Last week New Partners for Community
Revitalization issued a report entitled: “Missing the Target: Making the
Brownfields Tax Credit Work for Communities.” The report can be obtained
at NPCR’s website: www.npcr.net.
The report recommends delinking eligibility for the Brownfield Cleanup Program from
the Brownfield Tax Credit and targeting the Brownfield Tax Credit based on cleanup
costs, and type of development project.
From:
brownfields-bounces@list.cpeo.org [mailto:brownfields-bounces@list.cpeo.org] On Behalf Of LSchnapf@aol.com
Sent: Tuesday, May 29, 2007 1:22
PM
To: brownfields@list.cpeo.org
Subject: [CPEO-BIF] BCP Data
In response to Peter's question, we tried
to determine the percentage of costs relative to the development costs because
some were suggesting that a percentage could be used to identify projects that
were worthy of the BCP or that the the amount of tax credits that a developer
could claim should be based on the percentage of the costs. It seems like
some might have been looking to the percentage as a surrogate metric for the
quality or amount of the cleanup, or perhaps the validity of the project as a
brownfield site.
What we found was that the percentage had
little relationship to the quality of the cleanup. Large developments tended to
remove the source materials more frequently than smaller projects because of
the depth of excavation. The fact that the cleanup costs only represented say
1% of the project costs does not mean that the project was not a valid
brownfield project or that the contamination did not complicate the
reuse. In many cases, the BCP was the factor that tipped the
developer towards going forward with its project and assuming the risk of the
cleanup.
In contrast, if the BCP project was
a one-story retail building that was formerly a gas station, a risk-based
cleanup that leaves residual contamination might range 20% to 40% percent of
the total project. Did a fairly simple petroleum cleanup representing 20% of
the project costs complicate the reuse more than the $10 million remediation
that represented 1% of a that total project?. It depends on the
site-specific factors. Certainly, the massive cleanup at a large project
poses significantly more risk to a developer because of
uncertainty of costs, the numerous variables that can change the scope of
the cleanup and the associated project delays which can be extremely
costly than a site where there are less variable and less things to go wrong
since the developer only has to pull out some tanks, remove
contaminated soil and do some groundwater monitoring for a few years.
My point was that the percentage by its
own does not serve as a good surrogate or barometer of a project's value. We
collected the information because we felt it was an important piece of
information to have but when we looked at the results, it was fairly clear to
us that this alone should not be used to determine if a site should be admitted
into a brownfield program or what tax credits it should be allowed
to claim.
My personal opinion is that It might be
more useful to establish a cap or have a sliding scale of tax credits set
at a certain amount of cleanup dollars spent on a project with perhaps a higher
level allowed for affordable housing projects, than use a percentage of
cleanup approach since this will have an adverse impact on larger sites that
are taking on greater cleanup risk.
With respect to excavation costs, the
normal excavation costs would be based on how much soil would have to be
removed based on the project design and geology, and then what it would cost to
dispose of non-contaminated soil. If additional soil has to be removed
because it is contaminated or if the soil that would normally be excavated is
contaminated, there would be additional costs for properly managing that
impacted soil either as "contaminated or special waste" or as
"hazardous waste". This "delta" or additional costs
are the costs that we used in our calculations.
A more tricky question to when the
project would only normally excavate say 15 feet and this would be
acceptable from an environmental standpoint but the developer wants to be able
to achieve an unrestricted residential cleanup since this would eliminate the
need for filing deed restrictions and also allow them to claim an extra 2% in
tax credits so they dig down to bedrock at 20 feet. Is this costs to excavate
the additional five feet the environmental"delta" of extra costs or
is it just the normal costs of construction since this was not
REQUIRED. One could argue this particular issue either way and I would be
delighted to read your responses.
Lawrence P. Schnapf, Esq.
55 E.87th Street #8B
New York, NY
10128
212-756-2205 (office)
212-876-3189 (home office)
203-263-5212 (weekends)
212-593-5955 (fax)
LSchnapf@environmental-law.net
www.environmental-law.net
(website)