Reforming New York State Brownfield Cleanup Program: Recommendations & Impacts

1. 11 WAYS TO REFORM THE NEW YORK STATE BROWNFIELD CLEANUP PROGRAM David J. Freeman Gibbons P.C. February 19, 2015

2. BACKGROUND • Tax credits sunset as of December 31, 2015 • Governor, Senate, Assembly proposals in 2014 • No consensus • Senate and Assembly passed extender until March 31, 2017 • Governor vetoed

3. BACKGROUND • 2003 Tax credit scheme • 10% for cleanup expenses • 10% for most development expenses • Add 8% for En-Zone, 2% for Track 1 cleanups • 2008 Tax credit scheme • Sliding scale for cleanup expenses • 50% for track 1 • 27% - 40% track 2 • 22% - 28% track 4

4. BACKGROUND • 2008 tax credit scheme (continued) • Maintain 10% for most development expenses • Bonuses for En-Zone (8%), Track 1 cleanup (2%), BOA (2%) • Caps 3X cleanup cost for non-industrial sites 6X cleanup cost for industrial sites • Caps of $35 Million for non-industrial sites $45 Million for industrial sites

5. BACKGROUND • Effect of 2008 Amendments • Sites smaller, more geographically diverse, more likely to have affordable housing or industrial end use • Less expensive to State (average tax credit cost $1 million vs. $14 million) • Greater percentage of tax credits for cleanup costs (74% vs. 7%) • $1 billion tax credits  $8 billion of direct investment • Total economic activity of $15.5 billion

6. BACKGROUND • State Bar active on commenting on Brownfield Cleanup Program since 1999 • Convened stakeholder group last fall • Wide spectrum of participants • New York League of Conservation Voters • Environmental Defense Fund • Real Estate Board of New York • New York State Business Council • New Partners for Community Revitalization • New York City Office of Environmental Remediation • New York City Brownfield Partnership

7. BACKGROUND • State Bar took input from participants • Came up with series of recommendations • Recommendations passed State Environmental Law Section Executive Committee unanimously (49 – 0)

8. 1. DEFINITION OF BROWNFIELD SITE NOW: Site which may be “complicated” by presence or potential presence of contaminant GOVERNOR AND STATE BAR RECOMMENDATION: Property where contaminant is present at levels exceeding cleanup standards for intended use • Who decides use? • Urban fill • Onsite source

9. 2. EXTEND DEADLINE FOR TAX CREDITS NOW: • December 31, 2015 GOVERNOR: • December 31, 2025 • Must be admitted by December 31, 2022 • Current sites must obtain by December 31, 2017 to be grandfathered for current tax scheme STATE BAR RECOMMENDATION: • December 31, 2025 • 10 year max between admission and COC • Grandfathered based on admission to program, not date of COC

10. 3. ADJUST TANGIBLE PROPERTY TAX CREDIT NOW: • As of right for all sites in program • 10% of development costs • Capped at 3X cleanup costs, or $35 million for non-industrial sites GOVERNOR: Only eligible if: • 50% or more in En-Zone • “Upside down” • Affordable housing (and only for proportion of site that represents such housing)

11. 3. ADJUST TANGIBLE PROPERTY TAX CREDIT STATE BAR RECOMMENDATION: • Continue as of right, at 10% (with bump-ups) • No separate criteria to qualify • Adjust caps to increase for certain types of projects • Affordable housing • LEED • En-Zone / BOA • Transit-oriented development • Reduce caps for other sites (e.g., to $15 million)

12. 4. ADJUSTING DEFINITION OF ELIGIBLE SITE COSTS NOW: Broadly defined as any expense that prepares site to receive COC GOVERNOR: Only if directly tied to remediation-related construction STATE BAR RECOMMENDATION: Retain broad definition but limit eligible costs for foundation construction

13. 5. CREATION OF NON-TAX CREDIT VCP NOW: • None GOVERNOR: • Establishes, for sites which waive tax credits • DEC to set rules STATE BAR RECOMMENDATION: • Same as Governor’s proposal • Statute should establish rules

14. 6. MAKE CLASS 2 SITES ELIGIBLE NOW: Ineligible GOVERNOR: Eligible if being cleaned up by Volunteer and no viable party available to pay for or perform cleanup STATE BAR RECOMMENDATION: Eligible if being cleaned up by Volunteer. State retains right to pursue viable party

15. 7. ELIMINATE HAZARDOUS WASTE PROGRAM FEES AND SPECIAL ASSESSMENTS NOW: Significant taxes and fees unless being cleaned up under specific state programs GOVERNOR: Eliminate if cleaned up under municipal program having Memorandum of Understanding with DEC STATE BAR RECOMMENDATION: Same

16. 8. EXPENDITURES PAID TO RELATED PARTIES NOW: Qualify for tax credits GOVERNOR: Eliminate eligibility for costs paid to parties with 10% or more common ownership STATE BAR RECOMMENDATION: Retain eligibility, except for costs which are incurred but not paid

17. 9. STATE OVERSIGHT COSTS NOW: Payable GOVERNOR: Eliminate for Volunteers. Reasonable flat fee for others STATE BAR RECOMMENDATION: Same

18. 10. MUNICIPAL ACCESS TO SITES NOW: Municipality must foreclose on property in order to get benefit of statutory exemption of liability to investigate environmental conditions GOVERNOR: No change STATE BAR RECOMMENDATION: Municipality can sell tax lien, without foreclosing, and still obtain benefit of statutory exemption

19. 11. BROWNFIELD OPPORTUNITY AREAS NOW: Lots of promise, but little actual accomplishment GOVERNOR: Eligible for enhanced development tax credit, but only if meet other criteria STATE BAR RECOMMENDATION: • Eligible for enhanced tax credit • More transparent designation • More publicly available information re: BOAs • Provide sufficient funding for implementation of pre-development activities

20. CONCLUSION • Valuable program • Needs to be extended • Significant degree of consensus on types of changes that are needed • Stay tuned!