUD Secretary to fund a common loan pool for

brownfields and economic development loans to be distributed on a

competitive basis. By that, I mean I don’t fully understand the

need for its so-called pilot program, but you can tell me how that

gets integrated.

Because the newly passed Small Business Liability Relief and Brownfields Revitalization Act authorizes only $200 million with a

$1 million cap on funds to any individual locality, the pilot program

funds, as I understand it, will fill the gap for potential developers

of the other hundreds of thousands of brownfields across the country. Again, I just don’t understand that separation, but there must

be a temporary need for this proposal.

Significantly, the HUD 2003 proposed budget request submitted

to the President proposes decoupling the brownfield programs from

the Section 108 loan guarantee program to attract more participants. This reflects, of course, what we are proposing here in this

legislation. And it’s assuming, of course, that we’re going to be successful in getting this through.

I certainly would like to take time again to commend Congressman Miller and the Northeast/Midwest Coalition, of which New

Jersey is an active participant, for their work on this issue. They

have worked closely with HUD officials to look for ways to make

this program more efficient and effective so that we can provide

State and local governments another source of funding for

brownfield cleanup and redevelopment.

I also want to thank Congressman Jack Quinn of New York and

Marty Meehan of Massachusetts for their work on this important

issue.

And with that, I would like to acknowledge Congressman Frank,

the Ranking Minority Member on the subcommittee, and look forward to his comments.

[The prepared statement of Hon. Marge Roukema can be found

on page 36 in the appendix.]

Mr. FRANK. Thank you, Madam Chairwoman. I want to express

my appreciation to Mr. Miller and Mrs. Maloney who worked with

him in bringing this forward. This is a very important step. We will

be marking this up actually next week. We had a couple of questions, but they do not go to the fundamental heart of the bill, and

I am confident that we will get a unanimous vote out of the Committee I believe on this. Certainly on the basic principle, there is

no good reason—I can’t even think of a bad reason—why it should

be Section 108 dependent requiring this to be part of a loan program as well as a grant.

I note that the Administration has taken a position with which

I am in substantial agreement that we should, with regard to the

International Development Association, which helps very poor

countries, we want to switch from loans to grants, and if we can

do that overseas, which I think we should, I think I can support

doing it for a lot of American cities. So I want to work on this.

I’m particularly pleased that we will be hearing later from the

Mayor of the City of New Bedford in the district that I’m able to

represent, because New Bedford is one of those American cities

which carried the burden of industrialization for this country for a

4

very long time, and then found national policy somewhat neglectful

of the needs of its citizens, including leaving behind as the result

of some of this industrial activity, brownfields. Brownfields, I must

say, is the nicest word for a pretty nasty group of places that anybody has ever coined. And helping the municipalities deal with the

brownfield situation is a very important one, so I am very supportive of this.

I would note that the one set of questions we have deals in part

with the implications of ending the linkage with the Community

Development Block Grant Program. It’s the wrong kind of linkage

to Section 108 and I raise that, Madam Chairwoman, because I

want to renew my request, which I’ve made several times before,

that we have a hearing on the whole question of Community Development Block Grants and particularly on the low- and moderateincome impact. That’s very important to a number of our colleagues. Congresswoman Meek from Florida and others, and it’s an

issue that came up when we debated the appropriations bill people

will remember, and the question was making certain firefighting

activities eligible. So while I want to go ahead with this hearing,

I hope that this will be the precursor to a hearing in which we consider the broader implications of the CDBG program, although

there’s no reason to hold up this bill as we go forward.

The only other point I would make is this. The purpose of this

bill is to give more Federal money to municipalities so they can do

something very good. That’s important to note, because we have

this strange dichotomy in America in which almost everybody in

this House of Representatives is for, from time to time, giving people more Federal money to do good things, but in general we think

the Federal Government shouldn’t have any money. People need to

understand that there is a disconnect. You cannot keep reducing

the amount of revenue the Federal Government takes in and expand the amount of revenue the Federal Government gives out.

And this is an example of Government. People should understand

this. This is bureaucracy, this is Government. The people sitting at

this table are two public employees of great distinction who intend

to administer a program in which we take tax revenues and give

it to other public employees so that they can do good things. In the

abstract, this whole process of taxing the private sector so that one

group of public employees can give another group of public employees money to do something is often demonized. In particular,

everybody’s for it. And there really is a limitation intellectually in

the extent to which you can be opposed to something in general

and then be all in favor of it in the particular. And I hope that this

strong support for the particular will ooze out a little bit, maybe

leaching would be the term in terms of brownfields. Maybe a little

of this support for this particular Government activity will leach

over the people’s views about whether or not the Federal Government is a bad thing, and whether or not having Federal revenue

is a bad thing.

The last the thing I have to say is a bit of an apology. The House

Judiciary Committee will be going into session at 10:30, fortunately

not far away, to mark up a couple of important pieces of legislation,

and one of the consequences of legislative scheduling is it has become fashionable for Members to get elected to Congress and spend

5

a great deal of time expressing their horror at the very notion of

association with other Members of Congress. That is it has become

a mark of your being good at the job that you spend as little time

in the place where the job is carried on as is humanly possible. So

we have this situation where Congress now exists from 6:00 p.m.

on Tuesday to 6:00 p.m. on Thursday, and if it starts getting to

6:00 p.m. on Thursday, the Members get cranky and want to get

out early. And the result is that we have two days, two working

days so that too many things have to be crammed into too few days

and we do not have enough time to do them adequately. And thus

I will have to be at both the Judiciary Committee and here and

that will mean that I will not be here for this full hearing. It’s not

the chair’s fault. She was very gracious in the scheduling, and I appreciate her accommodating us in that regard. It’s just that you

can only, I guess limitations is the theme of today’s sermon. The

more you limit the Government’s money, the less you can do with

it, and the more you limit the number of days Congress is in session, the fewer things people can accomplish. And having said that

and knowing that, at least in the current situation, it will fall almost entirely on deaf ears, I conclude my statement.

Chairwoman ROUKEMA. Well, I do thank you for that bipartisan

approach to action here in the Congress. My colleague, I appreciate

your support for brownfields, but we will not have a debate on the

other subject that you’ve raised as to how we spend our money,

whether or not we need taxes, and whether or not we need a 5-

day week here in Congress.

Mr. FRANK. No, I appreciate that. What are the consequences of

a 2-day week is you don’t have any time for debates.

Chairwoman ROUKEMA. I’m going to recognize now the Chairman

of the Full Committee, Mr. Oxley, who has honored us with his

presence today. It’s indication of an intense interest on this subject.

Chairman Oxley.

Mr. OXLEY. Thank you, Madam Chairman, and thank you for

your leadership on this issue, and I want to associate myself with

most of the remarks of the gentleman from Massachusetts. I’ll be

in more detail later in my submission to the subcommittee, but we

appreciate his leadership on this as well.

Madam Chairman, it seems that brownfields keep following me

around. As some of you may know, in a prior congressional life, I

spent a lot of time trying to reform the Superfund program for the

clean up of toxic waste sites. As a matter of fact, it was just across

the hall. Superfund has a broad liability system. People are interested in redeveloping a contaminated site fear that without legal

protection, they could be sued to pay for part or all of an expensive

cleanup even if they had nothing to do with the original pollution.

And what we saw emerge was the brownfield phenomenon. Developers would shy away from even slightly contaminated sites like

old factories and gas stations and build instead on pristine greenfields in the country. Cities lost jobs and their tax base. Rural communities complained about urban creep. This hit industrial States

like Ohio especially hard. There are thousands of abandoned

brownfields in Ohio that have the potential to contribute to the

economy. I recall holding a field hearing at a brownfield site in Columbus several years ago. The true test of how persuasive you are

6

with your congressional colleagues is if you can convince them to

traipse over a frozen waste site in Ohio in 20 degree weather on

Valentine’s Day, which I somehow managed to do. A few Members

still haven’t forgiven me for that exercise.

The threat of brownfield life became so great that people were

moved to action. States like Ohio and Pennsylvania pioneered voluntary cleanup programs providing more legal certainty and flexible cleanup standards. Thanks to the good work of our friend, Paul

Gillmor, we now have a Federal law clarifying liability at

brownfield sites.

Today, we turn our attention to the Department of Housing and

Urban Development, HUD’s brownfields and community development programs are going to become more important as more

brownfields projects get underway. These programs need to be user

friendly, especially for communities that are new to this specialized

area. I’m pleased to be a co-sponsor of H.R. 2941 introduced by the

Vice Chairman of this subcommittee, Gary Miller, who has shown

great leadership and vision on this issue and the tenacity that can

only be attributed to a weight lifter.

This legislation will authorize HUD’s brownfields programs for

the first time. It will make more communities eligible for grants,

make it clear that brownfield redevelopment is a community development block grant eligible activity and permit HUD to set up a

pilot revolving loan program to maximize the impact of Federal dollars.

Ultimately, the vast majority of the funding for brownfield

projects must come from the private sector. This subcommittee is

working to assure the banks and insurance companies under our

jurisdiction that brownfields projects are good business investments. We want to remove the stigma and turn these into normal

real estate deals that have a manageable environmental component.

I want to welcome HUD Assistant Secretary Roy Bernardi, who

was the former mayor of Syracuse and is well versed in the community development issues. The Northwest/Midwest Institute cochaired by our good friend Jack Quinn, from Buffalo, has been a

source of innovative thinking about brownfields and helpful in developing H.R. 2941. Charlie Bartsch has always been able to see

the big picture and of course I’m especially honored to greet the

Mayor of Mansfield, Ohio, Lydia Reid. Mayor Reid and I have

worked on a variety of development projects over the years for

Mansfield. Mansfield has a vigorous revitalization program that

has won national awards. Mayor Reid has a great story to tell on

the second panel, and we look forward to her testimony, and want

to thank her for taking the time to come out here and share her

vision on this important issue.

Brownfields redevelopment should unite Republicans and Democrats, city mayors and farmers. Our subcommittee has a role to

play by highlighting and fine-tuning HUD’s vital programs. Having

toiled in the vineyards on this, I am very happy to see brownfield

legislation finally bearing fruit in this Congress.

Madam Chairwoman, thank you again for your patience, and I

yield back the balance of my time.

