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Brownfield Redevelopment in Western New York

As reported in the Buffalo Law Journal/Buffalo Business First, Gov. Andrew Cuomo designated four Brownfield Opportunity Areas in Buffalo last month, providing another tool for area stakeholders to have the areas developed.

He designated areas in South Buffalo, the Buffalo Harbor, the Buffalo river corridor and the Tonawanda Street corridor.

“These designations will equip Buffalo officials with tools and resources needed to carry out their vision of community revitalization and help turn these blighted properties back into economic engines,” he said. “This is one more reason why Buffalo remains a city on the move.”

Before the designation, the city had to submit plans for the areas, said Michael Hecker, senior associate at Hodgson Russ. “The goal is to find these areas and figure out a way for the state to work with them to help them with long-term planning on how to redevelop the sites.”

It’s a three-step grant process to determine how to revitalize a brownfield area, Hecker said.

“The first step is a pre-nomination study,” he said. “The second is step is nomination and the third is implementation strategy.”

South Buffalo Brownfield Opportunity Area (Credit: Buffalo Urban Development Corporation)

In the pre-nomination phase, a municipality and associated groups look at an area that may have an issue and explore ways to revitalize the area. In the nomination process, funding sources are considered, as well as market trends. And in the third step, implementation of the plan is identified and there’s a thorough accounting of funding sources.

“It’s a wholesome package that the state has developed as a basis to spur economic development,” Hecker said.

The three steps are completed through the New York State Department of State. Once the governor designates a brownfield opportunity area, various programs can lead to more state benefits.

“If you do your redevelopment project through a BOA, there are additional tax credits available,” Hecker said.

“It’s basically the governor recognizing that these areas have spent the time and focus on an economic redevelopment strategy and they should qualify for additional credits to spur redevelopment in these areas.”

He said the designations fit in with the city’s Green Code under Mayor Byron Brown.

“(BOAs) are a central component of our city’s Green Code initiative and my administration’s place-based economic development strategy,” Brown said in a statement.

“The State’s approval of the BOAs, created by the city of Buffalo with significant public input, places Buffalo at the forefront of brownfield redevelopment nationally and will further enhance Buffalo’s ability to compete for investment, bringing new life to even more neighborhoods by making use of underutilized properties that create jobs for city residents.”

Some of the areas will need to go through remediation in order to be redeveloped, according to Hecker. For instance, the South Buffalo Brownfield Opportunity Area, which consists of approximately 1,968 acres in an area that was once heavily industrialized by the steel industry, has sites that will require remediation.

Plans for that site include a nine-hole golf course, indoor and outdoor recreation and expansion of the Tifft Nature Preserve.

The Buffalo River Corridor Brownfield Opportunity Area also has long-standing contamination issues. It’s made up of 1,050 acres in the Old First Ward, containing 58 possible brownfield sites.

“One of the main areas of that project is restoration and enhancement of the environmental quality of the river and enhancing waterfront access,” Hecker said.

“Buffalo is lucky in the fact that it has an unbelievable natural resource with water access. Over the last 10 to 15 years, you’ve definitely seen an enhanced focus on trying to leverage that natural resource to be an economic driver. I think the city, to its credit, has done a very good job of doing that. This is just another option for them to utilize that program to benefit it.”

The Buffalo Harbor Brownfield Opportunity Area is 1,045 acres, with six brownfield sites. The area includes waterfront space at both the Inner and Outer harbors.

Assemblyman Sean Ryan said BOA designation will help with future waterfront development.

“Investing in environmental remediation prepares our communities for revitalization and renewed economic activity,” Ryan said. “Contaminated sites along our waterfront have made progress difficult over the years.”

The Tonawanda Street Corridor Brownfield Opportunity Area is 650 acres containing 46 potential brownfield sites. Plans include reconstruction of the Scajaquada Expressway and restoration of Scajaquada Creek.

Hecker said the designated areas represent places where longtime residents can see the potential benefit to redevelopment.

“One of the interesting things to me about these projects is that they really are fully integrated community projects,” he said.

Brownfield funding is available at the federal level through the Environmental Protection Agency, as well, Hecker said.

While the Trump administration has pared back the EPA, Administrator Scott Pruitt has said that brownfields would remain a priority to the agency.

“There hasn’t been any change in that area,” Hecker said.

Pruitt is focused on shifting the responsibility for contaminated sites to states, Hecker said.

“(Pruitt) wants states to work together with the federal government in a limited capacity to manage these things on their own,” he said.

“From a standpoint of economic development, especially with President Trump’s focus on infrastructure, I don’t think this is going to be a major issue unless there are further cuts in the budget. That remains to be seen.”

U.S. Federal Brownfield Legislation: U.S. House of Representatives Passes Amendments

By Walter Wright, Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.

The U.S. House of Representatives (“House”) on November 30th passed amendments that would address the federal Brownfield program.

H.R. 3017 is titled the “Brownfields Enhancement, Economic Redevelopment, and Reauthorization Act of 2017” (“H.R. 3017”).

H.R. 3017 amends the Comprehensive Environmental Response, Compensation, and Liability Act and reauthorizes the United States Environmental Protection Agency’s (“EPA”)Brownfield Program.  The legislation appears to have bipartisan support.

Residential, commercial, agricultural and industrial properties are sometimes difficult to sell, redevelop, and/or finance because of perceived or real environmental contamination issues. Properties or facilities subject to such impediments are typically called “Brownfields.”

The EPA has defined a “Brownfield” as “abandoned, idled, or under-used industrial or commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination.” Besides EPA, many states have Brownfield programs whose purpose is to eliminate unnecessary barriers of the redevelopment of commercial or industrial properties which may have environmental concerns. Arkansas has had such a program for several years.

