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Communities Cope with Administrative Cost Prohibitions
The administrative cost prohibition on Environmental Protection Agency (EPA) brownfield grants came about in January 2002, when President Bush signed into law the Small Business Liability Relief and Brownfields Revitalization Act.
The law set forth many helpful points for the EPA’s brownfield program, such as expanding the definition of brownfields, but it also set forth some challenges for grant recipients, such as the prohibition on administrative costs (i.e., direct costs such as salaries and benefits).
In short, the prohibited administrative cost, as defined, is forcing many communities to locally pay for the staff and materials needed to administer grant awards. Many communities have been resourceful in meeting this challenge or have found outside assistance to bridge the gap.
However, those who haven’t been as capable have found themselves on the verge of declining their awards. Many community leaders feel that this prohibition is a burden and are hoping that Congress will remove it in the near future.
Illinois Town Finds Relief
Although the Town of Cicero, Illinois is a high-density suburb of Chicago (population 85,616), with a healthy tax base and minority population benefits, there is still concern about how the township will absorb the cost of administering the $350,000 in assessment grants awarded to it this year.
Grant director Jose Luis Alvarez said, “The best option for us has been working with the EPA representative assigned to negotiate our work plan. We developed a category under activities for programmatic management, which enables activities to take place and be absorbed by the grant. The only obligation is to document the activities in a very detailed manner. Hopefully the town can offset some of the administrative costs by doing this.”
EPA has determined that the administrative cost prohibition does not apply to programmatic costs, commonly known as those costs for activities that are integral to achieving the purpose of the grant, such as the loan processing costs and legal fees associated with administering revolving loan funds.
Vermont Assists Grantees
In June 2004, the Vermont state legislature voted for a one-time allocation of $9,500 to each of the seven regional planning commissions administering EPA brownfield grants. These grants cover disallowed costs, like the administrative cost prohibition.
However, some commissions have reported that their annual disallowed costs range between $13,000 and $16,000 annually. Peter Gregory, director of the Two-Rivers Ottauquechee Regional Commission said, “We were fortunate to get state assistance this year. Otherwise, our core planning funding covers the overruns. Getting this prohibition changed remains an important issue, especially for the 28 communities we serve.”
Rural Oklahoma Endeavors
The Association of South Central Oklahoma Council of Governments (ASCOG) in Lawton is already responsible for administering $350,000 in EPA brownfield assessment grants for a rural eight-county region. This year the region was awarded another $200,000 assessment grant and a $1 million revolving loan fund.
However, the communities have until December 2004 to determine how they cover the administrative costs before they can accept funds.
According to Blaine Smith, director of ASCOG, “The prohibition puts yet another burden on all local governments and is especially detrimental to the fiscally-strapped rural communities.”
Kelly Novak is research manger of NADO Research Foundation in Washington, D.C. and a doctoral candidate at Virginia Tech, Center for Public Administration and Policy.
Editor’s note: After this article was written, the Senate Appropriations Committee approved language permitting grant recipients to claim “reasonable” administrative costs. The House is opposed to it. See “This Just In from Congress” for more information.