BILL NUMBER: S8472

SPONSOR: MARCELLINO
 
TITLE OF BILL:  An act to amend the environmental conservation law, in
relation to the "Brownfield cleanup program" exceedances of the track 1
soil cleanup objectives, to clarifying the operative documents that
describe the approved remedial action for a brownfield site, and to
incorporating provisions related to soil vapor intrusion; and to amend
the tax law, in relation to the brownfield redevelopment tax credit

 
PURPOSE:

The bill clarifies certain Brownfield Cleanup Program (BCP) provisions
currently being misconstrued by the Department of Environmental Conser-
vation (DEC) due to vague language or lack of plain language clarity,
clarifies the interaction between federal tax law and the brownfield
redevelopment tax credit, and provides a means for determining credits
when qualified tangible property is placed in service on a qualified
site by more than one taxpayer (as is common with affordable housing
projects and larger BCP sites). The bill gives guidance to the Depart-
ment of Taxation and Finance (DTF), which has misconstrued the intent of
certain statutory provisions. These changes will promote predictability
              

for program applicants, and would further advance the program's environ-
mental cleanup and urban revitalization goals by incentivizing the reme-
diation, strategic reuse and redevelopment of contaminated land through-
out the State."

 
SUMMARY OF PROVISIONS:

Section 1 of this bill amends ECL § 27-1411(2) by clarifying the docu-
ments that describe the approved remedial action for the site. DEC has
been issuing "decision documents", which are not documents required by
or described in the BCP Act. When DEC began issuing decision documents
several years ago, BCP applicants thought these documents were simply
summaries of the remedy to help the public understand the remedy since
they were issued in a similar fashion to a fact sheet, and were not
intended to include all remedial components approved by the DEC and the
Department of Health (DOH) in the Remedial Action Work Plan (RAWP).
However, DEC and DTF began using these documents as the only operative
document to describe the components of the remedy, even if both NYSDEC
and NYSDOH had approved a Remedial Action Work Plan (RAWP) which
included different remedial action components. NYSDEC's and DTF's use of
decision documents in this fashion changes the legislative intent of the
BCP Act. The BCP Act was drafted to allow volunteers or participants to
select their remedy subject to Departmental approvals when the site does
not pose a significant threat. The remedy selection process was effec-
tively intended to be performed through the volunteer's/participant's
submission of a RAWP, Department's approval of the RAWP, any amendments
thereto, and finally the final engineering report (FER), which describes
the remedy ultimately implemented (the RAWP remedy, plus any deviations
from the RAWP). There is no issue with a decision document being used to
summarize the remedy for purposes of public notice.  However, this
should not be the operative document only relied upon by DTF to describe
the remedy. The final remedial action should be fully set forth in the
FER. This amendment clarifies that the RAWP describes the final selected
remedy and FER describes the final remedy implemented, and are thus the
principal documents that create the record, which should be relied on by
DTF to determine costs incurred to qualify a brownfield site for a
certificate of completion.
DOH also has assumed more of a role than intended, and has been delaying
RAWP and FER approvals. This provision clarifies that DOH's review
should be solely focused on public health impacts of the remedy, if any.

Section 2 of this bill includes a new brownfield cleanup agreement
provision that cross-references the tax credit Sections 21 and 22 of the
Tax Law such that once a party receives a Certificate of Completion they
will be entitled to the applicable tax credit.

Section 3 of this bill updates the Track 1 cleanup definition in ECL §
27-1415(4) to address sites where contaminated soil vapor may still be
present from an on-site residual or off-site groundwater or soil vapor
source after implementation of a Track 1 soil remediation. The added
language clarifies that a site that completes a Track 1 soil remediation
does not lose its Track 1 status if it must implement groundwater and/or
soil vapor institutional or engineering controls to maintain the Track 1
soil remediation as a result of the site being present in an area-wide
contaminated groundwater and/or soil vapor plume. The Track 1 remedi-
ation that the volunteer or participant has conducted will likely be
re-contaminated from no fault of theirs when a Site is in an area-wide
groundwater or soil vapor plume area without institutional controls. The
amendment clarifies that a site that achieves the Track 1 soil cleanup
objectives can maintain the site's Track 1 status, provided the site
records an environmental easement to ensure that the soil vapor and
groundwater mitigation measures are maintained by the site's owner
pursuant to a Site Management Plan to ensure the Track 1 soil standards
continue to be met.