7

[The prepared statement of Hon. Michael Oxley can be found on

page 38 in the appendix.]

Chairwoman ROUKEMA. I thank the Chairman. May I observe

that I’m told that we may be shortly having a vote on the floor, but

in any case, with that in mind, let us move as quickly as possible

with the opening statements.

All right, Mrs. Maloney, you’re not a Member of this subcommittee, so let me go on to Mr. Miller first. Thank you in consideration of the time restraints.

Mr. MILLER. Thank you, Chairwoman. I’d like to begin by thanking Chairwoman Roukema and Ranking Member Frank also for

calling this hearing on H.R. 2941, the Brownfields Redevelopment

Enhancement Act.

My mike is awful loud, isn’t it? Excuse me.

I would also like to thank the hardworking people of the staff of

this subcommittee who worked so hard to improve the bill, and

Chairman Oxley, you’ve been very supportive on this issue and I

want to thank you personally for that.

My personal knowledge of brownfields is rooted in a few different

experiences. As a developer and builder for over 30 years in Southern California, I’ve seen the interest in redeveloping brownfields

grow and grow each year. This has been a response to the rising

land value and the shrinking undeveloped available property that

we have in our communities. Moreover, because brownfields tend

to be located in developed areas, they are close to the infrastructure and potential markets private developers are often seeking.

However, I’m also very familiar with the liability issues associated with brownfields. Although many of these concerns were addressed with the passage of H.R. 2869, this issue still merits attention. Lenders should not be scared away due to liability issues.

As the Mayor and Councilman of the City of Diamond Bar, I

learned about the critical issues of financing brownfields developments as I watched several neighboring cities analyze the feasibility of redeveloping local contaminated sites.

Today’s hearing focuses on the critical issue of financing and

there is where the Department of Housing and Urban Development

has a constructive role to play. HUD’s financing comes in after the

environmental issues have been addressed and communities need

some assistance to close the deal. About a year ago, I began discussions with HUD to try to remedy some of the problems I was familiar with in regards to brownfields, specifically the ability of communities to obtain capital needed to develop these sites. I was pleased

to learn that HUD’s Section 108 Loan Grant program has been trying to address this issue for over 25 years. But I believe that in

its current form, 108 Loan Guarantee programs for the Brownfield

Economic Development Initiative—or BEDI—grants, are not flexible enough. This finding is echoed by Secretary Martinez’ budget

which proposes delinking these two programs.

In addition to delinking the BEDI grants from the Section 108

Loan Guarantee program, H.R. 2941 authorizes, for the first time,

the BEDI program and creates a pilot program for the national redevelopment of brownfields. Moreover, this bill clarifies that CDBG

funds can be used for brownfields redevelopment and it’s not an attempt to reduce or to restrict CDBG funding in any way.

8

By making HUD’s programs more flexible and thereby accessible

to more communities, brownfields redevelopment will become a

more attractive option for communities of all sizes. Again, I’d like

to thank Chairwoman Roukema for her support and co-sponsorship

on this, as well as Congresswoman Maloney. I’m looking forward

to hearing the views of today’s panel and I hope we’ll basically be

able to resolve some of the issues that local agencies deal with, and

I’m delighted to hear that Mr. Frank is not grouchy today. I’ve

never seen him that way before. But thank you for calling this

hearing, Madam Chairwoman.

Chairwoman ROUKEMA. All right, thank you.

Mr. Tiberi. No? All right.

Congresswoman Maloney.

Mrs. MALONEY. Thank you very much, Chairwoman Roukema

and also Ranking Member Barney Frank. I want to certainly welcome from the great State of New York, the Honorable Bernardi,

Assistant Secretary and compliment him on the fine work that he

did in Syracuse. I know you’re very familiar with this program.

You’ve had some successes in Syracuse.

I also thank my colleague, Gary Miller from California, for working so hard on this for a very long time. I want to emphasize that

this work has been shared by many Members in Congress. It has

been very much a bipartisan effort. On the House side, Jack Quinn,

Marty Meehan, James McGovern and John McHugh have introduced H.R. 2064, which also addresses the decoupling issue, and on

the Senate side, Senators Levin and Jeffords have introduced

S.1078 with a similar objective. And the support for this legislation

is significant, because it is needed and it is bipartisan. As the

Chairwoman pointed out, we have over 500,000 brownfield sites in

our country, it is a drag on our economic development, and Congress really needs to support and seek creative approaches that

match the large number of needs with the financing to redevelop

contaminated sites.

Obviously, one of the most critical obstacles in cleaning up

brownfields is funding and the financial resources that are needed

for a large number of potential jobs. This bill allocates $25 million,

and also will allow working with the $200 million revolving loan.

The BEDI initiative has been successfully funded since 1998, and

I support the flexibility of funding and the streamlining, which is

in this legislation, which will make it easier to access. At the same

time, there are many existing BEDI success stories and Assistant

Secretary Bernardi can certainly tell you about the success in Syracuse where New York State received over $800,000 in BEDI funds

and a $2.19 million Section 108 loan guarantee that are being

used, as we speak, at the Crossroads project by the City of Syracuse to create 200 new jobs for low- and moderate-income workers.

And as this legislation moves forward, I hope we can meet the dual

goals of streamlining the funding and the approval process and

making these funds available quickly to the needy communities

such as the Syracuse project.

I welcome all efforts to review HUD brownfields activity and all

efforts to increase the number and effectiveness of projects that the

Department funds. I want to note that this is for State and local

entities, it is not for private developers and our State and local enVerDate 11-MAY-2000 08:58 Jul 23, 2002 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\78502.TXT HBANK1 PsN: HBANK1
9

tities desperately need this help. Even the City of New York has

a number of brownfields areas that are just really fallow and sitting there not serving or helping anyone. And with this program,

hopefully we can build a community center or a park or something

that people can use.

I thank everyone for their efforts on it. I look forward to working

with the Minority staff and the Majority staff as we move forward

to a mark-up, and thank you very much, particularly Congressman

Gary Miller.

Chairwoman ROUKEMA. I thank the Congresswoman. We are

going to be having a vote, as you can tell, or maybe you don’t know.

Those lights mean that we’re having a vote on the floor, so if the

panelists will excuse us, we’ll go to vote on the floor and I understand that more Members are expected to return right after the

vote, and we will begin immediately following this vote.

Thank you.

[Recess.]

Chairwoman ROUKEMA. The hearing will come to order. I believe

we will have to proceed. Oh, here, I was just going to announce

that Mr. Frank was in a mark-up of the Judiciary Committee, and

he’s back here now, and I think with that, we can proceed and

hopefully we will have a period of time without voting interruption

to hear our panels today.

I do want to welcome the Honorable Roy Bernardi, Assistant Secretary for Community Planning and Development at HUD. We appreciate your being here today, and certainly you bring extensive

experience on this subject sa well as a whole range of subjects relating to housing needs in this country. So Mr. Bernardi, I welcome

you and with that, I will hold it open for your statement. I will also

inform you that any statement can be included in the record. By

unanimous consent, your full statement will be included in the

record and anything supplementary that you want to include, if

you just mention it, it will be included in the record. Thank you

and the microphone is yours.

STATEMENT OF HON. ROY A. BERNARDI, ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT,

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Mr. BERNARDI. Good morning, Chairwoman Roukema. I really

appreciate the opportunity be here with Ranking Member Frank

and the distinguished Members of the subcommittee.

My name is Roy Bernardi. I am the Assistant Secretary for Community Planning and Development for the Department of Housing

and Urban Development, and I have the responsibility for the management, the operation, and oversight of approximately $8 billion

in Federal funds, most of which are distributed by formula to our

communities for economic development and housing activities.

As the former Mayor of Syracuse, New York, as Congresswoman

Maloney mentioned, I was a recipient at one time of HUD funding

and I can tell you all first hand that the programs are very, very

important to the communities around the Nation.

I’m pleased to appear before you to discuss a common interest,

brownfields remediation and revitalization. Brownfields is a subject

that has received a good deal of attention these last few years. And

10

President Bush indicated clearly that brownfields revitalization is

high on his domestic agenda. Given the shared goals of the Congress and the Administration, I think we have the makings of a

good, solid partnership. That potential was demonstrated only a

few weeks ago when President Bush signed the legislation that the

Congress crafted and that being the Small Business Liability Relief

and Brownfields Revitalization Act.

The redevelopment of brownfields may be framed in two ways.

One as an environmental cleanup issue and two as a community

redevelopment issue. Framed as an environmental issue, the central concerns are an assessment, the cleanup, and potential liability and the principal players are environmental specialists and engineers. Framed as a community development issue, the central

concern is the issue of creating a community asset and the principal players are economic development specialists and financiers.

Experience has taught us that both approaches are relevant, especially when they are harnessed together. For a variety of reasons, coordinating remediation and redevelopment into an integrated approach does not always happen seamlessly. At the Federal level, HUD, the Environmental Protection Agency, the EPA,

and the Economic Development Administration, the EDA, are the

primary agencies that assist communities with addressing

brownfields issues. Given the different funding mechanisms that

exist within these agencies, their various regulatory responsibilities, their own internal priorities, their unique field structures,

and certainly the well-established operating cultures within each

agency, the coordination of HUD with EPA and with EDA is not

always an easy task.

As we move from the Federal to the State and local levels, the

complexity of this obviously sometimes only increases. All over

America today, big cities, small cities and medium cities are engaged in building cities on old industrial and manufacturing sites

that were left soiled by our heavy industries of the early and mid20th century. The General Accounting Office has estimated that

450,000 brownfields sites exist, the vast majority of which are located in urban areas.

We at HUD, along with our colleagues from EPA and EDA and

the other 20-plus Federal agencies involved in the interagency

brownfields efforts, strive daily to achieve the maximum result at

the minimum cost and in the shortest time.

Secretary Martinez and I are committed that HUD will fulfill its

mission as the principal vehicle for the redevelopment of these

brownfields.

Let me turn to H.R. 4921, the Brownfields Redevelopment Act.

