TESTIMONY OF D. REID WILSON
D. REID WILSON
CHIEF OF STAFF
U.S. ENVIRONMENTAL PROTECTION AGENCY
SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
September 30, 1999
Good afternoon Mr. Chairman and members of the Committee. I am Reid Wilson, Chief of Staff at the United States Environmental Protection Agency (EPA). I am pleased to provide comment about Clinton Administration efforts to use tax incentives to preserve open space, spur economic redevelopment through brownfields cleanup, and promote more livable communities throughout America.
Across America, communities are searching for ways to boost economic growth, protect their environment and public health, and preserve a high quality of life. They want to see older neighborhoods revitalized. They want to see their local waters protected. And they want to preserve farmland and green space close to home.
In 1998, according to the Brookings Institute and State Resources Strategies, more than 240 ballot initiatives to preserve open space, protect water quality, and speed brownfields cleanup were considered in communities across the country. More than 150 passed, authorizing $7.5 billion in state and local spending. These communities were responding, in part, to the astonishing loss of open space that has occurred across the nation. According to the American Farmland Trust, more than 30 million acres of farmland have been lost since 1970. That's like paving over all of Pennsylvania. This loss of land has substantial environmental consequences. For instance, a one acre parking lot generates sixteen times more runoff than a meadow. This runoff washes toxic chemicals and other pollutants into our waters, lakes and coastal areas, making them unfit for families who want to enjoy them and wildlife that depend on them.
This Administration has proposed creative ways to help communities further their efforts to promote more livable communities. I would like to focus on two of these proposals - the Better America Bonds program and extension of the Brownfields Tax Incentive. A key principle to both of these proposals is that the federal government's appropriate role is to provide tools, resources and information to communities so that they can grow in ways that are best for them, not to interject the federal government into local land use decisions. These proposals are about empowering and assisting communities, not dictating or micromanaging their decisions.
BETTER AMERICA BONDS
The Better America Bonds program, as embodied in H.R. 2446, would provide states, tribes, counties, and cities $9.5 billion in bonding authority over five years to preserve their open spaces, protect their water, clean up brownfields, and improve their quality of life, in a manner that works best for them.
Better America Bonds can be used for three general purposes. First, State, Tribal and local governments can create or restore parks and greenways, preserve green spaces, and protect threatened farmland and wetlands, either by acquiring title or purchasing conservation easements.
Second, Better America Bonds can be used to fund brownfields site assessments, site cleanups, and provide flexible funding to boost reuse of these contaminated properties. The U.S. Conference of Mayors has pointed to a lack of capital for local governments as the leading barrier to the cleanup and reuse of brownfields. Better America Bonds will supplement existing brownfields grant and loan funding with bond proceeds. This spares green space from development by reusing already developed properties at a time when over 700 acres of open space and farmland are lost per day to development.
Third, Better America Bonds can be used to protect and improve water quality. Rivers, lakes, coastal waters, and wetlands can be restored or protected, stream side corridors can be planted or repaired, and land can be acquired to reduce polluted runoff or protect drinking water sources.
Better America Bonds are structured to provide a deeper subsidy to communities than traditional tax-exempt bonds. In short, they are a great bargain for state and local governments. The bonds are interest-free to communities because the bondholder receives tax credits from the federal government in lieu of the interest they would have received from the community. The Treasury Department and EPA estimate that a community that issues a one million dollar, 15-year, tax exempt bond (at an interest rate of 5.8 percent) would pay roughly $102,000 per year to service the debt. But a community issuing a tax credit bond would pay only $42,000 per year into a sinking fund earning interest at the current Treasury rate of about 6.2 percent. That is an annual savings of $60,000 -- or about 60%. Over the fifteen year life of the bond, the savings add up to $900,000.
Bonding authority will be distributed directly to States, Tribes, and local communities through a competitive process. EPA plans to administer the Better America Bonds program in consultation with other federal agencies including the USDA, Transportation, and Interior. EPA envisions that the program will be run the same way as our successful Brownfields grants program, which has provided over $60 million to three hundred communities to assess contamination of brownfields sites and plan cleanup activities. This program has leveraged over $1.5 billion in redevelopment funds and supports more than 4,000 jobs. All of this has been accomplished without writing a single rule or regulation.
