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entitled 'Economic Development Administration: Remediation Activities 
Account for a Small Percentage of Total Brownfield Grant Funding' which 
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Report to Congressional Committees: 

October 2005: 

Economic Development Administration: 

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

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-7] 

GAO Highlights: 

Highlights of GAO-06-7, a report to congressional committees: 

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

Before and after Photographs of EDA-Funded Business Incubator 
(Philadelphia, PA): 

[See PDF for image] 

[End of figure] 

What GAO Recommends: 

GAO recommends that the Secretary of Commerce (1) require all EDA 
regional offices to use special conditions concerning the remediation 
of hazardous substances and (2) ensure that EDA staff verify the 
estimated jobs and private-sector investment for proposed projects. 

In commenting on a draft of this report, the Department of Commerce 
agreed with the report’s findings and provided technical comments on 
the recommendations which are discussed at the end of the report. 

www.gao.gov/cgi-bin/getrpt?GAO-06-7. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William B. Shear at (202) 
512-8678 or shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

EDA Has Provided Limited Funding for a Variety of Remediation 
Activities at Brownfield Sites: 

Some EDA Regions Have Developed Processes to Better Ensure Compliance 
with Environmental Remediation Standards: 

Grants Were Used for a Variety of Economic Development Purposes, but 
Data on the Projects' Impact Were Largely Unavailable: 

Conclusions: 

Recommendations: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Examples of EDA Grants to Brownfield Projects: 

Appendix III: Comments from Department of Commerce: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Types of Remediation Activities Conducted at EDA-Funded 
Brownfield Sites, Fiscal Years 1998-2004: 

Table 2: EDA's Investment Policy Guidelines: 

Table 3: Initial Estimates and 6-Year Data on Jobs Created and 
Retained: 

Table 4: Initial Project Estimates and 6-Year Data on Private Sector 
Investment: 

Table 5: GAO Sample of EDA Grants to Brownfield Sites: 

Table 6: Grants Reviewed at EDA Regional Offices: 

Table 7: 95-Percent Confidence Intervals for Numeric and Percentage 
Estimates: 

Figures: 

Figure 1: EDA Grants to Brownfield Projects Compared with Total EDA 
Grants, Fiscal Years 1998-2004: 

Figure 2: Remediation at EDA-Coded Brownfield Sites, Fiscal Years 1998- 
2004: 

Figure 3: Analysis of EDA Funding to Brownfield Sites, Fiscal Years 
1998-2004: 

Figure 4: Purposes and Project Goals of EDA Grants with Brownfield 
Coding: 

Figure 5: EDA Grant to the City of Atlanta and Northyards Business 
Park, LLC: 

Figure 6: EDA Grant to Philadelphia Authority for Industrial 
Development: 

Figure 7: EDA Grant to City of Chester, Chester, Pennsylvania: 

Figure 8: EDA Grants to Greater Kelly Development Corporation, San 
Antonio, Texas: 

Figure 9: EDA Grant to FAME Assistance Corporation, Los Angeles, 
California: 

Abbreviations: 

CERCLA: Comprehensive Environmental Response, Compensation and 
Liability Act: 

DOD: Department of Defense: 

DOE: Department of Energy: 

EDA: Economic Development Administration: 

EPA: Environmental Protection Agency: 

HUD: Department of Housing and Urban Development: 

NEPA: National Environmental Policy Act of 1969: 

OPCS: Operation and Planning Control System: 

REO: Regional Environmental Officers: 

Letter October 27, 2005: 

The Honorable James M. Inhofe: 
Chairman: 
The Honorable Jim Jeffords: 
Ranking Minority Member: 
Committee on Environment and Public Works: 
United States Senate: 

The Honorable Don Young: 
Chairman: 
The Honorable James L. Oberstar: 
Ranking Democratic Member: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

This report responds to a requirement in the Department of Commerce's 
Economic Development Administration (EDA) Reauthorization Act of 2004 
that GAO evaluate grants made by EDA for the economic development of 
brownfield sites.[Footnote 1] Brownfield sites--areas where 
redevelopment or reuse may be complicated by real or perceived 
environmental contamination--including former industrial and commercial 
properties, gas stations, and military sites. More than 450,000 of 
these sites are scattered across the United States. Because of the 
stigma of existing or potential contamination, brownfield sites often 
remain unproductive, blighting communities while developers resort to 
the use of "greenfields," or open spaces outside of cities. However, 
brownfield sites often offer a number of redevelopment advantages, 
including competitive locations, established infrastructure, untapped 
customer and labor markets, easy access to multiple modes of 
transportation, and unique development opportunities, such as historic 
and culturally significant buildings. For the past 40 years, EDA has 
provided support for the redevelopment of brownfield sites as a core 
component of its mission to aid the nation's most economically 
distressed communities.[Footnote 2] Historically, EDA's brownfield 
redevelopment activities have focused on sites after assessment and 
remediation (cleanup of contaminated or hazardous materials) have taken 
place. However, EDA has stated that current statutory authorities allow 
it to provide support for site assessment and incidental remediation 
activities at brownfield sites. 

To evaluate the grants made by EDA for the economic development of 
brownfield sites, we (1) determined the types of remediation activities 
conducted, the extent to which projects funded by EDA at brownfield 
sites included remediation activities, and the amount of EDA grant 
funds used for those activities; (2) identified the environmental 
standards applied to projects, the role of environmental agencies 
(federal, state, and local), and the amount of public participation; 
and (3) identified the economic development activities conducted, the 
economic development standards applied to projects, and the reported 
economic development impact. 

The EDA Reauthorization Act of 2004 directed GAO to evaluate EDA grants 
for the economic development of brownfield sites during the 10 years 
before the law came into effect [1994 to 2004]. As agreed with the 
committees of jurisdiction, we limited our analysis for this report to 
the grants EDA awarded to brownfield sites from fiscal years 1998 
through 2004, because EDA did not begin coding these grants in its data 
systems with a special brownfield code until 1998. The act also 
directed GAO to use the term "brownfield site" as defined in the 
Comprehensive Environmental Response, Compensation and Liability Act of 
1980 (CERCLA). CERCLA defines a brownfield site as real property that 
is or may be contaminated by a hazardous substance that could 
complicate redevelopment efforts.[Footnote 3] CERCLA does not include, 
under the brownfield definition, sites listed on the Environmental 
Protection Agency's (EPA) National Priorities List; sites subject to 
environmental enforcement actions; and sites under the custody or 
control of the federal government. However, EDA codes certain grants as 
brownfield sites, even though the sites are not included under the 
CERCLA definition. These grants are primarily for projects at former 
military or Department of Energy (DOE) installations that were still 
under the control of the federal government when the grant was made. In 
some cases, the federal government transferred ownership of the 
brownfield site before the project was completed. As a result, this 
report presents separate analyses of (1) all grants EDA coded as 
brownfield sites and (2) grants EDA coded as brownfield sites that are 
specifically included under the CERCLA definition. 

Unlike EPA and the Department of Housing and Urban Development (HUD), 
which administer specific grant programs targeted at brownfields site 
redevelopment, EDA does not have a specific brownfield program. 
Instead, the agency provides grants for brownfield-related activities 
under three programs: 

* The Public Works Program empowers distressed communities to 
revitalize, expand, and upgrade their physical infrastructure to 
attract new industry, encourage business expansion, diversify local 
economies, and generate or retain long-term private sector jobs and 
investment. For example, the program has provided grants for investment 
in industrial and business parks, port facilities, and rail spurs as 
well as for the redevelopment of brownfields. 

* The Economic Adjustment Program helps state and local interests 
design and implement strategies to adjust or bring about change to an 
economy. This program focuses on areas that have experienced or are 
under threat of serious structural damage to the underlying economic 
base-for example, from foreign trade competition, the actual or 
threatened closure of a principal industry or company, a catastrophic 
natural disaster, or a terrorist attack. 

* The Defense Adjustment Program, a subset of the Economic Adjustment 
Program, helps communities impacted by base closures, defense contract 
reductions, or both to rebuild and diversify their economies. EDA 
receives funding for this program through direct appropriated funding 
or transfers of funds for defense projects from the Department of 
Defense (DOD) Office of Economic Adjustment. 

To meet our objectives, we reviewed the project files for a random 
sample of 140 of the 257 construction-related grants that EDA coded as 
brownfield sites from fiscal years 1998 through 2004.[Footnote 4] We 
visited EDA regional offices in Atlanta, Austin, Chicago, Denver, 
Philadelphia, and Seattle to conduct our file reviews. During these 
reviews, we obtained information on the remediation activities 
conducted and the amount of EDA grant funds used for these activities, 
economic development activities conducted and economic development 
impacts, and amount of public participation in the projects. We used 
the 140 construction-related grants in our sample to make estimates 
about the entire population of EDA grants coded as brownfield sites and 
the subpopulation of EDA grants with brownfield coding that were 
included under the CERCLA brownfield definition. We interviewed 
officials from EDA to obtain a better understanding of the economic 
development and environmental standards applied to projects and the 
role of federal, state, and local environmental agencies in the 
projects. We also interviewed officials from EPA and HUD for 
information about each organization's brownfield redevelopment 
activities. 

We conducted our work from January 2005 through September 2005 in 
accordance with generally accepted government auditing standards. 
Appendix I contains a detailed description of our scope and 
methodology. 

Results in Brief: 

We found that remediation activities at EDA-funded brownfield sites 
appeared to be incidental to the purpose of the overall projects and 
included cleanup activities such as the removal and disposal of 
asbestos-containing materials, underground storage tanks, lead-based 
paint, and contaminated soil. Overall, we estimated that of the 257 
construction-related grants with brownfield coding that EDA made from 
fiscal years 1998 to 2004, approximately 139 (54 percent) of them 
included some kind of remediation activity.[Footnote 5] However, EDA 
contributed funding for remediation activities at only an estimated 72 
(28 percent) of these brownfield sites. Grantees, former property 
owners, or other agencies generally were responsible for most 
remediation costs. We also estimate that of the 257 construction- 
related grants, 191 (74 percent) met the CERCLA definition at the time 
the grants were awarded, and remediation activities were conducted at 
100 (52 percent) of the sites. Further, our review of a sample of 140 
construction-related EDA grants with brownfield coding showed that EDA 
did not provide a significant amount of funding for remediation 
activities and that projects funded through the Defense Adjustment 
Program generally required more funding for remediation activities than 
projects funded through EDA's Public Works or non-Defense related 
Economic Adjustment Programs. Total funding for all construction- 
related grants with brownfield coding that EDA awarded in fiscal years 
1998 through 2004 was $341.2 million. Of this amount, an estimated $4.8 
million (or about 1.4 percent) was used for remediation activities, 
including $3.7 million for remediation activities EDA funded primarily 
at former military or DOE sites under its Defense Adjustment Program 
and $1.1 million for remediation activities funded through regular EDA 
appropriations. Similarly, we estimate that EDA provided about $226 
million to brownfield sites that met CERCLA standards and used $3.3 
million (or about 1.5 percent) of it for remediation activities, 
including $2.3 million for remediation activities under the Defense 
Adjustment Program and $1 million for remediation activities funded 
through Public Works or non-Defense related Economic Adjustment 
Programs. 

