Superfund: Impact on Small Firms

Small firms have been a very important source of jobs and entrepreneurial activity for the U.S. economy since the late 1970s. U.S. Census Bureau data show that small firms (defined as those with fewer than 500 employees) employed 57 million people in 2000, the same number as provided by large firms (see chart). Small firm payroll was $1.7 trillion in 2000, compared to $2.1 trillion for large firms. In addition, there were 16.5 million businesses with no paid employees in 2000; these are typically selfemployed individuals or partnerships. Small business produced almost half of GDP in 1997 according to a report by Joel Popkin and Company. In summary, small business plays a critical role in U.S. economic growth and job creation. To assess the potential impact of Superfund liability on small business activity, the ACCF Center for Policy Research co-sponsored a research project with the National Federation of Independent Business. While the survey of small firms and the report were completed in the mid-1990’s, the findings are likely to be a good indication how Superfund liability affects their cost of capital and investment today.

This study breaks new ground by surveying a group of small potentially responsible parties (PRPs) to assess the impact of Superfund liability on small firms’ ability to raise capital, invest in plant and equipment, and create jobs. Superfund’s site-by-site financing mechanism relies on strict, retroactive, joint and several liability. This liability standard means that PRP’s are liable for waste disposal that took place before the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or “Superfund,” was passed and therefore may have been lawful at the time. Liability is not limited to a PRP’s “fair share” of costs based on its wastes. Each PRP may be held liable for the entire cost of cleanup. Thus, Superfund liability can have a major impact on a firm’s cash flow and financial health because remedial costs average $25 to $30 million dollars per site.

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