Biggest Omnibus Bill Ever Boosts Investment in Brownfield Redevelopment, Infrastructure and Everything Else
Latest omnibus package has something to please everyone, more than doubles the EPA brownfield program and bumps up development investment across the board along with the biggest price tag in the history of big omnibus bills.
Updated and corrected: March 27, 2018.
This afternoon President Trump signed the Consolidated Appropriations Act of 2018, better known as the 2018 omnibus bill (PDF), into law. Like it’s large predecessor before, the 2018 omnibus bill is a massive smorgasbord of funding and policy changes reaching across all levels of government and to all corners of the country and beyond. Generally, omnibus bills are big deals in terms of both process and substance.
This omnibus is no exception. At 2,232 pages, this monster spending measure is stuffed to the brim. And at $1.3 trillion in total spending, it’s the largest omnibus funding bill in U.S. history.
Omnibus bills are becoming routine in Washington. In the first public BL forecast, we wrote that the Obama-Ryan $1.1 trillion omnibus bill passed in December 2015 was substantial enough to set the course for the entire next year—and it did, though markets were calmer then and the path of recovery more clear, so this omnibus bill may not figure as significantly in the overall macro picture as other potential intervening factors (e.g. trade war, rising interest rates, inflation). The last Trump-Ryan omnibus bill in May 2017 also cost more than a trillion bucks, held federal brownfield funding steady at $80 million (the same as in 2016) and even increased the Superfund line item by $7.5 million, but it was only supposed to last until September.
A few continuing resolutions (“CR snacks”) later—on the brink of another government shutdown at midnight—we finally have a full meal to sustain the workings of federal government. But President Trump was not happy to sign a second omnibus bill, vowing to “never sign another bill like this again” during the signing ceremony. “Nobody read it,” he said, after threatening to veto it this morning.
Fortunately, the vigilant and vital few did read it. BL among them. Our spot analysis is included below.
While the final package was slapped together rather quickly, this legislation cobbles together work ongoing in Washington for many years. There are many well considered and significant policy/program upgrades. So, beyond the record spending spread around to a surprising number of agencies and programs, the policy impact of this omnibus bill will be felt for many years to come.
The $1.3 trillion buffet bill rejects President Trump’s previous proposal to gut the Environmental Protection Agency (EPA) budget by ~1/3rd, which is a repeat of the same funding showdown last year when the President called for major EPA cuts and Congress balked with the omnibus preceding this one. Once again, lawmakers agreed on a bipartisan basis to maintain EPA appropriations at approximately the same allotment as the prior year—at just over $8 billion.
Beyond that, however, Congress did accept the administration’s recent embrace of renewed vigor in efforts to redeveloping brownfields, cleaning up Superfund sites and improving water infrastructure. All three focus areas are clear winners in an omnibus bill with few losers. It rejects many of the cuts proposed by the Trump administration’s prior budgetary proposals. To the contrary, lawmakers on Capitol Hill managed to discover a lot of ground where bipartisan consensus took root to support increased funding to priority national investments. The Clean Water and Drinking Water State Revolving Loan funds, for example, will receive $2.89 billion in funding.
“The American people support investments in clean air and water, public lands, parks, and the arts and humanities, which are vital to the health and well-being of our communities and our economy,” Sen. Tom Udall (N.M.), ranking member of the Appropriations Subcommittee on Interior, Environment and Related Agencies (responsible for EPA), said in a statement. “[W]e restored funding for the EPA, increased funding for the Land and Water Conservation Fund and the National Endowments for the Arts and Humanities, among other programs. And we added $1.9 billion in funding for water infrastructure and to complete badly needed maintenance and construction at parks, wildlife refuges, Tribal facilities and arts and cultural institutions.”
Funding highlights, by agency.
