Client Alert: NYSDEC Finalizes Revisions to Key Terms in NYS Brownfield Cleanup Program

From the desk of James P. Cinelli, P.E., BCEE

In order to spur development of underutilized or abandoned commercial properties with real or perceived environmental contamination, most States have adopted brownfield development programs that provide financial incentives to those to undertake the cleanup and redevelopment of these properties. In some states, these financial incentives take the form of grants or low-interest loans. In New York State, they take the form of property tax credits.

The property tax credits that are provided under New York’s Brownfield Cleanup Program are used to defray the costs that the developer incurs to remediate the property and put it back into productive use. In 2015, New York amended the BCP to restrict eligibility for tax credits for properties in New York City to those that are 1) located in Environmental Zones (“EnZones”), 2) are to be redeveloped for affordable housing, 3) that are underutilized, or 4) that are financially “upside down.” The New York legislature then assigned responsibility to DEC to define the key terms to determine eligibility, including “underutilized.”

While the definition of “affordable housing” is quite broad, the “underutilized” definition is somewhat narrow. While the state legislature’s intent was to target redevelopment projects with the greatest need (expressly intended to eliminate high-value New York City projects with high development costs), it will also eliminate many properties because they are not in targeted redevelopment areas and do not include an affordable housing component.

The following criteria must be met for a property to be considered “underutilized” and therefore be eligible for the brownfield tax credit.

• no more than fifty percent of the permissible floor area of the building or buildings is certified by the applicant to have been used under the applicable base zoning for at least three years prior to the application; and
  1. the proposed use is at least 75% industrial; or
  2. at which:
     1. the proposed use is at least seventy-five percent for commercial or commercial and industrial uses;
     2. the proposed development could not take place without substantial government assistance, as certified by the municipality in which the site is located; and
     3. one or more of the following conditions exists, as certified by the applicant:
        1. property tax payments have been in arrears for at least five years immediately prior to the application;
        2. a building is presently condemned, or presently exhibits documented structural deficiencies, as certified by a professional engineer, which present a public health or safety hazard; or
        3. there are no structures.

An unfortunate result of the “underutilized” definition will preclude small commercial properties from drawing from the benefits of the brownfield tax credits. Many of these small properties are those that sometimes have substantial environmental contamination issues, such as dry cleaners, gas stations, and auto repair shops.