EDA is required to ensure that environmental assessments of its 
brownfield projects comply with all federal environmental statutes and 
regulations. In turn, EDA requires that grant recipients certify that 
their contractors and subcontractors will comply with all applicable 
environmental laws and regulations and works with federal, state, and 
local environmental agencies to ensure that these requirements are met. 
EDA regional environmental officers (REO) prepare an environmental 
assessment to document a project's compliance with federal 
environmental requirements. As part of the assessment, the REO 
evaluates whether the project site contains any hazardous substances 
that might require remediation, using documentation submitted by grant 
applicants. We noted that three of the six REOs (in Atlanta, Chicago, 
and Seattle) routinely recommended adding special conditions to grant 
awards that grant recipients provide evidence to the government that 
hazardous substances had been remediated in accordance with 
environmental standards not identified in the standard terms and 
conditions of the awards. The REO in EDA's Chicago office told us that 
special conditions, while not required, provided EDA with more specific 
assurance that a project complied with standards for the remediation of 
hazardous substances. EDA does require that grant applicants provide 
evidence that the public is aware of proposed projects, but does not 
impose a specific public participation requirement for grants. For most 
of the grants we reviewed, we found evidence that efforts were being 
made to inform the public of proposed projects through venues such as 
newspaper articles, public meetings, and public notices. 

EDA brownfield grants were used for various economic development 
purposes, most often for infrastructure improvements and building 
demolition or renovation that resulted in the development of industrial 
and business parks, business incubators, training facilities, and 
tourism and recreation facilities. EDA evaluates proposed construction 
projects competitively based on standard investment policy 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. EDA grant applicants are required to demonstrate how 
proposed projects will meet or exceed these guidelines. We found that 
data were not available on the reported economic development impact for 
most of the grants that we reviewed because the projects either had not 
been completed or had not been completed long enough to establish 
results. However, the reported economic development data that were 
available sometimes varied significantly from the initial project 
estimates. Further, while regional staff are required to verify 
permanent job and private sector estimates, we found that in some 
instances the estimates for proposed projects did not appear to be 
verified. For example, one EDA grant we reviewed for the development of 
a biotechnology center estimated that the project would generate 400 
permanent jobs. But this estimate included 300 students who were 
expected to graduate from the center within 5 years and whose jobs 
would therefore not be a direct result of the project. 

To better ensure that remediation activities are conducted in 
accordance with applicable regulations and to obtain better economic 
development impact data, this report recommends that the Secretary of 
Commerce (1) require all EDA regional offices to use special conditions 
concerning the remediation of hazardous substances and (2) ensure that 
EDA staff verify the estimated jobs and private-sector investment for 
proposed projects. 

In commenting on our draft report, the Deputy Secretary of Commerce 
wrote that the report accurately reflects EDA's role in supporting 
brownfield revitalization projects and that remediation activities are 
a small part of EDA's activities. Two of the comments addressed our 
recommendations. The first stated that adding special conditions would 
not change grantees' and EDA's obligations to ensure that projects 
comply with applicable laws and regulations. However, we found that 
half of EDA's regional offices were using special conditions with some 
success and believe it would be beneficial if all EDA regional offices 
adopted this best practice. The second comment questioned our 
recommendation that verification of projected jobs and private 
investment in initial applications be strengthened, noting that the 
data for completed projects after 6 years were too limited. This 
recommendation is based on our findings that some initial estimates did 
not appear to be effectively substantiated. We continue to believe that 
substantiating these estimates would help EDA make more accurate 
funding decisions and increase the chances of EDA funding projects with 
the greatest potential impacts. 

Background: 

EDA was established in 1965 within the Department of Commerce to 
generate jobs, help retain existing jobs, and stimulate industrial and 
commercial growth in economically distressed areas of the United 
States.[Footnote 6] EDA fulfills its mission through grants to state 
and local governments, Indian tribes, educational institutions, 
nonprofit organizations, and others. EDA grants, including those in 
support of brownfield redevelopment, are intended to create wealth and 
minimize poverty by promoting a business environment that attracts 
private capital investment and creates relatively higher-skill, higher- 
wage jobs. 

EDA grants to sites coded as brownfields represent a small portion of 
the agency's total grants portfolio. EDA awarded 363 grants totaling 
$358.8 million to sites coded as brownfields (including construction 
and planning grants) from fiscal years 1998 through 2004. EDA grants to 
sites coded as brownfields represented 13.6 percent of the $2.6 billion 
of the agency's total grants portfolio of 6,826 grants EDA awarded 
during this period (fig. 1). 

Figure 1: EDA Grants to Brownfield Projects Compared with Total EDA 
Grants, Fiscal Years 1998-2004: 

[See PDF for image] 

[End of figure] 

In 1998, EDA began coding grants to brownfield sites with a special 
initiatives code, 1 of more than 100 such codes EDA uses to categorize 
its grants.[Footnote 7] EDA generally uses the same CERCLA definition 
of a brownfield site as EPA, but it also codes as brownfield sites some 
venues that are not included under the CERCLA definition of a 
brownfield site, primarily former military or DOE installations that 
are still under the control of the federal government at the time the 
grant is awarded. Under its current statutory authorities EDA can make 
grants to these sites without requiring that the grant recipient have 
title to the property.[Footnote 8] In such cases, EDA generally 
requires that the grant recipient provide evidence that the property 
will be transferred at a future date or obtain a leasehold interest in 
the property until it transfers. 

EDA has six regional offices across the United States that administer 
its grant programs. Each regional office accepts preapplication 
investment proposals from prospective grantees. Based on established 
regulations, EDA regional officials encourage only those investment 
proposals that will significantly benefit areas experiencing or 
threatened with substantial economic distress to continue with the 
application process. Before receiving a grant, an entity must submit a 
preapplication proposal to an EDA regional office responsible for that 
area. After preliminary reviews by various EDA regional office staff, 
each preapplication proposal is considered by the regional Investment 
Review Committee, which consists of the division chiefs and other 
regional office staff, to ensure that the entity is eligible to receive 
funds and that the project is likely to provide benefits meeting EDA's 
criteria. The committee decides whether the entity should be invited to 
submit an application, but EDA headquarters reviews the committee's 
recommendation action for quality assurance. Grant funds are awarded 
upon completion of the application. 

EDA Has Provided Limited Funding for a Variety of Remediation 
Activities at Brownfield Sites: 

We found that remediation activities at brownfield sites typically 
included the removal and disposal of materials containing asbestos, 
underground storage tanks, lead-based paint, and contaminated soil. 
Generally, these activities have been a small part of much larger 
projects that involved infrastructure improvements, renovations of 
buildings, or complete demolition of existing structures that do not 
meet current building codes. Overall, we estimate that remediation 
activities were conducted at about half of the 257 construction-related 
grants that EDA coded as brownfield sites from fiscal years 1998 
through 2004. EDA provided funding for remediation activities at only 
about a quarter of the sites, using an estimated 1.4 percent of its 
funding to pay for these activities because these costs were generally 
covered by grantees, former property owners, or other agencies. Our 
estimates showed similar percentages for the subset of brownfield sites 
meeting CERCLA standards and indicated that EDA spent more for 
remediation activities on projects funded through the Defense 
Adjustment Program than for projects funded through its other programs 
(Public Works or non-Defense related Economic Adjustment Programs). 

Although remediation activities took a variety of forms, removing and 
disposing of materials containing asbestos was the primary activity 
(table 1). 

Table 1: Types of Remediation Activities Conducted at EDA-Funded 
Brownfield Sites, Fiscal Years 1998-2004: 

Remediation activity conducted: Asbestos abatement; 
Estimated percent of projects[A]: 84. 

Remediation activity conducted: Underground storage tank removal; 
Estimated percent of projects[A]: 35. 

Remediation activity conducted: Lead-based paint abatement; 
Estimated percent of projects[A]: 17. 

Remediation activity conducted: Other[B]; 
Estimated percent of projects[A]: 46. 

Source: GAO analysis of EDA data. 

[A] Percentages do not add to 100 percent because some projects 
required multiple types of remediation. 

[B] Other remediation activities included removing and disposing of 
contaminated soil or polychlorinated biphenyl materials and cleaning up 
contaminated groundwater. 

[End of table] 

EDA officials said that remediation activities were often necessary to 
the redevelopment of brownfield sites. For example, asbestos-containing 
materials are often found in buildings constructed before 1970 and must 
be removed if the structures are to conform to EPA standards. EPA has 
regulated the use of asbestos since 1973 through various laws such as 
the Clean Air Act and the Toxic Substances Control Act.[Footnote 9] 

On the basis of our sample of 140 EDA grants made to brownfield sites 
between 1998 and 2004, we estimated that remediation activities were 
conducted at 54 percent of the sites EDA coded as brownfields and at 52 
percent of the sites that met the CERCLA definition. We also estimated 
that EDA provided funding for remediation at 28 percent of all the 
sites coded as brownfields (fig. 2). 

Figure 2: Remediation at EDA-Coded Brownfield Sites, Fiscal Years 1998- 
2004: 

[See PDF for image] 

[End of figure] 

EDA officials said that they generally tried to limit the amount of 
grant funds that were used for remediation activities, per an EDA 
Directive effective July 1992 and later clarified in a memorandum from 
the Acting Assistant Secretary of EDA in June 2000, which states that 
EDA typically participates in hazardous waste cleanups as part of a 
larger economic development project, but not as the principal activity 
of the EDA funded activity. As previously stated and further shown in 
the examples presented below, we generally found this to be true for 
the projects we reviewed. EDA officials explained that they were in 
business to redevelop blighted areas in order to create higher paying 
jobs and promote private investment and that remediation was an 
incidental EDA activity. They noted that former property owners or 
other federal agencies, such as EPA or HUD that have specific 
brownfield grant programs, should help fund remediation at sites 
requiring a significant amount of environmental cleanup. Specific 
examples where EDA funded remediation activities that appeared to be 
incidental to the larger projects include the following: 

* A project in Cumberland, Maryland, funded in 2002, that met the 
CERCLA definition of a brownfield site required environmental 
remediation work to renovate an existing building for use as a micro- 
enterprise business incubator and training facility. From EDA's 
investment of $900,000 in the project, about 2 percent of EDA's funds 
were used to remove asbestos and lead paint found throughout the 
building being renovated. 

