By: Jason Yots
Like most Rust Belt states, New York
has its version of a brownfields cleanup program (BCP) that offers financial
assistance to developers willing to remediate and redevelop environmentally
contaminated land and buildings.
In New York, that assistance is provided largely in the form of
reimbursement-based state tax credits.
The last iteration of the BCP legislation was set to sunset at the end
of 2015, prompting renewal negotiations in Albany last year.
At issue in those negotiations were
perceived abuses (mostly downstate) of the redevelopment component of the
program. Critics argued that,
despite prior rebalancing, the BCP still was too light on remediation results
and too heavy on redevelopment upside (for which, goes the argument, there are other incentives,
if needed, or the private market itself). Proponents of the program argue that in hard-to-develop
areas like upstate New York, the BCP is a critical component of the bundle of
economic development incentives required to plug the funding “gap” that plagues
most real estate redevelopment projects.
Backing critics, New York Governor Andrew Cuomo
recently vetoed the legislative renewal of the BCP, casting a cloud over numerous upstate projects that would have relied on the program in the coming
years. But there may be a silver
lining: The Buffalo News reported
today that Governor Cuomo is stepping back from his prior veto in
exchange for more changes to the program during the budget process.[1]
The most significant change for
historic rehabilitation projects may be that the redevelopment component of the
BCP would be available only if at least one of three criteria is satisfied:
1. The
area surrounding the project is “economically distressed” (to be defined, but
presumably will take a cue from similar provisions in New York’s rehabilitation
tax credit law).
2. The
project involves “affordable housing” (generally meaning households earning
less than 60% of the area’s median income).
3. The
project is “upside down” (meaning that the cost of the remediation exceeds the current
market value of the building).
Will these new requirements
constrict the overall flow of projects toward the BCP? Potentially. But most upstate New York projects enjoy the dubious benefit of
satisfying one, if not all, of the new criteria. Hopefully, that will mean that the BCP - which has become so critical
to the feasibility of historic rehabilitation projects in upstate New York - will
remain fully available and funded.
[1] “Cuomo Plans
Changes for Brownfields Tax Breaks”, The Buffalo News, January 19, 2015 (http://www.buffalonews.com/city-region/cuomo-plans-changes-for-brownfields-tax-breaks-20150118)
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