Glimmer of Hope Emerges for BCP Reform

Since Governor Andrew Cuomo and the Legislature reached an agreement on the 2014 budget, there has been frustrating little progress on extending the Brownfield Cleanup Program (BCP). In the absence of any forward movement, developers have been rushing to submit applications to the BCP so they could obtain a certificate of completion (COC)   before the BCP tax credits (BTCs) expire at the end of 2015 or to become grandfathered ahead of any changes to the BTCs.

Now, though, with less than two weeks before the New York State Legislature adjourns, there is growing optimism that a deal may be within reach to extend the BCP.  The pace of negotiations  among representatives of the Legislative, Executive  and key stakeholder groups appeared to heat up after the NPCR brownfield summit last week brought many of key participants together in one room. While it appears that the parties have been narrowing their differences, some significant hurdles remain.

By way of review, the impetus for BCP reform was the looming expiration of the BCP tax credits but the Executive Branch was also concerned about the costs of the BCP.  As a result, the Governor’s bill would have limited that the Tangible Property Tax Credit (TPC) to certain categories of brownfield projects and proposed to restrict the kinds of costs that would be eligible for the Site Preparation Tax Credit (SPC) so that so-called “soft costs” could not be included. It was unclear from the Governor’s bill if the definitional changes to the costs eligible for the SPC would apply only to BCP applications accepted after the proposed July 1st effective date or would extend to costs incurred by existing applicants after the effective date. Another significant feature of the Governor’s bill was automatic termination for BCP projects that did not receive Certificates of Completion (COCs) by 12/31/15 if they were accepted into the BCP prior to 6/23/08, or by 12/31/17 for sites accepted after that date but before 7/1/14.

The Senate proposed its own reform legislation that would have retained the current “as of right” tax credit structure. To accommodate the Governor’s concerns about the costs, the Senate proposed to refine the definition of brownfield site to incorporate more precise concepts of under-utilization, functionally obsolescence, affordable housing or qualify as a priority economic development site. The Senate also declined to narrow the scope of the costs eligible for the SPC, contained a broader exemption for applications for Class 2 submitted volunteers and omitted the automatic termination dates.

The Assembly’s bill largely mirrored the approach proposed by the Governor that BCP sites would have to satisfy a second test to  qualify for the TPC but largely adopted the test advanced by the Senate. The changes would have taken effect on January 1, 2016. The Assembly did not attempt to change the SPC definition, did not include any automatic termination dates, did not exempt applications for Class 2 sites submitted by volunteers and did not provide for an exemption from the hazardous waste fee for projects enrolled in the NYC VCP or under a federal cleanup order.

Click here  for a prior post summarizing the key changes proposed by the Governor’s original bill.

Recognizing the political handwriting on the wall, representatives of the real estate appear to be resigned that a separate test for qualifying for the TPC. The negotiations will center on the nature of the qualifying test.

There has also been progress on some of the ambiguities in the SPC definition. It appears any changes to the SPC definition will only apply to new applications accepted after July 1st. The parties are still negotiating the details of the SPC definition but it appears that the Executive branch has backed away from the more extreme changes that could have conflicted with federal tax law.

It also appears that the negotiators may be moving away from the automatic termination provisions of 12/31/15 for sites accepted into the BCP prior to the 2008 amendments or 12/31/17 for sites accepted into the BCP prior to July 1, 2014. The problem with the automatic termination was that it would have exposed applicants to potential liability since they have owned or controlled the site for an extended period of time. Instead, it is likely that a final bill will have a single date for all sites accepted prior to July 1, 2014. Applicants who fail to obtain a COC by that dated would simply forfeit their right to receive the TPC but could remain in the COC and obtain the liability release upon completion of the cleanup.

The key to any BCP bill may be the Assembly’s insistence on re-authorizing the state superfund program bonding for ten years. The Executive does not want to add $1B to the state’s debt. But it is Albany so anything is possible. So keep the light on and stay close to the phone until the Legislature adjourns on June 19th..



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