As we understand it, the purposes of this Act are to: first, provide

more flexibility to communities; second, increase accessibility to

funds; third, increase capacity to coordinate and collaborate. It does

this by providing additional incentives for remediation and redevelopment and by delinking the Brownfield Economic Development

Initiative grants from the Community Development Loan Guarantee program. Further, this bill clarifies that activities associated

with brownfields redevelopment are eligible activities under the

Community Development Block Grant program. Finally, it permits

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the Secretary to establish a pilot program, a common loan pool

which may be securitized.

We are interested in working with you on this, and other approaches to brownfield revitalization, that will enhance the well

being of affected communities.

A survey of over 200 cities by the U.S. Conference of Mayors esti- mated that brownfield redevelopment could add up to $2.7 billion

in additional tax revenues and create 675,000 new jobs if these

sites were returned to productive use. We, as an Administration,

are committed to what I am calling the Three R approach; remediation plus redevelopment equals revitalization.

Just as Governor Whitman has brought a new level of commitment to EPA, to address and resolve brownfield remediation, Secretary Martinez and I bring a renewed commitment to HUD’s focus

on redevelopment. Brownfields include real property with real or

perceived contamination. Therefore significant remediation is not

always necessary or required. As always, HUD’s role as the catalyst and contributor is to leverage adequate private financial resources along with other public funds to enable redevelopment to

take place. We are confident that our brownfields effort will, over

the long term, provide for neighborhoods to attract better housing,

and will lead to better quality living environments for moderate

and low income residents.

I’d like to tell you just a little bit about my experience as Mayor

of the City of Syracuse. Back in 1989, we had a scrap yard on the

northern section of our city. And that scrap yard was 75 acres.

That was remediated and now what sits there is a 1.5 million

square foot shopping mall called the Carrousel Center accomplished by the Pyramid Company.

Presently, just before I left in July to assume this position as Assistant Secretary for CPD at HUD, we were able to negotiate with

this developer to reclaim the 60 acres that are adjacent to that site.

And on those 60 acres were approximately 75 oil tanks. It was

known as ‘‘oil city.’’ If you fly around this country, as I know most

of you do, as you go into an airport, usually you’ll see the oil tanks

right in the periphery of the city. Well, through eminent domain

and through negotiation, these oil tanks were moved. That site was

remediated and right now the plan is to construct another 3.5 million square feet and call it Destiny USA, not just a shopping mall.

And I bring this up because the first phase of that created thousands and thousands of jobs, permanent jobs, temporary construction jobs, tremendous sales tax income, and it really revitalized

that area.

And the tens of thousands of jobs, the property taxes that eventually are going to accrue from that project is going to enhance the

City of Syracuse and the County of Onondaga. But it was a partnership. It was a partnership of the Federal Government, the State

government. Syracuse is now an empowerment zone using tax incentives. That developer, you provide a business person with the

opportunities to make money and make sure that that bottom line

is going to obviously do what it needs to do for a business person

to be successful, you can create the kind of atmosphere, the kind

of remediation off those brownfield sites, the redevelopment of

those brownfield sites so that everyone benefits, and the purpose

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here is to preserve the environment, take care of the environment,

create economic activity, create jobs. And we at HUD play a small

part in that, and the Bush Administration understands that there

are opportunities to improve the revitalization process, to speed redevelopment while still achieving remediation of risks to human

health and the environment. We can improve the administration of

our brownfield efforts without sacrificing either redevelopment or

remediation. We really, really believe that and the cooperation between EPA and HUD in the short 6 or 7 months that I’ve been

there is improving, and I feel very good about that. So Madam

Chairwoman and Members of the subcommittee, we thank you for

your leadership and as we look at this bill, and Congressman Miller, thank you for all of your efforts in putting this together. Congressman Frank, you talked about limitations. Well, we want to

take those limitations away. We want more people to have access

to the limited amount of funding that we have for brownfields.

Thank you.

[The prepared statement of Hon. Roy A. Bernardi can be found

on page 49 in the appendix.]

Chairwoman ROUKEMA. I thank you, Secretary Bernardi. Let me,

and I do commend you for outlining very nicely the positive and the

comprehensive approach that is being take here. It’s not only the

environment, it’s jobs and housing, and I think you made an excellent case.

But I do have to go back to the question I introduced in my opening statement, and you referenced the Pilot Program for National

Redevelopment of Brownfields. Why does that have to be supplementary? Cannot that be integrated? I don’t really understand the

reason for the separation and why it’s not the common pool, or is

it a common pool?

Mr. BERNARDI. Well, the pilot program for the redevelopment, as

I understand it, it’s a common loan pool for economic development

and it’s going to be geared toward a common underwriting approach. It’s going to serve as a credit enhancement for private

loans.

Chairwoman ROUKEMA. Why should that be separated, however,

from the overall BEDI program, the Relief from Brownfields Revitalization Act? I don’t quite understand the reason for the separation.

Mr. BERNARDI. Well, we’re planning to separate the 108 from the

BEDI obviously to have communities that can’t participate in the

process, non-entitlement communities, for example, that receive

their CDBG dollars from the State. We want more participation,

but at the same time this is a pilot program that I believe our staff

is working in conjunction with your staffs to try to put it together

so that we an create another avenue for communities to be able to

participate in brownfield remediation.

Chairwoman ROUKEMA. Well, I’m going to have to submit a question in writing to you for more explicit explanation of this, and I

don’t believe it’s going to be contradictory to the total—it won’t be

contradictory to the total bill and we will be able to deal with it,

but I just don’t understand the technicality.

Mr. MILLER. Madam Chairwoman.

Chairwoman ROUKEMA. I yield to the Congressman.

13

Mr. MILLER. The difference is currently in order to get a BEDI

grant, you have to apply for the loan and it’s guaranteed through

CDBG fund repayment, which virtually blocks the use of CDBG

funds locally. This takes and sets up a new pool and says you can

apply for a BEDI grant without even getting a loan, and it doesn’t

impact your CDBG funds, or if you want to get the loan through

the guarantee program and the CDBG fund, there’s no locking in

the CDBG funds for the guarantee so you can virtually go get a

loan for the redevelopment of a brownfield site plus a grant, and

yet have your CDBG funds be used for purposes in the community

that they’re currently used for.

Chairwoman ROUKEMA. I guess what confuses me is the terminology ‘‘pilot program.’’

Mr. MILLER. Because it’s a limited program. And the $25 million

can be used——

Chairwoman ROUKEMA. By time? By time?

Mr. MILLER. Well, no. It can be increased next year by appropriations if they want to. The bill allows each year they can increase

the program if they want to, but this year it starts up with the $25

million and that’s leveraged funds which could equate $100 million

worth of loans or $200 million worth of loans.

Chairwoman ROUKEMA. We won’t take up more time on this, but

I guess my definition of pilot program is different from what is

being defined in this bill. But it’s not going to be contradictory to

our mutual goals here.

Mr. BERNARDI. As Congressman Miller indicated, there are communities that were just averse to pledging their CDBG dollars to

be involved in the BEDI program, so we wanted to take that away

by delinking it with 108. Now the pilot program for the common

loan pool is not a substitute for that, but I think it gives additional

impetus, it gives additional opportunities for communities, but I’ll

be more than happy to have our people look at it and get back to

you in detail.

Chairwoman ROUKEMA. I would appreciate that. Thank you very

much.

Mrs. JONES. Thank you. First of all, good morning. Glad to have

you here before the subcommittee. I hail from the City of Cleveland

where there are a lot of issues with regard to brownfields. We

have, in fact, right now a juvenile justice center being built on an

old facility that was like a Carling’s Brewery facility and the possibility of a job corps facility being built on an old facility that used

to be a Ford Motor Company place. So the issue of brownfields is

prevalent, particularly in cities like the City of Cleveland and other

industrial areas where we still have a number of former urban filling stations, as they used to call them. They now call them gas stations. I’m laughing, because the other day I was walking with my

dad, who’s 80 years old, and he said ‘‘filling station.’’ I said to myself, ‘‘Boy, I haven’t heard that term in a long time.’’

So there are a lot of places and I am very much supportive of

options or opportunities for communities to use dollars for

brownfields in innovative ways, particularly as we begin to talk

about housing. My question would be directed to assuring, and this

is the issue that continues to come up in my community, why are

we building juvenile detention facilities? Why are we building job

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corps facilities on locations that were brownfields? What do you believe that we can do to assure the communities across the board

that the locations that we clean up are going to be redeveloped for

other purposes and are going to be cleaned up for other purposes.

Surely clean to the extent that children would not be put in jeopardy, people moving into housing would not be put in jeopardy.

How do we get that message out to them?

Mr. BERNARDI. In the BEDI application, the Brownfield Economic Development Initiative Application, there is a grading system to make sure that the environmental work is done so that we

don’t have a property, once the money has been expended, that will

cause harm to children. It can be residential, it can be a playground, it can be obviously the community puts forth in the application what they want to use the property for once the remediation

takes place. But in the application process, there’s a scoring system. That scoring system indicates that we need to be assured that

the remediation will take place so it won’t have a harmful effect

on its reuse.

Mrs. JONES. What else do I want to ask? I’m usually not speechless. The question just came to me so quickly, I think it was going

to ride on top of some other questions. One of the suggestions—I

also serve on the Small Business Committee, Subcommittee On

Empowerment—a suggestion that the Small Business administrator and HUD administrator begin to have a discussion about

what can we do collectively to continue to build communities by encouraging small business and encouraging housing to happen in

the same development. Do you have any ideas in your capacity that

you serve whether we might be able to do that? Because in my

opinion, a community is more than a house or housing. A community is having the ability to have businesses operating right there

with that housing.

Mr. BERNARDI. As I indicated earlier, I was Mayor of Syracuse,

New York and like most northeastern cities and other cities around

the country in the 1960s and 1970s and 1980s, everyone pushed

out into the suburbs and left the city behind with a significant

number of brownfields sites and neighborhoods that were in blight.

My belief and Secretary Martinez I know feels very strongly about

this, is we need to have more people owning their own homes.

Right now, there’s 67.7 percentage of homeowners overall in this

country. When we look at minorities, we look at African Americans,

I believe it’s about 49 percent. We look at Hispanics, it’s about 48

percent. And home ownership in the center cities is only 52 percent. Initiatives such as this, the Brownfield Economic Development Initiative, our HOME program, our CDBG program, what we

strive to do is not only to build housing, to refurbish housing to

provide rental assistance, but at the same time the UD, Urban Development, has to take place.

