The 110th Congress left town for good in early October after grappling with a significant economic crisis that consumed the last several weeks of the session and left a number of legislative proposals, including reauthorization of the EPA brownfield program, on the back burner.

Although the outgoing 110th Congress considered a number of brownfield proposals during its two- year stretch, at the end of the day very little was finalized with direct application to the brownfield marketplace—we saw no brownfield program reauthorization, no permanent brownfield tax incentive passed, and no BEDI de-coupling effort enacted.

On the other hand, Congress continued to fund brownfield programs; and the two bailouts that passed in 2008—the foreclosure assistance authorized this summer and the Wall Street rescue plan passed at the end of the session—provide opportunities for creative state, local, and private brownfield reuse to promote brownfield revitalization efforts. The Wall Street rescue plan, for instance, included significant new incentives for “green” construction and development that could play a critical role in brownfield projects.

The new 111th Congress will come to Washington in early January to select its leaders and organize itself into committees, and begin work in earnest after the inauguration of President-elect Obama. One of the first major tasks it will face: Finalizing appropriations for fiscal year 2009, which were deferred by the outgoing Congress.

Brownfield Program Reauthorization
In spite of considerable effort by nearly two dozen diverse economic and community development organizations comprising an informal “brownfields coalition,” including the N BAs, reauthorization of the EPA brownfield program did not advance very far in the 110th Congress.

The current political leadership at EPA did not push it.

• Except for a few informal discussions at the subcommittee staff level, the Senate did not consider it.
• Key House committees were not interested in significant changes.
• HR 5336, a reauthorization bill introduced in June, was essentially a status-quo extension of the brownfield program, with only a couple of small changes.

However, considerable spadework has been done, and a good foundation laid to advance the discussions in 2009. Congressional staff and a few members have expressed interest in including some of the ideas advanced by the brownfields coalition when a new proposal is introduced. These include:

• Permitting larger grant amounts (up to $1 million);
• Authorizing multi-purpose grants (for comprehensive assessment, cleanup, demolition and removal projects);
• Making non-profits eligible for all types of grants, including assessment; and
• Eliminating the petroleum set-aside to streamline both grant application and administration procedures.

At the same time, other coalition suggestions have not yet gained acceptance at the congressional level, such as funding to support establishment of state-wide insurance programs, allowing grants for sites acquired pre-2002 enactment, and mandating stricter state institutional control enforcement efforts. And a few others, mostly linked to liability—such as extending the enforcement bar to RCRA sites and allowing a CERCLA exemption for acquisition by innocent states and localities—proved to be showstoppers.

Appropriations
Congress did not pass any of the regular appropriations dealing with environmental or development programs before it adjourned; in late September, it did approve a continuing resolution (CR) (HR 2638) which provides fiscal 2009 funding at FY08 levels through March 6, 2009. In doing so, it left final appropriations decisions to the incoming 111th Congress, and final sign-off authority to the incoming President.

At this point, it is not clear whether the new Congress will try to pass individual appropriations measures, make some modifications to funding levels via an omnibus (which combines all outstanding appropriation needs into one bill), or simply decide to extend the continuing resolution (and current funding levels) later into the fiscal year—perhaps even to the end. Following is a summary of FY08 levels that will be continued into FY09:

EPA brownfields program

• FY ’08 — $166 million
• FY ’09 issues — key House appropriations committee had raised the amount available for assessment and cleanup grants by $7.5 million, a gain which will not be realized unless a new bill is passed.

HUD/community development block grants-CDBG

• FY ’08 — $3.87 billion
• FY ’09 issues — CR may result in more money to this program; earlier Congressional proposals were nearly $200 million less.
  HUD/Section 108 loan guarantees
• FY ’08 — $4.5 million, supporting $205 million in guarantee activity
• FY ’09 issues — basic program survival; CR continues program that Senate had proposed to zero out.

HUD/brownfields-BEDI

• FY ’08 — $10 million
• FY ’09 issues — program continuation has taken considerable effort in recent years, and FY ’09 is no exception; CR maintains it at $10 million and gives the next administration time to consider its importance.

Rescue Legislation Impacts Brownfields?
In early October, Congress passed legislation to address the Wall Street crisis, the Emergency Economic Stabilization Act (HR 1424), which included $700 billion in assistance to banks and other financial institutions; the bill also included several tax-code provisions providing potential opportunities to brownfield reuse advocates:

• Extended the expired brownfield cleanup cost expensing incentive to December 31, 2009, and made it retroactive to January 1, 2008

This means that the incentive will be in continuous effect since 1997. The expensing incentive—which allows cleanup costs to be deducted in the year incurred rather than depreciated over time—is the only federal incentive targeted to private site owners, typically new property purchasers who are conducting environmental cleanup at brownfield sites. By making it retroactive, Congress provides a way for previously filed tax returns to be amended to include deductions for past cleanup expenditures.

