To amend the Environmental Remediation Program regulations pertaining to the Brownfield Cleanup Program.
Text of final rule:
6 NYCRR PART 375 is amended to read as follows:
(Existing Table of Contents remains unchanged.)
Subpart 375-1 General Remedial Program Requirements
(Existing section 375-1.1 through subdivision 375-1.2(a) remain unchanged.)
Existing subdivision 375-1.2(b) is amended to read as follows:
(b) “Brownfield site” means any real property[, the redevelopment or reuse of which may be complicated by the presence or potential presence of] where a contaminant is present at levels exceeding the soil cleanup objectives or other health-based or environmental standards, criteria or guidance adopted by the Department that are applicable based on the reasonably anticipated use of the property, in accordance with applicable regulations. Such term shall not include real property identified in subdivision 375-3.3(b).
(Existing subdivision 375-1.2(c) through section 375-1.12 remain unchanged.)
(Existing Subpart 375-2 remains unchanged)
Subpart 375-3 Brownfield Cleanup Program
(Existing section 375-3.1 remains unchanged.)
Existing subdivisions 375-3.2(a) through 375-3.2(j) are renumbered 375-3.2(b) through (k).
A new subdivision 375-3.2(a) is adopted to read as follows:
(a) “Affordable housing project” means, for purposes of this part, title fourteen of article twenty seven of the environmental conservation law and section twenty-one of the tax law only, a project that is developed for residential use or mixed residential use that must include affordable residential rental units and/or affordable home ownership units.
(1) Affordable residential rental projects under this subdivision must be subject to a federal, state, or local government housing agency’s affordable housing program, or a local government’s regulatory agreement or legally binding restriction, which defines (i) a percentage of the residential rental units in the affordable housing project to be dedicated to (ii) tenants at a defined maximum percentage of the area median income based on the occupants’ households annual gross income.
(2) Affordable home ownership projects under this subdivision must be subject to a federal, state, or local government housing agency’s affordable housing program, or a local government’s regulatory agreement or legally binding restriction, which sets affordable units aside for home owners at a defined maximum percentage of the area median income.
(3) “Area median income” means, for purposes of this subdivision, the area median income for the primary metropolitan statistical area, or for the county if located outside a metropolitan statistical area, as determined by the United States department of housing and urban development, or its successor, for a family of four, as adjusted for family size.
A new subdivision 375-3.2(l) is adopted to read as follows:
(l) “Underutilized” means, as of the date of application, real property on which 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, which zoning has been in effect for at least three years; and
(1) the proposed use is at least 75 percent for industrial uses; or
(2) at which:
(i) the proposed use is at least 75 percent for commercial or commercial and industrial uses;
(ii) the proposed development could not take place without substantial government assistance, as certified by the municipality in which the site is located; and
(iii) one or more of the following conditions exists, as certified by the applicant:
(a) property tax payments have been in arrears for at least five years immediately prior to the application;
(b) 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
(c) there are no structures.
"Substantial government assistance" shall mean a substantial loan, grant, land purchase subsidy, land purchase cost exemption or waiver, or tax credit, or some combination thereof, from a governmental entity.
(i) there must be confirmed contamination on the property or a reasonable basis to believe that contamination is likely to be present on the property; and
(ii) there must be a reasonable basis to believe that the contamination or potential presence of contamination may be complicating the development, use or re-use of the property.]
Existing paragraphs 375-3.3(a)(2) through 375-3.3(a)(4) are renumbered 375-3.3(a)(1) through 375-3.3(a)(3).
(Existing subdivision 375-3.3(b) through section 375-3.11 remain unchanged.)
(Existing Subparts 375-4 through 375-6 remain unchanged.)
Final rule as compared with last published rule:
Nonsubstantive changes were made in section 375-3.2(l).
Revised rule making(s) were previously published in the State Register on
March 9, 2016.
Text of rule and any required statements and analyses may be obtained from:
Michael Ryan, NYS Department of Environmental Conservation, 625 Broadway, Albany, NY 12233-7011, (518) 402-9706, email: derweb@dec.ny.gov
Additional matter required by statute:
Negative Declaration, Short Environmental Assessment Form, and Coastal Assessment Form have been completed for this proposed rule making.
Revised Regulatory Impact Statement
1. Statutory Authority
In 2003, the New York State (State) Legislature created the Brownfield Cleanup Program (BCP) to promote environmental and public health as well as the economic vitality of the State through the cleanup and redevelopment of brownfields. The BCP offers parties two separate categories of refundable tax credits for the cost of (1) site cleanup and (2) redevelopment, the latter described as tangible property tax credits (TPCs).