To me, it’s a very simple process. You need economic development—you need jobs so that people can buy homes, people can live

in a neighborhood, people can have a good quality of life and send

their children to school, so it’s a combined effort.

What I think we’re doing with EPA right now, the opportunity

to work together where they will do the remediation, we will do the

redevelopment. I’m very pleased, as I know all of you are, that the

15

budget at EPA has been doubled to $200 million, up to a maximum

of $250 million. This is the first time I believe that EPA is actually

doing direct grants for remediation. There’s an awful lot of unused

property in a lot of our neighborhoods in our central cities that programs, such as this, are going to help. Not just for businesses,

that’s the primary part of it, obviously. We want to redevelop and

we want to create jobs, but at the same time on the periphery of

those businesses, we need to continue parallel roads to build our

neighborhoods so people who are in those neighborhoods can work

in those businesses.

Mrs. JONES. My time is up. I can’t ask any more questions, but

I look forward to having the opportunity to work with you and your

administration on this issue, particularly in the City of Cleveland.

Thank you, Madam Chairwoman.

Mr. BERNARDI. My pleasure.

Chairwoman ROUKEMA. I thank you.

And now, Congressman Miller.

Mr. MILLER. Thank you, Madam Chairwoman.

It’s good to have you here today. When I started meeting with

the Secretary the first part of last year, right after he was sworn

in, we had an agreement on the issue of redevelopment and housing issues and specifically brownfields and looking for opportunities

to be able to provide local assistance. I know a lot of local cities

have a lot of political pressure placed on them, especially when it

comes to CDBG funds, because there are so many groups pulling

at them for those dollars.

So under the current program, for them to go out and really use

funds for redevelopment purposes, many cities were unable to do

that because of the obligation of historically giving those funds to

certain groups within the community. That’s where I became interested in this legislation. We looked for areas and we thought how

can we take and provide opportunities to revitalize communities,

eliminate brownfields and put them to purposes, whether they be

parks or community centers or commercial use or residential use,

and yet free up the opportunity for cities that still have CDBG

funds to use with those local groups that they’ve historically dealt

with. I think this bill does a good job at that.

The Chairwoman had a concern because of the term ‘‘pilot program’’ and I understand that. But the way the bill is drafted, it

says $25 million this year, but the appropriators can, if it’s a successful program, can increase that to $50 million or $100 million

or $200 million if they want to as the years progress. So it’s a program that I believe will justify itself, and if it does justify that it’s

benefited the communities, which I believe it will, then the appropriators have the opportunity to increase the program and help

HUD in working with that. And the site of a loan guarantee being

able to receive a BEDI grant, if you can do that now before these

projects based on this bill, without having to borrow money, which

you couldn’t do before, plus if you want to go out and get a loan,

and then get a BEDI grant. At the same time, these funds can be

used to leverage, if the Secretary chooses, $12.5 million. That

might leverage $100 million worth of loans or $200 million, depending on the amount they’re able to leverage.

16

This is a program that, although it’s considered a pilot program,

I think can be a very beneficial program nationally and can really

produce great benefit, and I applaud you for being here today. I

have no questions. I’ve worked with the Secretary and your staff.

You have just been excellent trying to resolve the issues and resolve the concerns. I’ve worked with the Democrat staff also to try

to deal with some of the issues. A big concern that the staff on the

Democrat side has with the way CDBG funds are being locked up.

That’s why we made sure, through the bill, that it said no, this is

really going to enhance current programs. If you want to go get a

loan under the current program, you still can using 108 funds, and

then a loan under BEDI, a grant under BEDI, or you can take and

go this direction, or you can get a loan guarantee, you can get a

BEDI grant and yet not involve your CDBG funds in any way. So

I want to thank you for working with us, working with my staff

and the Ranking Member’s staff here and the Chairwoman’s staff.

They’ve been just excellent. I applaud you for your efforts in this

area.

Mr. BERNARDI. Thank you, Congressman. I know of what you

speak when you talk about the CDBG grants. In many communities, before they get there, they’re already spent. And the groups

that vie for that money it becomes very difficult, but there’s also

the old adage that success breeds more success. If we go with this

program, and we’ve enjoyed working with your staff putting it together, CDBG dollars can be used for brownfield redevelopment.

Some communities do it obviously more so than others. As I mentioned earlier, we do this redevelopment. We give businesses the

opportunity to expand or to locate into an area where all the infrastructure is already there and has been there for years. We create

jobs, then they’re creating jobs for the people that need them the

most.

Mr. MILLER. Your goal has tried to create accessibility and create

an environment where there can be more funds in the market to

solve this problem and I believe this bill goes a long way to doing

that. Thank you for your help.

Chairwoman ROUKEMA. Thank you.

Now I want to recognize Congresswoman Maloney and acknowledge the fact that she is an original co-sponsor of this bill. I thank

her for her leadership.

Mrs. MALONEY. Thank you, Madam Chairperson.

Do you have a listing now at HUD of brownfields sites. In the

past, there’s always been a reluctance in New York to designate

anything brownfields, because of the problems or challenges that

come out of that. Do you have a listing now?

Mr. BERNARDI. EPA would have a listing. I’m sure we have an

identification of them, but they have a listing that I think would

be more exact.

Mrs. MALONEY. What is the criteria for brownfields?

Mr. BERNARDI. Real or perceived contamination. That’s a good

phrase, real or perceived. Perceived sometimes is you look at a

property and perhaps it’s unkempt and it just looks bad and you

feel there’s contamination there, but I think as you go through the

phases, Phase I tells you whether there’s contamination, and then

that requires a Phase II.

17

Mrs. MALONEY. Today we will hear testimony on the second

panel about how the delinking of the Section 108 guarantee and

the BEDI funds will allow more access. It certainly is my desire to

get as much money as quickly as possible to the communities that

need it. The bill also states that the Secretary shall establish criteria for awarding grants. Could you share with us what those criteria will be?

Mr. BERNARDI. Well, I think we have it here chapter and verse.

Mrs. MALONEY. Will this be done by a panel or just by the Secretary? I would assume you’re going to have many more requests

for the $25 million in the pilot program than the funding will be

available.

Mr. BERNARDI. As I mentioned earlier, the application process is

competitive, and there’s points for different categories and it’s quite

detailed. There’s a program overview, eligible activities, national

objectives.

Mrs. ROUKEMA. Will the gentlelady yield? That’s an excellent

question, and I’d just like to refer back to the fact that the record

is open and I think this is the kind of information that HUD, that

you, Mr. Secretary, should be submitting in writing for the record,

because it’s an excellent question.

Mrs. MALONEY. I just know that the prior criteria was need

soundness of approach leverage capacity of the administering organization and cooperation of the proposed project with community

development objectives.

I wonder if the criteria is going to change or will it be the same

criteria.

Mr. BERNARDI. Not appreciably. The Secretary will make the

final decision, but I’ll get everything back to you in this booklet

that tells you what the procedure is now and any perceived

changes.

Mrs. MALONEY. In addition to the legislation we’re considering

today, what other proposals is the Bush Administration considering

that would increase available funding, actual money, to clean up

brownfields through HUD?

Mr. BERNARDI. Our budget for 2003 is $25 million for the

Brownfield Economic Development Initiative.

Mrs. MALONEY. But it will also be able to tap into the Gilmore initiative of the $250 million in loans, is that correct?

Mr. BERNARDI. That’s EPA, as I understand it.

Mrs. MALONEY. But this could work with that program and leverage more money for this initiative?

Mr. BERNARDI. Absolutely.

Mrs. MALONEY. That’s very good. Do you see any problem in the

de-linking?

Mr. BERNARDI. Not at all. It would still allow a community the

opportunity to use a 108 if they so choose, but by delinking it, it’s

going to give other communities, smaller communities if you will,

the opportunity to participate in the competition.

Mrs. MALONEY. Syracuse is a small community and you got

through the de-linking. Why is it such a problem to be linked with

a Section 108?

Mr. BERNARDI. There are smaller communities in New York

State, for example, Congresswoman, that the State basically

18

they’re not entitlement communities so they have to depend on the

State to pledge their CDBG dollars, and in some instances, many

instances, the State doesn’t want to do that for the community, so

it gives the community a little more independence and flexibility,

smaller communities. In Syracuse, we use the 108s.

Mrs. MALONEY. Then it will release the CDBG, because then you

don’t have to use the CDBG?

Mr. BERNARDI. That’s right.

Mrs. MALONEY. That also is a benefit. Well, I find it exciting. I

think it’s an important program and I’m glad you’re in the position

you are bringing the experience that you bring from Syracuse successfully implementing prior programs in this area. Thank you

very much.

Mr. BERNARDI. Thank you.

Chairwoman ROUKEMA. Thank you.

Congresswoman Kelly.

Mrs. KELLY. Thank you, Madam Chairwoman.

We welcome you, and we’re delighted to have you here. Mr.

Bernardi, I am just very excited about what you did in Syracuse.

I’ve seen it. It works. And the beautiful thing is it puts back onto

the tax rolls and thereby relieves the taxes, a certain tax burden

from the local citizens. When you do the kind of thing that you do

in Syracuse with brownfields, you’ve moved them from useless

areas of the community into something that’s very useful. People

enjoy going there.

A similar thing actually happened in my home town of Katonah,

New York. We had oil tanks in the middle of the town. It became

a brownfield and we moved the oil tank. I was very interested in

your saying you moved oil tanks and redeveloped the area into a

shopping mall. In this little village of Katonah, New York, we had

oil tanks and we now have a three story attractive group of small

businesses in there that range everywhere from a toy store to a podiatrist. All of those people are bringing individuals into our community. It’s really an excellent idea. I’m a co-sponsor of the bill,

and I really do feel very strongly that we need to make progress.

I’m delighted that we have, if we can get a piece of it out for a

demonstration project, I think it’s really important.

I do think though you’ve pointed something very important out.

That is that you’ve got to have State and local as well as the Federal Government working together to make anything happen. I’m

very excited about the possibility also that we’re actually going to

put money into the communities instead of into one more study of

something. It’s wonderful to think that there will actually be

money put into an applied process that will actually bring communities back in the same way that happened in the community that

you represented and my home town.

