[Update: At a bill signing ceremony in Buffalo on June 24th, Governor Cuomo was quoted as saying he would sign the BCP extension]
On June 20th, the NY State Senate approved legislation that would extend the expiration of the Brownfield Cleanup Program (BCP) to March 31, 2017. The same bill had been passed by the Assembly earlier in the week. However, it is unclear if Governor Andrew Cuomo will sign the legislation.
As we have previously discussed, the BCP was slated to sunset on December 31, 2015. Governor Cuomo proposed sweeping reforms to the BCP in his January budget in response to a perception that the program was too expensive and not sufficiently targeted. The key elements of the Governor’s proposal had been to limit the lucrative qualified tangible property (QTP) tax credits to certain categories of sites (informally known as “gates”) and to redefine what constituted site preparation costs (SPC) for purposes of calculating the QTP “soft” cap (i.e., 3x the SPCs).
The legislature and the Governor could not reach agreement on the QTP gates since the proposal essentially pitted upstate against downstate and would have had a detrimental impact on affordable housing and Brownfield Opportunity Areas (BOAs). Thus, the Governor eventually removed BCP reform from the budget that was approved at the end of March. BCP reform appeared stalled until early June when the approaching end of the legislative session spurred last minute negotiations. It appeared that the parties were moving towards a compromise until the Governor agreed– in exchange for the endorsement of the Working Families Party– to campaign against a handful of Senate democrats who had formed a alliance with senate Republicans that allowed the Senate to remain in control of Republicans. This poisoned the well for further negotiations between the Senate and the Governor. As a result, the Legislature opted to pass a simple BCP extension.
It is unclear if the Governor will sign the extension. The Assembly is the legislative chamber that sends bills to the Executive for final action. Under the state Constitution, the Governor has a limited time to sign or veto legislation. However, the Assembly tends to send bills to the Governor in batches over the summer (to achieve maximum media coverage) and it is unclear when the BCP legislation will be forwarded to the Governor. The last time a BCP extender was passed by the Legislature, the Governor did not sign it into law until August.
So what are developers to do? The good news is that the proposed July 1st deadline for changes in the BCP tax credits (BTCs) is no longer a concern. Thus, developers who recently submitted applications but had not received a decision can breathe a sigh of relief.
The combination of a potential July 1st effective date and the 12/31/15 expiration had essentially brought the BCP to a halt for new applications. This was because even if developers were willing to live with the proposed BTC reforms, only the simplest and smaller projects could be assured of completing cleanups and receiving a Certificate of Completion (COC) by the end of 2015. Indeed, even applicants who had been recently accepted into the BCP were under the gun to complete their cleanups by the end of 2015. In reality the cleanup completion is earlier than 12/31/15 because of DEC documentation requirements. Most sites will probably have had to complete physical cleanup (i.e., soil excavation, foundation and installation of any required groundwater treatment system) by September 2015 to obtain DEC approval of all of the required submittals especially given the sheer volume of projects that DEC is going to have to review in 2014 and 2015. Thus, the extension of the BTCs to March 31, 2017 would take the pressure off many existing applicants.
So what are developers with potential new BCP projects to do until the Governor acts? The conventional wisdom (CW) would seem to be that they should proceed with their applications. If the Governor signs the extension bill, they will have until 3/31/17 to complete their projects.Moreover, they will be presumably be grandfathered into the existing BTC structure.
The CW would also seem to weigh in favor of proceeding with a BCP application even if the governor vetoes the legislation (under the political calculus that he will have a democratic senate in 2015). A veto would mean that the 2015 BTC expiration remains in effect so the sooner an applicant gets accepted into the BCP, the faster it can start working towards achieving a 2015 cleanup .
Even if the applicant believes it cannot complete its cleanup by the end of 2015, it still probably makes sense to apply now to the BCP. Assuming the proposes a new BCP reform package in January, the legislation would presumably grandfather projects that have been accepted into the BCP by at least 12/31/14, possibly 12/31/15 (coincidentally the original BTC expiration) or possibly as late as 7/1/15. Of course, it is possible that the Governor may decide to completely reinvent the wheel and allow the BTCs to expire. While Albany often resembles Game of Thrones, this would seem to be an extreme even for Albany. It is hard to believe that NY State would allow its BCP to lapse and become one of only two states without a brownfield program.