by Steve Dwyer

In January, New York Gov. Andrew Cuomo introduced the New York FY 2019 executive budget, and it was armed with a proposal that would defer taxpayers’ ability to claim certain tax credit amounts.

In short, brownfield projects would be hit particularly hard. Due in large part to the brownfield credits, the market has been willing to take on significant risk associated with cleaning up contaminated sites throughout New York.

Let’s look at this as a hypothetical: Proposed, passed or struck down, what if such a proposal were to be enacted. What is the recourse for New York practitioners to stanch the loss of such critical funding?

The 2019 state budget proposal from January is indeed is a wakeup call to redevelopment practitioners in New York state, a call to arms activate Plan B in the name of generating project funding.

One way would be making greater use of private capital resources as a hedge against public-side fiscal budgetary cutbacks.

Any type of l tax deferral provision would negatively affect credits under the New York Brownfield Cleanup Program, the New York credits for low income housing and the rehabilitation of historic properties, the alcoholic beverage production credit, and others. In total, thirty‐five tax credits would be subject to this provision.

Under this type of action, brownfield projects in progress would be in danger of disruption or failure due to the delay of the credits, which are critical to the projects’ financial viability. If enacted, the proposed deferral would jeopardize dozens of brownfield cleanups seeking to meet NYSDEC program deadlines.

This is a major step backward for what had been a blossoming initiative. During the summer of 2017, representatives of local and state government described a reinvigoration of the New York State Brownfield Opportunity Area program. In particular, New York City’s unique programs had encompassed more than 500 site remediations and several innovative grants and initiatives.

Under any type of rollback to much-needed tax credits, brownfield projects would be significantly affected, and this would encompass:

•     Projects receiving a Certificate of Completion from NYS Department of Environmental Conservation in 2018-2020;
  
•     Projects with qualified tangible property (including buildings and depreciable assets) placed in service on brownfield sites in tax years 2018‐2020; and
  
•     Certain completed projects with 25 or more full‐time employees on site that are claiming the tax credit for remediated brownfields.
  

With a public-side vacuum always lurking for this industry, private real estate capital resources are regarded as trending north. The HUD budget at one point last year stood at $57 billion. Commercial real estate is estimated to contribute $465 billion to the GDP and housing including both construction and consumption is now estimated back up to roughly 18% of GDP.

As various capital-oriented “certainties” morph into “uncertainties”-within an urban redevelopment context-having a backup plan is not only prudent but greatly advisable. Who anymore can rely on the capriciousness of state and federal support? Crafting a private-side game plan is at least a hedge to warding off a disastrous outcome.