The legislature recognizes that there may be residual groundwater or
soil vapor contamination even after a Track 1 soil cleanup is imple-
mented, but still desires to encourage Track 1 cleanups regardless if
there are engineering controls required to address residual groundwater
or soil vapor contamination. Without these mitigation controls, Track 1
cleanups may not be achievable on most brownfield sites, since most
brownfields are in areas near other brownfields, and therefore the
requirement leads to a result that is counter to the overall statutory
intent of encouraging the most permanent and protective remedies. This
is also the case whether or not the party is a volunteer or participant.
Participants are also encouraged to achieve Track 1. Therefore, the
regulation that limits the five-year provision to only volunteers is
counter to legislative intent and is hereby superseded.

Section 4 of this bill updates the Track 2 cleanup definition in ECL §
27-1415(4) to clarify the original legislative intent that Track 2 soil
cleanup objectives must be met down to bedrock in order to achieve a
Track 2 cleanup, and to address soil vapor that may still be present
from an on-site source or an off-site source after implementation of a
Track 2 soil remediation.  NYSDEC created a regulation at 6 NYCRR §
375-3.8(e)(2), which allowed a party to leave contamination above the
Track 2 soil cleanup objectives below 15 feet, while still allowing the
site to maintain Track 2 status. This regulation does not reflect the
intent of the original statutory Track 2 definition, which as plainly
drafted required all soil above bedrock to achieve the Track 2 contami-
nant-specific soil cleanup objectives as set forth in the Track 2 Tables
at 6 NYCRR § 375-6.8(2). The statutory amendment effectively supersedes
the regulation at 6 NYCRR § 3753.8(e)(2), which allowed a party to leave
contamination below 15 feet above the Track 2 soil cleanup objectives,
while maintaining Track 2 status; but this statutory amendment preserves
the party's ability to use restrictions on the site to address any resi-
dual soil contamination remaining above the Track 1 SCOs, or groundwater
or soil vapor contamination.

Section 5 of this bill would amend ECL § 27-1415 subpart 5 to include a
new section 5-b defining when "remedial action cover systems" are
required and the required thickness for such a cover system to be effec-
tive. This confirms that remedial action cover systems can consist of
physical barriers made up of clean soil, asphalt or concrete exterior
surfaces, and interior barriers like foundation slabs and sidewalls. The
2015 amendments to the Tax Law defining "site preparation costs" permit
a portion of the cost of foundations and sidewalls that are part of a
remedial action cover system to be counted as "site preparation costs."
However, NYSDEC has been drafting decision documents, and revising work
plans and engineering reports to exclude the cover system requirement,
even though the presence of a remedial action cover system is part of
the remedy in order to eliminate the costs of these systems counting
toward the site preparation tax credit. This exclusion means that build-
ing foundations are not part of the remedy, and thus not subject to
upkeep, maintenance, or inspection requirements, or to DEC oversight
through an environmental easement or site management plan. This is not
what the Legislature intended. Foundation slabs and sidewalls can and
often are part of the remedy in a Track 4 remediation, and the bill
recognizes this and clarifies what that means for tax credit purposes.

The bill first affirms that where a remedial action cover system is
present in a Track 4 site and includes a foundation slab and/or side-
walls, the entire cover system is part of the remedy. The Tax Law then
determines how much of the cost of that system can be counted as a "site
preparation" cost. When read together, Tax Law Sections 21(b)(2) and
21(a)(3)(iv), as amended in April 2015, clearly intended to require
taxpayers to divide the cost of remedial action cover systems consisting
of building foundations into two parts: (1) a site preparation amount
equal to the equivalent cost of a remedial action cover system for the
area on the site that is covered by the foundation slab; and (2) a qual-
ified tangible property amount equal to the balance - that is, the foun-
dation cost that exceeds the equivalent remedial action cover system
cost (i.e. the excess cost for very thick foundation slabs, etc.).

Due to the lack of clear statutory and regulatory direction, the NYSDEC
has been providing unclear guidance to BCP parties on when cover systems
are and are not required. This Section of the bill clarifies this and
confirms that hardscape surfaces, including foundation slabs and side-
walls, may properly be part of the remedial cover system. The 2015
changes make it clear that for post-2015 sites, only a portion of foun-
dation costs may be counted as site preparation costs. The bill does not
change the calculation of site preparation costs for sites accepted
prior to the July 2015 cutoff.