The resource-strapped National Park Service (NPS) will receive a boost of $255 million additional monies above FY17 levels, $185 million of which is targeted towards ameliorating a long backlog of deferred maintenance projects. Really just a small down payment on the estimated $18 billion NPS reports as needed for all deferred maintenance, the additional funding will patch some of the most dangerous conditions on park roads and other vital public NPS infrastructure. Overall, the omnibus bill grants $13.1 billion to the Department of the Interior including a $79 million spending bump for the Bureau of Land Management and $75 million more for the U.S. Fish and Wildlife Service.
At HUD, the Community Development Block Grant program will receive an allocation of $3.3 billion, an increase of $300 million from FY17. Tenant-based rental assistance will receive $22.01 billion or $1.72 billion more than last year.
The Treasury Department’s Community Development Financial Institutions Fund, recently nearly killed, will continue on with an additional $2 million in FY18 or $250 million total.
The Department of Energy (DOE) receives $34.5 billion, a large ~13% increase over the prior year. The $3.77 billion in additional public capital will fund a number of efforts seen as pivotal in this period of rapid technological revolution in the energy space. Increased DOE funding currently enjoys a high level of support by both Democrats and Republicans and the additional funding will go towards high priorities with broad economic and even national security implications, such as modernizing and hardening the nation’s energy infrastructure and research to guard the grid from physical and cyber attacks. The Office of Electricity Delivery and Reliability, which specifically focuses on improving the resilience of the country’s electrical infrastructure, will receive $248 million in total.
DOE’s office of Energy Efficiency and Renewable Energy receives $2.32 billion— or ~15% more than FY17. And the omnibus even increases funding for the highly successful, but much maligned Advanced Research Projects Agency-Energy (ARPA-E) to $353 million, also ~15% more than FY17. The program funds high risk, high reward technologies much like DOE’s 1703 and 1705 loan programs that produced large scandals such as solar panel maker Solyndra (which went bankrupt when the solar price war broke out (driven in part by dumping by China)) as well as substantial victories such as Tesla (which paid it’s DOE loans back early and triggered two hugely constructive electric car and battery technology races in the process).
ARPA-E maintains its popularity in part because it’s inexpensive. It costs roughly the same amount as the government invested in Solyndra in a single loan, but it’s funded hundreds of projects. The Trump administration has previously proposed eliminating the program that focuses on supporting cutting-edge energy technology research on high-risk energy technologies in both of its previous annual budget proposals. But despite occasional failures, funding these high-risk, early stage technologies, investment programs like sections 1703 and 1705 make taxpayers money. Return on investment, plus the positive ripple effects this type of lead or “seed” investment can have, was seemingly enough for Congress to increase its investment in ARPA-E. Solyndra may have failed, but enough of its program counterparts succeeded to keep the government in the black--and during that time solar prices came down by ~80% to the benefit of the entire economy.
Congress found similar bipartisan support for the Advanced Technology Vehicles Manufacturing Loan Program ($5 million) and the Innovative Technology Loan Guarantee program (for clean energy projects, $33 million). The Office of Science even receives a nearly 14% funding increase, to a total level of $6.26 billion—which finances the majority of our national laboratories and will certainly welcome the additional $869 million above FY17.
And in similarly pro-science steps, the budget for the National Oceanic and Atmospheric Administration was increased by $234 million. The National Weather Service was bumped up to nearly a $1 billion budget.
Potentially complicating the climate prediction business, the omnibus bill also allocates $727 million to the Office of Fossil Energy—~$59 million more than FY17—largely meant for investments in “clean coal” technologies, such as carbon capture.
Another old, but zero-carbon energy tech also got a bump: nuclear. The omnibus bill increases the budget for the Office of Nuclear Energy by $178 million over FY 2017 levels to $1.2 billion total. But the bill extends the bottle of nuclear waste storage by blocking DOE from restarting construction permitting for the Yucca Mountain nuclear storage site in the Nevada desert. Congress selected the site in 1987 to be the nation’s sole repository for high-level nuclear waste, but it has never followed through—leaving waste scattered around the country at various nuclear energy facilities.