* A 1999 project in Atlanta, Georgia that met the CERCLA definition of 
a brownfield site received EDA grant funds to help construct a proposed 
business park, including a roadway, and a water line and sanitary sewer 
line. During the project, the contractors discovered the buildings 
scheduled for demolition contained asbestos, and the soil underneath 
the path of the road was contaminated with lead and petroleum. EDA 
agreed to participate only in cleanup activities associated with 
demolition of the buildings that were in the footprint of the EDA 
improvements (asbestos and removal of contaminated soil). Of EDA's 
investment of $1.2 million, about 7 percent of the funds were used for 
remediation. 

Other federal agencies and grantees played a larger role than EDA in 
cleaning up some sites: 

* EDA provided $1.57 million to the Lawrence Economic Development 
Corporation in 2002 for infrastructure improvements (water lines, 
sanitary sewers, and roads) to a brownfield site in South Point, Ohio, 
that was listed on EPA's National Priority List. EDA's project, located 
on about one-third of this Superfund site, required removing 
contaminated soil, burying the soil onsite, and covering it with a clay 
cap. EDA did not provide any funding for these remediation activities. 
Instead, the previous owner paid about $1 million for the remediation. 
The federal and state EPAs were responsible for monitoring the 
remediation. Although the site was completely remediated, it did not 
meet the CERCLA definition for a brownfield site because it remains on 
EPA's National Priority List since EPA plans to continue performing 
groundwater testing for an extended period of time, possibly another 20 
years. 

* In 2000, EDA provided $1.1 million funding through the Defense 
Adjustment Program to develop infrastructure (storm drains, new streets 
and sidewalks, street lights, sewer lines, and water lines) for an 
industrial park in Pomona, California. This site required removal of 
asbestos, underground storage tanks, and lead paint. Because the 
project was located on the former Naval Industrial Reserve Ordnance 
Plant and the Navy still legally owned the land, the Navy paid for all 
remediation costs. The California Department of Toxic Substance Control 
provided documentation to EDA that it had provided regulatory oversight 
for the necessary remediation activities. This project did not meet the 
CERCLA definition of a brownfield site since the land was still owned 
by the Department of the Navy. 

Appendix II contains additional details on the Atlanta project and 
examples of remediation at other EDA sites coded as brownfields. 

Overall, we found that of the $341 million EDA provided to sites coded 
as brownfields from fiscal years 1998 through 2004, an estimated 1.4 
percent of its funding, or $4.8 million, was used for remediation 
activities. Similarly, of the estimated $226 million for sites coded as 
brownfields meeting the CERCLA definition, we estimate that EDA used 
about 1.5 percent, or $3.3 million, of its funding for remediation 
activities (fig. 3). 

Figure 3: Analysis of EDA Funding to Brownfield Sites, Fiscal Years 
1998-2004: 

[See PDF for image] 

[End of figure] 

We also analyzed EDA grant funds spent on remediation activities 
through regular EDA appropriations and appropriated or transferred DOD 
funding. EDA receives direct appropriated or transferred funding under 
the Defense Adjustment Program for projects at former military or DOE 
installations that have closed and are in the process of being 
redeveloped. These sites often require extensive remediation. Our 
analysis demonstrated that EDA has spent more for remediation 
activities on projects funded through the Defense Adjustment Program 
than for projects funded through its Public Works or non-Defense 
related Economic Adjustment Programs--$3.7 million and $1.1 million, 
respectively (fig. 3). From fiscal years 1998 through 2004, EDA 
received $135 million in direct-appropriated or transferred funding for 
construction-related projects under the Defense Adjustment Program, or 
about 40 percent of the total grant funding provided to sites coded as 
brownfields during this period. 

Our sample of 140 grant awards contained 46 grants funded through the 
Defense Adjustment Program. For seven of these grants, more than 10 
percent of the funding was designated for remediation activities, 
including two grants made to brownfield sites that were included under 
the CERCLA definition at the time the grants were awarded. For one of 
these grants, $1.46 million or 29 percent of the funding was earmarked 
for remediation activities (see the Philadelphia case study in app. 
II). For projects funded through direct appropriations under the 
Defense Adjustment Program, EDA has the discretion to choose and 
administer the projects in accordance with their Economic Adjustment 
Program authority. However, according to EDA officials, the majority of 
EDA projects in the Defense Adjustment Program are undertaken with 
transferred funding pursuant to a memorandum of understanding between 
EDA and DOD's Office of Economic Adjustment. The officials added that 
these projects are often funded pursuant to a targeted DOD 
appropriation, and EDA is generally left with little or no up-front 
decisional authority over which projects should receive funding. In 
addition, the officials stated that in these projects, DOD's Office of 
Economic Adjustment provides EDA with a general framework for the 
project; and EDA, which primarily serves as the grant administrator, 
works directly with the grantee to establish the specific scope of work 
and controls the disbursement of funds for eligible expenses. 

Some EDA Regions Have Developed Processes to Better Ensure Compliance 
with Environmental Remediation Standards: 

EDA is required to ensure that environmental assessments of its 
projects coded as brownfields comply with various federal environmental 
requirements. EDA relies on federal, state and local environmental 
agencies to ensure that grant recipients and their contractors and 
subcontractors comply with applicable environmental standards. REOs 
prepare environmental assessments to document compliance with federal 
environmental requirements and determine whether the project site 
contains any hazardous substances that might require remediation. We 
noted that the REOs at three of EDA's six regional offices routinely 
recommended adding special conditions to grant awards concerning the 
remediation of hazardous substances in order to provide EDA with more 
specific assurance that projects were complying with environmental 
standards. We also noted that while EDA requires grant applicants to 
provide evidence that the public is aware of proposed projects, it does 
not have a specific public participation requirement. 

Environmental Assessments Document That Projects Comply with Applicable 
Environmental Laws: 

Under the National Environmental Policy Act of 1969 (NEPA), EDA 
generally evaluates the likely environmental effects of brownfield 
projects it is proposing using a relatively brief environmental 
assessment or, if the action will be likely to significantly affect the 
environment, a more detailed environmental impact statement.[Footnote 
10] These environmental assessments are conducted in accordance with 
federal environmental statutes and regulations.[Footnote 11] To 
document a project's compliance with this act and other federal 
environmental requirements, REOs prepare environmental assessments to 
help ensure that adverse environmental impacts are mitigated or avoided 
to the extent possible. As part of the assessment, the REO reviews 
documentation from grant applicants to determine whether any hazardous 
substances are present at the project site that may require remediation 
activities. For example, grant applicants are required to certify on 
the Applicant Certification Clause (Form ED-536) whether a project site 
is contaminated by toxic or hazardous substances. The form includes 
questions related to the presence of asbestos-containing material, 
underground storage tanks, equipment (such as electrical transformers) 
containing polychlorinated biphenyls, and other hazardous substances. 
Grant applicants are also required to submit copies of any 
environmental surveys or inspection reports conducted for the project 
site and documentation from any investigations by federal, state, or 
local environmental agencies that are related to it. 

In three regional offices (Atlanta, Chicago, and Seattle), we noted 
that REOs routinely recommended adding special conditions on the 
remediation of hazardous substances to grant awards. For example: 

* In 1998, EDA attached a special condition to a $668,500 grant made to 
the city of Cleveland, Ohio and the Shorebank Enterprise Group for the 
renovation and expansion of an existing business incubator building to 
be used by new and emerging companies at a brownfield site that met the 
CERCLA definition. The condition stipulated that before the project 
closed and EDA made the final disbursement, the recipient would provide 
evidence satisfactory to the government that all asbestos had been 
disposed of in a manner that complied with applicable state and federal 
regulations. 

* In 1999, EDA attached a special condition to a $750,000 grant to the 
city of Marquette, Michigan for infrastructure improvements to 
facilitate business revitalization in the central business district, 
including the replacement of water mains, sanitary sewer mains, 
sidewalks, and curbs at a brownfield site that met the CERCLA 
definition. The condition stipulated that the recipient agreed to 
remediate any soils found to contain regulated levels of contamination 
as defined by the Michigan Department of Environmental Quality, using 
procedures approved by the department. 

* In 1999, EDA placed another condition on a $1,085,200 grant to Lenoir 
City and Loudon County Tennessee for the demolition of existing 
structures and construction of a new two-story building in the central 
business district at a brownfield site that met the criteria in CERCLA. 
The purpose of the new building was to house a satellite campus that 
included a community college, career center, city library, and business 
development center. This special condition required the recipient to 
furnish evidence satisfactory to the government that all asbestos and 
lead-based paint materials had been removed or contained from the 
property before construction started, in accordance with the National 
Emission Standards for Hazardous Air Pollutants and other appropriate 
standards and regulations. 

The REO at EDA's Chicago regional office told us that special 
conditions concerning the remediation of hazardous substances provided 
EDA with more specific assurance that a project would comply with 
environmental standards not identified in the standard terms and 
conditions of EDA grant awards. The Chicago REO also told us that 
special conditions could be used to protect the government from 
liability if individuals were injured by exposure to hazardous 
substances at EDA-funded brownfield sites. The Chicago REO added that 
while such conditions were not required, they were useful in 
emphasizing the grant recipient's responsibilities for site-specific 
environmental issues. 

EDA's Seattle regional office routinely attaches specific assessments 
and additional documentation requirements of environmental hazards to 
Defense Adjustment Program project deeds. According to the Seattle 
office's regional counsel, while the environmental restrictions are 
often benign and unobtrusive, they promote efficiency by calling 
attention to the restrictions and placing the onus on the grantee to 
meet the additional requirements in the deed. The REO at EDA's Denver 
regional office also agreed that special conditions concerning the 
remediation of hazardous substances were more effective than EDA's 
standard terms and conditions, although we did not identify any grants 
to which the Denver REO attached such conditions. According to 
officials at EDA headquarters, as part of its due diligence under NEPA 
and depending upon the project facts and timing for remediation, the 
agency may make its financial assistance conditional on the grantee's 
providing evidence that a remediation plan has been approved at the 
state level or of actual compliance with a state process. 

EDA Works with Federal, State, and Local Environmental Agencies to 
Ensure That Grant Recipients Comply with Applicable Environmental Laws: 

As we have seen, EDA requires grant recipients and their contractors 
and subcontractors to comply with all applicable federal, state, local, 
and territorial environmental laws as part of the standard terms and 
conditions of its grant awards. EDA works with environmental agencies 
at all levels of government to ensure that grant recipients comply with 
environmental requirements, but state environmental agencies (along 
with EPA) generally take the lead in ensuring such compliance. For 
example: 

* In 2000, EDA funded a project in Kansas City, Missouri to demolish 
blighted structures, rehabilitate combined sewer lines, and replace 
catch basins at an existing industrial park site. This site also met 
the criteria of a brownfield under CERCLA. About 9 percent of the $1 
million awarded to the project was used for the removal of material 
containing asbestos found in the structures. The project file showed 
that the Missouri Department of Natural Resources issued a permit to 
the firm that completed the asbestos remediation in accordance with the 
state's asbestos regulations. 