• Authorized an additional year’s allocation of New Markets Tax Credits – $3.5 billion to be distributed in 2009.

New Markets Tax Credits, with their focus on stimulating investment in distressed areas, have been used in a growing number of communities to support brownfield-related community development and housing activities, and this new allocation will help more cities further these goals.

• Authorized the issuance of $800 million in clean renewable energy bonds (CREBs) for renewable energy facilities. The amount would be allocated in thirds, to governmental bodies, public power providers, and cooperative electric companies, to support renewable energy facilities.

Bond proceeds could be used for a range of activities related to renewable energy facilities, presumably including placement of those facilities on brownfield sites, which would need to be appropriately prepared for this type of new use. The federal subsidy would take the form of federal tax credits to the bond buyers, in lieu of interest, which means that the issuers would enjoy de facto zero percent borrowing. As more communities explore new energy-related uses on brownfield sites, these bonds could help facilitate financing of these facilities.

• Authorized the issuance of $800 million in energy conservation bonds, a new category of private activity bonds, to state and local governments for conservation purposes. The $800 million would be allocated to each of the states based on population; states are directed to distribute a portion of their share to their larger cities, with greater than 100,000 people, based on their relative percentage of a state’s population.

The new energy conservation bonds are intended to finance a range of activities related to energy conservation—projects to reduce energy consumption in publicly owned buildings, implement green community programs, promote rural development efforts that include electricity from renewable sources, encourage mass commuting facilities, and support green building technology demonstration projects. Many of these activities could be integrated with brownfield reuse strategies.

The Emergency Economic Stabilization Act also revised and extended a range of energy credits, which could play an important part in the financing package of projects built on brownfield sites, including:

• Renewable energy credits were extended to January 1, 2010 for wind and refined coal projects, and through to January 11, 2011 for other types of energy facilities.
• Credits for solar energy systems were extended until January 1, 2017 (from 2009).
• Credits for energy efficiency combined heat and power systems, which are gaining more use at larger brownfield sites featuring a mix of uses, were extended to December 31, 2018 (from 2008).
• Credits for green building and sustainable design strategies were extended to December 31, 2013 (from 2008).

Foreclosures Can Enable Brownfield Reuse Projects
State and local community development leaders and housing advocates need to understand what provisions the new Housing and Economic Recovery Act (HR 3221) contains—and how help can be accessed through them. Effective working partnerships between cities and towns, lenders, homeowners, and other community development stakeholders could help promote a range of stabilization and revitalization efforts that could include key brownfield activities.

The main provision in HR 3221 is the $3.92 billion it provides in Neighborhood Stabilization formula grant program (NSP) funds, administered through the CDBG system to help communities deal with abandoned and foreclosed properties—through purchase, management and resale. Funds are being distributed to states and cities by a formula based on a jurisdiction’s relative level of foreclosure activity since 2005. Cities entitled to at least $2 million via this formula get the resources directly; states receive their own allocations for smaller cities, plus the aggregate from communities that do not make the $2 million threshold. Funds must be used within 18 months for a range of defined purposes related to addressing the problems of foreclosure and community deterioration: for various financing and purchase mechanisms, as well as for demolition of blighted properties, redevelopment of vacant or demolished properties, or establishment of land banks for foreclosed homes.

The amount of resources available to states varies, but can be substantial—for example, California will receive a total of $560 million and Florida nearly $540 million. Even states with low rates of foreclosure will see important infusions of resources; for instance Washington state will receive nearly $28 million. HR 3221 also authorizes a new “Capital Magnet Fund” within Treasury’s Community Development Financial Institutions Fund (CDFI) which can, among other things, support economic development activities in conjunction with neighborhood stabilization efforts. The launch date for this fund still needs to be determined.

What’s Ahead?
Brownfield activities next year—like all economic and community development initiatives—will play out in a climate of great volatility and uncertainty. Key decision makers at the federal agencies will be replaced by a new cast of characters in the next administration, and new members of Congress will influence the selection of committee and party leaders. All of these players will come to Washington with their own ideas and their own agendas, and the priority for brownfields and the nature of brownfield revitalization in a larger economic recovery strategy, is yet to be determined. So stay tuned...as Bette Davis so aptly put it so long ago—“Fasten your seat belts, it’s going to be a bumpy ride.”

Charlie Bartsch is a senior fellow/vice president with ICF International in Washington, D.C.