Big brownfield reauthorization more than doubles funding
The last several Congressional sessions have worked seriously to reauthorize EPA’s brownfields program, including S. 1479, Brownfields Utilization, Investment, and Local Development Act of 2015, or 2015 BUILD Act, in the Senate co-sponsored Jim Inhofe (R-Okla.), Edward J. Markey (D-Mass.), Mike Rounds (R-S.D.), Cory Booker (D-N.J.) and Mike Crapo (R-Idaho). The House soon followed the BUILD Act with their own brownfield bill. Numerous other brownfield bills would follow. In November 2017, the House passed H.R. 3017, the Brownfields Enhancement, Economic Redevelopment Act of 2017, or 2017 Brownfield EERRA (“era”), co-sponsored by David McKinley (R-W.V.) Greg Walden (R-Oregon), Frank Pallone (D-N.J.), John Shimkus (R-Illinois), and Paul Tonko (D-NY) passed by a nearly unanimous vote of 409-8.
Today the omnibus codified into law concepts cooking in redevelopment policy circles these many years with specific compromises between S. 1479, H.R. 3017 and other attempted brownfield bills. The result is the Brownfields Utilization, Investment, and Local Development Act of 2018, or the 2018 BUILD Act. It more than doubles funding for the brownfield program, authorizing the appropriation of up to $200,000,000 for each fiscal year through 2023—plus an additional $50,000,000 for state response program funding in each of those fiscal years.
“With more than 450,000 Brownfield sites across the country, we have our work cut out for us, but the BUILD Act will help us make progress cleaning up these contaminated sites and breathing life into formerly degraded areas,” said Senator Carper in a statement. “Since the program began, Delaware has received nearly $11 million in grants, and we see the positive impact of this program in places like the revitalized riverfront in Wilmington, Delaware that continues to bring new jobs and spur economic growth across southern Wilmington. Instead of cutting funding and crippling this economic driver as President Trump’s budget proposed, the BUILD Act will help ensure that communities across the country have the tools they need to clean up contaminated sites and make our environment healthier and more productive like we have in Wilmington.”
“The inclusion of the bipartisan BUILD Act in the funding bill shows how Congress is working together to promote local economic development while cleaning up contaminated sites,” long time brownfield champion Senator Inhofe said. The former mayor added: “This program has already seen real results in Oklahoma and the reauthorization will continue to create jobs in communities across the country. Without the Brownfields program, Oklahoma City wouldn’t have Bricktown and Tulsa wouldn’t have the BOK Center; this program has been essential to our communities redeveloping their urban core. It’s reauthorization will ensure its continued success, particularly in Oklahoma’s more rural communities.”
“Improving Brownfields utilization is a bipartisan legislative bright spot, and the BUILD Act is critical to cleaning up the decades of abuse our lands have experienced at the hands of corporate polluters,” said Senator Markey. “Cleaning up Brownfield sites is a win-win for Massachusetts and the country, helping to create jobs and spur economic activity while revitalizing underutilized and polluted lands. I look forward to continuing to work with Senators Inhofe and Carper and all of my colleagues to ensure that these Brownfield sites will no longer be part of the problem, but a part of our economic solution.”
“I’m pleased that the Brownfields program was included in the omnibus bill to fund the government for the remainder of Fiscal Year 2018,” added Senator Rounds. “The Brownfields program provides funding for technical assistance grants to small communities and rural areas. This will be helpful to many communities in my home state of South Dakota.”
“Today marks a promising step forward in our efforts to restore the estimated 450,000 brownfield sites nationwide to productive uses,” said Senator Booker. “Both as mayor and senator, I’ve seen firsthand how the Brownfields program helps revitalize communities across New Jersey. I’m glad our bipartisan bill to reauthorize and improve this critical program is included in this spending package.” Senator Booker also recently introduced the groundbreaking Environmental Justice Act.