* EDA funded another project that met the criteria of a brownfield 
under CERCLA in Newport, Rhode Island in 2002, for infrastructure and 
site work on a former naval housing site that was being redeveloped as 
a community college, preschool program, and office complex. EDA funded 
$26,394 of the remediation costs for soil contaminated with arsenic 
(about 3 percent of the $1 million awarded to the project). The project 
file showed that the Rhode Island Department of Environmental 
Management provided oversight of the cleanup of the contaminated soil 
to ensure compliance with the state policy for the remediation of 
arsenic contaminated soil. 

EDA Grants Do Not Include A Specific Public Participation Requirement: 

We found that EDA required grantees to provide evidence of any efforts 
they had made to ensure that the public was aware of proposed projects, 
but it does not have a specific public participation requirement. 
Grantees could use newspaper articles, public meetings, or public 
notices as evidence of public awareness efforts. We found this type of 
evidence in the project files for an estimated 81 percent of the 
projects coded as brownfields. In some cases, the public might have 
been aware of projects, but we did not find evidence that grantees had 
tried to disseminate information in the project files; in some cases, 
EDA officials could not locate the evidence. EDA also requires grant 
applicants to fully describe any public controversy surrounding or 
objections to the proposed project, including the steps that were taken 
to resolve any issues, and submit a copy of the transcript if formal 
public hearings were held. Our analysis showed that most of the 
projects were not controversial and that public hearings were held for 
an estimated 27 percent of the projects with brownfield coding. For 
example: 

* A project funded in 2002 in Trenton, New Jersey involved moving 
industrial park businesses from a flood prone industrial area to a 
flood protected area. The property contained asbestos, underground 
storage tanks, and contaminated soil, but much of the remediation had 
been done prior to this EDA grant.[Footnote 12] The project met the 
criteria of a brownfield site in accordance with CERCLA. According to 
the environmental assessment, the project was discussed at open city 
council meetings, and EDA officials said that they were not aware of 
any objections to the project. 

* Another project funded in 1998 in Los Angeles, California involved 
converting an abandoned four-story building into a business incubator. 
The project met the criteria of a brownfield site in accordance with 
CERCLA. EDA spent less than $100,000 of a $1.8 million grant on 
remediation. The project details were posted in the California Areawide 
Clearinghouse, a biweekly public review and comment process, and sent 
to the Southern California Association of Governments. The project also 
received widespread newspaper coverage. 

* A project funded in 2002 in Boston, Massachusetts involved renovating 
an industrial building in a shipyard and purchasing a boat lift to help 
attract new business. The project met the criteria of a brownfield site 
in accordance with CERCLA. At the time of our review, EDA had spent 
just over $1,000 of a $1 million grant on asbestos removal. According 
to the project file, public hearings were not held on this specific 
grant, but over 20 public meetings were held on planned renovations of 
the entire shipyard over a 3-year period. The file also documented that 
there was no controversy involving the project. 

Grants Were Used for a Variety of Economic Development Purposes, but 
Data on the Projects' Impact Were Largely Unavailable: 

We found that EDA brownfield grants were used for various economic 
development purposes that resulted in the creation of industrial and 
business parks, business incubators, training facilities, and tourism 
and recreation facilities. The guidelines EDA uses to evaluate proposed 
projects emphasize a variety of factors, including the following: 

* The number of relatively higher-skill, higher-wage jobs the project 
will generate; 

* private sector investment in the project; 

* strong leadership skills and project management experience; and: 

* the amount of matching funds that are available from local 
governments or nonprofits. 

We found that data were not available on the reported economic 
development impact for most of the grants that we reviewed because the 
projects either were not complete or had not been completed long enough 
to establish results. However, we found during a review of project 
files that some estimates of the permanent jobs or private-sector 
investment a project would create did not appear to have been properly 
verified. 

EDA Grants Supported a Variety of Economic Development Purposes: 

For our analysis, we reviewed EDA grants to sites coded as brownfields 
to determine the grants' purposes and project goals. We found that the 
most common purpose of EDA grants to brownfield sites was to make 
infrastructure-related improvements, such as upgrading water and sewer 
lines, constructing streets and curbs, and installing signage and 
lighting. EDA's development activities supported a variety of projects. 
Figure 4 shows the most common purposes of EDA grants, along with the 
goals or types of projects--most commonly industrial parks and other 
commercial developments--that were planned for former brownfield sites. 

Figure 4: Purposes and Project Goals of EDA Grants with Brownfield 
Coding: 

[See PDF for image] 

[A] Percents do not sum to 100 because some of the projects had more 
than one purpose, goal, or both. 

[B] Other purposes included transportation development, financial 
assistance, and waste water treatment upgrades. 

[C] Other project goals included providing low-income housing and 
upgrading transportation. 

[End of figure] 

When eligible grant applicants submit preapplication proposals for 
construction projects, EDA must first determine whether the project 
area is eligible for assistance.[Footnote 13] Project areas eligible 
for EDA assistance generally include those that have one of the 
following: 

* an unemployment rate at least 1 percentage point higher than the 
national average for the most recent 24-month period for which data are 
available; 

* per capita income that is 80 percent or less of the national average 
for the most recent period for which data are available; or: 

* a special need, as determined by EDA, arising from actual or 
threatened severe unemployment or economic adjustment problems 
resulting from severe short-term or long-term changes in economic 
conditions.[Footnote 14] 

After determining that a project area is eligible for assistance, EDA 
evaluates project proposals competitively, based on five investment 
policy guidelines (See table 2). These guidelines are intended to focus 
on results rather than processes and encourage investment in U.S. 
communities based on risk and the expected return on the taxpayer's 
investment. EDA's investments through these guidelines also aim to 
attract private sector investment, have a higher probability of 
success, and ultimately result in an environment where relatively high- 
skill, high-wage jobs are created. 

Table 2: EDA's Investment Policy Guidelines: 

Investment policy guidelines: Be market based and results driven; 
Description: Investments should capitalize on a region's competitive 
strengths and positively move a regional economic indicator measured on 
EDA's Balanced Scorecard--for example, by increasing the number of 
relatively high-skill, high-wage jobs; increasing tax revenue; or 
increasing private-sector investment in the local community. 

Investment policy guidelines: Have strong organizational leadership; 
Description: Projects need to demonstrate strong leadership 
capabilities, relevant project management experience, and a significant 
commitment of human-resources talent to ensure their success. 

Investment policy guidelines: Advance productivity, innovation, and 
entrepreneurship; 
Description: Projects should embrace the principles of 
entrepreneurship, enhance regional clusters and leverage and link 
technology innovators and local universities to the private sector to 
create the conditions for greater productivity, innovation, and job 
creation. 

Investment policy guidelines: Look beyond the immediate economic 
horizon, anticipate economic changes, and diversify the local and 
regional economy; 
Description: Any investment must be part of an overarching, long-term 
comprehensive economic development strategy that enhances a region's 
success in achieving a rising standard of living by supporting existing 
industry clusters, developing emerging new clusters, or attracting new 
regional economic drivers. 

Investment policy guidelines: Demonstrate a degree of commitment; 
Description: Projects should exhibit (1) high levels of local- 
government or nonprofit matching funds and private sector leverage; (2) 
clear and unified leadership and support by local elected officials; 
and (3) strong cooperation among the business sector, relevant regional 
partners, and local, state, and federal governments. 

Source: EDA. 

[End of table] 

EDA currently gives further priority to proposed projects that enhance 
regional competitiveness and support long-term development of the 
regional economy. EDA considers the following as strategic investments 
that enhance regional competitiveness and support long-term development 
of the regional economy, including projects that: 

* upgrade core business infrastructure, including transportation, 
communications, and specialized training programs; 

* implement regional strategies that involve all stakeholders and 
support regional benchmarking initiatives; 

* encourage institutional collaboration, reflect strong leadership 
commitment, and encourage a formalized structure to maintain consensus; 

* cluster development establishing research and industrial parks that 
encourage innovation-based competition and recruitment efforts; 

* help communities plan and implement economic adjustment strategies in 
response to sudden and severe economic dislocations; 

* support technology-led economic development, and reflect the 
important role of linking universities and industry and technology 
transfers; and: 

* advance community and faith-based social entrepreneurship in 
redevelopment strategies for areas of chronic economic distress. 

Given its funding resources, EDA invites successful project proposals 
to submit full applications. 

Insufficient Time Has Elapsed to Assess the Economic Development Impact 
of Brownfield Projects: 

We found that insufficient time had elapsed to assess the economic 
development impact of most of the grants that we reviewed, either 
because the projects had not been completed or had not been completed 
long enough to establish results. EDA has two primary measures of the 
economic development impact of construction-related projects--(1) the 
number of permanent jobs a project creates or retains and (2) the 
amount of private-sector investment that a grant generates. Because the 
typical project is completed 3 years after the grant is awarded, EDA 
monitors performance results at 3, 6, and 9 years after the award. Data 
for jobs created after 3 years were available during our review for 32 
percent of the 257 construction-related grants that EDA coded as 
brownfield sites, while data for jobs created after 6 years were 
available for 11 percent. Data on private-sector investment generated 3 
years after grants were awarded were available for 25 percent and after 
6 years for 9 percent of the grants. EDA officials stated that the most 
reliable data on economic development impact are those from 6-and 9- 
year evaluations. 

EDA officials said that they relied to a certain extent on applicants' 
estimates of job creation and private investment in determining whether 
to fund a brownfield project. To evaluate the initial estimates, we 
compared 12 of the 140 grants that had both data on estimated job 
creation in the original application with data on job creation at the 6-
year evaluation. Because of the limited data, we were not able to 
project our results to all construction-related projects coded as 
brownfields. For the 12 grants that had both types of information, we 
found that the reported jobs created or retained differed substantially 
from the initial project estimates for more than half of the grants 
(table 3). 

Table 3: Initial Estimates and 6-Year Data on Jobs Created and 
Retained: 

Project: 1; 
Initial project estimate: 150; 
Reported jobs after 6 years: 7. 

Project: 2; 
Initial project estimate: 800; 
Reported jobs after 6 years: 24. 

Project: 3; 
Initial project estimate: 620; 
Reported jobs after 6 years: 478. 

Project: 4; 
Initial project estimate: 725; 
Reported jobs after 6 years: 35. 

Project: 5; 
Initial project estimate: 115; 
Reported jobs after 6 years: 163. 

