Hearing: Hearing On Members Proposals On Tax Issues Introduced In The 109th Congress

Statement

Hearing: Hearing On Members Proposals On Tax Issues Introduced In The 109th Congress

Chairman Camp, Ranking Member McNulty and Members of the Subcommittee, thank you for the opportunity to testify concerning America's Brownfield Cleanup Act- H.R. 4480.

Mr. Chairman, thank you for another opportunity to address the Subcommittee about an issue of great importance to my constituents and many communities throughout the country. Before being elected to Congress I served for eight years as the Mayor of the city of Dayton, Ohio where my top priorities were urban revitalization and economic development. The city of Dayton is not unlike many of America's center cities that continue to struggle economically.

In most of urban America, tax revenues are declining and jobs are leaving. In my district, the city of Dayton is expected to lose approximately 6,000 jobs due to Delphi restructuring. Although many center cities are inventing wonderfully creative programs to achieve economic revitalization, they are hindered by the very thing that makes them unique: density. The availability of land is an enormous impediment to the economic renewal and revitalization of cities.

And yet, there is a solution to this predicament. American cities hold acres of abandoned land that could be—should be—redeveloped as the key ingredient to urban recovery. These abandoned properties include former factories and other contaminated sites called brownfields.

Brownfields are defined as abandoned or underutilized properties, such as old factories, where expansion or redevelopment is complicated by environmental contamination. These properties are found in every state and every congressional district.

Estimates range from 500,000 to 1 million brownfields sites nationwide, covering at least 178,000 acres, or roughly the combined land area of Atlanta, Seattle, and San Francisco. These sites are missed economic development opportunities.

Local officials, developers and environmentalists all consider brownfields a federally created problem in that under current law, a property owner may be fully responsible for all costs to remediate environmental problems once those problems are identified. One unintended consequence of the current environmental laws is that properties with suspected contamination are abandoned to avoid potential liability for high cleanup costs. The end result is that brownfields remain, marring the face of our communities and impeding economic development and job creation.

H.R. 4480, America's Brownfield Cleanup Act, provides a federal program to encourage redevelopment by providing funding for demolition and environmental remediation costs for sites enrolled in a state voluntary action program. Specifically the proposed Brownfields Tax Credit Program would provide $1 billion in federal tax credits allocated to states according to population. The credit program would be administered by state development agencies in partnership with state environmental agencies, and would provide credits to brownfield redevelopment projects where the local government entity includes a census track with poverty in excess of 20%. The redevelopment project may be located anywhere within a qualifying local jurisdiction. States would be able to provide preference to redevelopment projects based on the extent of poverty, whether the site is located in an enterprise zone or renewal community, whether the site is located in the central business district, the extent of environmental remediation, the extent of redevelopment, the extent of financial commitment to the redevelopment, the amount of new employment resulting from the redevelopment, and whether a past owner/polluter is expected to provide at least 25% of the remediation expenditures.

Brownfields tax credits would be allocated for up to 50% of demolition and remediation costs pursuant to an approved plan. Tax credits would be competitively awarded based on remediation and redevelopment plans. The proceeds of the sale would be non-taxable. The remainder of cleanup costs would be deductible or may be capitalized by the property owner, and the plan also includes incentives for original polluters to participate in redevelopment.

In September 2003, Chairman Tom Davis and I requested a Government Accountability Office (GAO) study regarding the EPA's Brownfields Program and the general state of brownfields redevelopment across the Nation. The GAO's findings were released in a report (GAO-05-94) on January 13, 2005 and entitled "Brownfield Redevelopment: Stakeholders Report That EPA's Program Helps to Redevelop Sites, but Additional Measures Could Complement Agency Efforts."

In the course of its work, GAO spoke with over 30 individuals and groups covering a wide range of stakeholders, including EPA, state and local government agencies, national groups with brownfields expertise, EPA brownfields grant recipients, real estate developers, property owners, attorneys, and nonprofit organizations. The majority of these stakeholders believe that a federal tax credit, which would allow developers to offset a portion of their federal income tax with their remediation expenditures, could complement EPA's Brownfields Program by attracting developers to brownfields on a broader national basis. Some of these stakeholders said that tax credits are an easily understandable and tangible incentive to the private sector and noted that other, similar tax credits--such as the affordable housing and historic preservation credits--have proven effective in stimulating redevelopment.

The final report stated that according to stakeholders, EPA funds "provide [] an important contribution to site cleanup and redevelopment by funding activities that might not otherwise occur." The report stated Stakeholders recommended three possibilities to improve or complement the EPA's Brownfields Program. The first option would remove a provision that essentially bars landowners who purchased a brownfields site before January 2002 from grant eligibility. The second recommendation would simplify the administrative burdens for revolving loan funds. Finally, the report found that "stakeholders believed a federal tax credit for developers' remediation costs could attract developers to brownfield sites on a broader national basis."

As Chairman of the Government Reform Subcommittee on Federalism and the Census, I convened a series of hearings to determine: (1) the state of brownfields redevelopment across the country; (2) the effect of the Federal and numerous State brownfields programs on remediation and redevelopment; (3) and what further actions Congress could take to encourage more aggressive remediation and redevelopment efforts. The Subcommittee held a total of five hearings on this matter.

Based on the GAO Report and these hearings, the Subcommittee wrote Report 109-616 titled "Brownfields: What Will it Take To Turn Lost Opportunities Into America's Gain?" The Committee on Government Reform unanimously passed and reported to the Committee of the Whole House this Report on September 6, 2006. Mr. Chairman, I have attached a copy of the report to my submitted testimony so that it can be entered into the record. Among the 10 recommendations included in the report was a "federal tax credit would be the most useful incentive in attracting financial investment in brownfields redevelopment projects."

Mr. Chairman, a brownfields tax credit would constitute a powerful incentive to transform derelict brownfields sites into job-producing economic development. Without a federally created program, brownfields will remain, marring the face of U.S. cities. Redeveloping brownfields will revitalize our cities, returning to them the life and vitality once seen when these sites provided jobs and were anchors for our neighborhoods and communities.

Source