Governor Cuomo vetoed Assembly Bill #10135 / Senate Bill #7878 (collectively, the "BCP Extender") on December 29, 2014, and returned it to the Assembly unsigned. The BCP Extender would have extended from December 31, 2015 to March 31, 2017 the cutoff date by which a participant in the New York State Brownfield Cleanup Program ("BCP") could secure access to the BCP's refundable state tax credits.
This veto would not have been anticipated six months ago when Governor Cuomo publicly stated his intention to sign the extension bill. On June 24th, four days after the Assembly and Senate passed the BCP Extender, Governor Cuomo responded to a media inquiry by stating that he would sign the BCP Extender, although he signaled further changes were coming by noting "I think it needs an overall reform and we're going to be working on that when we go back."
In his veto message to the Assembly, the Governor stated that he did not approve the BCP Extender because "it would "¦ have an unplanned, direct impact on the current State fiscal plan," since "the legislation was not included as part of the 2014-15 Enacted Budget."
For a number of participants in the BCP process who read of the Governor's intention to sign the BCP Extender and paced their cleanup to be completed on or before March 31, 2017, it will be difficult, if not prohibitively expensive, to complete their remediations by December 31, 2015. Thus, at least some of these participants will be unable to secure access to the refundable state tax credits upon which they counted to help pay for their cleanups if the overall reform to which the Governor alluded does not offer them some relief.
Moreover, because the BCP Extender would also have refinanced the State Superfund Program with $100,000,000 of immediate financing and an additional $300,000,000 in bonding authority through 2017, the State Superfund program will also be looking for some relief as part of such overall reform.
These adverse affects on New York's remedial programs may help the participants in the forthcoming legislative debate regarding how best to accomplish an overall reform of the BCP and/or State Superfund program focus the best practicable outcome rather than simply their preferred outcome. The gubernatorial veto, therefore, has set the stage for some very intense negotiations regarding how best to amend the Brownfield Cleanup Program and refinance the State Superfund Program.
Those negotiations will likely start with the release of the Governor's proposed budget bill for the 2015-2016 fiscal year. Last year, Governor Cuomo released his executive budget bill and briefing for the 2014-2015 fiscal year on January 21st, so the interested and adversely affected parties should not have long to wait. We will be monitoring those negotiations, and will issue further Alerts to keep you apprised of significant developments.
Nevertheless, last year, the Governor, the Senate and the Assembly were far apart on how the BCP should be amended, and whether and how the State Superfund program should be refinanced. So, reaching an agreement may not be easy.
The Governor and the New York State Department of Environmental Conservation are on record seeking statutory changes that would amend the BCP to make the refundable tax credits proportional to the amount of money expended on the remediation (without reference to the amount spent preparing the site or building new structures on it), and those credits would be linked to the development of jobs. In addition, the legislation which the Governor introduced last year would have limited "expenditure" of the tax credits to no more than $50 million in any single tax year.
The Assembly has a number of bills which would target the BCP tax credits to low income areas and/or properties that had been abandoned, underutilized, are "upside down" and/or were being redeveloped for affordable housing. Reportedly, the Assembly signaled that it would be willing to see the BCP's existing refundable state tax credits sunset completely on December 31, 2015 if need be.
In its 2014-2015 budget bill, the Senate only included a provision that would bifurcate the sunsetting of the refundable state tax credits, so that the tax credits for the earliest sites into the BCP program would sunset as planned on December 31, 2015 but the tax credits for the sites which just entered the program would be available until 2025. Thus, last year, the Senate appeared to be in favor of maintaining the current BCP "as is" and would therefore continue to include the amount spent preparing the site, remediating the site, and building new structures on the site when calculating the tax credit.
Without guaranteed access to the refundable tax credits after December 31, 2015, or if extended, after March 31, 2017, the BCP may be viewed as too onerous a program to induce voluntary remediation except under the most limited of circumstances, such that functionally there is no longer a viable remedial program in New York State for volunteers. Yet, the State clearly benefits when private dollars are leveraged to remediate sites in New York. If that is the case, then the ensuing legislative debate precipitated by the veto of the BCP Extender may offer an opportunity for the creation of a statutory voluntary cleanup program that is both flexible in timing and approach, and based upon cooperation between the remediating party and the State.
Although we will continue to monitor developments regarding the legislative negotiations concerning the BCP, State Superfund Program, and possibly, a new voluntary cleanup program, it nevertheless would be wise to assess the risks to your assets before any future determinations on whether and how to remediate a site are to be decided.
We would be happy to help you further understand the potential risks and to devise a plan of action to avoid potential pitfalls that may arise if you or your company are contemplating entry into the BCP or State Superfund Program. If you or your company would like more information on the implications of this gubernatorial veto or would like to discuss how it relates to your specific situation, please do not hesitate to contact the author of this Alert and partner in Hiscock & Barclay's Project Development and Environmental Practice Areas, Thomas F. Walsh, at (585) 295-4414 or twalsh@hblaw.com.