So I welcome you here. I thank you for your testimony. Thank

you, Madam Chairman. I turn back the balance of my time.

Mr. BERNARDI. Thank you.

Chairwoman ROUKEMA. Thank you.

Mr. Bernardi, is there anything you would like to say in summary? I believe we’ve concluded the questioning and are ready for

the second panel, but I don’t want to cut you off if there’s some follow-up that you would like?

19

Mr. BERNARDI. Just to say that it’s a pleasure to be here representing the Bush Administration and Secretary Martinez. Be assured that we at HUD, all of us, working together with all of your

staffs, whatever builds up that we forge, we’ll do it together we’ll

do it in a combined way, and I welcome the opportunity and I know

the other speakers are going to provide information and thoughts

and ideas that we’ll perhaps incorporate into the process, so the

process, as I understand it, is to come out with the best possible

bill that will enable us to do what we need to do to help the poor

people in our country. I thank you.

Chairwoman ROUKEMA. And I might repeat the inference or the

reference that I had in my opening statement that the Members,

yourself as well as Members, will have 30 days in which to submit

written questions. You will have that time period in which to submit further information that we’ve requested and/or anything additionally that you think is appropriate for the record, and it will be

an open record for the next 30 days. Thank you again. Will the

next panel take their positions at the table.

I welcome all of you panelists here today. I will acknowledge you

by name as you testify, but I would like to make the observation

that all of you have extensive experience in the field. You’re not

speaking hypothetically, you’re speaking from ground zero, so to

speak. We do appreciate having the benefit of your experience and

long history of experience at many different levels, both the local,

State and regional, as well as the national level.

That having been said, I recognize first the Honorable Lydia

Reid, Mayor of Mansfield, Ohio. And as we’ve all heard that region

has extensive experience in this area. We thank you for your leadership and your presence here today. Mayor Reid. I would simply

ask you in the interest of time that you try to limit your statements to 5 minutes. I’ll use some discretion here, but be aware of

the time limitations. Thank you.

STATEMENT OF HON. LYDIA J. REID, MAYOR, MANSFIELD,

OHIO

Ms. REID. Thank you, Congresswoman. Again I appreciate the

opportunity to talk about House Bill 2941. I also appreciate Congressman Miller’s initiating the bill. It is long awaited and we very

much appreciate it. I’d also like to say hello to my friend, Stephanie Tubbs Jones from Cleveland. Nice to see you.

Mansfield, Ohio is the 19th largest city in the State of Ohio.

We’re the county seat. We have a population of 50,793 people.

We’ve gone through struggling times. We have a labor surplus area

with a poverty rate of 17.8. Our unemployment rate is 9 percent.

Our median household income is $22,591; 48.2 percent of our population is low-to-moderate income.

Over the years, as any typical Rust Belt city, we have lost a lot

of industry. As they closed up, a third generation did not continue

on in the process that their parents had initiated. Our downtown

was deteriorating. In 1989, we all pulled together. Our downtown

was absolutely gutted. We took everybody, and this was Government, it was community, and private developers, and as a result,

we have a showcase downtown called the Carousel District. We

have the first hand-carved carousel in the United States since the

20

1930s. We now have over a million visitors a year, and we won the

National Mainstreet Award last year. That’s just a little history of

how we have been able to do some things with our downtown area

to further emphasize the brownfields, which is what we’re here

about today.

The City of Mansfield recently was awarded a grant for a pilot

project for a brownfield redevelopment master plan called the PR

Project Path Revitalization, and the key components of that are

identification of potential brownfield sites, assessment of

brownfield sites, remediation of brownfield sites, redevelopment

and prevention.

The City’s PR project is a mixed redevelopment linear zone with

new commercial and industrial properties. The city also includes

large, under-utilized vacant parcels of land where economic development is low or absent.

In this corridor, there’s numerous abandoned and obsolete buildings of all sizes and shapes that are just sitting there waiting for

the City to come and try to do something with them. They no

longer meet the operating efficiencies demanded by modern manufacturing processes. The numerous brownfield sites have depressed

our inner city core. The property values are going down. Community values in those adjoining neighborhoods are down. Depressed

real estate values, people don’t want to invest where everything

does not look like it will ever rise again.

What we did, we initiated a multifaceted undertaking. We said,

OK, we’ve got this site. We communicated with local and State regulatory agencies that were our public partners. We continued dialogue with them to establish a foundation for the Brownfield Initiative. Then we went to the industrial facilities. We said we would

secure the services of the contractor, which we have been using

McCabe Engineering as our consultant who has been excellent that

had worked the industrial arena, because you need consultants

that know what they’re doing when you go into these projects.

The private partner offered first hand knowledge of the working

complications, then the current and past owners were contacted

and we said to them, you have to be a part of this, this was your

doing, it was on your watch that this occurred. You will have to

come very apprehensively into the process to contribute dollars to

help us put this plan together. Obviously we were faced with how

are we going to fund the entire issue once we had an estimate of

what the cost was. And subsequently we secured required funds.

We did not go to 108 dollars for a very good reason. We didn’t want

to tie up our precious CDBG dollars into 108 commitments, because as all of you well know, when you borrow 108 dollars, you’ve

got to take that chunk out of your CDBG money and say we pledge

this and then if we develop the site and we don’t get our money

back in the timeframe that we have to pay the 108 back, we are

then stuck with taking that out, the precious dollars that we used

to revitalize homes, to provide housing for the elderly, for demolition, for all the other things you do with CDBG money.

So what we did, the first big project we did, we got a pilot grant

of $200,000, we got a revolving cleanup, revolving loan fund of $1

million, which is a grant from the U.S. EPA. We went to the Ohio

Department of Development Urban and Rural Initiatives, and we

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got another grant, $750,000, and then we went to the potential responsible parties and got another $570,000. So that project was

$2,820,000. We were able to do this without getting into our 108

dollars because we found other ways, with the help of the State,

and our consultant and the EPA in order to do those things.

Now the challenges are obvious and I’d like to bring up a little

bit about——

Chairwoman ROUKEMA. Mayor Reid, can you summarize. I’m

going to extend your time period, but your time is up.

Ms. REID. Let me just conclude, Congresswoman. The city is fortunate to have had success with our brownfields program. In an effort to spur development, the city has taken ownership of the

brownfield sites, became the banker, secured the funds, secured the

loans to assess and remediate the sites. Our brownfields cost

$50,000 to $100,000 an acre, but greenfields are $10,000 to

$20,000, so in summary, we need to be able to have more accessibility to funds that are like Section 108 dollars that we don’t have

to worry about whether or not we’re going to pay back, because the

city doesn’t have enough money to do it all.

In summary, we totally support the bill and look forward to its

passage. Thank you, Congresswoman.

[The prepared statement of Hon. Lydia J. Reid can be found on

page 68 in the appendix.]

Chairwoman ROUKEMA. Mayor, may I just ask one tiny question?

It may not be so tiny. But when you made those decisions, were

you and the counsel free to make those decisions at your own pace?

You weren’t limited either by State or Federal legislation? You had

that latitude?

Ms. REID. We did have the latitude. We took the initiative. We

looked at our Ohio Brass site, for example, which was really the

critical one, coming right into town, terrible looking sight, and we

took the initiative to go out to the people that owned the buildings

before. We took the initiative. It was our decision. EPA was not

hammering us over the head, if you will.

Chairwoman ROUKEMA. And your local zoning ordinances or

State were not restrictive?

Ms. REID. They were not. We worked very closely with all of

them.

Chairwoman ROUKEMA. Thank you.

The second panelist is the Honorable Mayor of New Bedford,

Massachusetts, Frederick M. Kalisz. Mayor Kalisz from New Bedford, Massachusetts.

STATEMENT OF HON. FREDERICK M. KALISZ, JR., MAYOR, NEW

BEDFORD, MASSACHUSETTS

Mr. KALISZ. Thank you very much, Madam Chairperson. We certainly appreciate the opportunity to address you and the Members

of the subcommittee today.

New Bedford is a city of 95,000 people. We are also this year recognized as a brownfields showcase community among the Federal

agencies of the United States Government. The brownfields program has spearheaded an economic development program that it

has proved that it can provide jobs and business opportunities.

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Today I hope to provide in this brief period a perspective of local

government to you in your deliberations process.

My purpose is twofold to describe some of the extensive experiences and successes as well as second to comment specifically on

H.R. 2941 and how we might benefit in the future municipalities,

such as mine.

As mayor, I took over just a little over 4 years ago. We had realized a job loss in our community of some 11,000 jobs, mostly from

the industrial and manufacturing complex that Congressman

Frank had made reference to a little bit earlier. Unemployment

was high, real estate values were dropping, and tax revenues were

in a free fall. We reversed that trend to a degree. Our unemployment rate went from 15.6 percent down to a low of 5.3. Assessed

valuations have begun to rise in the community, and the fishing industry, which has been a mainstay of our economy is once again

beginning to thrive.

The Port of New Bedford is the largest-value port of fishing anywhere in the United States. Last year, 3,600 jobs were maintained

and over $700 million in seafood-related sales were earned. We’ve

created a tourism industry at the same time, and this year some

30 cruise ships will arrive in the port that Melville once referred

to in Moby Dick as the ‘‘most fairest place of all of New England.’’

We have a national whaling museum, a national park and we’re

developing a marine science center that will truly enhance and recognize the God-given resources that we have.

Our many environmental challenges over the decades have

spawned new environmental management opportunities and management industries. The brownfields program has been a major

help in reversing our economic decline and beginning our economic

and cultural revitalization. Our job training program, funded by

one of the early brownfields programs, has allowed individuals not

only to learn new job trades in hazardous waste management, but

has provided them with meaningful compensation opportunities,

enhanced benefits, and in many cases the opportunity to continue

their formal education past the post-secondary level.

The brownfields pilot program funded a comprehensive evaluation program of all of our brownfields sites, permitting us to evaluate and formulate a plan for the future. Our targeted site assessment allowed us to take funds and put them into a waterfront development over land that had earlier been made reference to by the

Secretary, was unappealing and deemed to be a brownfield just because of the lack of understanding of what could possibly happen.

As I made reference to earlier, we’ve been named recently a

Brownfield Showcase Community. That allows for Federal representation in our community to manage potentially dozens of

projects within the City of New Bedford and allow for the coordinations of agencies’ efforts to ensure that a fast tracking takes place,

and the re-utilization and use of properties to become economically

viable. We need the brownfields program. We are identifying and

remediating hazardous situations, removing the cloud of concern

and liability which has been inhibiting new development for decades.

I enthusiastically support H.R. 2941. We believe that the BEDI

grants at the same time should be decoupled from the Section 108s.

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I’d like to explain a little bit about that with regard to the funding

situation. New Bedford’s experience has demonstrated that small

public investment in cleaning up and redeveloping abandoned and

under used properties yield large returns of tax revenues and employment. The brownfields programs spell hope to communities

such as ours. I respectfully suggest to you that you not diminish

the BEDI program by deducting the BEDI funds from the Community Development Block Grant program. And I’d specifically like to

talk about the flexibility of what is so important and I understand

my time is drawing to an end.

We have been able to take a program, such as an oceanarium in the City of New Bedford, a $100 million investment, and the city

has taken the lead. We’ve been able to get a $2 million BEDI on

top of a $3 million section 108 which has then stimulated State,

local and private investment to the tune of some $80 million. The

shovel will be going in the ground this year, this July, to what will

be an extensive project. That’s where it works when it’s coupled together. But where there are non-revenue generating projects, such

as the reenhancement of parks in urban mill settings where housing has been the predominant mainstay of what has been left, the

mills have been taken away. You don’t have the revenue generating capacity. Park development that could benefit from a BEDI

grant will then stimulate the private sector to look at an environment that has been enhanced, and allow for them economic development at that point.

My final comment has to do, just very simply, with the fact that

there are other programs in ports such as ours with homeland security issues and other issues that cannot generate revenue of and

by themselves. But the value of the BEDI a brownfield economic

initiative program can help to stimulate that type of economy. The

loan programs that were spoken of by HUD I believe as well are

a good move into the future. HUD has demonstrated themselves in

a good loan management program with municipalities. EPA has

done a wonderful job with grant administration. HUD has been the

expert with the loan programs. And it rightfully belongs with an

agency that has a track record of these types of successes.

I thank you for the opportunity to have been able to address you

and look to you for support for the future sa this legislation advances.

[The prepared statement of Hon. Frederick M. Kalisz Jr. can be

found on page 55 in the appendix.]

Chairwoman ROUKEMA. Thank you very much. You brought your

practical experience to the fore here.

Mr. Bartsch, Director of Brownfield Financing Studies, the

Northeast-Midwest Institute. You’re speaking for a large component of those of us intensely interested in this subject.

STATEMENT OF CHARLES BARTSCH, DIRECTOR OF

BROWNFIELD FINANCING STUDIES, NORTHEAST-MIDWEST

INSTITUTE

Madam Chairwoman and Members of the Housing and Community Opportunity Subcommittee, I appreciate the opportunity to

testify today on this proposal. It reflects the next wave of congressional interest and activity in the brownfields arena. Since 1991,

24

the Institute has analyzed activities in nearly 100 jurisdictions of

all sizes across the country, and as you pointed out, we work very

closely with the bipartisan Northeast-Midwest Congressional Coalition to examine the relationship between environmental contamination and economic development. A key part of that effort has

been identifying ways in which existing Federal financing programs could be more creatively and usefully linked with the resource needs of brownfield sites.

There’s a clear and critical role for agencies such as HUD to play

to take the next step to help fill the brownfields capital gap and

improve the market conditions for these properties. The BEDI program was put in place to respond to this redevelopment challenge,

and H.R. 2941 would make important changes to enhance this effort. For those communities that are able to tap the existing program, BEDI is one of the most flexible Federal resources available

for brownfield purposes.

Unlike EPA’s grant programs, BEDI funds can be used for the

full range of redevelopment activities, everything from cleanup to

construction. BEDI funds can address petroleum and other types of

contaminants that are still problematic for EPA, even with the new

brownfields law. And my prepared statement gives examples of

how BEDI has brought significant benefits to cities like Camden

and Syracuse and Lorraine, Ohio. There’s no question that BEDI

has been a vital component of brownfield revitalization strategies

in those cities that have been able to access the program and its

resources.

Those successes notwithstanding, HUD has not seen the level of

grant application activity that one would expect, given the tremendous need. And as is clear from today’s hearing, the most critical

issue, and the one that H.R. 2941 addresses, is the required linkage of BEDI to the HUD Section 108 loan guarantee programs.

By decoupling these programs, H.R. 2941 would make a significant change to this program, with good potential benefits. Clearly,

this decoupling is needed. As you know, BEDI grants can’t be

awarded unless communities also apply for and receive a companion Section 108 loan guarantee. In practice, this adds complexity and time demands to projects. These are key disincentives

for small and mid-sized cities that just don’t have the staff capacity

to prepare and push dual applications, and it also discourages

small projects, because the effort and cost of structuring and securing a Section 108 loan guarantee reduces its usefulness. This linkage requirement has proven difficult for many entitlement cities

and counties to meet, as we’ve heard from other witnesses. Even

if they haven’t reached their legal limit on 108, economic and political constraints effectively prohibit their use of this program, and

this makes needed BEDI resources inaccessible.

There are several reasons for this, and I just want to briefly

touch on them. From a fiscal standpoint, bond rating agencies have

viewed Section 108 loans as municipal debt, and this is a sensitive

issue in many places. Some cities have debt caps, which are defined

by statute or financial rules, and this helps to discourage the use

of 108. And in other communities, as Mayor Reid has pointed out,

using the 108 proceeds for local loan funds or infrastructure development forces cities to rely on CDBG as backstop to pay down their

25

Section 108 debt, and a lot of cities just don’t have the capacity to

take on this kind of debt without jeopardizing their basic block

grant activities.

As we have heard, from a practical political standpoint in many

cases, mayors and city councils find it impossible to pledge future

CDBG grants as collateral for these projects, even though we know

that HUD has an outstanding record of application review and underwriting.

I want to focus on the issue of small cities, because they face insurmountable obstacles to accessing BEDI resources, again first

and foremost, because of this required connection to Section 108.

By law, they don’t get their own entitlement grants. They can’t

offer anything to meet the 108 collateral pledge. And while in theory they can work through their States or urban counties, in practice, those entities are resistant or even hostile to these kinds of

efforts.

To date, only a handful of small cities have been able to make

the Section 108 brownfield connection. This is even as the need for

brownfield financing resources in smaller and mid-sized cities

grows. A couple of States, notably Connecticut and Washington, are

trying to make an effort to work with their small cities, but I want

to give you an example from one State, Massachusetts, which is

really very typical of the national situation. Massachusetts has 370

incorporated non-entitlement towns. Many of these have brownfield

sites, but none of them have ever gotten a Section 108 or a BEDI,

so decoupling is really the critical issue that H.R. 2941 would address. It would open up the program to thousands of communities

with significant brownfield reuse opportunities. I would urge the

subcommittee, as this goes forward, and this comes into place, to

really keep an eye on the changing demand for BEDI resources, because I really believe that a more flexible, more widely accessible

BEDI program will intensify interest in this program.

I have pointed out other benefits in my prepared statement. I

know my time is running out. I just want to focus on one last point.

H.R. 2941 specifically authorizes appropriations for BEDI. This is

critical, because it will reiterate Congress’s support for this key initiative. I would like to emphasize, as several Members have suggested, that the resources dedicated for BEDI should not be taken

from the larger CDBG program. Since BEDI was first funded, it

has been defined as a separate item in the budget and carried out

in accordance with HUD’s mission, and I think this approach is the

right one to take. So to close I just want to again reiterate what

Congresswoman Maloney said, the ideas put forward in H.R. 2941

are shared by many other Members of Congress. Representatives

Quinn, Meehan, Mcovern, and McHugh have introduced H.R. 2064,

which would also address the decoupling issue. On the Senate side,

Senators Levin and Jeffords have introduced S. 1078 with a similar

objective. This all shows that support for this kind of change to

BEDI is bipartisan, it’s significant, and I thank you for the time.

[The prepared statement of Charles Bartsch can be found on

page 44 in the appendix.]

Chairwoman ROUKEMA. Thank you.

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Now we have Mr. John Murphy, Executive Director of the National Association for County Community and Economic Development.

STATEMENT OF JOHN C. MURPHY, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION FOR COUNTY COMMUNITY AND ECONOMIC DEVELOPMENT

Mr. MURPHY. Thank you, Madam Chairwoman, for inviting my

testimony here this morning. I am the Executive Director for the

National Association for County Community and Economic Development, or as the acronym has it, NACCED. We are an association

of practitioners that administer at the urban county level the community development block grant, HOME and other related programs. I’m also appearing today on behalf of the National Community Development Association, which is an affiliate of the U.S. Conference of Mayors. It includes city governments that administer

those same programs. The mission of each of the organizations is

to improve the technical capacities of cities and counties, to administer a whole range of affordable housing and neighborhood revitalization programs.

So you have combined in our two membership really the bulk of

the entitlement CDBG communities. I’d like, at the outset, to offer

the enthusiastic support for this bill, in particular the decoupling

of the Brownfield Economic Development Initiative Grants from

the requirement that a community also apply for a Section 108

loan guarantee.

I recently surveyed our NACCED members as to whether this

created an impediment in their moving forward on brownfield activity, and, in fact, discouraged them from applying for a

brownfield EDI Grant, because of the coupling with 108. I found at

least nine counties across the country, ranging from Cuyahoga

County and Hamilton County in Ohio to Westchester County, New

York, to Clark County, Nevada. these counties had said that, because of the required coupling of the two programs, they had not

applied for that assistance.

I think the reasons are threefold. First, they didn’t want to

pledge future block grant dollars to pay for the 108. Second, they

wanted to use perhaps other funding and it was non-HUD funding

or non-CDBG or 108 guaranteed funding. Third, I think many communities have been discouraged from applying for 108, quite frankly, because of the lengthy processing time that HUD takes in approving 108 loan guarantees. As you know, in financing many development projects, timing is everything.

