THE WHITE HOUSE
Office of the Press Secretary (Secaucus, New Jersey)
PRESS BRIEFING BY DEPUTY TREASURY SECRETARY LARRY SUMMERS AND EPA ADMINISTRATOR CAROL BROWNER Aboard Air Force One En Route Newark, New Jersey
MR. MCCURRY: Carol's going to talk a little bit about an overview of what the President is going to do today, and Larry can answer specifically about some of the taxes.
ADMINISTRATOR BROWNER: The President's going to be talking very generally about his commitment to strong public health and environmental protection. He'll be comparing his record to the record of the Congress of what we've seen over the last two years in terms of bills that would literally take us back, would diminish EPA's ability to set strong public health standards for clean air, clean water, food safety.
He'll be specifically talking about Superfund. We're going to visit a Superfund site first; that will be the first stop, and what you're going to see there is far too common across this country. It's in an urbanized area, there are children living not too far away. There's an elementary school that -- I've been to this site a couple of years ago, and I think you can actually see the elementary school. This is a site that EPA has been dealing with for sometime. The responsible party, the polluter who caused the problem is no longer financially viable, so we are paying for the cleanup.
Unfortunately, because of the budget cuts at EPA, we are one of those agencies that still doesn't have a budget -- we've been shut down, we've been reopened, we're functioning under a continuing resolution, which is about a 25 percent cut in Superfund -- because of that, we've had to stop cleanup activities at this site. There are approximately 70 sites where we're no longer working right now because of the budget issues that we've been dealing with.
Q What was your budget then if the President had signed the Republican budget? The one that was --
ADMINISTRATOR BROWNER: The one he vetoed? That was a 25 percent cut from that the President had asked for.
Q So the CR funding is the same as what would have been if he had signed the Republican one?
ADMINISTRATOR BROWNER: Right. What happened to EPA in the budget scenario is that under the first CR, we had the House -- which was a very bad level for us. In this last CR, we were brought up to the conference level, which is still very, very bad; it is what the President vetoed. So we've had a lot of problems. We've probably been one of the more heavily impacted of the agencies and departments in terms of doing our job.
Q What is -- is that -- first level, 25 percent?
ADMINISTRATOR BROWNER: The conference level is the 22 percent cut from what the President asked for across the agency -- 25 percent in Superfund. It is a 14 percent cut off of the '95 budget levels at EPA. In addition to Superfund taking a very large cut, our enforcement program takes a very large cut. We're down almost 40 percent in terms of the number of inspections that we do of industrial facilities; again, because of the shutdown and the dollar reductions.
Q -- you said you had to stop work --
ADMINISTRATOR BROWNER: Right, and let me explain. There are sort of two general types of sites that we deal with in the Superfund program. The worst are on the national priority list -- that's approximately 1300 sites. This site you're going to today is a national priority site. The work that we've stopped -- when I say the 70 -- those are what we refer to as the worst sites -- the MPL -- they are part of that 1300.
Now, under this administration under the President's leadership, what we have been doing in the Superfund program is fundamentally changing how the program operates. You might remember, this is a program that was started by a woman who eventually went to jail, it hasn't had perhaps some of the support that one would like for your toxic waste cleanup program. It's had its share of problems. The President and I both agreed we wanted to make changes in the program. I remember he spoke about Superfund in his first State of the Union Address.
And so, I have been working through a series of administrative changes. And the Superfund program today is a very different program than it was three years ago. Just as an example, we have cleaned up more of the big sites in the last three years under this administration than in the first 12 years of the program.
One of the big criticisms of Superfund been not what has happens at the biggest sites, but what happens at smaller sites, what we refer to as brown fields. And there are literally maybe as many as 100,000 or more of these sites across the country. They're in D.C. -- I mean, you can drive through any downtown area where you once would have had industrial areas; they have gone out of business. Buildings are left abandoned, you know, a block or two is just sort of fenced off, not available for redevelopment.
Now, the level of contamination at these brown field sites are not something we are particularly concerned with. I mean, it's contaminated and
it needs to be cleaned up, but it's not in the top 1,000, 1,300 worse sites. So we began a program of saying, how can we bring developers and banks to these sites, how can we regenerate these communities.
The first thing I did under our Brown Fields Action Agenda, and this is what the President will put the cap on, if you will, today -- the final and most important step -- the first thing I did was take 27,000 of these sites off our master list. We were keeping a master list of Superfund sites. Someone would call us up and say, hey, we think there's a Superfund site, we'd stick it on the master list, we'd go out, we'd find out whether or not it was a really bad situation -- we would do an emergency removal if there were barrels there, we'd deal with that, and then we would decide how to proceed. We kept a site on the master list even if we were never going back again, and there was a real stigma with being on our master list. It was as if -- you know, people didn't believe we were coming back, EPA thinks there's something wrong, I don't want to develop it and I don't want to get involved in the ownership. So I de-listed 27,000 sites to remove the stigma, number one.