“The Brownfields program has been an incredibly important tool for protecting public health and spurring economic growth in New Jersey and throughout the country,” said Representative Frank Pallone (D- N.J.), a long-time advocate for the brownfield program and frequent co-sponsor on legislation, in a statement. “The Brownfields program is proof that having a strong economy and protecting the environment is not an ‘either-or’ issue. We can have both.”
“Brownfield grant funds have been used successfully across communities in Idaho to address potential environmental challenges as properties are expanded or redeveloped,” added Senator Crapo. “The BUILD Act improves this already successful program by increasing access for rural and small communities to apply for grants while providing much-needed certainty for long-term projects. Including the BUILD Act in this omnibus bill will enable communities to draft long-term plans and prioritize important projects.”
Takeaway Bullets from the 2018 BUILD Act
The 2018 BUILD Act:
Reauthorizes the Brownfield program at the same authorized funding level ($250 million per year) through fiscal year 2023.
Incentivizes clean energy development on brownfields and revitalization of waterfront sites.
Expands the eligibility for brownfield grants for nonprofit organizations to include certain nonprofit organizations, limited liability corporations, limited partnerships, and community development entities.
Increases the funding limit for remediation grants to $500,000 for each site, with some exceptions for higher funding, and authorizes multi-purpose grants up to $1 million, which provide greater certainty for long-term project financing.
Relieves state and local governments from liability under certain circumstances if they own a contaminated site but did not cause the contamination.
Allows eligible entities to use up to 5% of their Brownfields grant funding for administrative costs.
Authorizes up to $20,000 in technical assistance grants to eligible entities in small communities, Indian tribes, rural areas, and disadvantaged areas.
Through the omnibus bill, the 2018 BUILD Act sets a new, reliable course for the U.S. redevelopment space for the next 5 years at least. More than doubling down on a program proven to leverage nearly $18 for every public dollar invested seems like a prudent investment, especially at a time of such tremendous evolution in real estate. Brownfield redevelopments are perpetually starved for capital, so additional public seed funding (via site assessment, testing and cleanup) will help feed deals. And additional public capital is particularly helpful in the brownfield space because these grants help accomplish early-stage critical path due diligence tasks that make it possible for public and private sector dealmakers to then assemble normal capital stacks that would otherwise be unfinanceable.
As important, or perhaps more so, the 2018 BUILD Act adds greater flexibility for grant recipients by creating multi-purpose grants and adding a 5% allotment for administrative expenses (inevitable when administering a brownfield grant). This brownfield reauthorization also raises the per site financial limits on grants, which will help these grant awards meet the reality of higher costs in today’s market (from inflation, especially in construction, remediation, and skilled labor).
It will also provide special recognition for waterfront brownfield sites and renewable energy projects, with specific scoring advantages for such bluefield (defined in the 2018 BUILD Act as “a site adjacent to a body of water or a federally designated flood plain”) and brightfield sites. When originally proposed in the original 2015 BUILD Act, there were concerns that these preferences would diminish the pure competition of the brownfield program (long a source of pride in the agency). As BL noted at the time, the concern was that an otherwise “less worthy waterfront project might be funded over a non-waterfront brownfield project in the future simply because of the categorization instead of on merit. This, of course, is a particular concern when funding levels are so low that brownfield grant applicants with perfect scores still cannot manage to win badly needed funds in the competition.”
This is less of a concern with $250 million in brownfield funding in the 2018 BUILD Act, but competition for these grants will still be intense. Most applicants will still be rejected, though the chances of winning may increase from the current win rate of ~1 in 5. Going forward, however, brownfield projects with bluefield or brightfield elements will have a slightly better chance than projects that do not. As such, the 2018 BUILD Act officially leans into the trends toward waterfront redevelopment and renewable energy development—two of the hottest segments at the forefront of redevelopment activity today and for the foreseeable future.