The Legislature amended the BCP law in April 2015. Part BB of Chapter 56 of the Laws of 2015 amended and added new language to Environmental Conservation Law (ECL) Article 27, Title 14 (BCP) and Section 21 of the Tax Law. Some of these amendments provided new requirements for sites in New York City to qualify for TPCs. These requirements provide that, in order to qualify for TPCs, New York City sites need to be in an environmental zone, “upside down,” “underutilized,” or constitute an “affordable housing project.”
While the Legislature defined the environmental zone and “upside down” requirements, ECL § 27-1405(29) and (30) of the BCP law directs the New York State Department of Environmental Conservation (DEC) to define the terms “affordable housing project” and “underutilized” by regulation. DEC published proposed regulations regarding the “underutilized” and “affordable housing project” definitions in the State Register on June 10, 2015. Proposal of these regulations resulted in the amendments to the BCP law becoming effective on July 1, 2015. DEC also proposed to replace the prior regulatory definition of “brownfield site” to comport with the statutory definition found in ECL § 27-1405(2), as amended by Part BB of Chapter 56 of the Laws of 2015.
In the proposed rule making, DEC does not propose to revise the text of the “brownfield site” definition and only made one minor technical change to the “affordable housing project” definition as published in the State Register on June 10, 2015. No revisions were made to these definitions after the revised proposed rule making was published on March 9, 2016. The substantial revisions to the Express Terms made during the proposed rule making are found in the definition of “underutilized.” DEC proposed these revisions in response to comments received during the public comment period and the public hearing in 2015. After the revised proposed rule making, DEC made a minor clarification in the “underutilized” definition to the language pertaining to substantial government assistance which would allow for a combination of different types of assistance in order to meet the requirement for substantial government assistance. The comments on the “underutilized” definition to a large extent urged DEC to expand the definition of underutilized properties that would qualify for the benefit of TPCs. The revisions to the definition consider the realities of redevelopment by allowing for mixed use development (up to 25 percent residential or restricted residential) while focusing on incentivizing redevelopment for industrial and commercial uses within New York City. The City of New York made clear that their primary focus was to promote the redevelopment of underutilized sites for industrial uses. The changes to the definition removed the requirement for substantial government assistance for development where the proposed use was going to be 75 percent or more for industrial uses. Additionally, DEC has lessened the time period from five to three years that a property has to be underutilized relative to applicable zoning, and DEC expanded the eligibility criteria for “underutilized” properties to include properties that are vacant with no structures on the site. All of these changes were made after consultation with the business community and the City of New York.
Finally, DEC recognizes that many of the 2015 amendments to the BCP law require the agency to propose additional regulatory changes which will apply state-wide. Following the finalization of this rule making, DEC will undertake another rule making in order to make the required additional changes to the regulations.
2. Legislative Objectives
ECL § 27-1403 states the objectives of the BCP, including the advancement of “the policy of the state of New York to conserve, improve, and protect its natural resources and environment and control water, land, and air pollution in order to enhance the health, safety, and welfare of the people of the state and their overall economic and social well-being,” finding that, “it is appropriate to adopt this act to encourage persons to voluntarily remediate brownfield sites for reuse and redevelopment.”
The 2015 amendments to the BCP reflect an intent to reduce the amount TPCs available to applicants in New York City for brownfield sites in high-value real estate markets while further incentivizing development on brownfields where certain project criteria are met. These amendments also clarify the definition of “brownfield site” such that DEC-identified standards may be used to determine program eligibility for sites. The amendments restricting the availability of BCP TPCs apply only to sites in New York City and preclude credits unless the sites are determined to be “upside down,” in an environmental zone, “underutilized,” or used for an “affordable housing project.” For sites that are eligible for TPCs anywhere in the State, these credits may be increased for projects “in an environmental zone,” “within a designated brownfield opportunity area,” “developed as affordable housing,” “used primarily for manufacturing activities,” or “remediated to Track 1.”
3. Needs and Benefits
The revised proposed rule making is mandatory and required by statute. This rule making would amend Part 375 to add to new definitions to 375-3.2, "affordable housing project" and "underutilized," and revise the existing definition of "brownfield site" as specified in statute. Part BB of Chapter 56 of the Laws of 2015 amended and added new language to Environmental Conservation Law (ECL) Article 27, Title 14 (Brownfield Cleanup Program, BCP) and certain other laws. As required by ECL § 27-1405(29) and (30), DEC must define the terms “affordable housing project” and “underutilized” by regulation. On June 10, 2015, DEC published proposed regulations to define “affordable housing project,” and “underutilized,” as well as revise “brownfield site;” and the 2015 amendments to the BCP law became effective on July 1, 2015.
