Brownfields Update From Capitol Hill

Webinar

October 3, 2013

Empowering localities to revitalize their communities through the exchange of strategies, tools, and best

practices for brownfields reuse

NALGEP’s Upcoming Webinars • Preparing Successful Grant Applications – October 24, 2013

• White House Manufacturing Initiative – November/December 2013

The NALGEP Brownfield Communities Network • More than 2000 brownfields leaders in the community, non-profit,

government and private sectors • Overcoming barriers by convening experts, preparing white papers,

and educating decision makers • Providing technical assistance and sharing lessons learned through

regional workshops, webinars, and conferences

Thank you to NALGEP’s 2013 Sponsors

Webinar Agenda

Brownfields Reauthorization Judy Sheahan, U.S. Conference of Mayors

Federal Brownfields Tax Incentive Evans Paull, National Brownfields Coalition

FY 2014 Funding for Brownfields Ken Brown, NALGEP

Brownfields Utilization and Investment

Act of 2013 – BUILD Act • Renews program that expired at the end of 2006

• Themes:

– Creates flexibility for grantees

– Creates new grants to support federal priorities in the areas of energy efficiency and waterfront renewal

– Eliminates arbitrary eligibility barriers

– Enhances assistance and eliminate barriers for disadvantaged, small/rural communities

– Increases grant ceilings

Polouse, WA site

Courtesy Maul-Foster-Alongi

Increased Flexibility for Grantees

• Multi-Purpose Grants

– Site assessment, cleanup, and RLF

– Individual MP grant awards capped at $950,000

– Total number of MP grants awarded can’t exceed 15% of

total 104(k) funds available each fiscal year

– Additional ranking criteria to evaluate to include in MP

grant guidelines

• Overall plan for revitalization of 1 or more BF sites

• Demonstrate capacity

• Demonstrate need

New grants:

Energy Efficiency & Waterfront Renewal

• Clean Energy Grants

– Clean energy project: renewable electricity (wind, solar, or

geothermal energy) and energy efficiency (combined heat and

power and district energy)

– Activities: assessment, cleanup, RLF

– Grants capped at $500,000

• Waterfront Brownfields

– Definition: site adjacent to a body of water or federally

designated floodplain.

– EPA to consider if waterfront brownfield sites are served by the

grant and give consideration to waterfront brownfield sites.

Brockton, Massachusetts Brightfields

Eliminate arbitrary eligibility barriers

• Non-profit eligibility

– Eligible for all categories of grants

– 501(c)(3) plus LLC and limited partnership subsidiaries to

501(c)(3)’s

• Site assessment eligibility for publicly owned sites

acquired before 2002

– Property acquired before January 1, 2002 is eligible without the

burden of proving bona fide prospective purchaser status

Baltimore Aquarium –

Center for Aquatic Life and

Conservation

Enhanced assistance:

Disadvantaged, Small/Rural Communities

Indian Creek, Caldwell, ID

• Eliminates the Administrative Cost Prohibition

– Allow recipients to use up to 8% of grant funding for

administrative costs.

• Small Community Technical Assistance

– EPA prioritize TA for small communities, Indian tribes, rural

areas, or low-income areas with a population less than 15,000

• Targeted Funding for States

– Up to $2M of 104(k) funding can be

used for 128(a) eligible activities

• Non-Profit Eligibility

Higher Grant Ceilings

• Increased funding for remediation grants

– Increase the cleanup grants amount to $500,000

– Entities can request a waiver up to $650,000

Harper-Thiel Site, Wilmington, DE – $800,000 in cleanup costs

BUILD Act: Status on Capitol Hill

Senate

• S. 491 introduced March, 2013

• Lead Sponsors

– Frank R. Lautenberg (D-NJ) (deceased)

– James M. Inhofe (R-OK)

– Mike Crapo (R-ID)

– Tom Udall (D-NM)

• 10 co-sponsors

• Environment Committee hearing held in July

House: HR 2896 introduced July, 2013 by Rep. Louise Slaughter (D-NY) with 3 co-sponsors

• Federal tax deduction for brownfield cleanup costs

• Established in 1997

• Reauthorized biannually by Congress

• Developers used deduction ~350 times since 1997

• Expired December 31, 2011

What is Federal IRS Section 198?

• Brownfield developer performs cleanup

• State environmental agency issues 198 brownfield certification letter for eligibility

• With letter, taxpayer can deduct entire cost of remediation in year incurred against income on federal tax return

• For $1M cleanup: – Tax savings of $400,000 to $520,000, depending

on total income tax burden in each state.