Number two, I figured out a way to say to the banks, to the developers, look, if you're willing to come in, do the cleanup that may be necessary, redevelop the site, I'll make sure you don't get caught in the broader Superfund net, which everyone is so worried about -- the liability net that you hear about and you'll hear about today, no doubt.
And, in fact, we took a position that we could do this under current law. Unfortunately, we lost in the Supreme Court, so now we've developed a package of legal documents, and that developers are now willing to come in and actually go ahead and take ownership of these sites.
We also have our Brown Fields Pilot Project -- it's 40 sites across the country that we began this effort at to see what is the best way to revitalize these communities, what is the best way to bring hope back, and each of them is a different story, but an amazing story. In Cleveland -- I'll just give you one example -- one of our first sites for our pilot projects, there are now 170 people employed where there had been none previously. I visited a site in Richmond where, because of this brown fields activity, housing was being restored, another brown field site was about to be cleaned up.
I mean, our pilot projects are very small; they're $200,000. The money doesn't really go to cleanup, it goes to other activities.
Q Each pilot project gets $200,000?
ADMINISTRATOR BROWNER: Yes. That's all they get from us.
Q And what does it go to?
ADMINISTRATOR BROWNER: And what they do is, for example, every city has done something different. In one instance, they've been able to come up with new technologies for doing this kind of cleanup. In another case, they used it to bring the bankers and the developers in to leverage money for redevelopment of the area.
What we're doing is, we're taking a site that is not paying any taxes, that has all of the services running to it, but it's fenced off. We're taking down the fence, we're cleaning it up, we're reestablishing a tax base. Business comes in, now they're going to be paying taxes, they employ people, and it's working quite successfully.
The final thing -- and this is what Larry can speak to in more detail and this is what the President will announce today -- he mentioned this in his State of the Union -- the final thing is to say beyond the pilot project, what was the best way to get as many of the developers in this country, as many of the banks interested in cleaning up these sites, lending money coming back in, and it is a tax incentive package that will be announced today. Essentially, what it does is, it allows the cleanup costs, the cost of coming in and doing the cleanup, to be deducted, which is an incentive.
I talked to about, I don't know, more than a half a dozen mayors of large cities on Friday. They were all thrilled. They thought this would leverage a tremendous amount of activity in their community. I think we estimate -- Treasury estimates it's almost a $2-billion tax -- how do you describe it -- what's the word you use? Well, it's in the balanced budget -- that you -- that will leverage about $10 billion in activities.
Q Where does that money come from? We're having a hard time educating kids --
DEPUTY SECRETARY SUMMERS: Let me say a couple of things about the incentive, and then I'll answer that question. A central theme of the administration's environmental policy and economic policy has been promoting the environment and helping the economy go together, and that they go together particularly in the areas of the country, both the inner cities and the rural areas that have traditionally been depressed.
Here, we have a case where brown fields -- areas which are polluted in one way or another because of past economic activity are an important impediment to economic development. They sit empty, they don't provide cities with a tax base, they're not in a form where people are in a position to go directly into business in them. Cleaning them up is good environmental policy and it's good economic policy and it's good urban policy which is why it's a particular interest of Secretary Rubin's.
What this incentive does is to change the current practice which is that if you buy a plot of land and you want to clean it up and develop it for a new business, you can clean it up. But you are only permitted to deduct the cost of cleaning it up over a period of five to 10 years, even though you have to pay the whole cost up front before you engage in the business.
By allowing the cost of purchasing that to be written off immediately, the capital cost of that improvement is cut in half. This incentive will be eligible for some 30,000 sites, all in depressed areas. There are a set of criteria, it is for census tracts where 20 percent or more of the population is in poverty, or industrial and commercial areas that adjoin those census tracts, or for the administration's enterprise and empowerment zones, and for the pilot projects that the EPA has already identified.
But essentially, it's poor areas, 20 percent or more in poverty -- they have these brown fields.
Q So it's not a new incentive, it just allows them to do the deduction a heck of a lot quicker.
DEPUTY SECRETARY SUMMERS: That's the standard -- it is a new incentive because it permits a cost that previously could have been deducted over time to be expensed, so it's like in the other contexts, accelerated depreciation --
Q Let me just make sure I understand this -- this was an incentive they could have taken before, but it's taken them five years to be able to get the full benefit; now, they can get it in one year?