In part, the 2015 amendments to the BCP law address the large differences in the potential state tax liability between New York City BCP sites and those in the rest of the State. The primary driver for the regional imbalance within the BCP is attributed to high development costs for some downstate projects, which resulted in excessive TPCs. Limiting the eligibility of New York City sites for redevelopment credits to specific affordable housing projects and underutilized properties through criteria established by regulation, in addition to sites which are in an environmental zone or “upside down,” should help to target funds and projects in New York City areas with the most need. The substantial revisions to the proposed “underutilized” definition were made in response to comments and after consultation with New York City. Importantly, the revisions to the underutilized definition fulfills the City of New York’s stated goal to promote industrial redevelopment, while maintaining a fair and balanced approach to restrict the availability of TPCs to the sites with the most need. Finally, to ensure that TPCs are only afforded to sites with actual contamination rather than potential contamination, the amended definition of “brownfield site” clarifies DEC’s use of an environmental standards-based approach to site eligibility determinations as was set forth in the revised statute.
4. Costs
a. Costs to Regulated Parties
Since all costs incurred at a site prior to its acceptance to the BCP are ineligible for tax credits, applicants would incur credit-ineligible costs for performing site investigation work prior to the acceptance of a site in order to meet the amended definition of “brownfield site.” Nearly all applicants currently conduct this work, or are required to do so by DEC in the context of the review of their application as set forth at 6 NYCRR 375-3.3(a)(4)(ii), under the original definition. However, following the implementation of the amended statute, every applicant would be required to provide investigatory information sufficient to satisfy DEC’s environmental quality standards prior to acceptance into the BCP.
New York City applicants may incur costs to establish the required criteria for TPCs, including costs involved with obtaining a certification that a site would not be developed without substantial government assistance as described in the definition of “underutilized.” Should New York City applicants meet the required criteria for TPCs, the costs that are incurred in the application process would be fully or partially offset through tax credits. There may be similar costs to applicants across the rest of the State attempting to increase tax credits through a certification of an affordable housing project.
b. Costs to DEC, State and Local Governments
DEC, State and local governments would not incur additional costs due to the issuance of the revised proposed regulations. DEC costs for BCP application review are ongoing and any changes to DEC’s application review process due to revised proposed regulations are expected to be de minimis.
5. Local Government Mandates
This is not a mandate on local governments. Local governments have no additional compliance obligations as compared to other subject entities. Also, no additional monitoring, recordkeeping, reporting, or other requirements would be imposed on local governments under this rule making. To the extent that New York City certifications are required for projects to meet the definitions of underutilized or affordable housing, these certification programs are in place or are developed and implemented at the discretion of the local government. The revised proposed rulemaking also responded to a request by New York City to limit instances where it needed to certify to applications received for “underutilized” properties.
6. Paperwork
The 2015 amendments to the BCP require environmental investigation data to be submitted with BCP application materials in order to prove status as a “brownfield site.” Applications for New York City sites seeking TPCs would need to also include documentation of the proposed eligibility criteria for such credits. The additional information has been added to the application form that is required for entry into the BCP.
7. Duplication
The revised proposed rule making does not duplicate, overlap, or conflict with any other State or federal requirements.
8. Alternatives
DEC was directed by the legislature to propose definitions for “affordable housing project” and “underutilized” in order for the amendments in Part BB of Chapter 56 of Laws of 2015 relative to the BCP to become effective. While conforming the definition of “brownfield site” in the regulations to the law is not statutorily dictated, failure to do so would result in confusion between the statute and existing DEC regulations with potential legal action.
Because of the statutory mandate to define “affordable housing project” and “underutilized” and the need to conform the statutory definition of “brownfield site” to the regulatory definition, there are no other alternatives for this revised proposed rule making.
9. Federal Standards
The revised proposed regulations would not exceed any minimum federal standards.
10. Compliance Schedule
As applicants have had a proposed definition for underutilized since June 2015, and DEC has revised the definition to make it less stringent (which included an additional 30 calendar day public comment period, March 10 - April 8, 2016), applicants to the BCP should be able to comply with the regulations upon adoption.