Even though buried in the belly of a beastly omnibus bill, the 2018 BUILD Act stands out. Many of its policy changes will have lasting effects, particularly for proactive municipalities, nonprofits, CDCs and even (some) private developers. These entities received something even better than additional brownfield capital: liability protection.
The 2018 BUILD Act follows suit from its 2015 predecessor and most other brownfield policy thinking in granting liability relief to states and municipalities acquiring contaminated property through actions as sovereign governments and other bona fide purchasers. The Trump administration’s infrastructure proposal proposed similar expansions of liability protections earlier this year and BL wrote then that “liability protections for redevelopment, it seems, is another place where broad policy consensus has emerged even in these bitterly partisan times.” And it would represent:
We’re about to find out. It’s now the law of the land. Brace for wider application of bona fide purchaser protections.
For cities, states, §501(c)(3) nonprofits, proactive land banks & §45D(c)(1) community development corporations, the 2018 BUILD Act opens up a new world of possibilities for pro-action. Free from fear of environmental liability, many would-be brownfield redevelopers can now acquire and develop contaminated property they have avoided in the past without worrying about being sued for a mess they did not make.
All of this is very constructive for the redevelopment market as a whole. And timely. It’s still the early innings of the real estate renaissance and there’s still a whole lot of work to do. A big boost from the tax cut last year and now a beefy brownfield reauthorization within an even beefier omnibus bill that increases all kinds of pro-redevelopment, pro-housing, pro-investment public funding—including research and development—will serve to firm the foundation of this expansion.
A recession is inevitable. The economy is at all-time, record-breaking heights. Still, redevelopment fundamentals continue to develop in very positive ways and substantial policy support from Washington such as this will likely contribute to constructive growth.
For years policy brownfielders have lobbied for a brownfield authorization and modernization. Over a similar period, the Federal Reserve has begged for fiscal stimulation. The 2018 omnibus bill gave us both.
Correction March 27, 2018: Chart of "Historic & Authorized Future Annual Federal Brownfield $" fixed with proper funding timeline and second ** notation important context of this appropriation authorization.
BONUS OMNIBUS BITS
- The EB-5 program is extended until Sept. 30, 2018.
- The omnibus bill adds flexibility to the low-income housing tax credit program. Whereas before the program required every unit it subsidized to have an income ceiling of 60% of the area’s median tenant income, under new “income averaging” rule, a building may combine units with rents set for 20% of the area’s median income up to 80% so long as the average income across all subsidized units in the building is 60%. This mixed pricing model will make buildings more financially feasible for developers while also providing for more deeply affordable units than currently (where building units typically are all set at 60%).
- The omnibus increases the annual total amount of each state’s allocation of tax credits for the low-income housing tax credit program by 12.5% 2018-2021, which will help address increasing land and construction costs and funding additional projects.
- The omnibus bars EPA from regulating lead in ammunition and fishing tackle.
- The bill exempt farms from air pollution emissions reporting requirements.
- EPA and USDA and DOE must now treat biomass as carbon neutral.
- The omnibus bill also steps up efforts to prevent ships from carrying the invasive Asian Carp species between the Illinois River to the Great Lakes by mandating that the Army Corps of Engineers (USACE) construct an electric field ships through which ships will traverse (but Asian Carp cannot).
GUEST POST: Bartsch on Final Tax Bill Impact to Brownfield Financing (by Charlie Bartsch)
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What's a "Bluefield"?
A bluefield possesses water resources itself or has access to a navigable body of water such as a river, sea, or ocean—either directly or via canal or port. Some Bluefields can support viable commercial uses, and many of these commercial bluefields have definitive access or riparian rights. Many other Bluefields merely provide simple enjoyment for the property owners and tenants. As defined in the 2018 BUILD Act, a qualifying waterfront property for purposes of applying for brownfield grants are defined as “a site adjacent to a body of water or a federally designated flood plain” Use the bluefield tag on BrownfieldListings.com to post any water-related development RFP, RFQ or RFI, or to simply signal water resources or concerns on your property or in your project.