PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET ESTIMATES

1. SUMMARY OF BUDGET REQUEST

   The fiscal year 2001 request for the Brownfields Redevelopment Program is $50 million, a $25 million increase over the 2000 appropriation. Brownfields are abandoned, idled or under-used real property where expansion or redevelopment is complicated by real or perceived contamination. An estimated 450,000 brownfields exist, the vast majority of which are located in urban areas. Brownfields redevelopment is critical to economic development and community revitalization, especially in urban areas. While brownfields are often perceived as environmental problems, they are also barriers to community revitalization. HUD is the principal Federal agency overseeing the Administration's efforts to revitalize urban communities, and hence is actively working with communities to assist them with the economic redevelopment of brownfields. Brownfields redevelopment is a priority for the U.S. Conference of Mayors (USCM), the National Association of Counties, the Large Urban Counties Caucus and the National Governors Association. HUD is working with these organizations and communities across this Nation to facilitate the clean-up and redevelopment process.

   Brownfields Redevelopment, or the Brownfields Economic Development Initiative (BEDI), provides targeted grants to revitalize vacant, abandoned, or under-utilized commercial and industrial sites, and gives a clear priority to a problem that mayors and other officials across the country have indicated is essential to achieving rapid economic growth. There is extensive need that remains to be addressed. Suitable and sufficient dedicated source of funding to alleviate this need will result in necessary community revitalization and job creation which is integrated with the elimination of dangerous environmental hazards. A survey by the USCM on brownfields in over 200 cities estimated that brownfields redevelopment could add up to $2.7 billion in additional tax revenue and create 675,000 jobs if the sites were returned to productive use.

   BEDI supports the Department's Strategic Goal #4: "Improve Community Quality of Life and Economic Activity," by improving the quality of the environment within urban communities. Reflecting performance indicator 4.2.6, the $50 million program level is projected to assist up to 45-50 sites and to create 20,000 - 25,000 jobs depending in large part on the complexity and type of clean-up and economic development involved at each site. The Brownfields program, authorized by Section 108 (q) of the Housing and Community Development Act of 1974, as amended, requires that a Section 108 Loan Guarantee program be part of a community's proposal, thus leveraging private funds that are guaranteed by the Federal Government. A substantial portion of the projected job creation is also included in the discussion of the Section 108 Loan Guarantee Program within the Community Development Block Grant program justification.

   Since 1998, this Program has made competitive economic development grants in conjunction with Section 108 loan guarantees for qualified brownfields projects. Grants are used to redevelop moderately contaminated industrial or commercial sites. Returning these brownfields sites to productive uses creates permanent jobs, revitalizes urban areas and addresses the economic development needs of communities in and around such sites. In November 1998, the Department awarded $25 million in BEDI grants to 23 communities. These grants leveraged $141 million in Section 108 Loan Guarantees and $811 million in other private and public sector funds. In September 1999, the Department announced another $25 million in grants to 20 communities with an estimated $103 million in Section 108 loan guarantees and $558 million in other private and public sector funds leveraged.

   Cities are addressing brownfield redevelopment issues using BEDI funds, as well as Community Development Block Grant (CDBG), Economic Development Initiative (EDI) funds, and Section 108 guaranteed loans. Some examples are:

   • Syracuse, NY - Syracuse will receive a $1 million BEDI grant and $3 million in Section 108 loan guarantees to acquire and remediate a 15-acre site to transform two former industrial sites into a light industrial, business, and commercial park. The development of the Crossroads Commercial Park is expected to result in the introduction of 20 new businesses and the creation of an estimated 200 new jobs in one of the City's most distressed areas. The BEDI and Section 108 loan guarantee funds will be used for land acquisition, site preparation, clearance and demolition, infrastructure improvements, and economic development activities. The estimated total project costs are $4.9 million.
   • Bethlehem, PA - Bethlehem will receive a $1 million BEDI grant and $7 million in Section 108 loan guarantees to finance road and utility improvements to permit the development of the Bethlehem Works project at the former Bethlehem Steel Plant. When completed, the facility will house a recreation and entertainment complex, a hotel/conference center, a Discovery Center of Science and Technology, restaurants, retail shopping, and a Technology Center for incubator start-up companies. The central feature of the development will be the National Museum of Industrial History, a Smithsonian Institution affiliate museum. The 575,000 square foot Phase 1 development is expected to create 757 full time jobs. The estimated costs of Phase 1 are $122.7 million, with a total estimated project cost of $450 million.
   • Chicago, IL. - Using HUD's Economic Development Initiative and Section 108 loan guarantees, the City of Chicago cleared a 17-acre illegal dump site. When developed, the site will be home to the country's first-of-its-kind Black family Television Network studio, which will generate 400 new jobs. Central City Production plans to build a $150 million, 337,000 square foot studio complex on the site.

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

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

   In addition to funding available through HUD and other agencies, the Taxpayer Relief Act of 1997 provided a 3-year brownfields tax incentive that reduces the cost of cleaning up thousands of contaminated, abandoned sites in economically distressed areas by permitting clean-up costs to be immediately deducted for tax purposes, rather than requiring the costs to be written off over time. This incentive lays the groundwork for redevelopment of these areas, thus making the availability of BEDI funds critical.

   Finally, existing environmental laws may discourage the investment required to successfully stimulate new economic activities on environmentally hazardous sites. Communities must address these requirements when carrying out economic redevelopment efforts in areas that have low or moderate amounts of contamination from prior industrial uses. The lack of clean up funds has been ranked a top impediment by cities. Because these costs and related obstacles of redeveloping brownfields were not anticipated by communities, they have neither the resources nor the proven capability to address these sites. As a result, economic redevelopment often excludes these areas which otherwise could become significant parts of local economic development strategies. BEDI funds provide the capital to help address these issues.

2. CHANGES FROM 1999 ESTIMATES INCLUDED IN 2000 BUDGET

All 1998 and 1999 BEDI grants have been obligated. However, the obligations were physically processed after general ledger reconciliation was finalized. All $50 million in carryover funding is now recorded as obligated in the first quarter of fiscal year 2000. Zero outlays reflect that funds cannot be disbursed until a corresponding Section 108 loan guarantee is approved.

3. CHANGES FROM ORIGINAL 2000 BUDGET ESTIMATES

The fiscal year 2000 Budget requested $50 million for Brownfields Redevelopment. The current estimate reflects the appropriated level of $25 million.

EXPLANATION OF INCREASES AND DECREASES

The fiscal year 2001 proposal of $50 million is a $25 million increase over the 2000 appropriation. Federal assistance is critical for the redevelopment of formerly contaminated Brownfields sites. Obligations are expected to decrease by $25 million in 2001, as the 2000 level reflects the obligation of carryover discussed above. The entire 2001 appropriation is expected to be obligated in fiscal year 2001. Outlays are expected to increase by $18 million over 2000, reflecting both the spend-out of multiple years of previous funding and the higher appropriated amount in 2001.

PROGRAM DESCRIPTION AND ACTIVITY