Revised Regulatory Flexibility Analysis
1. Effect of Rule
The revised proposed rule would add or update definitions of the following terms: “brownfield site,” “underutilized,” and “affordable housing project.” These definitions would only affect eligible parties that voluntarily elect to participate in the Brownfield Cleanup Program (BCP). The rule does not impose any mandate to participate. It is unknown how many small businesses or local governments would want to participate in the BCP and thus be affected by the rule.
2. Compliance Requirements
Since the BCP is a voluntary program and the revised proposed rule would only be adding or amending definitions, it would not impose any additional compliance requirements. Thus, no small business or local government would be required to undertake reporting, recordkeeping, or other affirmative acts in order to comply with the revised proposed rule. New York City has volunteered to issue certifications that a property requires “substantial government assistance” described in the definition of “underutilized.” Additionally, New York City already enters into regulatory agreements with developers of affordable housing projects.
3. Professional Services
Since the BCP is a voluntary program and the revised proposed rule would only add or amend definitions, it would not impose any requirements for professional services. Thus, no small business or local government would require professional services in order to comply with the revised proposed rule. The New York State Department of Environmental Conservation (DEC) will continue to post information on its website to explain recent changes in the law and to provide information about the revised proposed rule.
4. Compliance Costs
Since all costs incurred at a site prior to its acceptance to the BCP are ineligible for tax credits, applicants would incur credit-ineligible costs for performing site investigation work prior to the acceptance of a site in order to meet the amended definition of “brownfield site.” Nearly all applicants currently conduct this work, or are required to do so by DEC in the context of the review of their application as set forth at 6 NYCRR 375-3.3(a)(4)(ii), under the original definition. Following the implementation of the amended statute, every applicant would be required to provide investigatory information sufficient to satisfy DEC’s environmental quality standards prior to acceptance into the BCP.
New York City applicants may incur costs to establish the required criteria for tangible property tax credits (TPCs) or costs involved with obtaining a certification that a site would not be developed without substantial government assistance as described in the definition of “underutilized.” Should New York City applicants meet the required criteria for TPCs, the costs that are incurred in the application process would be fully or partially offset through tax credits. There may be similar costs to applicants across the rest of the State attempting to increase tax credits through a certification of an affordable housing project.
5. Economic and Technological Feasibility
It is economically and technologically feasible for a small business or local government to comply with the revised proposed rule. There are financial incentives and liability protections for applicants, including small businesses and local governments, to participate in the BCP.
6. Minimizing Adverse Impact
The revise proposed rule would have no adverse economic impact on small businesses and local governments.
7. Small Business and Local Government Participation
DEC continues to post relevant information on its website to assist applicants, some of which may be small businesses or local governments, in understanding the requirements of the BCP. A public hearing on the proposed rule was held during the public comment period (June 10 – August 5, 2015) in New York City on July 29, 2015. Based on comments received, DEC made substantive revisions to the “underutilized” definition; one minor technical change to the “affordable housing project” definition; and no changes to the “brownfield site” definition. The revised proposed rule making (March 9 – April 8, 2016) also included a 30 calendar day public comment period, and the revised Express Terms and supporting rule making documents were posted on DEC’s website. DEC also maintains a listserv to which persons/entities, including small businesses and local governments, may subscribe so that they can receive information about new developments regarding the BCP.
8. Cure Period or Other Opportunity for Ameliorative Action
The rule would only add two new definitions and revise an existing definition to the BCP. Thus, no cure period is needed.
Revised Rural Area Flexibility Analysis
Changes made to the Express Terms published with the Notice of Proposed Rule Making do not require revisions to the Rural Area Flexibility Analysis that was previously published in the June 10, 2015 issue of the State Register.
Revised Job Impact Statement
Changes made to the Express Terms published with the Notice of Proposed Rule Making do not require revisions to the Job Impact Exemption Statement that was previously published in the June 10, 2015 issue of the State Register.
Initial Review of Rule
As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2019, which is no later than the 3rd year after the year in which this rule is being adopted.
Assessment of Public Comment
This assessment of public comment summarizes and responds to the comments received on the revised proposed regulations for the amendment of 6 NYCRR Subparts 375-1 and 375-3. On June 10, 2015, the New York State Department of Environmental Conservation (DEC) released for public comment proposed regulations to define “affordable housing project,” “underutilized,” and “brownfield site,” under the Brownfield Cleanup Program (BCP). The statutory authority for such regulations is governed under Article 27, Title 14 of the Environmental Conservation Law. A public hearing was held on these definitions on July 29, 2015 and the comment period ended on August 5, 2015. Comments were received, both in writing and at the public hearing, from 11 separate entities. Subsequently, on March 9, 2016, DEC released for public comment revised proposed regulations which addressed comments received on the proposed regulations. No public hearing was required for the revised rule making. Written comments were received from eight separate entities.