We also support the bill’s language that would clarify that

brownfield redevelopment and cleanup is an eligible CDBG activity.

I must say, Madam Chairwoman, I’m as confused as you are

about the provision that calls for the creation of a loan pool. I’m

not sure whether that’s a separate guarantee of private sector

loans or whether it’s an opportunity for HUD to buy these private

sector loans and create, in effect, a secondary market. I think that

provision, as you rightly point out, needs some clarification. I

would urge the subcommittee to act expeditiously on this. We look

forward to its enactment by the Congress.

27

Thank you.

[The prepared statement of John C. Murphy can be found on

page 65 in the appendix.]

Chairwoman ROUKEMA. Thank you. I don’t think we can get both

in before we go for our vote on the floor, but we will hear Mr. Robert Colangelo. He is the Executive Director of the National

Brownfields Association. You’ve see, I’ve learned something today.

I didn’t know there was such an association. We welcome you here.

STATEMENT OF ROBERT COLANGELO, EXECUTIVE DIRECTOR,

NATIONAL BROWNFIELD ASSOCIATION

Mr. COLANGELO. Thank you, Madam Chairwoman and distinguished Members of the subcommittee for inviting me to present

my views on H.R. 2941. In my capacity of Executive Director of the

National Brownfield Association, I work with a wide range of property owners, investors, developers, service professionals and representatives of the public sector, and I hear their concerns daily

about the issues regarding the redevelopment of brownfields. I also

founded Brownfield News Magazine and I also manage Brownfield

Development which holds title to a 26-acre industrial park, so I

have firsthand knowledge and experience about the difficulties and

complexities of financing and redeveloping brownfield properties.

Simply put, I define a brownfield as a real estate transaction

with environmental personality. And the structuring and the finance to acquire and clean up environmentally-impaired properties

remains the primary obstacle in redeveloping brownfields. The

lending community considers brownfields high risk transactions;

therefore, they are not leveraged. And securing traditional sources

of debt financing remains difficult at best. Banks will not lend on

a brownfield until the risk is mitigated. That leaves equity and

gray market sources of capital as the primary mechanism for financing these transactions. Both sources of capital are very expensive, typically requiring yields in excess of 30 percent.

As the brownfield market matures, considerable experience has

been gained by both the public and private sector about the redevelopment process. The maturing market has left few positive

value properties available that can generate returns that warrant

the use of high-priced capital. The current market condition has

also left hundreds of thousands of sites within the confines of our

cities undeveloped, due to the high cost of private capital, poor

market conditions and difficulty in utilizing Government incentives.

As the market evolves, Government incentives will continue to

serve as a key mechanism to lower the cost of private capital by

structuring the acquisition of a brownfield using a combination of

equity, debt, and Government incentives, a blended lower cost of

capital can be achieved. The lower cost of capital will allow more

brownfield sites to be economically redeveloped.

The government’s, and particularly HUD’s role in the brownfield

redevelopment process will also increase as the market transitions

from environmentally driven to real estate driven transactions.

I’ve had the opportunity to work with a number of the cities and

just recently I worked with the Brownfield Office of the City of

Chattanooga, Tennessee. I think they’re a great example of the real

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world difficulties in using the HUD’s Section 108 Loan Guarantee

and the companion EDI and BEDI grants to promote industrial

and business recruitment and retention.

The City of Chattanooga’s Brownfield Office identified the redevelopment of abandoned industrial sites, brownfields, as an important economic objective of the city. Actions to facilitate this objective included the identification of projects to stimulate economic development using HUD’s Section 108 Loan Guarantee and the companion EDI and BEDI grants to promote industrial and business

recruitment and retention. However, implementation was stymied

by four factors:

Linking the Section 108 loan to EDI/BEDI funding;

Unwillingness by the mayor’s office to risk CDBG proceeds as

collateral;

Lack of local financial expertise to administer the Section 108

loan; and

Failure to produce a specific project that fits the HUD definition

of economic development.

This legislation appears to promote the responsible redevelopment and productive reuse of brownfield properties by removing

unwarranted obstacles, specifically de-linking grants and loan

guarantees for brownfield development from the pledge of the community development block grant funds. This proposed change will

allow more communities to have access to funding which in turn

should allow them to promote the cleanup, transfer, and economical

use of more brownfields.

Chairwoman ROUKEMA. Mr. Colangelo, I’m sorry. You have about

a minute left, or a little less than a minute, but we are going to

have to go over for a vote now. We will return and hopefully we’ll

all be here to hear your one minute or 50 seconds. Certainly the

Home Builders, which we would be very interesting in hearing

their perspective on this. We’ll be returning very shortly. We have

one or two votes. It’s a question as to whether there are one or two

votes, but we should be back within 15 minutes or less.

[Recess.]

Chairwoman ROUKEMA. I believe we’ll get started here, again resume our hearing. I feel compelled to make a comment to you, however. For the whole panel, the fact that there are so few of us here

today is no indication that people are not interested in the subject

or what you’re saying; it’s a competition with other committees.

However, if it were highly controversial, they would all be here

ready to question to you. It’s a reflection of the fact that this has

been so well-received by all Members of the subcommittee, but

again I am confident and I’m assured that the Members and their

staffs will be going over your testimony here today, but I didn’t

want you to feel as though the panel here was not important today.

It’s very important. But it’s also a reflection that the Members are

wholeheartedly for this legislation and supportive of what we’re

doing here today.

With that having been said, Mr. Colangelo, I believe you have at

least another minute to summarize your statement.

Mr. COLANGELO. Thank you. I guess in summary, this legislation

is another step in the right direction toward fostering the participation of a wide range of stakeholders, the owners, the developers,

29

the investors, service professionals and the public sector and community representatives in brownfield redevelopment.

Moreover, the bill would allocate resources to promote partnerships between the public and private sector and encourage reuse of

brownfield redevelopment. I think this bill puts HUD back into the

brownfield business and whether you’d know it or not, part of the

other positive benefit is we’ve really created a new market here, a

domestic emerging market and that’s the brownfield industry.

Thank you very much for inviting me and listening to my comments.

[The prepared statement of Robert Colangelo can be found on

page 53 in the appendix.]

Chairwoman ROUKEMA. Thank you very much.

Mr. Kasko, I believe is regional sales manager and has a lot of

experience in real estate, and in home building, Avis America. But

you’re here today testifying on behalf of the National Association

of Home Builders and I know we’re all most anxious to hear your

observations.

STATEMENT OF CHARLES KASKO, REGIONAL SALES MANAGER, AVIS AMERICA, ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS

Mr. KASKO. Thank you, Madam Chairwoman. I’d like to thank

you and Members of the subcommittee and Congressman Miller for

having us here today to address you on behalf of the more than

205,000 members of the National Association of Home Builders to

express our support for H.R. 2941, the Brownfields Redevelopment

Enhancement Act.

My name is Charlie Kasko. I’m a member of the association, and

I’m also the Chairman of the Federal Government Affairs Committee for the National Association of Home Builders. I’m from

Shaverton, Pennsylvania. I’m a regional sales manager for Avis

American. We are a division of Excel Homes. We operate in 20

States in the Northeast and build approximately 1,400 homes a

year through a network of independent builders.

Brownfields redevelopment, if it’s done correctly, presents a

unique opportunity to marry economic development with the principles of smart growth and environmental protection. Additionally,

brownfields redevelopment is consistent with the notion of reestablishing our communities. Many brownfield sites are located in

urban areas or close-in suburbs within walking distance or in close

proximity to existing amenities such as restaurants, shops, and the

arts. This proximity both fosters the sense of community and satisfies the increasing needs of our population while helping to satisfy

the need for safe, affordable housing.

For example, in my home State of Pennsylvania, the city of Pittsburgh has partnered with local builders and developers to redevelop a 42-acre site on the banks of the Allegheny River. Once a

heavy industrial site, Washington’s Landing will now be a standout in full community complete with townhomes, an office park, a

rowing club, tennis courts, a marina, a public park and a bike path.

NAHB has always held that the first priority when addressing

brownfields redevelopment must be relief from Federal liability and

enforcement for innocent parties under environmental statutes.

30

The recently enacted Brownfields law was a good first step in meeting this priority. Unfortunately the new law fails to grant liability

relief to innocent parties for sites contaminated with petroleum, because approximately half of the brownfield sites in this country are

contaminated with petroleum. The absence of petroleum liability

protection potentially leaves thousands of desirable sites undeveloped.

While we remain hopeful that Congress will address this shortcoming in the new law, we continue to be supportive of the efforts

to provide Federal aid for the redevelopment of brownfield sites.

NAHB is confident that H.R. 2941 will complement the new

brownfields law by removing the barriers to valuable Department

of Housing and Urban Development funding for brownfields

projects.

Grants under HUD’s Brownfields Economic Development Initiative are designed to provide governments with a flexible source of

funding to pursue the redevelopment of brownfields through acquisition of land, site preparation, economic development, and other

activities. However, access to these funds under current law requires a local government to pledge future allocations of Community Development Block Grants as collateral. Many of the communities with the greatest potential for reclaiming brownfields are unable or unwilling to pledge their CDBG funds in this manner, as

we’ve heard so many times here this morning.

H.R. 2941 would remove these leveraging requirements and open

the door to BEDI to spur much needed economic development and

affordable housing production. In addition, 2941 would help clear

up confusion and uncertainty regarding the eligibility of brownfield

initiatives for CDBG funding. The bill would ensure that the redevelopment of brownfield sites is a permissible CDBG activity.

This clarification is important. CDBG funds are the chief means

used by State and local governments in harnessing public and private investment to address community development needs by explicitly listing brownfields redevelopment activities as a permissible activity for the CDBG funding. 2941 will ensure that they

have the ability to integrate such efforts as part of a broader community development initiatives.

Finally, H.R. 2941 gives the HUD Secretary the ability to establish a pilot program for the development of a loan pool that would

provide economic development financing for eligible public entities.

Cities will now be able to expand their redevelopment options by

leveraging funding from private and public sources with the funds

from the loan pool.

Madam Chairwoman, on behalf of the homebuilding industry, I’m

pleased to support H.R. 2941 and look forward to answering any

questions that you may have.

[The prepared statement of Charles Kasko can be found on page

60 in the appendix.]

