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Cuomo vetoes extension of state Brownfield Cleanup Program’s redevelopment tax credits

Gov. Andrew M. Cuomo vetoed a bill to extend the state’s Brownfield Cleanup Program, an environmental remediation program that has benefited several high-profile redevelopment projects in Western New York.

The bill sought to extend the availability of tax credits under the program until March 2017, authorize $300 million in bonding authority for the Superfund program through the same time frame, and add $100 million to the current year’s Superfund budget.

In June, Cuomo said he would approve the bill providing the extension, but rejected it late Monday night.

“Since this legislation was not included as part of the 2014-15 enacted budget, it would now have an unplanned, direct impact on the current State fiscal plan,” Cuomo wrote in a veto message to the Assembly. “This is not the way to enact such legislation. For that reason, I am vetoing this bill.”

The Brownfield Cleanup Program gives developers state tax credits based on the amount of money spent cleaning up and redeveloping polluted land.

Cuomo said he is still strongly committed to the brownfield program and would make it a priority in his 2015 to 2016 budget. The governor’s last budget proposed reforms to the program, including limiting tax credits to cleanup costs instead of development, and sought to extend the program through 2025.

“I will again propose extending the Brownfield Cleanup Program with appropriate reforms and funding the Superfund,” Cuomo wrote.

The veto means any current projects in the program must be completed by Dec. 2015 in order to benefit from its tax credits, unless lawmakers can work out the program’s reform and extension before then.

The Buffalo Niagara Partnership said it was “very disappointed” by the veto, and called it “especially challenging” for Western New York.

“At this point, we want to do whatever we can do to work with the governor and the legislature to get reforms enacted and get this program going,” said Dottie Gallagher-Cohen, president of the Partnership.

Erie County has had more remediation projects benefit from the program than any other county in the state. In recent years, those projects have included the NORAMPAC facility in Niagara Falls, the Coventus medical office building on the Buffalo Niagara Medical Campu, the Larkin District, Solar City at Riverbend as well as downtown’s HarborCenter, HealthNow office building and the redevelopment of the Donovan State office building into One Canalside.

“The brownfield program has been part and parcel to a lot of the biggest, most expensive, transformational projects we’ve had in the region,” said Marc Romanowski a partner at Harter Secrest & Emery who specializes in land use and environmental law and who has worked on several high-profile local brownfield projects.

Supporters of the bill said the veto will slow the redevelopment momentum that has built in the region and interrupt future economic development. In Western New York, the cost of cleaning up polluted properties tends to exceed the value a property will have even after it has been remediated.

“Developers for the past six months have pretty much universally stalled their projects if there was a brownfield cleanup component to them because this impending end of the program means it’s unlikely that they would be able to complete all the work necessary before the program expired,” Romanowski said.

Misuse of the project’s funding has made it a target of reform for years. Some projects downstate, where property values are high and the program’s benefits are not necessary for projects to be profitable, were criticized as wasteful uses of the clean-up program. The developments in prime areas would likely have gone through without the tax breaks. Such projects included upscale condominiums and office towers in Midtown Manhattan and a Ritz-Carlton in White Plains.

Environmental Advocates of New York, which has worked with Cuomo on the brownfield proposals, applauded the governor’s veto of what it called a “short-sighted” extension. The group said it supports the Brownfield Cleanup Program but said it is “broken” and needs reform. It pointed to data from a study it conducted showing just 130 properties have been cleaned up as a result of the program’s $1.2 billion in spending.

Environmental advocates said the program spends too much money on too little cleanup, and agreed with Cuomo that tax credits should be dedicated to cleanup rather than development. As it stands now, developers can secure up to a 50 percent tax break for money spent on cleaning up polluted property, and up to 22 percent for the cost of developing a site, including new buildings and equipment.

Critics of the veto said those concerns were addressed by earlier reforms, which included capping development credits at three times the cleanup cost, or $35 million. But the additional reforms Cuomo has sought include tightening up eligibility requirements and restricting development credits to projects on sites that have been vacant for 15 years or more, or where the cost of cleanup exceeds the value of the property once it’s clean.

It would also give preference to projects deemed a priority by the state’s Economic Development Corp. That piece of reform, that favored projects with an official government blessing, raised hackles among developers who said it interfered with free market development.

“That drew a lot of concern and ire because frankly, the program has been working extraordinarily well for Western New York and it’s driven a lot of good projects that probably would not have happened,” said David Flynn, a partner at Philips Lytle who leads the environmental team and has consulted on several major brownfield redevelopment projects.

Current projects that stand to benefit from a program extension are the Millard Filmore Gates Hospital redevelopment and “Project Hello,” a $102 million development planned for South Buffalo that claims it will create 170 local jobs. The company behind the project, steelmaker Alita Holdings USA, has said it will not move forward with the project without the program’s benefits.

But proponents of the veto said the few months it is expected to take for the governor to hammer out reforms with the legislature should not have a significant impact on local development.

“I’m not sure what three months’ difference will make,” said Peter Iwanowicz, executive director at Environmental Advocates of New York.