Newark New York Trenton Philadelphia Wilmington 11 WAYS TO REFORM THE NEW YORK STATE BROWNFIELD CLEANUP PROGRAM David J. Freeman Gibbons P.C. February 19, 2015

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington BACKGROUND State Bar took input from participants Came up with series of recommendations Recommendations passed State Environmental Law Section Executive Committee unanimously (49 – 0)

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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, year max between admission and COC Grandfathered based on admission to program, not date of COC

Newark New York Trenton Philadelphia Wilmington 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)

Newark New York Trenton Philadelphia Wilmington 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)

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 9. STATE OVERSIGHT COSTS NOW: Payable GOVERNOR: Eliminate for Volunteers. Reasonable flat fee for others STATE BAR RECOMMENDATION: Same

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington 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

Newark New York Trenton Philadelphia Wilmington CONCLUSION Valuable program Needs to be extended Significant degree of consensus on types of changes that are needed Stay tuned!