Project: 6; 
Initial project estimate: 1,500; 
Reported jobs after 6 years: 60. 

Project: 7; 
Initial project estimate: 72; 
Reported jobs after 6 years: 1,234. 

Project: 8; 
Initial project estimate: 400; 
Reported jobs after 6 years: 180. 

Project: 9; 
Initial project estimate: 100; 
Reported jobs after 6 years: 49. 

Project: 10; 
Initial project estimate: 100; 
Reported jobs after 6 years: 290. 

Project: 11; 
Initial project estimate: 23; 
Reported jobs after 6 years: 77. 

Project: 12; 
Initial project estimate: 100; 
Reported jobs after 6 years: 290. 

Source: GAO analysis of EDA data. 

[End of table] 

We also compared 6 of the 140 grants that had both estimates of private 
sector investment in the original applications with data on such 
investment at the 6-year evaluation. We found that the reported private 
sector investment 6 years after grant approval differed substantially 
from the initial investment estimates for most of the grants (table 4). 

Table 4: Initial Project Estimates and 6-Year Data on Private Sector 
Investment: 

Project: 1; 
Initial project estimate: $30,000,000; 
Reported private sector investment after 6 years: $30,000. 

Project: 2; 
Initial project estimate: $230,000; 
Reported private sector investment after 6 years: $750,000. 

Project: 3; 
Initial project estimate: $1,526,439; 
Reported private sector investment after 6 years: $932,685. 

Project: 4; 
Initial project estimate: $2,000,000; 
Reported private sector investment after 6 years: $1,794,000. 

Project: 5; 
Initial project estimate: $1,600,000; 
Reported private sector investment after 6 years: $5,577,264. 

Project: 6; 
Initial project estimate: $15,000,000; 
Reported private sector investment after 6 years: $10,000,000. 

Source: GAO analysis of EDA data. 

[End of table] 

We did not try to determine whether a direct causal relationship 
existed between the grants EDA made to brownfield sites and the 
reported economic development. However, as we have noted in prior 
reports, we believe that attempting to quantify the gains from economic 
development programs is difficult. Determining that a causal 
relationship exists would require (1) documenting improvement in the 
targeted area, (2) linking specific elements in the program to the 
economic changes, and (3) measuring the growth stemming from other 
influences on the region's economy in order to isolate the impact that 
could be attributed to EDA's program.[Footnote 15] 

Economic Development Estimates Outlined in Project Proposals Were Not 
Always Appropriately Verified: 

We found that in some cases project proposals that provided estimates 
of the potential jobs or investment did not appear to have been 
verified. Grant applicants are required to estimate both the number of 
permanent jobs their project will create or retain and the amount of 
private sector investment the proposed projects will generate, 
including jobs directly related to the project. Regional office staff 
are required to verify the estimates before the projects begin, but we 
found instances in which verification appeared to have been 
insufficient. For example: 

* In 1999, EDA awarded a $1.39 million grant to the city of Laredo, 
Texas, for the construction of a bridge overpass and road to connect an 
existing industrial brownfield site to an interstate highway. The 
bridge overpass was designed to span existing railroad tracks in order 
to prevent collisions between trains and tractor-trailers traveling 
from the industrial site. EDA project summary documents indicated that 
the project would retain an estimated 1,500 jobs at the industrial 
site. However, the project file contained no documentation suggesting 
that the existing tenants would vacate the industrial site if the 
bridge overpass and road were not constructed. 

* In 2002, EDA awarded a $3 million grant to the Research Corporation 
of the University of Hawaii to help the School of Medicine construct a 
biotechnology center for technology transfer at a brownfield site and 
to acquire equipment for the center. EDA project summary documents 
indicated that the center would generate an estimated 400 permanent 
jobs. However, this estimate included 300 students who were expected to 
graduate from the center within 5 years--indirect jobs that should not 
have been included in the permanent jobs estimate. 

* In 1998, EDA awarded a $2.25 million grant to the Fitzsimons 
Redevelopment Authority in Denver, Colorado for the construction of 
50,000 square feet of interior space in a bioscience park center at a 
brownfield site--the second grant this project had received (the first 
was used to construct the building). EDA project summary documents 
indicated that an estimated 100 jobs would result from the project. 
However, the EDA project summary documents for the first grant also 
used the same permanent jobs estimate, so that the same jobs appear to 
have been counted twice. 

Officials at some EDA regional offices said that they did not have the 
capacity or resources to verify the permanent jobs or private sector 
investment estimates submitted by grant applicants for proposed 
projects. Instead, they relied largely on their professional judgment 
and past knowledge and experience when reviewing permanent job and 
private-sector investment data for proposed projects. However, by not 
effectively substantiating the data applicants supply, EDA may not be 
funding those projects with the greatest potential economic development 
impact. 

Conclusions: 

We found that, overall, EDA grants were being used for a variety of 
economic development activities that resulted in the reclaiming of 
former brownfield sites. Although we could not measure the precise 
economic impact of these projects, potentially, they serve a purpose 
that is difficult to quantify in reclaiming previously blighted land 
and structures and reducing the need to further develop rapidly 
disappearing "greenspace." During our review, we found (1) best 
practices that could usefully be emulated and (2) a lack of appropriate 
verification procedures during the grant application process, as 
follows: 

* Grant recipients and their contractors and subcontractors must comply 
with all applicable environmental laws as part of the standard 
conditions of EDA grant awards. We noted that REOs at three of EDA's 
six regional offices routinely recommended adding special conditions to 
grants involving the remediation of hazardous substances that 
emphasized the need to comply with any environmental standards that the 
grant might not specifically identify in the standard terms and 
conditions of EDA grant awards. These special conditions help ensure 
that projects comply with all environmental standards, promote 
efficiency, and help limit any potential liability to the government. 

* Although EDA processing procedures require that regional office staff 
verify the estimated permanent jobs and private sector investment for 
proposed projects, we found instances in which these estimates appeared 
out of line but were not questioned by EDA staff. Substantiating these 
estimates would help EDA make more accurate funding decisions, based on 
more accurate job forecast and investment information, and would likely 
increase the chances of EDA funding projects with the greatest 
potential impact. 

Recommendations: 

We recommend that the Secretary of Commerce direct EDA to take the 
following two actions: 

* 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--and: 

* 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 Comments and Our Evaluation: 

We provided the Department of Commerce with a draft of this report for 
review and comment. The Deputy Secretary provided written comments that 
are presented in appendix III. The letter stated that the report 
accurately reflects EDA's role in supporting brownfield revitalization 
projects and that remediation activities are a small part of EDA's 
activities. The letter also included technical comments, which have 
been incorporated in this report, where appropriate. Two of the 
technical comments dealt with our recommendations. 

We recommended that EDA require regional offices to add a special 
condition to grants for brownfield sites that grantees provide evidence 
that remediation has been conducted in accordance with all applicable 
federal, state, and local regulations. The Deputy Secretary noted that 
adding a special condition did not change a grantee's and EDA's 
overarching obligation to ensure that a project complies with all 
applicable laws and requirements. However, we found that three of EDA's 
six regional offices were routinely using such special conditions as a 
best practice. Officials in the regions implementing the practice told 
us that the special conditions (1) provided more specific assurances 
that projects were complying with environmental standards, (2) helped 
protect the government from liability if individuals were injured, and 
(3) promoted efficiency by placing the onus on the grantee to meet 
additional requirements. Given these benefits, we believe it would be 
beneficial if all six EDA regional offices adopted the practice. 

The Deputy Secretary also questioned our recommendation that regional 
staff increase efforts to verify estimated jobs and private sector 
investment for proposed projects, because our sample size of projects 
with 6-year data was too small. We agree that the data do not allow for 
projections to all construction-related projects coded as brownfields. 
However, our recommendation was based on the fact that EDA's processing 
procedures required EDA regional staff to verify these estimates before 
construction began. We found examples of approved estimates that did 
not appear to be effectively substantiated by EDA staff. Verifying 
these estimates could help ensure that EDA funds those projects with 
the greatest potential impact. 

We will send copies of this report to the Secretary of Commerce, 
relevant congressional committees, and other interested parties and 
will make copies available to others upon request. In addition, the 
report will be available at no charge on the GAO Web site at 
[Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-4325 or [Hyperlink, shearw@gao.gov]. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix IV. 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

To evaluate the grants made by EDA for the economic development of 
brownfield sites, we (1) determined the extent to which brownfield 
projects funded by EDA grants included remediation activities, the 
types of remediation activities conducted, and the amount of EDA grant 
funds used for those activities; (2) identified the environmental 
standards that applied to EDA projects, examined the role of federal, 
state, and local environmental agencies, and the amount of public 
participation in the projects; and (3) identified the economic 
development standards that applied, the economic development activities 
conducted, and the reported economic development impact for the 
projects. 

To meet our objectives, we obtained data from EDA on all grants awarded 
from fiscal years 1998 through 2004 that were coded as brownfield 
sites. For each grant, we obtained the following information from the 
database that EDA uses to track its grants: 

* grant recipient's name, 

* fiscal year the grant was awarded, 

* project number, 

* grant amount, 

* funding source, 

* investment type, 

* general project description, 

* state investment amount, 

* jobs created or retained 3 years after approval, 

* jobs created or retained 6 years after approval, 

* private investment generated 3 years after approval, and: 

* private investment generated 6 years after approval. 

We selected a sample of 140 (54 percent) of the 257 construction- 
related grants EDA awarded that were coded as brownfield sites. As 
table 5 shows, our sample consisted of the 32 grants EDA awarded in 
fiscal year 2002 (regardless of grant amount), the 17 grants EDA 
awarded from fiscal years 1998 through 2004 for amounts greater than or 
equal to $2.5 million (excluding 2002), and a random sample of 91 
grants EDA awarded from fiscal years 1998 through 2004 for amounts less 
than $2.5 million (excluding 2002). 

Table 5: GAO Sample of EDA Grants to Brownfield Sites: 

Grants awarded in 2002 (any amount); 
Public Works/other nondefense economic adjustment: 32; 
Defense adjustment: 0; 
Total: 32; 
Sample: 32. 

Grants awarded from 1998 to 2004 (excluding 2002): 

Amount <$2.5 million; 
Public Works/other nondefense economic adjustment: 6; 
Defense adjustment: 11; 
Total: 17; 
Sample: 17. 

Amount < $2.5 million; 
Public Works/other nondefense economic adjustment: 146; 
Defense adjustment: 62; 
Total: 208; 
Sample: 91. 

Total; 
Public Works/other nondefense economic adjustment: 184; 
Defense adjustment: 73; 
Total: 257; 
Sample: 140. 

Source: GAO analysis of EDA data. 

