SUMMARY OF BUDGET ESTIMATES

SUMMARY OF BUDGET REQUEST The Budget proposes $50 million for a Brownfields initiative in 1999, an acceleration of the President's agenda in this area. This level of funding is expected to leverage $200 million in Section 108 loan guarantee commitments, which will in turn lead support more than 28,000 jobs. Given the large unmet need in this crucial environmental area, only a suitable and sufficient dedicated source of funding will result in adequate and necessary community revitalization and job creation integrated with the elimination of dangerous environmental hazards. The Taxpayer Relief Act of 1997 provided a 3-year brownfields tax incentive that will reduce the cost of cleaning up thousands of contaminated, abandoned sites in economically distressed areas by permitting clean-up costs to be immediately deducted for tax purposes, rather than requiring this spending to be written off over time. This will serve to encourage redevelopment of these areas, thus making the availability of these grant funds even more critical. Brownfields are former vacant or underutilized industrial and commercial properties that may contain low-to-moderate levels of contamination. An estimated 450,000 brownfields exist, the vast majority of which are located in urban areas. Though many perceive brownfields, first and foremost, as an environmental problem, HUD views brownfields more through an urban community and economic development lens. Communities are now discovering that brownfields can most effectively be revitalized through concerted community and economic development strategies, including streamlined clean-up procedures and redevelopment activities. This program will make competitive economic development grants in conjunction with Section 108 loan guarantees for qualified brownfields projects. Grants would be used to redevelop moderately contaminated industrial or commercial sites after they are cleaned up. 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. HUD's role in the Brownfields initiative is to help communities in the economic redevelopment of formerly contaminated sites by providing grant funds and loan guarantees. HUD is particularly well-suited to do this since we have experience in this very area under the Community Development Block Grant (CDBG) and Section 108 Loan Guarantee programs. However, a separate dedicated source of funding is needed for this program given the large number of competing demands for CDBG funding as well as the large number of sites needing remediation. HUD has years of experience in working with cities on large and small economic development and job-creation projects. HUD has the expertise and ability to help cities implement brownfields redevelopment programs, and will coordinate with the EPA in Washington and in the Field. The Administration's Brownfield Initiative, announced in August1996, included $100 million for HUD's brownfields redevelopment grants between 1998 and 2001. HUD's principal contribution to this agenda was the commitment of $100 million in economic development funding and more than $400 million in Section 108 loan guarantees over 4 years. This Budget accelerates the initiative in order to quicken the pace of clean-up and redevelopment. Other key components of the President's Brownfields agenda were for Environmental Protection Agency (EPA) funding for assessment, clean-up and job training; and tax incentives that would allow businesses to "expense" brownfield costs. The Administration's initiative recognizes that Federal environmental laws reflect liabilities which discourage new economic activities in these environmentally hazardous sites. Communities must now address these new requirements when carrying out economic redevelopment efforts in areas that have low or moderate amounts of contamination from prior industrial uses. Because the costs and related obstacles of cleaning up and 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. A separate program dedicated to brownfields provides targeted funds, and gives a clear priority to a problem that mayors across the country have indicated is essential to achieving rapid economic growth through the revitalization of previous industrial sites but which could not be carried out by potentially responsible parties (PRPs) under EPA's Superfund program. In addition to HUD economic development grants, the Administration is also requesting $91 million for the EPA for grants to communities for site assessment and clean up, grants to States to develop voluntary clean up programs, and funds for EPA worker training program. To assure that HUD's and EPA's brownfields efforts are coordinated, a Memorandum of Understanding (MOU) pledging full cooperation between 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. CHANGES FROM 1997 ESTIMATES INCLUDED IN 1998 BUDGET No funds were appropriated for this program in 1997. CHANGES FROM ORIGINAL 1998 BUDGET ESTIMATES The 1998 Appropriations Act provides $25 million for Brownfields redevelopment. This is the same level of funding that was proposed in the 1998 Budget. EXPLANATION OF INCREASES AND DECREASES The 1999 proposal of $50million (an increase of $25 million over 1998) represents an acceleration of the President's initiative to provide the Federal assistance necessary for redevelopment of former contaminated brownfield sites after they are cleaned up. The entire amount is expected to be obligated in 1999. Outlays increase by $9 million, largely reflecting an increase in 1998 obligated amounts to be expended. PROGRAM DESCRIPTION AND ACTIVITY 1. Legislative Authority. Brownfields grants are Economic Development Grants, which are authorized by Section 108(q) of the Housing and Community Development Act of 1974, as amended. 2. Program Area Organization. This program will make competitive economic development grants in conjunction with Section 108 loan guarantees for qualified brownfields projects. Grants would be used to redevelop brownfields after they are cleaned up so that the areas can be returned to productive, job-creating uses and to address the economic development needs of communities in and around such sites. Economic Development grants are used to enhance the security of Section 108 guaranteed loans or to improve the feasibility of proposed projects, and to support business development activities. Section 108 loan guarantees enable communities to borrow funds from the private market and repay loans over time. It is estimated that this commitment of $50million in grant funds will result in applications for at least $200 million in new section 108 loan guarantees. The Brownfields Redevelopment Program supports the Department's Strategic Plan Objective #6, "Provide economic opportunities for low- and moderate-income persons through creation and retention of jobs." a. Eligible Recipients. Eligible recipients include Community Development Block Grant (CDBG) entitlement communities and non-entitlement communities. b. Allocation of Funds. Grants will be made on a competitive basis in accordance with Section108(q) selection criteria, including: (1) level of distress in the community to be served and in the jurisdiction applying for the assistance; (2) financial need for the assistance; (3) quality of the proposed plan and capacity of the applicant; and (4) extent to which the applicant is operating a brownfields program and is working with appropriate environmental regulatory agencies. Priority will be given to those projects located in designated Empowerment Zones or Enterprise Communities. The grant process will coordinate the Department's efforts with those of the EPA, reflecting the joint partnership goal to restore Brownfield sites to safe and productive uses. c. Eligible Activities. Eligible brownfields redevelopment activities are CDBG-eligible activities that support the cleanup and economic redevelopment of targeted brownfield sites. These include: (1)assistance to private, for-profit entities for economic development projects; (2) acquisition of property; (3) clearance, demolition, removal and rehabilitation of buildings and improvements; (4) rehabilitation of buildings or construction of real property improvements carried out by public or private nonprofit organizations; (5)infrastructure improvements, including construction, reconstruction or installation of public and other site improvements; and (6) the investigation and clean up of environmental contaminations in connection with any of these eligible activities. STATUS OF FUNDS Balances Available a. Unobligated Balances. The following table compares the program obligations with funds available by year. b. Obligated Balances. The status of obligated balances is as follows: