e-Texas e-Texassmaller smarter faster governmentDecember, 2000
Carole Keeton Rylander
Texas Comptroller of Public Accounts

Recommendations of the Texas Comptroller

Chapter 10: Environment and Natural Resources

Promote “Brownfield” Cleanup and Redevelopment


Many properties in Texas are abandoned or underused due to the liability associated with contamination from old industrial activity. Texas should use a variety of tools to encourage the cleanup and redevelopment of these “brownfields,” including the use of economic development tax; revenue, the creation of enterprise zones, the eliminate barriers that discourage the use of a property tax break for contaminated sites, and the Texas Natural Resource Conservation Commission’s Supplemental Environmental Project.


The United States has approximately 450,000 brownfield sites.[1] The Texas Natural Resource Conservation Commission (TNRCC) is working closely with the US Environmental Protection Agency (EPA) to facilitate the cleanup and revitalization of brownfields through the use of regulatory, tax, and technical assistance tools.[2] Of the 1,166 brownfield sites in Texas registered with TNRCC, 714 remain to be certified as "cleaned up" by the agency.[3]

Under TNRCC’s Voluntary Cleanup Program (VCP), future lenders and landowners can receive protection from state liability for site cleanups. As a result, many of these properties can be restored to economically-productive or beneficial uses.

According to a recent report by the US Conference of Mayors, the benefits of brownfield rehabilitation include tax base growth, job creation, neighborhood revitalization and environmental protection. Two hundred and thirty-one cities around the country provided information for the conference’s report, among them nine Texas cities. The Texas cities reported more than 170 sites in their jurisdictions.[4] The City of Houston alone had 16 sites covering more than 600 acres of land. Houston reported that if these sites were cleaned up, economic redevelopment in these areas could create 2,372 jobs and at least $1 million a year in additional tax revenue.[5]

Cleanup Strategies

Texas could use a number of existing tools to encourage the cleanup and redevelopment of brownfields.

For instance, economic development tax revenue could be used to pay for cleanups as is allowed by Texas law. Since 1989, a number of communities throughout Texas have had the opportunity, through local-option elections, to increase local tax rates to finance manufacturing and industrial development, the “4A” sales tax or quality-of-life improvements such as parks or community pools, the “4B” sales tax. At this writing, 126 Texas communities have approved the 4A tax, and 241 have passed 4B. Of these, 71 and 110, respectively, were passed in rural Texas counties. To oversee the use of these revenues, each city is required to create an economic development corporation. In most cases, the taxes are limited to cities located in counties with populations of less than 500,000 or 750,000, depending on whether a 4A or 4B sales tax, respectively, is involved.[6]

Another option for brownfield cleanup is the creating enterprise zones. The purpose of the Texas Enterprise Zone Program, administered by the Texas Department of Economic Development (TDED), is to encourage job creation and capital investment in areas of economic distress. The program allows communities to offer state and local incentives to new or expanding businesses choosing to locate in a designated area. To establish an enterprise zone, a city or county must nominate a specific geographic area within its jurisdiction that meets certain size and distress criteria. If approved by TDED, zone designation is effective for seven years.

Enterprise zones must incorporate an area with a continuous boundary, between one and 20 square miles in size, excluding waterways and transportation arteries. The area must have an unemployment rate of at least 1.5 times the state average for the preceding 12-month period, or have experienced a population loss of at least 12 percent during the most recent six years, or 4 percent during the most recent three years. The proposed area also must have at least one other “distress factor,” such as poverty, deteriorating structures, tax arrearages, low income, substantial loss of businesses or jobs, declaration as a state or federal disaster area, or a substantial increase in juvenile crime.[7]

Texas also could modify an existing property tax break available for contaminated sites to make it more effective. Section 312.211 of the Property Tax Code allows governmental entities to waive taxes on certain properties subject to a cleanup agreement under TNRCC’s Voluntary Cleanup Program (VCP).[8] To qualify for this tax benefit, the land must have been devalued due to contamination for at least two previous years. According to TNRCC, however, no one has taken advantage of this exemption. First, most tax appraisers lack the expertise to determine whether or not a property is contaminated. Furthermore, property owners who know their property is contaminated are unlikely to notify the local appraiser of the fact until they have some protection against liability. For this reason, brownfield properties usually are not reported as such until the owner applies for protection under the VCP.[9]

Finally, TNRCC could encourage brownfield cleanup by aggressively applying its Supplemental Environmental Projects (SEP) program. TNRCC has been using these projects as a part of enforcement actions since 1991.[10] The agency defines a SEP as “a project that prevents pollution, reduces the amount of pollution reaching the environment, enhances the quality of the environment, or contributes to public awareness of environmental matters.”[11] Under state law, a violator of environmental laws or regulations can negotiate an agreement with TNRCC to perform a SEP in return for reduced penalties.

According to TNRCC, potential SEPs include projects such as cleanups of abandoned illegal dumpsites; collections of community household hazardous waste; and on-site pollution prevention projects that exceed regulatory requirements.[12] TNRCC prefers projects that will directly benefit the environment in the community where the alleged violation occurred, without resulting in a direct benefit to the respondent.[13] SEPs could, however, also be used to encourage brownfield cleanup. EPA encourages this practice and can provide guidance on how to implement such programs.[14]


  1. The Texas Natural Resource Conservation Commission (TNRCC) and Texas Department of Economic Development (TDED) should work together to promote the use of economic development taxes in brownfield redevelopment.

Texas law already allows, by local option, economic development taxes collected by local governments to be used for the cleanup of brownfields. For local governments already collecting the tax, revenue could be diverted for the use of brownfield cleanup. TNRCC and TDED should promote such uses to local units of government where appropriate.

  1. TDED should amend its rules concerning enterprise zones to promote brownfield redevelopment.

Under current rules, employment rates are considered in determining an area’s eligibility for designation as an enterprise zone. TDED should amend its rules to exclude employment by any business that has remediated a brownfield and located its business there from its calculation of the area’s employment rate. This would encourage businesses to clean up brownfields and develop the properties in anticipation of the area’s designation as an enterprise zone.

  1. State law should be amended to eliminate the requirement that a property must be devalued for two previous years due to contamination before being subject to tax abatement under the TNRCC Voluntary Cleanup Program.

Although lawmakers have expressed concern over the extent of the use of tax abatements, the elimination of this barrier should encourage the cleanup and redevelopment of brownfield sites.

  1. TNRCC should promote the use of brownfield redevelopment as a part of its Supplemental Environmental Project (SEP) program.

Current law allows TNRCC to use brownfield cleanup as a means of satisfying an agreement under the Supplemental Environmental Project program, and the practice is encouraged by the federal government. The agency should make every effort to include brownfield cleanup in as many SEPs as possible.

Fiscal Impact

The use of economic development taxes for brownfield redevelopment would require no state expenditures beyond resources already allocated to inform localities of such options. The impact on local finances would depend on voter approval and cannot be estimated.

Amending the rules concerning enterprise zones to promote brownfield redevelopment would produce no additional state fiscal impact. State law limits the creation of enterprise zones to a total of 65 in each biennium. In this way, any fiscal impact to the state is anticipated in each new budget. The impact to units of local government cannot be determined since the number of localities that would exercise this option cannot be predicted.

Eliminating the requirement that a property be devalued in two previous years due to contamination before being subject to a tax abatement could result in a loss of property tax revenue to local units of governments and school districts; however, any such losses should be offset by the increased property value after cleanup. The potential loss of revenue would be a function of both the number and value of abatement agreements and cannot be estimated.

Promoting the use of brownfield redevelopment as a part of TNRCC’s Supplemental Environmental Project program would not require any additional state expenditure since TNRCC could conduct such promotion with existing resources. The recommendation would increase local property values, but the impact on local finances cannot be determined.

In addition to the above fiscal impact, other, indirect benefits would result. For instance, if 44,000 manufacturing jobs were created (as some Texas cities estimated) on remediated brownfields, and 5 percent of those were jobs entirely new to Texas and came about only because of the remediation, the Texas economy could be as much as $250 million richer per year.

[1] National Governor’s Association Center for Best Practices, “Brownfield Redevelopment” (http://www.nga.org/CBP/Activities/brownfieldRedev.asp). (Internet document.)

[2 ] Texas Natural Resource Conservation Commission, “Brownfields Redevelopment Initiative” (http://www.tnrcc.state.tx.us/permitting/remed/vcp/brownfields.html). (Internet document).

[3] Texas Natural Resource Conservation Commission, “Voluntary Cleanup Program Database, November 2000.” (Computer printout.)

[4] US Conference of Mayors, Recycling America's Land: A National Report on "Brownfield" Redevelopment—Volume 3 (Washington, DC, February 24, 2000), p. 10. See (http://www.usmayors.org).

[5] US Conference of Mayors, Recycling America’s Land: A National Report on “Brownfield” Redevelopment – Volume 3 (Washington, DC, February 24, 2000), pp. 18-27.

[6] Texas Comptroller of Public Accounts, “Economic Development Sales Tax,” Publication #96-302, Austin, Texas, June 1999; and “List of Economic Development Sales Tax Section 4A and 4B Cities.” (Computer printout.)

[7 ] Texas Department of Economic Development, “Texas Enterprise Zone Program,” (http://www.tded.state.tx.us/TexasEnterpriseZone/). (Internet document.)

[8] V.T.C.A., Tax Code §312.211.

[9 ] Interview with Charles Epperson, Section Manager, Voluntary Cleanup Program, Texas Natural Resource Conservation Commission, Austin, Texas, July 24, 2000.

[10 ] Texas Natural Resource Conservation Commission, “Supplemental Environmental Projects (SEP)” (http://www.tnrcc.state.tx.us/legal/sep/sepindex.htm). (Internet document.)

[11 ] V.T.C.A., Water Code §7.067(b).

[12 ] Texas Natural Resource Conservation Commission, “Supplemental Environmental Projects (SEP).”

[13 ] Texas Natural Resource Conservation Commission, “SEP Law and Policy” (http://www.tnrcc.state.tx.us/legal/sep/seppolicy.htm). (Internet document.)

[14] US Environmental Protection Agency, Using Supplemental Environmental Projects to Facilitate Brownfields Redevelopment, p. 1 (http://es.epa.gov/oeca/osre/980930.html). (Internet document.)

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

Privacy Policy