The brownfields program is popular and easy for communities to use. At the outset, EPA conducted an extensive stakeholder outreach effort to help us shape the application criteria that communities use to apply for grants. As with the Brownfields program, EPA will embark upon a thorough outreach process to receive advice and input from federal agencies and communities to help create the application criteria for Better America Bonds (assuming the program is passed by Congress and signed into law). In fact, this summer, EPA held Better America Bonds listening sessions around the country to solicit advice from a diverse group of stakeholders. We will work closely with communities to ensure that the program is structured in a way that meets their needs. We want to preserve green space, not promote red tape. And, like the Brownfields program, once the criteria are written and applications are received, we will put together a panel of federal agencies with relevant expertise to help review and evaluate applications.
One thing we would like to encourage through Better America Bonds is regional partnerships. For instance, a city and several neighboring suburban counties could submit a joint application to clean up brownfields sites in the city, purchase open space outside the city, and protect drinking water by restoring wetlands along a shared stream. We also want to make sure the program is available to all types of communities - big and small, suburban, rural, and urban.
It is important to emphasize what this program is not. The federal government will not purchase one square inch of land; the purpose of the program is to provide resources to communities so that they can implement decisions they believe are in their best interests. Nor will the federal government get involved in local zoning decisions. EPA will not micromanage decisions included in communities' applications for bonding authority. Just as in our Brownfields program we do not tell communities which brownfields sites to assess, we will not suggest which parcels of land to purchase under Better America Bonds. It is up to the community to put together a plan that is best suited to its needs, whether it is brownfields cleanup, water quality protection, open space preservation, or some combination. Finally, this program is not mandatory; it is up to communities to choose whether they want to participate.
BROWNFIELDS TAX INCENTIVE
EPA and other Federal agencies are providing resources and tools to state and local governments to clean up and redevelop brownfields -- abandoned, potentially contaminated properties. As mentioned before, EPA's pilot grant program has been extremely successful. In addition, EPA's Brownfields Cleanup Revolving Loan Fund provides funding for communities to move beyond site assessment and on to cleanup. So far, 68 communities are eligible for up to $500,000 each for cleanup activities. Finally, EPA's Job Training and Development Demonstration Pilot Program has helped create jobs by training workers to perform site cleanups in 21 communities so far.
We would like to commend this Committee and Congress for the passage of the Brownfields Tax Incentive in the last Congress. Passage of the Brownfields Tax Incentive has enabled the federal government to help level the economic playing field between brownfields and previously unused greenfield sites. Under the tax incentive, environmental cleanup costs for properties in designated areas are fully deductible in the year in which they are incurred, rather than being capitalized into the basis of the property. The incentive can reduce the capital cost of these types of investments by more than half. We regard this tax provision as an essential element of a comprehensive brownfields program and hope it can be made a continuing and broad tool for brownfields redevelopment in the future. The Treasury Department estimates that the $.3 billion incentive will leverage $3.4 billion in private investments and return some 8,000 brownfields to productive use.
West Chester, Pennsylvania provides a good example of how the tax incentive can be used to great advantage. The tax incentive was used there to help a demolition and environmental service company relocate its headquarters onto a brownfields property. The site was in a part of town plagued by a 29.6 percent poverty rate, well above the 20 percent poverty threshold set in Section 198. The company estimates that 100-200 jobs could be created and that the tax incentive saved nearly $42,000 in project costs.
Similarly, a company in Portland, Oregon plans the redevelopment of a brownfields located in an Enterprise Community along Portland's waterfront. The waterfront location and large property size made the area perfect for marine-related activities. The federal tax incentive was a key element in the efforts to revitalize a site that laid dormant and derelict within Portland's urban core. If the site is developed as planned, the company estimates that it will generate more than 150 jobs, some of which may be filled by residents in the adjacent community.
Despite these successes, many stakeholders voiced a concern that the geographic requirements are too restrictive. EPA, in response, has developed an internet-based mapping program which will allow taxpayers to determine the eligibility of their properties for Section 198 election. This mapping system has shown us that large and widespread tracts of our inner cities and rural economic corridors are eligible under one or more of the criteria.
Permanent extension of the Brownfields Tax Incentive is critical so that more communities can include it in their set of tools to bring brownfields sites back to vital economic life.
The Administration is working hard to develop new ideas and approaches that respond to public concern that we find creative ways to help communities grow according to their own values, maintain their quality of life, and enhance economic competitiveness. This is a challenging task, but innovative tax proposals such as Better America Bonds and extension of the Brownfields Tax Incentive will provide communities with resources they need to protect parks and open spaces, enhance water quality, and return contaminated properties to productive economic use. These programs allow communities to set their own priorities and design for themselves their preferred path toward economic revitalization and environmental protection. We look forward to working with the Committee to define common sense approaches to meet the new challenges that we face today.