[End of table] 

For each grant in our sample, we reviewed the project file maintained 
by EDA regional offices to determine (1) whether the project site was 
included under the CERCLA definition of a brownfield site at the time 
the grant was awarded,[Footnote 16] (2) the specific remediation 
activities conducted at the project site and amount of EDA grant funds 
used for these activities,[Footnote 17] (3) the economic development 
activities conducted and proposed economic development impact of the 
projects, and (4) the amount of public participation in the projects. 
We reviewed the individual project files because EDA does not maintain 
specific information on funding of remediation activities at brownfield 
sites in its automated database. 

To ensure that the file reviews were performed uniformly, we used a Web-
based, data-collection instrument to gather information about each 
project's brownfield classification, economic development activities, 
project costs, and remediation activities. To determine the purposes 
and project goals of the grants, two GAO analysts each performed an 
independent content analysis of information contained in project files. 
In cases where their results differed, the analysts obtained additional 
information from the project and redid the analysis until both analysts 
reached a consensus on each of the project's purposes and goals. Table 
6 shows the number of grants in our sample at EDA's regional offices. 

Table 6: Grants Reviewed at EDA Regional Offices: 

Regional office location: Atlanta; 
Number of grants in sample: 26. 

Regional office location: Austin; 
Number of grants in sample: 9. 

Regional office location: Chicago; 
Number of grants in sample: 21. 

Regional office location: Denver; 
Number of grants in sample: 16. 

Regional office location: Philadelphia; 
Number of grants in sample: 55. 

Regional office location: Seattle; 
Number of grants in sample: 13. 

Total; 
Number of grants in sample: 140. 

Source: GAO analysis. 

[End of table] 

We used the 140 construction-related grants in our sample to generate 
separate estimates about the entire population of EDA grants coded as 
brownfield sites and the subpopulation of EDA grants included under the 
CERCLA brownfield definition. Our confidence in the precision of the 
results from this sample is expressed in 95-percent confidence 
intervals, which are expected to include the actual results in 95 
percent of samples of this type. We calculated confidence intervals 
based on methods that are appropriate for our sample. All percentage 
estimates have 95-percent confidence intervals of within plus or minus 
8 percentage points of the estimated percentage. All numerical 
estimates other than percentages, such as dollar estimates or totals, 
have 95-percent confidence intervals of within plus or minus 50 percent 
of the estimate itself. Table 7 summarizes the 95-percent confidence 
intervals for the numeric and percentage estimates presented in this 
report. 

Table 7: 95-Percent Confidence Intervals for Numeric and Percentage 
Estimates: 

Estimates for all Brownfield sites: 

Number of brownfield sites that included remediation activities; 
Estimate: 139; 
Lower bound: 123; 
Upper bound: 156. 

Percentage of brownfield sites that included remediation activities; 
Estimate: 54%; 
Lower bound: 48%; 
Upper bound: 61%. 

Number of brownfield sites where EDA contributed funding toward 
remediation activities; 
Estimate: 72; 
Lower bound: 58; 
Upper bound: 87. 

Percentage of brownfield sites where EDA contributed funding toward 
remediation activities; 
Estimate: 28%; 
Lower bound: 22%; 
Upper bound: 34%. 

Amount of EDA funds used for remediation activities; 
Estimate: $4,807,000; 
Lower bound: $3,622,000; 
Upper bound: $5,992,000. 

Defense Adjustment program funding; 
Estimate: $3,731,000; 
Lower bound: $2,617,000; 
Upper bound: $4,845,000. 

Public Works or nondefense related Economic Adjustment Programs; 
Estimate: $1,076,000; 
Lower bound: $574,000; 
Upper bound: $1,578,000. 

Percentage of EDA funds used for remediation activities; 
Estimate: 1.41%; 
Lower bound: 1.06%; 
Upper bound: 1.76%. 

Brownfield sites that met the Brownfield criteria defined in CERCLA. 

Number of brownfield sites that met the brownfield criteria defined in 
CERCLA; 
Estimate: 191; 
Lower bound: 177; 
Upper bound: 205. 

Percentage of brownfield sites that met the brownfield criteria defined 
in CERCLA; 
Estimate: 74%; 
Lower bound: 69%; 
Upper bound: 80%. 

Number of Brownfield sites that included remediation activities; 
Estimate: 100; 
Lower bound: 84; 
Upper bound: 116. 

Percentage of brownfield sites that included remediation activities; 
Estimate: 52%; 
Lower bound: 45%; 
Upper bound: 60%. 

Percentage of brownfield sites where EDA contributed funding toward 
remediation activities; 
Estimate: 28%; 
Lower bound: 21%; 
Upper bound: 35%. 

Amount of EDA funds used for remediation activities; 
Estimate: $3,336,000; 
Lower bound: $2,492,000; 
Upper bound: $4,181,000. 

Defense Adjustment program funding; 
Estimate: $2,305,000; 
Lower bound: $1,598,000; 
Upper bound: $3,012,000. 

Public Works or nondefense related Economic Adjustment Programs; 
Estimate: $1,031,000; 
Lower bound: $530,000; 
Upper bound: $1,533,000. 

Percentage of EDA funds used for remediation activities; 
Estimate: 1.48%; 
Lower bound: 1.11%; 
Upper bound: 1.84%. 

Source: GAO analysis of EDA data. 

Note: All dollar amounts are rounded to thousands. 

[End of table] 

To identify the environmental standards that applied to projects; the 
roles of federal, state, and local environmental agencies; and the 
amount of public participation in the projects, we reviewed information 
on the environmental requirements for federal agencies, EDA policies 
and procedures for complying with these requirements, and the 
environmental requirements included in the standard terms and 
conditions of EDA grant awards. We also discussed the roles of federal, 
state, and local environmental agencies in projects with officials at 
EDA headquarters and regional offices. In addition, we reviewed EDA's 
grant requirements related to public participation for proposed 
projects. 

To identify the economic development standards applied to projects, we 
reviewed information on the economic development standards that EDA 
used to evaluate proposed projects. We also discussed the application 
of these standards with officials at EDA headquarters and regional 
offices. In addition, we reviewed prior GAO reports about the impact of 
the economic development assistance provided by EDA.[Footnote 18] 

Our analysis of EDA grants was limited to a sample of grants provided 
to brownfield sites. EDA's grants to sites coded as brownfields 
represented only 13.6 percent of the total amount of funding that it 
awarded from fiscal years 1998 through 2004. Therefore, we could not 
evaluate the overall effectiveness of EDA's grant programs or determine 
how EDA applies its criteria to the broader universe of grant 
applications. In addition, we did not analyze the preapplication 
process, which, includes an evaluation and recommendations by EDA's 
regional investment review committees. 

To report on the economic development impact related to EDA-funded 
brownfield projects, we relied on data contained in the project files 
for estimates of jobs created and private-sector investment. We also 
reviewed EDA's database of information on the actual numbers of jobs 
created at 3 and 6 years after the grants were funded and private- 
sector data. However, we did not verify the accuracy of the estimates 
or actual data reported. 

In assessing the reliability of EDA's data, EDA officials, who were 
knowledgeable about the Operations Planning and Control System (OPCS) 
database used to track its grants, provided information to us; 
including the OPCS user manual. To increase our confidence in the 
reliability of EDA's grants data, we also compared the information that 
we obtained from EDA's database with source documents in the project 
file for each of the grants in our sample. We concluded that EDA's data 
were sufficiently reliable for the purposes of our report. 

We also interviewed officials from the Department of Housing and Urban 
Development and EPA and reviewed documentation about each 
organization's brownfield program. 

Our work was performed in Atlanta, Austin, Chicago, Denver, 
Philadelphia, San Antonio, Seattle, and Washington, D.C. We conducted 
our work between January 2005 and September 2005 in accordance with 
generally accepted government auditing standards. 

[End of section] 

Appendix II: Examples of EDA Grants to Brownfield Projects: 

Figure 5: EDA Grant to the City of Atlanta and Northyards Business 
Park, LLC: 

[See PDF for images] 

[End of figures] 

In 1999, EDA provided $1.2 million to the city of Atlanta and the 
Northyards Business Park, LLC for infrastructure improvements to a 
business park that was redeveloped on the west side of Atlanta's 
downtown. These improvements included the construction of a roadway 
into the business park, demolition of structures located in the pathway 
of the roadway, landscaping improvements along the roadway and entrance 
to the business park, and business park signage. EDA's grant covered 
about 64 percent of the cost of the infrastructure improvements, which 
were completed in 2002. 

The business park was one of the first heavy industrial sites in the 
city-used for steel manufacturing, railroad maintenance, and automotive 
repair; however, the general area had become blighted and contained a 
mixture of incompatible residential, commercial, and industrial uses. 
Because of the site's industrial nature, hazardous substances were 
found on some areas of the business park, including lead and petroleum 
soil contaminates, underground storage tanks, and asbestos containing 
materials. The city of Atlanta received $1 million from the Department 
of Housing and Urban Development Brownfield Economic Development 
Initiative/Section 108 Program to remediate hazardous substances from 
the business park. However, asbestos containing materials also were 
suspected in the structures located in the path of the roadway to be 
constructed as part of the EDA grant. As a result, EDA added a special 
condition to the grant, which stipulated that the recipient shall 
furnish evidence satisfactory to the government that all remediation of 
hazardous materials within the rights-of-way of the EDA construction 
elements shall be conducted in accordance with federal and state 
regulations prior to the invitation for bids. An environmental 
remediation firm conducted the removal and disposal of these materials 
at a cost of $127,609. EDA's share of the remediation costs totaled 
$82,079 or about 7 percent of EDA's grant. The six structures within 
the redeveloped 260,000 square-foot business park are currently 71 
percent leased. One of the largest tenants is a technical college that 
offers programs and career training for design, business, and 
information technology. According to EDA, $11.5 million of private 
sector dollars has been invested in the business park as a result of 
this project. 

Sources: GAO (analysis); EDA (photos). 

Figure 6: EDA Grant to Philadelphia Authority for Industrial 
Development: 

[See PDF for images] 

[End of figures] 

In 1999, EDA provided $5 million to the Philadelphia Authority for 
Industrial Development for infrastructure improvements to convert the 
former Philadelphia Naval Base, including the naval station and 
shipyard, into the Philadelphia Naval Business Center (PNBC). The 
infrastructure improvements included the demolition of existing 
structures, repair and improvements to the main gate, and landscaping 
and other aesthetic improvements within the business center. EDA’s 
grant covered about 50 percent of the cost of the infrastructure 
improvements, which were completed in 2004. This grant was one of three 
construction grants that EDA made under its Economic Adjustment Defense 
Conversion Program for the development of the PNBC. 

