New York DEC Finalizes Definition of “Underutilized” Under Brownfield Cleanup Act Amendments

On July 29, 2016, the New York State Department of Environmental Conservation (“DEC”) announced that it had finalized the definition of “underutilized” for purposes of the 2015 Brownfield Cleanup Act Amendments and eligibility for redevelopment tax credits. The final rule closely tracks DEC’s March 9, 2016 proposed definition, which attracted numerous comments, mostly adverse, from members of the public and the regulated community.

Prior to the 2015 Amendments, any site in the Brownfield Cleanup Program automatically qualified for tangible property credits for expenses incurred in redeveloping the site. The Amendments restricted eligibility for development (but not cleanup) credits for sites in New York City to those meeting certain additional criteria. One of those criteria was being “underutilized.” The Legislature did not define “underutilized,” instructing DEC to promulgate a definition after consulting with New York City and the business community.

The final definition provides that, to qualify as “underutilized,” a site’s anticipated future use must be (a) 75% for industrial purposes or, (b) 75% for commercial or industrial uses, not be able to be redeveloped without governmental assistance, and either 1) be vacant, 2) have property tax arrears for five years or more, or 3) be condemned or have certified structural deficiencies.

The definition is, in our view, so narrow that very few, if any, New York City sites will quality as “underutilized.” It is a point that we and others made in comments to the proposed rule, but which was dismissed by DEC in its response to comments.

In addition, the definition determines whether a site is “underutilized” by reference to its future use rather than its current or immediate past uses. It thus flies in the face of normal English usage and, we believe, is clearly contrary to both the statutory language and the intent of the Legislature.

DEC’s response to this criticism was that the Amendments required it to consult with New York City in fashioning a definition, and the City expressed an interest in favoring industrial development. However, we know of no rule of statutory construction that permits an agency to violate the terms of a statute simply because another agency has encouraged it to do so. Accordingly, we believe that DEC’s definition may be vulnerable to legal challenge in an appropriate case.

David J. Freeman is a Director in the Gibbons Real Property & Environmental Department.
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