11 WAYS TO REFORM THE NEW YORK STATE BROWNFIELD CLEANUP PROGRAM

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!