The naval station and shipyard closed in 1996, on the basis of a 
recommendation by the Base Closure and Realignment Commission (BRAC). 
As a result of the closure, the city of Philadelphia lost more than 
6,000 civilian jobs. The total job loss was estimated at more than 
18,000, including directly and indirectly associated activities, which 
translated into the annual loss of more than $180 million in direct 
income and $56 million in state and local government revenues. The city 
developed a comprehensive strategy to convert the former naval station 
and shipyard, which comprised more than 1,100 acres of land, to 
civilian use as part of a base reuse plan. The strategy called for the 
PNBC to be comprised of four sectors—the shipyard sector, targeted to 
ship building and repair businesses; the industrial park sector, 
targeted to medium- and small-sized manufacturers; the commerce center 
sector, targeted to research and development businesses, as well as 
light industrial and office businesses; and the distribution sector, 
targeted to inter-modal transfer terminal and warehousing facilities. 
The infrastructure improvements funded by this grant were located 
primarily in the commerce center sector of the PNBC. 

The Department of the Navy performed extensive cleanup of hazardous 
contaminated areas at the project site. However, per DOD BRAC policy, 
buildings scheduled for demolition in the city’s base reuse plan did 
not require mitigation by the Navy. Remediation activities conducted as 
part of the infrastructure improvements included the removal and 
disposal of asbestos containing materials, lead-based paint, and 
polychlorinated biphenyl (PCB) material at a cost of $2.9 million. 
EDA’s share of the remediation costs totaled about $1.5 million or 
about 29 percent of EDA’s grant. According to EDA, an estimated 800 
permanent jobs and $5 million of private sector investment are expected 
to be created at the PNBC as a result of this project. 

Sources: GAO (analysis); EDA (photos). 

Figure 7: EDA Grant to City of Chester, Chester, Pennsylvania: 

[See PDF for images] 

[End of figures] 

During the early part of the 20th century, the city of Chester, PA, 
located 15 miles south of Philadelphia, was recognized as one of the 
nation's greatest shipbuilding areas. Chester's population peaked in 
the 1950's at 66,000, but it has since shrunk by over 44 percent, as 
closings in industries along the waterfront led to declines in other 
sectors of the local economy. 

In 2003, EDA provided $2.5 million to the city for infrastructure 
improvements for redevelopment of a 90 acre brownfield site along the 
Delaware River. Known as the "Wharf at Rivertown," the redevelopment 
project will convert the former Chester Power Station into 400,000 
square feet of office space and develop the riverfront property, 
including a riverwalk, for recreational uses. Preferred Real Estate 
Investments (PREI), a private sector developer, committed over $40 
million to renovate the former power station under the condition that 
the surrounding public infrastructure be redeveloped. EDA's grant will 
cover about 80 percent of the cost of the infrastructure improvements, 
including site clearance and preparation for the construction of a 
parking lot and the riverwalk. The city anticipates that the riverwalk 
will be a focal point of its revitalization efforts. The city also 
received a $200,000 grant from the Commonwealth of Pennsylvania, a $1.4 
million Brownfield Economic Development Initiative (BEDI) grant, and a 
$3 million Section 108 loan guarantee through the Department of Housing 
and Urban Development (HUD) to help cover the cost of revitalizing the 
area. 

PECO Energy Company stopped generating power at the Chester Station in 
1982 and the riverfront site has been vacant ever since. In 1993, EPA 
required PECO, the former owner, to begin site remediation. Under 
agreements between the Exelon Corporation (formerly PECO Energy 
Company) and PREI, Exelon/PECO expended over $5.75 million in 
environmental assessment, investigation and site remediation, and has 
budgeted another $5 million to complete the environmental remediation 
and $6.7 million for additional asbestos abatement, if needed. EDA has 
not contributed any funding for remediation at this brownfield site. 

The applicant estimates that phase 1 of the "Wharf at Rivertown" will 
create 1,000 new jobs, and provide private-sector investments in the 
amount of $40 million. However, the U.S. Department of Commerce 
projects that the site could create between 2,000 to 4,000 new jobs, 
producing $95 million in wages. Three tenants have already signed 
leases to occupy over 210,000 square feet of space in the converted 
power station. Completion of the project is currently planned for March 
2006. 

Sources: GAO (analysis); EDA (photos). 

Figure 8: EDA Grants to Greater Kelly Development Corporation, San 
Antonio, Texas: 

[See PDF for images] 

[End of figures] 

In 1998, EDA administered two Defense Economic Conversion Assistance 
grants that were awarded to the Greater Kelly Development Corporation, 
a local redevelopment authority that oversees the conversion of Kelly 
Air Force Base. The base was officially closed by the Air Force in July 
2001, and the Greater Kelly Development Corporation has been 
transforming the base into KellyUSA, a multiuse airport and rail-
serviced business park. In the first award EDA contributed $1 million 
to a $5.65 million dollar project to build a new administration 
building at the complex entrance equipped with telecommunications 
infrastructure to attract a major telecommunications company and other 
local companies to help replace jobs lost due to the base closing. The 
second award was a direct grant of $2 million to help pay for concrete 
paving and replacement on the ramp (tarmac) where major aviation repair 
contractors, including Boeing and Lockheed, had leased space to perform 
aircraft maintenance. The Greater Kelly Development Corporation 
contributed an additional $700,000 to the second grant. 

KellyUSA is located approximately 5 miles southwest of downtown San 
Antonio, the eighth largest city in the country. When Kelly AFB was 
selected to close by the BRAC in 1995, 19,500 jobs were at risk. The 
application for the administration building grant stated that the 
project would replace 500 of the jobs that were lost due to the base 
closing, primarily made up of telecommunications jobs requiring 
bilingual employees earning an average salary of just under $23,000. 
The application for the ramp repair contract stated that the grant 
would help retain the 850 employees of the major aviation repair 
contractors that were considering moving to Georgia if the repairs 
necessary for base reuse and development, including the ramp/tarmac 
repairs, were not made. 

The major environmental concern on the former air force base is a 
contaminated groundwater plume, primarily made up of residues from the 
chemicals that were used to clean the engines parts over the prior 
decades at Kelly Air Force Base. However, the plume does not extend 
below either the area where the administration building was constructed 
or where the ramp repairs were made. Both projects had issues with 
contaminated soil, but the Air Force’s environmental solution of 
natural attenuation, i.e., leaving it in place, was accepted by the 
state environmental agency for both projects. The project files showed 
that in the event contractors found environmentally suspect soil not 
previously sampled that required remediation, the soil would be moved 
off-site by the Air Force and replaced with clean fill. Neither EDA 
grant paid for any remediation expenses. 

Since the EDA grants were made, most of the land not affected by the 
groundwater plume, including the Administration Building property and 
the airstrip ramp, have been turned over to the Greater Kelly 
Development Corporation. KellyUSA reports that as of September 2004, 63 
tenants had leased 8.2 million square feet of space, 5,140 jobs with 
salaries averaging over $38,000 per year had been created, and 7,221 
Air Force jobs were retained. 

Source: GAO. 

Figure 9: EDA Grant to FAME Assistance Corporation, Los Angeles, 
California: 

[See PDF for images] 

[End of figures] 

In 1998, EDA provided a $1.8 million grant to the FAME Assistance 
Corporation (FAC), a nonprofit corporation affiliated with the Los 
Angeles's oldest Black church, to renovate a four-story building as a 
business incubator. The building, an 80-year old brick structure once 
owned by Pacific Bell, contained asbestos, lead-based paint, and 
underground fuel storage tanks that needed to be remediated. EDA's 
grant covered $120,000 of the asbestos and lead paint remediation. 
Remediation of the underground storage tanks was done prior to EDA's 
grant, according to a plan approved by the Los Angeles Fire Department. 
State and local statutes comparable to federal regulations governed the 
remediation processes for the asbestos and lead-based paint. 

The completed incubator, which is based on a business model developed 
by the Enterprise Center in Philadelphia, is intended to serve inner-
city minority entrepreneurs who lack access to capital and have a 
demonstrated pattern of unmet need for loans and equity investments. 
FAC launched the incubator along with business training and technical 
assistance programs in the spring of 2002. Since then, the completed 
incubator has been supporting start-up businesses in the entertainment 
industry, including film, video, and animation production companies. 
The start-ups are expected to create an estimated 220 jobs that will 
give the unemployed and underemployed opportunities in an area that had 
lost many defense jobs. FAC has received funds and technical expertise 
from the Walt Disney Company and the ARCO Foundation and has started a 
venture capital fund that will invest up to $1 million in the 
incubator's start-ups. 

Sources: GAO (analysis); FAME Assistance Corporation (photos). 

[End of section] 

Appendix III: Comments from Department of Commerce: 

THE DEPUTY SECRETARY OF COMMERCE: 
WASHINGTON, D.C. 20230: 

October 17, 2005: 

Mr. William B. Shear: 
Director, Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
441 G Street, NW, Room 2A10: 
WASHINGTON, D.C. 20548: 

Dear Mr. Shear: 

Thank you for the opportunity to comment on the draft report entitled 
Economic Development Administration: Remediation Activities Account for 
a Small Percentage of Total Brown field Grant Funding (GAO-06-7). 

We have reviewed the draft report and found that it accurately reflects 
the Economic Development Administration's important role supporting 
national brownfields revitalization projects and its finding of 
incidental remediation activities as a small percentage thereof. We 
have appended minor technical comments and clarifications for your 
consideration. 

Again, thank you for the opportunity to review the draft report and for 
your interest in the programs of the Department of Commerce. If you 
have any questions, please contact me or Sandy K. Baruah, Acting 
Assistant Secretary for Economic Development, at (202) 482-5081. 

Sincerely, 

Signed by: 

David A. Sampson: 

Enclosure: 

Technical Comments/Clarifications: 

1. GAO Recommendation #1-Require all EDA regional offices to use 
special conditions concernine the remediation of hazardous substances: 
Environmental special conditions (i) are not required by law or 
regulations, (ii) may not be appropriate in all circumstances, and 
(iii) are not outcome determinative where compliance with federal, 
state and local environmental laws is concerned. Thus, while EDA 
believes that the use of special conditions generally promotes 
efficiency by drawing attention to environmental 
restrictions/requirements concerning remediation of hazardous 
substances, EDA disagrees with GAO's "blanket" recommendation that all 
EDA regional offices use special conditions where a project calls for 
the remediation of hazardous substances. 

Section 612 of PWEDA and the regulations promulgated thereunder require 
all EDA projects (including those that involve remediation) to be 
conducted in compliance with all applicable federal, state and local 
laws and standards. EDA does not need a special condition to enforce 
compliance with its statute and regulations and adding a special 
condition does not change a grantee's (and EDA's) overarching 
obligation to ensure that a project complies with all applicable 
environmental laws and requirements. Accordingly, while useful in 
certain situations, the use of special conditions is not outcome 
determinative where compliance with environmental requirements is 
concerned. 

