- More than 7,000 acres of vacant or underutilized brownfields in the five boroughs represent a large part of the city's undeveloped land
- Agreement between city and state could result in quicker resolution of brownfield cleanup applications
- Tips on navigating a brownfield project through city and state agencies
For years, redevelopment of brownfields in New York City has been a difficult, slow process. It has been difficult because the only available government program has been the Brownfield Cleanup Program administered by the state Department of Environmental Conservation, which has applied extremely restrictive eligibility criteria. It has been slow because DEC has been clogged with applications and even after a property is admitted into the program, the progress from start to finish has been sluggish and protracted.
So it was hardly surprising that developers and their counsel applauded the recently announced agreement between the city and the DEC in which DEC endorses the idea of having a city agency investigate lightly and moderately tainted brownfields, oversee remediation and advise that the cleanup is complete. Most environmental and civic groups also lined up behind the city's new Local Brownfield Cleanup Program, largely because the city will apply the state's cleanup standards and also because the LBCP program allows for citizen input at all key points in the process.
The theory behind the program and the authority conferred on the city's Office of Environmental Remediation is sound: the most severely tainted sites remain the province of the state and federal government, the city's program will be administered using the state's cleanup standards, and the OER process appears significantly more efficient than the DEC's. If the program works as well in practice—and we hope and believe it will—it should result in a streamlined, though not relaxed, investigation and approvals process, with no diminution in protections for the community.
The stakes are high. The more than 7,000 acres of vacant or underutilized brownfields scattered throughout the five boroughs represent a large portion of the city's otherwise developable land. For the citizenry, an effective brownfield program could translate to much-needed housing and retail, and fewer eyesores on the landscape. For developers, it could translate to fewer and shorter delays, less uncertainty as to how much time will elapse, easier access to financing, lower carrying costs, and healthier returns on investment after several years of market-related doldrums.
Questions abound—with only time answering most of them—and there are limitations to the LBCP as to benefits and eligibility. Unlike the state program, the LBCP does not offer tax credits, for instance, and the city's liability release does not bind the state to offer the same. And excluded from LBCP are those projects that are already in the state's brownfields program and those that are on the state's or federal government's Superfund lists. But it is with good reason that our firm and its developer clients are hopeful and reasonably optimistic that LBCP will ultimately be more user-friendly than the DEC's Brownfield Cleanup Program, and we urge that developers at least take a long look at the benefits of the city's program.
The LBCP seems to offer a far more streamlined process and quicker resolution to brownfield cleanup applications. And by some measures, it should be more inclusive than the state's BCP, which has been generally skittish about giving favorable review to sites with so-called historic fill, which can contain, among other contaminants, mid-century incinerator ash. Historic fill sites make up a significant portion of the brownfields in New York City.
As conceived, however, LBCP has two inherent, significant limitations:
- It does not offer lucrative tax credits, as the state's BCP does. It does, however, offer some financial incentives for participating in LBCP, which, although welcome, are not as lucrative as the tax credits.
- The liability release the city will confer on brownfield redevelopment projects that pass muster with LBCP will not bind the state DEC. Rather, under its agreement with the city, DEC states that it generally will have no interest in properties that are going through or have completed the LBCP, although of course DEC reserves all its rights. We hope that, as the LBCP grows and matures, DEC may be convinced to offer a legally binding release to parties who complete cleanups under the LBCP.
The joint appearance by Mayor Bloomberg and DEC Commissioner Pete Grannis at the ceremony marking the start of the LBCP program and announcing the first site accepted from among 35 applicants—a half-acre plot in the Bronx where affordable housing is planned—gives us reason for hope, as does the recognition that the OER is applying the DEC's standards throughout the process. For now, the city's release by itself is inherently valuable in terms of issues with financing, construction, sales and marketing, and community relations.
There is a significant, positive element in the agreement between the city and DEC that developers should not overlook. The LBCP offers an alternative to developers whose properties are contaminated by petroleum products. By law, the discovery of fuel oil or gasoline contamination must be reported to DEC, which then opens a Spill File. The only way for a Spill File to be closed is a determination by DEC that cleanup is either not necessary or has been satisfactorily completed. DEC has now agreed that Spill File properties can be addressed under the LBCP, although DEC must consent on a case-by-case basis. With the streamlined approach offered by OER, it may be possible to move Spill File sites through to a no further action determination and liability release much more quickly, which can be critically important to developers, for whom time is money.
Because a brownfield remediation project may not be in both the state and city programs simultaneously, developers whose sites might be eligible for either must weigh the respective costs and benefits, and risks and rewards, of both to determine where they want to apply first. Both programs offer developers pre-application meetings to discuss the project, and based on the content and tenor of those meetings, developers and their counsel can decide where to submit an application. The BCP-offered tax credits remain appealing, of course, so developers may well decide to approach DEC first; if the pre-application meeting with the DEC bodes poorly for favorable resolution, then application to the LBCP might make sense due to its less stringent criteria for eligibility. And for developers who elect to apply first to the state program but are rejected, the city program remains a viable option.
Stated simply, the state's tax credits are alluring, but so too is the likelihood that the city program will move more quickly to declare brownfield site cleanups complete. So developers and their advisors should pencil out the economic advantages of speedier review: less time without revenue, lower carrying costs, and the potential cost of market fluctuations.
There are precious few sure things in life, and the success of the LBCP—and developers' satisfaction with the program—are not among them, if for no other reason than we are barely in the first inning of a nine-inning game. But the program, the first of its kind in the nation, is intelligently conceived and is being administered by longtime environmental professionals, with the apparent cooperation of the DEC. That combination seems to offer a ray of hope to developers who own brownfield sites. We will, in tandem with our developer clients, be monitoring the early going: the process, the development community's reaction and OER's disposition of applications and DEC's consideration of releases from liability. For now, color us hopeful and optimistic.