Brownfield Cleanup Program (BCP) gets amended: Modifying existing tax incentives

As the old expression goes, "If it weren't for the last minute, half the things in this world would have never gotten done." Well, that was the case with the recent revisions to the Brownfield Cleanup Program (BCP). On the last day of the legislative session, governor Patterson and the legislative leaders came to an agreement and passed amendments to the BCP. The new amendments modify the existing tax incentives; however, will these amendments improve the sluggish NYS economy? Enacted in 2003, the BCP was established to promote reuse of brownfield sites by providing tax credits and liability releases to developers that clean them up. Its purpose is to mitigate the threat to public health and the environment from contaminated sites, promote the redevelopment of abandoned contaminated properties as a means to revitalize economically blighted communities, and create an alternative to greenfield development by removing barriers to redevelopment of urban brownfields. The NYS Division of the Budget expressed concern that the BCP could pose significant financial risk to N.Y. if this current structure of the tax credits are allowed to continue. In some cases, predominantly down state, projects have qualified for large tax credits (greater than $100 million) which greatly exceeded the cost of the cleanup. Some of these developments may have happened without the financial incentives due to the value of the real property and the economic conditions. Therefore, the state legislation felt it necessary to cap credits available to developing brownfield sites. The new amendments limit the tangible property credit available to qualified non-manufacturing sites to $35 million or three times the cost of site cleanup, whichever is less. Site cleanup costs include both the site preparation credit component and the on-site groundwater remediation credit. The tangible property credit limit available to qualified manufacturing sites is $45 million or six times the cost of site cleanup, whichever is less. Some of the "activities" identified as manufacturing include the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, and commercial fishing. However, the generation and distribution of electricity, the distribution of natural gas, the production of steam associated with the generation of electricity will not be considered manufacturing activities. The revised BCP will provide a remediation tax credit, consisting of a site preparation tax credit and an on-site groundwater remediation credit incentive of up to 50%, in some case, which is more than double the current tax incentive. Therefore, the level of cleanup will determine the amount of tax credit available to the developers, as follows: * Site soils which are cleaned up to "unrestricted use" standards - 50% remediation tax credit. * Sites soils which are cleaned up to "residential use" standards - 40% remediation tax credit (28% if Track 4, negotiated site specific standards, are used). * Sites soils which are cleaned up to "commercial use" standards shall receive the 33% remediation tax credits (25% if Track 4 are used). * Site soils which are cleaned up to "industrial use" standards shall receive the 27% remediation tax credit (22% if Track 4 are used). The tangible property tax credit caps do not apply to site which were accepted into the BCP before June 23. Once accepted into the BCP and an execution of a brownfield site cleanup agreement is in place, the developer will be required to submit an annual brownfields redevelopment report under the new amendments. This report must provide actual or estimated information about state and local taxes (income, business, corporate and property taxes) generated by the brownfield site. This report must be submitted annually for 11 years. Additionally, the amendments to the BCP also include the establishment of a N.Y. Brownfields advisory board which will consist of 15 members. The board will be responsible for monitoring and review of the BCP. The BCP replaced a NYSDEC administered Voluntary Cleanup Program (VCP) which since its inception in 1994 cleaned up 153 sites. This is an average of approximately 15 sites per year achieving the end goal. However, the VCP did not provide tax credit incentives to its participants and was available to sites with known or suspected contamination. In the four plus years that the BCP has been implemented, 394 sites have applied to the BCP, 260 have been admitted, 44 sites have been cleaned up and received certificates of completion. (Note: 60 sites accepted into the BCP were withdrawn by applicants or removed by NYSDEC). This is an average of approximately 11 sites per year achieving the end goal (http://osc.state.ny.us/reports/environmental/brownfields08.pdf). So have the financial incentives really paid off? It would appear that the financial incentives may not be the deciding factor in developing a brownfield site. However, only time will tell if the recently passed amendments to the BCP will increase the development of brownfield sites located in areas once thought not worth the trouble. Christopher Boron is a project manager at GZA GeoEnvironmental of New York, Buffalo, N.Y.