In addition, DTF has decided to completely disallow all foundation costs
as site preparation costs even when the RAWP and FER include a
constructed foundation as a required as part of the remedy at a brown-
field site. DTF contends its position is justified due to conflicting
provisions in the definition of site preparation costs.  Accordingly,
DTF has been allocating all of the foundation costs as tangible property
costs, even when a portion of the foundation was clearly remedial under
NYSDEC approved plans and documents. The effect is to eliminate valid
site preparation costs from the site preparation tax credit calcu-
lations. The bill clarifies the legislature's intent of the April 2015
amendments by 1) defining when remedial cover system consisting of a
foundation or hardscape surface such as asphalt is required as part of a
remedial action; 2) specifying the minimal thickness needed for such
cover systems to avoid cracking in the short term based on and in
accordance with the minimal construction requirements in the existing
Building Code of New York State, New York State Department of Transpor-
tation Standard Specifications, and based on practical remedial experi-
ence as explained by brownfield practitioners; and 3) requiring the
foundation to be certified by a licensed Professional Engineer.  Addi-
tional relevant technical amendments to the Tax Law are also summarized
below to further effectuate these amendments.

Section 6 of this bill amends Tax Law § 21(b) to harmonize federal tax
law with the definitions of "site preparation costs" and "qualified
tangible property" used in calculating the brownfield redevelopment tax
credit (BRTC).

This section of the bill clarifies that the cost of remediation and site
preparation as defined in the law can include costs that are also
included in the depreciable basis of project assets (such as a building)
used for federal income tax purposes, while preserving and clarifying
the no double dipping rule to ensure that federal depreciable basis is
reduced - for BCP credit purposes - by allowed site preparation costs
when calculating the tangible property credit component.

Sections 7 and 8 of the bill harmonize the definitions of "site prepara-
tion costs" with section 6 of the bill and also incorporate into the
definitions the remedial elements described in the environmental conser-
vation law (including the amendments under sections three through five
of this bill. Section 7 addresses sites accepted into the BCP before
July 1, 2015 (so-called "generation 2" sites), while section 8 addresses
sites accepted on or after July 1, 2015 (so-called "generation 3"
sites).

Section 7 of this bill amends the pre-April 2015 Tax Law § 21(b)(2)
(which became effective June 28, 2015) by deleting the contradictory
provision which appears to exclude from site preparation costs, costs
that qualify for the basis for federal income tax purposes of qualified
tangible property, even if such cost was otherwise a site preparation
cost since it was part of the remedial action. This change is applicable
to brownfield sites for which the Department of Environmental Conserva-
tion has issued a notice of acceptance on or prior to June 28, 2015.
This change is not required for sites that entered the program after
June 28,2015 law because this language was excluded in the current law.

 
JUSTIFICATION:

As of the current date, DEC has issued over 300 Certificates of
Completion (COCs) for Brownfield Cleanup Program sites since the program
was established in 2003. New York's Brownfield Cleanup Program has been
responsible for the remediation and redevelopment of contaminated sites
in an average of 3.2 years. In the Superfund program, the average time-
frame for remediation is 10 to 20 years, and the sites rarely, if ever,
are redeveloped because the final cleanups are not safe enough for site
reuse as the sites are typically permitted to remain industrial. Due to
the tax incentives in this program, superior cleanups have been achieved
enabling not only one brownfield site, but multiple brownfields in
brownfield infested neighborhoods to be redeveloped.  This is allowing
for residential and commercial development on sites that are no longer
suitable for industrial reuse. In addition, all of the project sites
that have been remediated and redeveloped, have not only create tax
revenue generating buildings and permanent jobs on sites that formerly
sat fallow, these projects have enhanced investment opportunities on
neighboring sites, which has improved property values in numerous commu-
nities throughout the State. The legislature did not intend some of the
new policy directions the executive branch has been taking the program
since the 2015, which appear to have been based on statutory provision
either misinterpreted or not clearly drafted. These technical amendments
are necessary to stabilize this highly successful remediation and
economic development program.

Nevertheless, the law has significant fiscal implications. However,
studies have shown that revenues exceed the tax credit expenditures over
the long term and are transforming neighborhoods. Since developers do
not clearly know what benefit they are or are not eligible for given the
executive branches recent policy directions, changes proposed in this
bill are designed to clarify the benefits and limitations on those bene-
fits. For example, before this bill, a developer could try to include a
5-6 foot thick foundation as a site preparation cost. This will no long-
er be permitted. However, one or two feet of the foundation cost will
clearly be covered if the foundation is a necessary part of the remedy
due to soil vapor issues, for example. Such clarity is needed by both
developers and the regulators to better understand the intent of the
legislature

 
LEGISLATIVE HISTORY:

New Bill.

 
FISCAL IMPLICATIONS:

Minimal.

 
EFFECTIVE DATE:
This act shall take effect immediately. Effective immediately, the addi-
tion, amendment and/or repeal of any rule or regulation necessary for
the implementation of this act on its effective date are authorized and
directed to be made ad completed on or before such effective date.