DEC received comments from business organizations, the City of New York, the New York State private environmental bar association, the New York State Business Council, private environmental consultants, and individuals. During preparation of the revised rule making, DEC incorporated suggestions made by the public based on the comments received. Seven comments received pertained to additional concerns with the “underutilized” definition as proposed. One commenter provided comments related to eligibility requirements, which will be addressed in a future rule making, and were not relevant to the proposed rule making which is limited to the definition provisions.
Based on comments received on the “underutilized” definition, DEC made a minor clarification to the language pertaining to substantial government assistance which would allow for a combination of different types of assistance in order to meet the requirement for substantial government assistance. No changes were made to the “affordable housing project” or “brownfield site” definitions which remain as published for public comment in the State Register on March 9, 2016. The proposed Express Terms have also been posted on DEC’s web site.
All documents submitted to DEC are available to the public, subject to exceptions in the Freedom of Information Law.
The comments pertaining to the “underutilized” definition, while acknowledging improvement from the June 10, 2015 proposed version, indicated that the definition was still restrictive and relies too heavily on anticipated future uses of the property as commercial or industrial development. DEC points out that this revised definition of “underutilized’ provides for mixed use development, with up to 25 percent restricted residential uses. Additionally, brownfields that are better suited for different types of development can still qualify for Tangible Property Tax Credits (TPCs) if they are located in an EnZone, are upside down, or provide affordable housing.
There was also the concern that few sites in New York City (NYC) would quality as ‘underutilized’ through the Tax-in-Arrears Test because of tax delinquency policies and procedures, and that few buildings would be deemed condemned or as having acute structural deficiencies because of building code violations. DEC believes that these criteria are valid indicators of underutilization and the regulations provide objective tests with clear parameters. DEC included these criteria to broaden the definition in response to comments received during the initial comment period.
Again, one commenter suggested using existing definitions of underutilized from outside New York or from various NYC laws or regulations in place of the DEC proposal. During the development of the statute, the Executive and Legislature evaluated the use of existing definitions of “underutilized” and did not come to the conclusion that any of those definitions were appropriate for eligibility for the TPCs associated with the BCP. DEC also reviewed other state and city laws, as well as other states’ definitions and determined that these definitions did not provide a workable definition in the context of the BCP. In many circumstances, the definitions in other laws are subjective and it is clear that in this area having the most objective criteria possible minimizes risk both for applicants and the State.
Another commenter indicated the need for substantial government assistance should be a factor for consideration, but not a requirement, and they also thought it was unclear which governmental entity would make this determination. The statute directs DEC to consider substantial government assistance in developing the regulatory definition of “underutilized.” Economic development agencies often assess projects to determine if state assistance is needed. DEC also consulted with NYC, who in many instances would certify that the proposed development requires substantial government assistance, and DEC would consider that certification in its determination on eligibility for TPCs for underutilized properties.
Two commenters suggested that the time limit for the Tax-in-Arrears test should be revised to either one or three years rather than be five years. DEC believes that the five year limit is appropriate to demonstrate underutilization. One year is too short of a timeframe to be a legitimate indicator of underutilization and it could have the perverse effect of encouraging entities to stop paying property tax specifically for the purpose of qualifying for TPCs.
DEC does not agree that the revised “underutilized” definition is unduly restrictive. Under the amendments to the BCP, it was clearly the intent of the Legislature to limit eligibility for TPCs in cities with a population of a million or more, as evidenced by the statutory restrictions adopted. Nonetheless, in response to concerns raised by the definition proposed on June 10, 2015, DEC significantly broadened the definition and increased the number of sites eligible for TPCs by revising the definition to allow for commercial use in addition to industrial use, with up to 25 percent restricted residential uses for “underutilized” properties. Yet the revised definition responds to the Legislative mandate to limit the number of sites that are eligible for TPCs.
It should also be noted that any site meeting the definition of a “brownfield” remains eligible to participate in the site preparation tax credits and release of liability offered by the BCP, and, once additional regulations are adopted, the newly created BCP-EZ program. Only sites seeking the TPCs would be subject to the underutilized definition, if not otherwise eligible under one of the other gateways.