ADMINISTRATOR BROWNER: That's right. But is also available to more people.
Q So what do they deduct, the cost of cleanup?
DEPUTY SECRETARY SUMMERS: Which means that more people will want it. It means that cities that have this land on their tax base will have a much easier time unloading this land to developers, which is one of the reasons why it is so important to the mayors.
ADMINISTRATOR BROWNER: This was the number one priority for the mayors, because they look at these sites and they see this idle land and they realize they're providing services and they're getting no return on the property. There's no tax there being paid in terms of revenues.
Q Priority number one measured against what -- other things that you're working on?
DEPUTY SECRETARY SUMMERS: Other taxes.
ADMINISTRATOR BROWNER: Other taxes.
Q How did you measure that?
ADMINISTRATOR BROWNER: The mayors came to us and said, this is what we want.
DEPUTY SECRETARY SUMMERS: We spoke to the mayors about agendas and
tax concerns, and this was their number one. And it's because they
recognized this is really bubble-up
development. It's $400,000 a site. This is not for the large developers to build malls, this is for people who are going to build a strip of small stores or a warehouse or a small apartment building.
Q How did you come up with the $400,000 per site? That's what you expect the average is going to be?
DEPUTY SECRETARY SUMMERS: That's what we expect the average cleanup cost to be.
Q Does this take effect immediately?
DEPUTY SECRETARY SUMMERS: This needs legislation and it will be contained in the President's budget when it's released on March 18th. The President's budget will, of course, be a balanced budget, so there's no specific pay-for, but it's connected to the full set of policies for the balanced budget.
Q How much did you estimate --
DEPUTY SECRETARY SUMMERS: Two billion dollars over seven years. But that $2 billion over seven years in lost revenue will be associated with -- will leverage $10 billion in cleanup effort on these brown field sites.
ADMINISTRATOR BROWNER: There's another reason the mayors were particularly interested in this is, what we've seen increasingly is what we call "green field developments." So, rather than coming back into the urban centers and using the land that's available, you were going out to -- developers were going out into green spaces. This brings them back. In many communities, you'll see people, developers who previously weren't interested coming back into the inner city into the urbanized area rather than destroying a green field.
Q Let me go back to your point. Why would it leverage much more money than the $2 billion -- if all of their cleanup is deductible, why would $2 billion leverage $10 billion in cleanup?
DEPUTY SECRETARY SUMMERS: Two reasons. One is, if I do $1,000 worth of cleanup and it's deductible, that only costs the government my tax rate, which is 34 percent. So $1,000 of cleanup which would only cost the government the corporate tax rate, which is 35 percent, is the first part of the answer to the question.
The second part is that because you will stimulate some of these projects to be done in a more efficient way because the properties will be sold -- and that's what takes from 3-to-1 from 5-to-1.
ADMINISTRATOR BROWNER: A lot of these properties are owned by cities right now, the party who caused the contamination has long since gone out of business, they've disappeared, and so they're sitting on the city's rolls. This will allow the cities to sell them. There will be an interest now in a developer actually coming in, purchasing it, and they can usually get it at a fairly good price, then having an agreement with the city to undertake the cleanup and the redevelopment of the site, they benefit they get, obviously --
Q I realize you said that the $2 billion was going to be part of the
President's budget presented on March 18, but where is the $2 billion going to come from, and I realize that's going to be up to the balanced budget plan, but where do you come up with the $2 billion? Obviously, you're going to have to come up with some kind of money to offset this.
DEPUTY SECRETARY SUMMERS: Well, but there are a lot of tax provisions and there are a lot of spending provisions in the President's budget. So there's no one pay-for that is specifically identified with this step.
ADMINISTRATOR BROWNER: It's in the whole budget.
DEPUTY SECRETARY SUMMERS: It's in the whole budget, which is balanced.
ADMINISTRATOR BROWNER: Let me say just one last thing. We're not going to a brown field site, just so you don't get confused. We're going to an actual Superfund site. It is one of the 1,300 worse in the country. We're not currently working on it because of the EPA budget cuts.
Q Why is that? Why does -- choose --
ADMINISTRATOR BROWNER: We had a lengthy process we went through in deciding which sites we would have to shut down because of budget cuts. We can explain it to you -- it was risk-based, health-based -- I mean, it's a complicated process.
What's unfortunate about this site is we have been working out there, we were very close to being done, and now, unfortunately, we have to shut it down. The interesting thing about the site is, there were all these barrels out there, the barrels got removed -- you'll see it's sort of the final stages -- but in one of the barrels many years ago when we removed it, there was a body, and people have always wondered. (Laughter.)