Brownfield Program Encourages Cleanups, Spurs Public/Private Partnerships

Wednesday, March 19, 2014 - 15:40

The Editor interviews David P. Flynn, Practice Team Leader for Phillips Lytle LLP’s Energy and Nanotechnology Practice Teams. His practice is concentrated in the areas of environmental law, energy and nanotechnology.

Editor: Governor Cuomo has proposed some significant changes to New York’s Brownfield Cleanup Program (BCP). What is driving the governor to propose these changes at this time?

Flynn: There are really two drivers. One driver is that the existing Brownfield Cleanup Program has a statutory sunset date of December 2015. Without any action, the program will end. The second driver is that concerns have been raised that the program is a bit too rich and perhaps not targeted as well as it could be to those areas that are really in need of redevelopment.

There have been several examples of the program being used in projects that probably didn’t need BCP benefits to move forward. These projects were located in areas that had high real estate values and high demand, yet the program provided these projects some very substantial benefits. The sense was that the program could be better targeted to areas upstate and to cities that really need it.

Editor: What are some of the more significant changes that have been proposed for the BCP?

Flynn: One significant change would be to extend the program an additional 10 years to 2025. That certainly would be helpful as it has evolved into a very important economic development tool for the state. Another change would be to reduce the amount of benefits that are available for projects. This change is concerning because the program has worked so well, and cutting benefits could have unintended consequences.

The cost-saving proposal would change how you calculate the necessary costs of cleanup. That number is used to then determine the amount of refundable redevelopment credits. In sum, it would reduce the pool of costs that are counted as being costs of remediation of a site, and that ripples through the calculation of how many credits would be available on the redevelopment side.

The proposal includes other significant changes to the program as well. One deals with eligibility for the redevelopment tax credits. The governor is proposing three criteria for property eligibility. There’s the vacancy criteria in which the property would need to be vacant for 15 years or both vacant and tax-delinquent for 10 years. Then there’s the “underwater test,” which is where a remediated property would be worth less than the actual cost of the cleanup. A third criteria is a “priority economic development project” – one that is designated as a priority by Empire State Development. A property would need to meet one of these criteria to be eligible for tangible property tax credits.

Editor: Has there been pushback on the governor’s proposal?

Flynn: There has been pushback on the fiscal front in terms of the costs of this program. It’s not inexpensive, and some are asking, “Are we getting enough as a state from our investment?” The perfect economic incentive is when there is enough funding to move a project forward, but not more than is needed. This is when concerns of over-incentivizing arise. I honestly don’t think we’ve been offering too much incentive, given the many projects the program’s been able to move forward. It's important to remember what things were like before we had the BCP. There’s always some concern that the BCP allows people to get away with lesser remedies, leaving more contamination behind. To a certain extent that’s correct, but it also brings a practical approach to the cleanup because the remediation of the property reflects its end use.

Editor: What are the prospects for the legislature making these proposed changes?

Flynn: There’s no question that the program will be modified. There is a fairly strong, broad-based push to keep the BCP going, and to do that, action needs to be taken by next year. I’m hopeful that the legislature and the governor’s office will consider the constructive criticism that’s being raised so that at the end of the day, we’ll have a program that continues to work and drive economic development in the state.

 

Please email the interviewee at dflynn@phillipslytle.com with questions about this interview.