How IRS Section 198 Works

Former NuTone Manufacturing Facility Cincinnati, Ohio

• 29+ acre, dormant manufacturing facility

• Lies in neighborhood targeted by City for redevelopment

• Environmental uncertainty for potential buyers caused site to remain dormant

• Acquired in a personal venture by a local business owner in 2008 - vision of establishing a campus for his expanding company (Medpace)

Development Challenges & Risks – Medpace Campus Development

• Environmental Uncertainty – Extent of environmental issues and necessary clean-up costs were

uncertain

• Financial & Development Risk Mitigation – Mitigation of this risk from a financial perspective was critical in moving

forward with the development – Timing of development was critical to the potential anchor tenant

(Medpace). Significant delays due to remediation activities would have been problematic and put development plans at risk.

• State & Local Government Support, Federal Tax Incentives Critical to Making Development Happen – Clean Ohio Revitalization Fund Grant ($3 Million) – Section 198(a) Deduction (Estimated $875,000 tax benefit)

• Estimated based on assumed $3 Million in qualifying Section 198(a) costs x 35% tax rate

• Only roughly $2.5 Million of the qualifying expenses were incurred prior to expiration of Section 198(a). Had it not been for this tax deduction, the timing and value of the tax benefit associated with this cost would have been uncertain.

– Infrastructure / Road Development Grant ($300,000) – Job Creation Tax Incentives Granted to Anchor Tennant

Development Progress – Current Status

• Medpace is the anchor tenant – Global headquarters of a Clinical

Research Organization (CRO) employing 1,200 primarily in the US, Europe & Asia

– Roughly 750 employees on-site in Cincinnati, occupying three buildings totaling ~330 thousand square feet of office and laboratory space

– A meaningful number of new jobs have been added since the campus relocation, with further growth in new jobs expected in the future

– Local payroll tax base expansion

– Partnering with community for further economic development in the area

– Roughly $50 Million in investment on the site to date

Boomerang Tube, Liberty, TX

• Steel pipe manufacturer • Years vacant before cleanup: 15 • Size: 118 acres, 487,000 sq ft • Permanent jobs: 600 • Capital investment: $200 million • Estimated construction jobs:

1,980 • Remediation costs: $1.2 million • Annual property tax revenue to

locality: $1.8 million, currently; $3.4 million after tax abatement expires.

• Educate Members of Congress about value of IRS Section 198

• Two Part Plan to Prepare Outreach Effort: – Establish compelling support documents – Enlist brownfield practitioners to educate Congress in key

states

• Implement outreach plan to: – Restore IRS Section 198 tax incentive – Educate Members of tax committees

• House Ways and Means Committee • Senate Finance Committee

Goal of National Brownfields Coalition Section 198 Committee

FY 2014 Brownfields Funding: Big Picture • House Committee zeroes out EPA brownfields

• House Committee cuts CDBG in half

• Senate Committee increases EDA funding

• No appropriations bills have passed

• Government is currently closed

• Likely short term CR until November/December

• Full year appropriations to be determined

EPA Brownfields Funding – FY 2014 • House Subcommittee provides zero funds – bill

stalled in House Appropriations Committee

• Senate Subcommittee proposes $167.6 million – same as last year.

– $94.7 million for grants

– $49.2 million for states

– $23.7 million for program management

HUD Brownfields Funding – FY 2014 • Community Development Block Grants (CDBG)

– House: $1.64 billion – cut of $1.6 billion – Senate: $3.15 billion – cut of $92 million

• Partnership for Sustainable Communities: Integrated Planning and Investment Grants – House: 0 – Senate: $75 million

• Section 108 Loans: Administration, House and Senate support shift to fee-based program that will support $500 million in guaranteed loans ($260 million increase)

EDA Brownfields Funding – FY 2014 • Total EDA Funding

– House: $220.5 million – cut of $80,000 – Senate: $276.2 million – increase of $56 million

• Public Works and Infrastructure Grants – House: $95 million – Senate: $100.3 million

• Economic Adjustment Assistance Grants – House: $32 million – Senate: $55.7 million

What You Can Do

• Educate Members of Congress and staff about your local brownfields projects.

• Invite them to ribbon cuttings, tours, and events.

• Send them photos, news clips, project summaries.

• Include facts and figures on benefits to your community.

For More Information

• Ken Brown, NALGEP

ken@akbstrategies.com

• Judy Sheahan, U.S. Conference of Mayors jsheahan@usmayors.org

• Evans Paull, National Brownfields Coalition ev@redevelopmenteconomics.com