The Green Lady

A landmark brownfields law mutates into a massive tax giveaway to the Times and other big developers.
By Elizabeth Cady Brown, City Limits MONTHLY, September/October 2004

In Williamsburg, Brooklyn, Hasidic, Latino and African-American Residents are locked in a ferocious battle for living space. Yet 12 acres on the border between East Williamsburg and Bushwick stand empty, save for barbed-wire fences and tangled weeds. The flat, bare land looks tantalizingly easy to build homes on, but the problem is what lies beneath. The soil contains a toxic mix of chemical pollutants that seeped underground during the neighborhood’s manufacturing days.

There are an estimated 7,000 plots like this across New York City – contaminated by industry and scattered mainly in economically depressed parts of the boroughs. These brownfields can sit festering and vacant for decades because the cost of assessing, cleaning, and insuring an environmentally degraded site simply overwhelms the value of any potential development.

A long-awaited state law, the 2003 Brownfields Cleanup Program, is supposed to change all that. “Our focus was enhancing environmental protections and public health,” says the legislation’s lead sponsor, State Assembly member Tom DiNapoli. “Related to that purpose is showing there is a way to have a rigorous environmental program that succeeds from the economic point of view. We want to create opportunities for putting nonproductive properties back to productive use.”

But nine months since the program’s launch, New York City’s applications are primarily being filed by big developers doing expensive projects on sites that have been in continuous use, are likely to have mild if any toxic contamination, and indeed were already being developed before the law was signed. One application came from Forest City Ratner and its partner the New York Times Company for its $850 million headquarters in Times Square. Another brownfields application was filed by the Related Companies, for its plan to turn the 34-acre Bronx Terminal Market into a $300 million retail center.

It’s no mystery what’s attracting titans of the building industry to the new brownfield program: tax credits. Big ones. “There is no limit on the number of projects, the amount of money to be expended, and no cap on the amount given to any one project,” enthuses Kelly Bennett, associate executive director of the Environmental Business Association, a New York state trade group for green industry. “These are the most powerful tax credits we have on the books right now.”

Of the 23 states that offer tax abatements or credits as part of a brownfield cleanup program, New York’s are the most generous to developers. In addition to giving a tax credit tied to the cost of environmental cleanup, New York also gives builders a tax break for a percentage of the cost of redevelopment – as high as 22 percent. The Times-Ratner project alone could get more than $170 million. If the credit amounts to more than what the developer owes in state income tax, New York State will pay the difference in a rebate check.

To get into the brownfield program, a builder has to convince the Department of Environmental Conservation (DEC) that “redevelopment or reuse [of the site] may be complicated by the presence or potential presence of a hazardous waste, petroleum, pollutant, or contaminant.” Even if subsequent testing shows no contamination, the project can keep the entire tax break. It is up to the DEC to decide eligibility on a case-by-case basis, and so far the agency seems inclined to err on the side of inclusion.

“It is a fairly broad definition,” agrees lawyer Michael Gerrard, who chairs the American Bar Association’s environment section and has written several books on brownfield law. “But it was written intentionally broad to encourage property owners to enter the program and encourage the redevelopment of brownfields.”

While offering generous, easy-to-access tax credits may be an effective way to get businesses to participate, some environmentalists who fought for the brownfield law are beginning to worry that these financial incentives will not end up serving the intended purpose of the program: spurring developers to put polluted, deserted real estate back into use. The tax credits are structured to give the maximum payout on pricey projects in areas where the real estate market is already strong, rather than steering developers to deeply contaminated sites in environmentally burdened neighborhoods.

“It was not my intention to include projects like the Times-Ratner building,” says Assembly member Vito Lopez, who cosponsored the Assembly’s brownfield bill and whose district includes the Bushwick site. “It wasn’t about projects that could afford to underwrite the costs of remediation. My intention was that this would get us out and able to do projects that wouldn’t have been done anyway.”

Some observers are also concerned that the use of the brownfield tax break as a subsidy for high-end development could put the entire program in jeopardy. The state budget office estimated that these tax credits would cost $135 million in forgone revenue this year. However, there is no ceiling on how much the state can out in tax credits. A tax break costing indebted New York State hundreds of millions of dollars each year – and benefiting deep-pocketed real estate and business interests – may prove politically unsustainable. “Long term, if too many sites enter with a low cleanup value but high tax credits, that’s not good for the state,” says Linda Shaw, a Rochester environmental attorney who worked on the brownfield law. “If you abuse a program like this, it won’t get renewed.”

Mathy Stanislaus, who was also involved in developing the legislation as a representative of the New York City Environmental Justice Alliance, shares Shaw’s apprehension. “Although it would be a huge mistake to eliminate a program simply because the legislature didn’t get it right the first time,” says Stanislaus, “it’s possible.”

“I’ve tried to figure out how the tax credits got crafted,” adds Stanislaus, “and no one has given me a straight answer.”

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