Chairwoman ROUKEMA. Thank you very much. I do want to just

restate the fact that I think that the way we have come together

here is quite remarkable, but perhaps maybe we’re long overdue.

I want to again congratulate Mr. Miller, my colleague, for taking

this initiative. Certainly all three of these issues, whether it’s jobs,

housing, and environmental concerns are a top priority of mine and

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I believe a top priority of the vast majority of people on this subcommittee, both the subcommittee and the Full Committee, and

the fact that Mr. Oxley, our Chairman, has paid such close attention to testimony here today, is an indication I believe that we all

want to move with Mr. Miller, with Mrs. Maloney, to move ahead

and expedite consideration of this legislation in a form that can be

taken to the floor.

With that, I’ll yield to my colleague, the prime sponsor of this

legislation, Mr. Miller.

Mr. MILLER. Thank you, Madam Chairwoman.

Mayors Reid and Kalisz, you both touched on something that I

think is very important. That’s the competition for CDBG funds

within the community. I think, Mayor Reid, that you said that your

median income is $22,000, so you have a lot of low- to moderateincome individuals and the need for those funds is tremendous

within organizations and the linkage between CDBG funds, BEDI,

the guarantees, have really impacted your ability to deal with

brownfields.

Do you see an opportunity, if this bill becomes law, for your implementation in dealing with brownfields locally?

Ms. REID. We absolutely do, Congressman Miller, because right now, we get $1,190,000 a year. Out of that you take admin of 20

percent. The balance of it right now, we do have a 108 loan that

we took out to buy 100 acres of land to develop out around our airport. The problem is it takes another $250,000 of our 108 dollars

of our CDBG dollars to pay that back. Until we can continue to develop that land out there and get this paid back, we are stuck with

that. That leaves us about $600,000 to do all of the rest of the city.

We’ve almost got it paid off, but we would never do it again for

that very reason, because we’ve got nine council people all vying for

money for their wards where there’s a lot of low, substandard housing, elderly housing projects, all of the things that we need to do

in our city. We have a decaying inner core. We’re an old Rust Belt

city and taking that money and going back to my council again and

asking them to do another 108 loan, Congressman, is not going to

work. We can’t afford to take that away from our citizens.

Mr. MILLER. So this program, if enacted, would benefit your city

and would be something you would take advantage of?

Ms. REID. Absolutely. Just get it passed, sir.

Mr. MILLER. Mr. Murphy, you talked about the State of Massachusetts has never been able to use HUD grant funds for this program because of the complexity of the process of the loan application process in 108. Is that correct, with the National Association

of Counties?

Mr. MURPHY. Actually I believe it was my colleague to my right

here.

Mr. BARTSCH. It was actually me, but that is correct, Congressman. Again, it gets into decoupling issues. Again, in theory, small

cities can take advantage of this because there is a process in the

law that allows that, but again in practice at the State level, the

same kind of constraints that Mayor Reid points out happen at the

State level. States are concerned about the impact on their future

allocations. They’re concerned about how existing resources may be

distributed to the many small cities within a State and many of

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those States, and again I use the example from Massachusetts, because I was able to get some numbers yesterday on that, many

States just have decided that they can’t do this, they can’t do a 108

for brownfields for the very reasons that Mayor Reid pointed out.

Mr. MILLER. So eliminating that requirement and simplifying the

process, as we’re doing here, you see a major benefit?

Mr. BARTSCH. I see a major benefit. One of the things that I do

is brownfields outreach for a variety of cities. In the last year, I

probably have been to 20 cities mostly in New York and New Jersey, small cities, and when you talk about this issue, the inaccessibility of this program comes up almost every single time. I think

there’s tremendous demand for this once this gets through.

Mr. MILLER. So linking this between the agencies for home builders, once the contamination issue is resolved and the funds are

there where a developer can come in then and purchase the site,

which frees the local agencies up from the debt they’re dealing

with, there could be a benefit tremendously for jobs in this country

too. Is that not true?

Mr. KASKO. That’s absolutely correct, Congressman. We’re always looking for new sites and for development sites. This is great

potential, especially in the affordable housing arena for us to look

at the sites. But the funding as well as the liability are two major

issues. We’ve addressed a portion of one. We need to continue on

the same path.

Mr. MILLER. And moving in this direction in the areas that these

would be used, most home builders have difficulty dealing with the

process because they want to development mainly in green areas,

let’s say, that are undeveloped. Lacking infrastructure, the costs

are tremendous. Many people in areas like that don’t want growth

to occur, but these are inner cities, blighted areas where growth is

needed because you’re basically cleaning the environment and putting it to a better use, and basically revitalizing the local government through taxation. Is that not correct?

Mr. KASKO. That is absolutely correct. This is a large component

of our smart growth plan. While it’s not exclusive to it, but revitalizing and redevelopment of the urban centers it has been long understood that to encourage development within the Urban areas,

there’s a number of issues that have to be addressed on what I like

to call livability, and brownfields is a major part of that livability

aspect, not just the schools and the infrastructure, but also the environment in which the people are living, and if you start cleaning

up these sites, you’re going to change, if you will, the image of the

urban centers and hopefully be able to revitalize them like so many

of us are trying to do.

Mr. MILLER. I want to thank all of you for your testimony. It’s

been really helpful. As the Chairwoman said, the reason we don’t

have a lot of people here is because obviously they support the bill

or they’d be here complaining, griping and bellyaching, so I want

to applaud you for taking your time and coming here to Washington to give us this expert testimony. Thank you very much.

Chairwoman ROUKEMA. Thank you.

Welcome back, Mr. Chairman. I acknowledged your intense interest in this in the context of hopefully being able to expedite this

33

through the Committee, and caring for it. We’ll leave that up to

you to make your own statement and observations here.

Mr. OXLEY. Thank you, Madam Chairwoman.

Again, welcome to all our panelists, particularly Mayor Reid.

Mayor Reid, you are to be congratulated on receiving the Great

American Mainstreet Award. That’s quite an achievement. It clearly puts Mansfield in a position to be one of the leaders and continue to be one of the leaders in the whole development area.

It was interesting that in your prepared testimony, you say

under the heading of ‘‘Challenges’’ complex is synonymous with

brownfield redevelopment, and indeed I suspect that everybody can

share that same frustration as we try to work our way through

some of these difficult issues with the various leaders of government and involvement of the private sector, and the like.

I’m wondering, part of this bill deals with revolving loan funds.

Has Mansfield had experience overall with revolving loan funds? If

so, are they useful in putting financing projects together?

Ms. REID. We use revolving loan funds on two levels. We have

revolving loan funds for our downtown redevelopment. As you

know, we have been able to put together a pool with the local

banks and with some city dollars. That is a loan to small business

people trying to get started and do something downtown.

Then we also, as you know, were awarded a million-dollar grant

which will be a revolving loan fund for brownfield remediation.

That one is just getting started. And Congressman, as you know,

the paperwork to get through this is about this high. We are trying

to wade our way through it. We had a very nice young man from

EPA in Chicago come in and tell us this was going to be really

easy, and we believe him. So we’re going to hope for the best. But

again that will be a revolving loan fund. We also use our CDBG

dollars into a revolving loan fund for the purpose of loaning money

to landlords to do rental rehab which then is paid back to us, which

we use to loan to another landlord to rehab another house. So in

the ways that we use our CDBG money, you can see how important

it is that we don’t tie it up with a commitment to 108 dollars.

Mr. OXLEY. That’s a good point. Clearly, the impetus behind this

legislation CDBG has been appropriate in many indications. For

example, Holiday Inn at Mansfield was begun with CDBG money

and obviously turned out to be quite successful and anchor that

area downtown with a renaissance theater next door, it became a

perfect opportunity for the city to really put its best foot forward.

Yours and past administrations were involved in that area. It was

most appreciated. It was also most helpful to look at the profile of

the former Ohio Brass, just to use one example. And the income

sources that you have laid out, would we expect, let’s say that we

were to start all over again with Ohio Brass, would the passage of

this legislation and the legislation that passed earlier last year,

Representative Gilmore’s bill that I mentioned, what would change

in that overall structure of financing and putting this package together.

Ms. REID. First of all, that project has been a long time coming.

We’ve been working on it, as you know, almost ever since I’ve been

Mayor. It’s been a project that we’ve really had to struggle to get

the dollars for. We are very proud of the fact that we were able to

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get the former owners to contribute dollars. The project would

probably have been speeded up by a minimum of 2 years, and

maybe a maximum of four if we could have had access to other

funding that we wouldn’t have had to pledge our precious dollars

to.

We did have to scratch for money out of our general fund to cover

part of it. When we take money out of our general fund, as you

know, Congressman, it means that we have to look somewhere else

to find money to pay our police and fire and to run our city. So in

reality, the Ohio Brass project, if we would have had in place what

we are now talking about and what Congressman Gilmore’s bill did

a year ago, we would not have had to take our precious general

fund dollars in order to make this. But we were so committed to

getting this done that there’s other things we could have done with

that money. A new fire station would be nice. But, you know, we

put those things off because we had to make a commitment to do

what we did at Ohio Brass.

Mr. OXLEY. That’s a great case example of what can be done, and

obviously with passage of this legislation, and the Gilmore bill

working together facilitates a lot of these things even better.

Madam Chairwoman, I thank you for your time. And let me just

say to you that this bill appears to have broad bipartisan support

and we would plan to put it on a fast track. And it’s important I

think that we send a strong signal and get a bill over to the other

body soon enough that they can act on it and we can get it to the

President. Coupled with what has already been accomplished on

the liability side, this is a natural, and we’re planning to move with

as much speed as we possibly can on that.

And I yield back.

Chairwoman ROUKEMA. I thank the Chairman and I thank him

for his exceptional leadership on the Committee of the whole as

well as for the subcommittee. I do thank the panelists. You’ve

made an excellent case and again I assure you that your testimony

will be made readily available to every Member of the subcommittee and the Full Committee.

If you have further comments or additions, you have a 30-day

time period to put it in the official record. Thank you again. We

look forward to this being a major piece of legislation in this Congress. Thank you.

[Whereupon, at 12:40 p.m., the hearing was adjourned.]

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March 6, 2002

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