The Business Council opposes this Executive Budget proposal that would deny remediation and development tax credits for projects which have been admitted into the Brownfield Cleanup Program before June 23, 2008, but have not yet received a certificate of completion. Adoption of this bill will endanger over $20 billion of cleanups and development in the state, will likely involve the state in protracted and expensive legal action at the federal level, and will violate the state's pledge to honor its commitments.
The adoption of tax credit caps in 2008 (Chapter 390 of the laws of 2008) expressly grandfathered projects that had been admitted into the Brownfield Cleanup Program prior to the adoption date. Approximately 100 projects, two-thirds of which are upstate, were thus protected from losing benefits previously promised by New York State. This bill would retroactively apply the credit caps and new credit determination standards to these projects.
There are several areas of concern with this measure.
First, the bill would treat projects already in the program and affiliated parties unequally compared to applicants that entered the program after the adoption of the credit caps. The credit amendments adopted in 2008 decreased development credits, but increased cleanup credits. The affected projects would be held to the new development caps, but would be unable to utilize the new higher cleanup credits.
Second, most of these projects would lose all credits. Prior to the 2008 amendments, a developer could either claim a state remediation credit of between 10 and 22 percent or take a thirty-five percent federal tax deduction. The 2008 amendments make developers apply for the cleanup credit to be eligible for any development credits. The 2008 amendments also capped development credits for most projects coming into the program after the adoption date to the lower of $35 million or three times the cleanup credit base. Most of the affected projects have chosen to expense their cleanup costs for economic and accounting reasons, and, therefore, have no state cleanup credit base. If this bill is adopted, then most of these projects will have a tax cap of zero. Over $800 million dollars in earned credits will be lost.
Third, this bill attempts to circumvent the judicial process, in that some of the affected projects have obtained final relief from the courts to be in the program under the prior uncapped development credit levels. If adopted, the will of the courts will be subverted.
Finally, this bill would violate the implicit contract the state made with these developers. The projects were proposed and admitted into the program under rules that the developers relied upon to make business plans, obtain private financing, employ tens of thousands of New Yorkers and reduce risks on what are inherently precarious ventures. Redeveloping brownfields is an extremely expensive and uncertain proposition. These private sector firms went into the program under good faith intentions to complete what they promised in return for partial state support of their expenses. State support that only comes after projects are completed, contaminated sites are cleaned up to the highest standards in the nation, and these previously abandoned and underutilized properties are put back into productive use. New York should not break its promises for those that are taking the risks to recharge our economy in these extremely difficult times.
For these reasons, the Business Council respectfully opposes approval of Part DD of executive budget billS.6610-A/A.9710-A.