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4 - Profiles of Selected International Activities on Brownfield
Redevelopment
1.
United States
Scope of the Brownfield Problem
The U.S. Environmental Protection Agency (EPA)
estimates that there are between 500,000 and one million brownfield
sites in the country. More than $2 trillion worth of property
within the U.S. is devalued due to the presence of environmental
hazards. The total cost of restoring these sites to productive
use may be in excess of $650 billion. 6
Policy Approaches
The U.S. has addressed the challenges of contaminated
sites for many years. Specific initiatives targeted to brownfields
began in 1993, with the EPA's Brownfields Economic Redevelopment
Initiative. In 1995, the EPA announced its Brownfields Action
Agenda. Even as the commitments laid out in the Action Agenda
were met, it became clear that the momentum for ongoing brownfield
redevelopment could only be sustained with further federal,
state and municipal involvement as well as greater private
sector participation. |
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In 1997, the Clinton Administration combined the resources
of more than 15 federal agencies to expand the brownfields initiative
and created the Brownfields National Partnership Action Agenda.
This provided a framework for cooperation among governments, businesses
and non-governmental organizations. The U.S. federal program currently
operates in conjunction with the brownfield programs of 48 states
and more than 300 local governments. Federal and state jurisdictions
continue to strive for harmonization of the legal, scientific and
financial incentives designed to spur the development of brownfields.
In general, U.S. federal brownfield incentives are
targeted to state and local governments, and few are applicable
directly to the private sector. In essence, the states and local
governments have become "partners" in the delivery of
federal programs. This approach has been criticized as an inefficient
and indirect means of providing funding. For example, administrative
structures are required at the federal, state and local government
level in order to deliver brownfield incentive programs. On the
other hand, such a system promotes greater accountability and flexibility
to meet specific local community needs.
Progress
Federal Government
Federal actions on brownfield redevelopment focus
on pilot projects, revolving loans, small grants and technical assistance.
About 20 federal agencies are involved, including the EPA, the Department
of Housing and Urban Development (HUD), the Economic Development
Administration (EDA), the Small Business Administration (SBA) and
the Department of Agriculture (USDA) (see Table
A4-1 for a summary of financial assistance incentives, by agency).
The EPA provides three types of financial incentives:
- Demonstration Pilot Grants of up to $200,000 each
to states, cities, towns, counties and tribes across the U.S.
to conduct environmental assessment-related activities and develop
remediation and redevelopment plans
- Cleanup Revolving Loan Funds of up to $500,000
($1 million under the new Small Business Liability Relief and
Brownfields Revitalization Act) awarded to states, cities, towns,
counties and tribes to provide low-interest loans to carry out
cleanup activities at brownfield sites
- Job Training Pilot Grants of up to $200,000 each
to provide job training for residents of communities affected
by brownfields.
Since its inception in 1993, the U.S. EPA's brownfield
program has provided over $280 million in pilot project funding
and grants to spur brownfield projects. The EPA reports that this
has levered $4 billion in public and private investment and over
19,000 cleanup, construction and redevelopment jobs.
The Cleanup Revolving Loan Fund has been criticized
by some observers for having onerous legal, environmental and administrative
requirements that hamper its usefulness and effectiveness. New U.S.
brownfield legislation is expected to focus more on development
financing, conventional development underwriting and loan evaluation
related to cleanup. This should help to make the Cleanup Revolving
Loan Fund program more useful. The key lesson that can be learned
from this financial incentive program is the need for harmony between
federal legislation and the legal, environmental and administrative
requirements of any financial incentive program.
In 1997, the U.S. federal government passed the Taxpayer
Relief Act (TRA), which included a new tax incentive to spur the
cleanup and redevelopment of brownfields. The TRA allows environmental
cleanup costs to be fully deducted from income in the year they
are incurred. The $1.5 billion TRA incentive for brownfields was
expected to lever $6 billion in private investment and return 14,000
brownfields to productive use. However, the TRA incentive has not
been widely used. Possible reasons include developer misunderstanding
of the tax incentive, procedural requirements that are considered
cumbersome, a perception that the tax credit is insignificant and
does not justify the amount of work (and related costs) needed to
get the tax credit, and the desire of some developers to re-sell
the property as quickly as possible. The conclusion is that an income
tax deduction for remediation expenditures may not be effective
unless the credits are significant and procedural requirements are
minimal.
State Governments
At the state level, departments of environment and
economic development generally deliver programs related to voluntary
cleanup, liability relief, tax abatement, technical assistance and
low-cost loans.
A recent study compared the performance of states
offering fairly comprehensive brownfield programs with that of states
offering only limited programs. The study correlated the success
of individual state programs (as measured by the number of brownfield
sites remediated under the program) with the presence or absence
of six key program features:
- civil and regulatory liability
- responsible person protection
- tax incentives
- loans, grants and guarantees
- risk-based remediation
- memorandum of agreement.
Of the 48 states with brownfield programs, 18 had
either five or all six of the key features, 20 had three or four,
while 10 had fewer than three of the features. Those states with
five or six of the features far outperformed the others, accounting
for more than 12,000 remediated sites, compared with 3,333 for the
second group and only 142 for the third group (see Table
A4-2).
Differences in history and location did not appear
to account for the differences in results. The study found that
states that are otherwise similar in character, but which incorporate
a different range of features into their brownfield programs, often
obtain significantly different levels of site remediation. For example,
New York and New Jersey are neighbouring states with similar industrial
legacies. Moreover, market forces in both states have failed on
their own to stimulate significant brownfield redevelopment. Yet,
after each state implemented a brownfield program, widely different
results were achieved: New Jersey, with five of the key program
features, has remediated 2,341 sites; New York, with only three
program features, has remediated only 265 sites. This appears to
confirm the correlation between program performance and feature
selection.
The study also considered the relative importance
of each of the program features, concluding that three features
were particularly important success factors: liability protection,
risk-based remediation, and loan and grant programs.
Local Governments
Local government initiatives in the U.S. generally
focus on tax-increment financing incentives, tax abatement and low-cost
loans. Examples of many brownfield "success stories" at
the local level in the U.S. can be found through the EPA's Internet
site: http://www.epa.gov/swerosps/bf/success.htm
Future Challenges
Future work on brownfield redevelopment in the U.S.
likely will focus on streamlining the administration and strengthening
the coordination of the various federal, state and local initiatives.
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