The Brownfield Cleanup Program Lives On with Notable Changes
Author: Steve Le Fevre
It was welcome news to hear that the Brownfield Cleanup Program (BCP), which was scheduled to expire or “sunset” on December 31, 2015, has new life and will be around for at least the next 10 years. Specifically, owners of Brownfield sites will now have until March 31, 2026, to receive a certificate of completion (COC) from the New York State Department of Environmental Conservation (NYSDEC) following the successful cleanup of their site. However, the NYS legislature was unwilling to extend the life of the BCP “as is”, and required that some notable changes be made prior to the passage of the bill.
One of the primary changes to the BCP involved the implementation of reforms for the issuance of Redevelopment (Tangible Property) Tax credits, which under the old BCP had largely been claimed by developers involved with the cleanup and redevelopment of Brownfield sites in New York City. Specifically, due to the value of real estate near New York City, a disproportionate amount of Redevelopment Tax Credits were issued for the cleanup and redevelopment of New York City Brownfield sites, as compared to Brownfield sites in central and upstate New York. Therefore, the State legislature enacted specific reforms to the BCP that mandates that eligible New York City Brownfield sites must be able to satisfy one or more of the following criteria:
- The Brownfield site must be located in an Environmental Zone (En-Zone), which is defined as an area with high poverty and/or unemployment levels.
- The cost to remediate the Brownfield site must equal at least 75% or more of the property value if the site were in a clean condition (i.e. not contaminated), or satisfy the NYSDEC definition of an “underutilized” property. Brownfield sites which meet this criteria are also referred to as “upside down” properties by the NYSDEC.
- Brownfield sites that will be cleaned up and redeveloped as affordable housing projects, as defined by the NYSDEC, in consultation with the Division of Housing and Community Renewal.
In addition to the above, new tax reforms were enacted to the BCP to enhance or promote the cleanup and redevelopment of Brownfield sites in upstate New York, while at the same time protecting the interest of taxpayers by reducing the eligibility of certain tax credit components. For instance, eligible Site Preparation Tax credit costs are now limited to only those costs that are associated with the implementation of a NYSDEC-approved remedial work plan.
Under the old program, the site preparation tax component included costs associated with the performance of site cleanup activities, as well as building demolition, excavation, fencing, and other capital expenditures. Under the newly enacted BCP, any costs that are not specifically associated with the investigation or cleanup of a Brownfield site will now fall under the provisions of the redevelopment tax credit. However, one notable change to the site preparation tax credit is that the costs associated with the abatement of asbestos, PCBs, and lead are now considered to be an eligible cost as long as the building structure will remain on site.
Other important changes to the BCP that you should be aware of are as follows:
- Applicants to the BCP must now demonstrate that their site is contaminated before being accepted into the program. This change means that applicants must now conduct soil sampling at their Brownfield site and demonstrate to the NYSDEC that the soil contaminant levels at the Brownfield site exceed the applicable Part 375 Soil Cleanup Objectives (SCOs) for the intended future use of the site, e.g. Unrestricted, Restricted Residential, Commercial or Industrial.
- Volunteers may now enter Class 2, i.e. State Superfund, sites into the BCP as long as the volunteer owns the site or is under contract to purchase the site, and the NYSDEC is unable to identify a viable responsible party.
- The NYSDEC will no longer charge applicants with oversight costs if the applicant was accepted into the BCP as a volunteer.
- The establishment of a BCP-EZ program which allows the NYSDEC to waive certain procedural requirements for applicants that do not wish to receive tax credits, but still desire liability protection. The intent of the BCP-EZ program is to enable the owners of lightly contaminated Brownfield sites to proceed through the BCP in a timely manner and obtain a liability release from the State, which is often a requirement of lending institutions in order to receive financing.
The effective date for the above noted reforms to the BCP is the later of July 1, 2015, or the date on which the NYSDEC publishes the proposed definition of an “underutilized site” in the State Register. However, the law requires that the new BCP regulations be adopted on or before October 1, 2015. With regard to sites that have already been entered into the BCP, it is important to note the following:
- Any site that was entered into the BCP prior to June 23, 2008, but has not received a COC by December 31, 2017, will be subject to the newly enacted provisions.
- Any site that was entered into the BCP between June 23, 2008, and the effective date of the new BCP regulations, but has not received a COC by December 31, 2019, will be subject to the new rules.
For more information regarding the newly enacted changes to the BCP, or to obtain information regarding the site eligibility requirements of the BCP and/or the steps involved in applying to the program, please contact Steve Le Fevre, P.G. at (518) 218-1801.