2. GAO Recommendation #2 - Ensure that EDA staff verify the estimated 
fobs and private sector investment for proposed protects: This 
recommendation stems from the finding that "the (GPRA] reported jobs 
created or retained differed substantially from the initial project 
estimates for more than half of the grants" and a similar finding with 
respect to private investment values. Specifically, GAO finds low 
correlation between the initial estimates and the 3-and 6-year GPRA 
reports. The errors are both high and low. Either can produce poor 
correlation. 

As GAO acknowledges, the comparison is not exact because the initial 
estimates refer to project maturity values (i.e., 9-year values), not 
the interim values (i.e., 3-and 6-year values) available at this time. 
Therefore, one would expect the correlations to be poor. Given these 
facts, conclusions concerning correlations between final (9-year) 
values and initial estimates, as implied by the GAO language, are not 
warranted. 

GAO presents tables comparing 3-and 6-year values with initial 
estimates. Some reported values are substantially higher than the 
initial forecasts, others considerably lower. Even if these were final 
values, variation is to be expected. Any forecast is subject to error. 
Ford Motor Company's original sales estimates for the Mustang and Edsel 
varied considerably from the actual outcomes, and in opposite 
directions. 

Finally, as GAO concedes, the findings are based on a very small sub- 
sample of grants. In the case of the 6-year private investment values 
only 6 projects are considered, for jobs only 12. Given such a small 
sample, no conclusions can be reached regarding EDA brownfield projects 
or EDA investments more generally, as the recommendation appears to 
imply. 

3. Draft GAO Report. Pace 3. Second Bullet Point (Economic Adiustment 
Program): 

A. Remove "foreign trade competition that causes" from the third 
sentence. The sentence should read: "Adverse economic impacts may 
result from the actual or threatened closure of a principal industry or 
company, a catastrophic natural or terrorist disaster, or a military 
base closure." This change is necessary as adverse economic impacts 
result from a myriad of circumstances, including but not limited to an 
increase in foreign trade competition. As currently drafted, the report 
indicates that foreign trade competition is the cause of the actual or 
threatened closure of a principal industry or company..; OR: 

B. Remove "that causes" from the third sentence so that the sentence 
reads: "Adverse economic impacts may result from foreign trade 
competition, the actual or threatened closure of a principal industry 
or company, a catastrophic natural or terrorist disaster, or a military 
base closure." This alternative makes clear that foreign trade 
competition is one of many events that cause adverse economic 
conditions. See Section 2119(c) of PWEDA. 

4. Draft GAO Report. Page 6. Second Sentence in the first Paragraph: 
Use of the phrase "high-skill, high-wage" jobs should be modified 
throughout the entire report to read "higher-skill, higher-wage" jobs. 

5. Draft GAO Report, Page 9, Last Full Sentence in the Last Paragraph: 
"Before receiving a grant, an entity must submit a preapplication 
proposal to an EDA Economic Development Representative responsible for 
that area." This is not correct. Strike "Economic Development 
Representative" after "EDA," and replace with "regional office." 

6. Draft GAO Report, Page 9. Last Sentence in the Last Paragraph: 
Rewrite this sentence to read, "After preliminary reviews, each 
preapplication proposal is considered by the regional Investment Review 
Committee, which consists of the Division Chiefs and other regional 
office staff." The Regional Director is not on the IRC, and in some 
regional offices the Regional Counsel serves an advisory rather than a 
full voting role on the IRC. 

7. Draft GAO Report, Page 16. Last Sentence in the First Paragraph: (i) 
add "with transferred funding" after "funded," (ii) add "and pursuant 
to EDA's MOU with the Department of Defense Office of Economic 
Adjustment," after "program," and (iii) replace "less control with how 
grant funds are spent" with "little or no upfront decisional authority 
over those projects selected for funding." The sentence should read: 
"For projects funded with transferred funding under this program, and 
pursuant to EDA's MOU with the Department of Defense Office of Economic 
Adjustment, EDA does not play a major role in determining the 
developmental activities to be performed and has little or no 
decisional authority over those projects selected for funding." 

The majority of EDA projects under the Defense Adjustment Program are 
undertaken with transferred funding pursuant to EDA's MOU with the 
Department of Defense Office of Economic Adjustment. Often these 
projects are funded pursuant to a targeted DOD appropriation; DOD/OEA 
transfers funds to EDA, which is responsible for grant and project 
administration. Accordingly, EDA is generally left with little or no 
decisional discretion as to which projects receive funding, although as 
the project administrator EDA does control the disbursement of funds 
for eligible expenses. The recommended change makes clear to the reader 
this very important distinction. Without the change, the reader may 
incorrectly understand that EDA (as the project administrator) does not 
exercise adequate fiscal and administrative controls over project 
disbursements. 

8. Draft GAO Report, Page 22, First Bullet: Another occurrence of the 
phrase "high-skill, high-wage" jobs that should be modified throughout 
the entire report to read "higher-skill, higher-wage" jobs. 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

William B. Shear, (202) 512-4325, [Hyperlink, shearw@gao.gov]. 

Staff Acknowledgments: 

In addition to those named above, Andy Finkel, Assistant Director; 
Marshall Hamlett, Analyst in Charge; Carolyn Boyce; Mark Braza; Tania 
Calhoun; Emily Chalmers; Marc Molino; Roberto Piñero; George Quinn; 
Mark Ramage; and Rhonda Rose made key contributions to this report. 

(250231): 

FOOTNOTES 

[1] Pub. L. No. 108-373, § 603, 118 Stat. 1756, 1769-1770 (2004). 

[2] According to EDA, distress may exist in a variety of forms, 
including but not limited to the following: high levels of 
unemployment, low-income levels, large concentrations of low-income 
families, significant declines in per capita income, substantial loss 
of population because of the lack of employment opportunities, large 
numbers (or high rates) of business failures, sudden major layoffs or 
plant closures, trade impacts, military base closures, natural or other 
major disasters, or depletion of natural resources. 

[3] Sec. 42 U.S.C. § 9601(39)(A). 

[4] According to EDA, regional office staff use the basic CERCLA 
definition and professional judgment in coding grants as brownfield 
sites. As a result, our estimates regarding the number of brownfield 
sites where remediation activities were conducted and the dollar amount 
and percentage of EDA funding used for remediation activities might be 
underestimated if EDA staff did not properly code certain grants as 
brownfield sites. 

[5] Estimates based on our sample of EDA grants are subject to sampling 
error. Different results could have been obtained with a different 
sample. Unless otherwise noted, all percentage estimates in this report 
have 95 percent confidence intervals of plus/minus 8 percentage points 
or less. Other estimates, such as dollar estimates, have 95 percent 
confidence intervals that are within plus/minus 50 percent of the 
estimate itself. Appendix I contains additional information on the 
sample design and reliability of estimates. 

[6] Public Works and Economic Development Act of 1965, Pub. L. No. 89- 
136, 79 Stat. 552 (1965) codified at 42 U.S.C. § 3121 et seq. 

[7] For example, EDA has also developed special initiative codes for 
eco-tourism, enhanced regional competitiveness, the Alaska fisheries 
disaster of 1998, and Hurricane Floyd in 2001. 

[8] 42 U.S.C. § 3142. 

[9] Clean Air Act, Pub. L. No. 88-206, as amended, codified at 42 
U.S.C. § 7401 et seq. and Toxic Substances Control Act, Pub. L. No. 94- 
469, as amended, codified at 15 U.S.C. § 2601 et seq. 

[10] NEPA, Pub. L. No. 91-190, as amended, codified at U.S.C. §§ 4321 
et seq. 

[11] These statutes and regulations include, among others, CERCLA (Pub. 
L. No. 95-510, as amended, codified at 42 U.S.C. §§ 9601 et seq.); the 
Safe Drinking Water Act of 1974 (Pub. L. No. 92-523, as amended, 
codified at 42 U.S.C. §§ 300f et seq.); the Clean Air Act (Pub. L. No. 
88-206, as amended, codified at 42 U.S.C. §§ 7401 et seq.); and the 
Resource Conservation and Recovery Act of 1976 (RCRA) (Pub. L. No. 94- 
580, as amended, codified at 42 U.S.C. §§ 6901 et seq.) 

[12] A second grant for this project was made in 2003 to cover asbestos 
remediation costs of which EDA funded $454,055 or 60 percent of the 
total estimated costs. 

[13] Eligible applicants for, and eligible recipients of, EDA financial 
assistance include Economic Development Districts; Indian tribes or 
consortia of Indian tribes; states; cities or other political 
subdivisions; institutions of higher education or consortia of 
institutions of higher education; public or private nonprofit 
organizations or associations acting in cooperation with officials of a 
political subdivision of a state. EDA is not authorized to provide 
grants directly to individuals or to other for-profit entities seeking 
to start or expand a business. 

[14] A special need can include substantial outmigration or population 
loss; underemployment (the employment of workers at less than full time 
or at less skilled tasks than their training and abilities permit); 
military base closures or realignments, defense contractor reductions- 
in-force, or DOE defense-related funding reductions; natural or other 
major disasters or emergencies; extraordinary depletion of natural 
resources; closure or restructuring of industrial firms that are 
essential to area economies; or destructive impacts of foreign trade. 

[15] GAO, Economic Development: Limited Information Exists on the 
Impact of Assistance Provided by Three Agencies, GAO/RCED 96-103, 
(Washington, D.C.: Apr. 3, 1996) and Economic Development: Observations 
Regarding the Economic Development Administration's May 1998 Final 
Report on Its Public Works Program, GAO/RCED 99-11R (Washington, D.C.: 
Mar. 23, 1999). 

[16] CERCLA defines brownfield sites as areas where redevelopment or 
reuse may be complicated by real or perceived environmental 
contamination but generally excludes the following: (1) sites that are 
on EPA's National Priorities List or subject to environmental 
enforcement actions; (2) sites under the jurisdiction, custody, or 
control of the federal government; (3) sites contaminated with 
polychlorinated biphenyls that are subject to remediation under TSCA; 
and (4) sites that have had cleanup activity funded by the Leaking 
Underground Storage Tank Trust Fund. 

[17] To determine the amount of EDA funding used for remediation 
activities for each grant, we multiplied the total cost of any 
remediation activities conducted by EDA's share of the total project 
costs. For a small number of grants in our sample, the project file did 
not contain documentation that enabled us to determine actual 
remediation costs. For example, these costs were included on invoices 
submitted by contractors as part of budget line items, such as 
demolition or construction. For grants for which actual remediation 
costs were not available, we used estimates provided by EDA regional 
office staff. 

[18] GAO/RCED-96-103, GAO/RCED-99-11R. 

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