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Courts Split on Eligibility Guidance for N.Y.’s Brownfield Program

Client Advisory

September 23, 2008

In 2003, New York created its Brownfield Cleanup Program (“BCP”) to provide incentives for developers to reuse contaminated sites, commonly called brownfields. These incentives include lucrative tax credits keyed to remediation and redevelopment costs, liability relief and flexible remediation standards. But the Legislature’s failure to include a cap on the tax credits threatened to cost the state hundreds of millions of dollars in lost tax revenues. In 2005, the New York State Department of Environmental Conservation (NYSDEC) first tried to restrict eligibility to the BCP through the issuance of its eligibility guidance manual.   And in 2008 the Legislature amended the  BCP to limit the tax credit for redevelopment costs.

Controversy concerning NYSDEC’s eligibility guidance has lingered. The BCP defines brownfield as “any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.”[1] According to NYSDEC, a brownfield is defined by two key components: contamination and complications. The eligibility guidance provides several factors that the agency utilizes in determining whether those two components are present. The most controversial aspect is the agency’s consideration of economics in determining whether contamination is truly complicating redevelopment.[2] 

At least two courts have upheld NYSDEC’s use of the eligibility guidance in certain circumstances, including the New York County Supreme Court in 377 Greenwich LLC v. NYSDEC (2006).[3] On September 10, 2008, however, Justice Walter Tolub of the same court reached a different conclusion in HLP Properties LLC v. NYSDEC, [4]  following the decision of Justice Cherundolo in Destiny USA Development, LLC v. NYSDEC (2008) [5] that concluded that NYSDEC’s eligibility guidance was contrary to the statute. HLP concerned NYSDEC’s denial of a BCP application for a contaminated parking lot in West Chelsea, Manhattan that was the site of a manufactured gas plant a century earlier.   Justice Tolub determined that NYSDEC impermissibly attempted to insert economic factors into the definition of brownfield by considering whether the surrounding community showed signs of economic distress.

This case is noteworthy because it expands the disagreement among the State’s trial courts about the legality of the eligibility guidance. Moreover, its goes to the heart of NYSDEC’s ability to keep moderately contaminated sites in urban areas with high property values (i.e., Manhattan) out of the BCP. More court decisions, agency rule-making or legislative action are sure to follow. 


Questions regarding this client advisory may be directed to Christopher Rizzo at (212-238-8677, rizzo @clm.com), Ethan I. Strell (212-238-8632, strell@clm.com) or Christine A. Fazio (212-238-8754, fazio@clm.com.)


Endnotes


[1] N.Y. Envtl. Conserv. Law § 27-1403.

[2] NYSDEC’s eligibility guidance is available at its website, www.dec.state.ny.gov.

[3] 377 Greenwich LLC v. NYSDEC, 14 Misc. 3d 417, 827 N.Y.S.2d 608 (Sup. Ct. N.Y. County, 2006). 

[4] HLP Properties, LLC v. NYSDEC, No. 115969/07 (Sup. Ct. N.Y. County, September 10, 2008).

[5] Destiny USA Development, LLC v. NYSDEC, 2008 WL 2368085, 2008 NY Slip Op. 51161(U) (Sup. Ct. Onondaga County, 2008).



Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2017 Carter Ledyard & Milburn LLP.
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