Economic Development Administration:

Remediation Activities Account for a Small Percentage of Total Brownfield Grant Funding

GAO-06-7: Published: Oct 27, 2005. Publicly Released: Oct 27, 2005.

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The Economic Development Administration (EDA) Reauthorization Act of 2004 (P. L. 108-373) included a requirement that GAO evaluate grants made by EDA for the economic development of brownfield sites. More than 450,000 brownfield sites--properties where redevelopment or reuse may be complicated by real or perceived environmental contamination--are scattered across the United States. This report discusses specifics of grants made by EDA at brownfields sites, including (1) the types, extent, and amount of EDA funds used for remediation activities; (2) the environmental standards and agencies involved; and (3) the economic development activities, standards, and impact.

Remediation activities conducted at EDA-funded brownfield sites appeared to be incidental to the purpose of the overall project and most often consisted of the removal and disposal of asbestos containing materials, underground storage tanks, or lead-based paint. We estimate that remediation activities were conducted at 54 percent of EDA-funded brownfield sites from fiscal year 1998 through 2004. Overall, we estimate that EDA used $4.8 million or about 1.4 percent of its grant funds to pay for remediation activities at 28 percent of the brownfield sites during this period. Grantees, former property owners, or other agencies generally were responsible for most environmental remediation costs at these sites. EDA regional environmental officers prepare environmental assessments to document a project's compliance with federal environmental requirements. In three of six EDA regional offices, we noted that the regional environmental officer routinely recommended various types of special conditions be added to grant awards concerning the remediation of hazardous substances that provide more specific assurance on a project's compliance with environmental standards. EDA requires grant recipients to certify that contractors will comply with applicable environmental requirements and works with federal, state, and local environmental agencies to ensure compliance. EDA grants to brownfield sites most often funded infrastructure improvements, such as upgrades to water and sewer lines, construction of streets and curbs, or installation of signage and lighting. EDA evaluates proposed projects competitively based on standard guidelines that emphasize increased numbers of relatively high-skill, high-wage jobs or private sector investment; strong leadership and project management experience; and matching funds from local governments or nonprofits. Data were not available on the reported economic development impact for most of the grants that GAO reviewed. Where data were available, the reported economic development data varied significantly when compared with initial project estimates for some grants. In some instances, permanent jobs or private sector investment estimates for proposed projects did not appear to be verified.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In report GAO-06-7, GAO recommended that the Economic Development Administration (EDA) implement a standard procedure requiring regional offices to add a special condition to grants for brownfield sites where remediation of hazardous substances was required stipulating that the grant recipient provide evidence that remediation had been conducted in accordance with all applicable federal, state, and local regulations. EDA issued revised operational guidance on December 1, 2006, that requires specific language to be added to the special terms and conditions section in the event that EDA funds incidental remediation as part of a reuse investment. EDA clarifies that brownfield investments are considered reuse investments. Per EDA's revised Fiscal Year 2007 Operational Guidance, the following language is to be added to special terms and conditions: "Compliance with Environmental Restrictions: Grantee agrees to comply with all environmental use restrictions and permit, health plan or coordination requirements, set forth in the [Lease...., Quitclaim Deed] and any amendments, supplements, or succeeding documents. Compliance with said restrictions shall be included in any contract documents for project construction. Grantee shall certify compliance before final disbursement of investment funds." The requirement of this special condition in the event of incidental remediation at brownfield investment sites will help ensure that projects comply with all environmental standards, promote efficiency, and help limit any potential liability to the government.

    Recommendation: The Secretary of Commerce should direct EDA to implement a standard procedure that would require regional offices to add a special condition to grants for brownfield sites where remediation of hazardous substances is required stipulating that the grant recipient provide evidence that remediation has been conducted in accordance with all applicable federal, state, and local regulations--including those not mentioned in the standard EDA grant forms.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: In report GAO-06-7, GAO recommended that the Economic Development Administration (EDA) ensure that regional staff verified estimated jobs and private sector investment for proposed projects by following existing guidelines or creating new ones, as necessary. EDA issued revised operational guidance on December 1, 2006, that included a new methodology that regional offices are to use to calculate estimated jobs and private sector investment attributable to EDA projects. The guidance includes a detailed description of the new methodology and a worksheet to guide the EDA staff in preparing the estimate. The worksheet must be completed for all projects and attached to the Investment Summary in the project file. The revised methodology and requirement to document how the estimate was calculated will help EDA make more accurate funding decisions, based on accurate job forecasts and investment information, and will likely increase the chances of EDA funding projects with the greatest potential impact.

    Recommendation: The Secretary of Commerce should direct EDA to ensure that regional staff verify estimated jobs and private-sector investment for proposed projects by following existing guidelines or creating new ones, as necessary.

    Agency Affected: Department of Commerce

 

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