H.R. 3017 makes several changes to the federal Brownfield related statutory provisions, which include:

  • Clarifies the liability of states and local units of government that take title to property involuntarily by virtue of their function as a sovereign
  • Clarifies when sites contaminated by petroleum may be considered a Brownfield site and when a leaseholder may qualify for certain liability protections
  • Expands eligibility for nonprofit organizations and for eligible entities that took title to a Brownfield site prior to January 11, 2001
  • Increases the limit for remediation grants under the Brownfields Program, establishes multipurpose grants and allows recovery of a limited administrative cost
  • Adds to the list of criteria for the grant program, whether a grant would facilitate the production of renewable energy
  • Allows EPA to provide additional funds for small, rural, and disadvantaged communities and Indian tribes
  • Reauthorizes funding for Section 104(k) of the Comprehensive Environmental Response, Compensation, and Liability Act and Section 128(a) of the same statute

A bill addressing federal Brownfield issues has also been introduced in the Senate (“S. 822”). This bill is denominated the “Brownfields Utilization, Investment, and Local Development Act of 2017.”

Issues addressed in S.822 include:

  • Funding for technical assistance grants to small communities and rural areas
  • Expansion of the scope of eligible grant recipients to include nonprofit community groups
  • Authorization of funding from multipurpose grants to address more complex sites
  • Allow certain entities that do not qualify as bona fide perspective purchasers to be eligible to receive grants (as long as government entities did not cause or contribute to a release or threaten the release of a hazardous substance at the property)
  • Direct EPA in providing grants to give consideration to Brownfield sites located adjacent to federally designated floodplains

A copy of H.R. 3017 can be downloaded here and copy of Senate Bill 822 here.

This article was first published on the Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. website.

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About the Author

Walter G. Wright, Jr. is a member of the Business Practice Group.  His practice has focused for almost thirty years on environmental, energy (petroleum marketing), and water law.  Mr. Wright’s expertise includes counseling clients on issues involving environmental permits, compliance strategies, enforcement defense, property redevelopment issues, environmental impact statements, and procurement/management of water rights.

Mr. Wright routinely advises developers, lenders, petroleum marketers, and others about effective strategies for structuring real estate and corporate transactions to address environmental financial risks.  He also serves as General Counsel and provides legislative representation to the Arkansas Oil Marketers Association, Arkansas Recyclers Association (scrap facilities) and Arkansas Manufactured Housing Association.  A unique part of his practice has been drafting and negotiation of a variety of specialized agreements involving the sale or consignment of motor fuels along with the ancillary agreements associated with the upstream segment of the petroleum industry.

Canada: BC Court Of Appeal Rules That Contaminated Property Must Be Assessed Using Highest and Best Use

Article by Luke Dineley and Jacob Jerome Gehlen

Borden Ladner Gervais LLP

In a highly anticipated decision for the valuation of contaminated property in British Columbia, the BC Court of Appeal overturned a decision of the BC Supreme Court and set out how contaminated property should be assessed for tax purposes.

The case involved a Brownfield – a contaminated commercial property with potential for economic redevelopment. The property in question had been operated as a retail gas station, automobile dealership, and repair shop. The soil on the property was contaminated, and the contamination had spread to neighbouring properties. The owner of the property was in considerable financial distress. In addition to tax arrears, legal bills, and accounting bills, she was defending a claim from the owner of a neighbouring property. She therefore arranged to sell the property to this owner through a share purchase agreement for $42,363.24, which was sufficient to cover her debts. She also obtained a full indemnity from any legal liabilities she might have in the future regarding the contamination. The existing structure on the property was renovated and converted into income-producing multi-tenant commercial retail units.

Abbotsford, British Columbia

In 2013, the property was assessed for taxation purposes.

The assessor had valued the land and improvements at $975,000. The property owner, Victory Motors (Abbotsford) Ltd. (“Victory Motors”), appealed, and the Property Assessment Review Panel reduced that assessment to $500,000. Victory Motors appealed to the Property Assessment Appeal Board (“Board”), claiming the property had no value. The Board reinstated the original assessment. The owner appealed again, to the Supreme Court of British Columbia. That court found that the Board had erred in law, and remitted the matter to the Board for reconsideration. The Assessor appealed that decision.

The Court of Appeal allowed the Assessor’s appeal and restored the Board’s decision.

The issue before the Court was this: how does one properly assess the value of contaminated land for taxation purposes? The assessor determined that because renovation into a two-storey structure would require remediation, the best use of the property was as it currently stood: a one-storey commercial structure. The assessor’s estimate did not otherwise take into account the presence of contamination. Their approach is known as the “income approach,” whereby a property’s value is determined according to the subject property’s highest possible annual net income. The Board agreed with the assessor’s method and ultimate evaluation.

The Supreme Court, however, held that the Board had erred in law. The chambers judge found that the assessor had ignored the property’s brownfield status, which any potential buyer would have in mind as a risk. The chambers judge further held that the land should be valued not according to value for the present owner, but according to the market in accordance with the BCCA’s decision in Southam Inc. (Pacific Newspaper Group Inc,) v. British Columbia (Assessor of Area No 14 – Surrey/White Rock), 2004 BCCA 245 [Southam]. Because there was no evidence a competitive market for the property existed, the Board’s decision was therefore unreasonable.

However, after the BCSC decision was released, a five-judge division of the BCCA overturned Southam in Assessor of Area #01 – Capital v. Nav Canada, 2016 BCCA 71, leave to appeal refused [Nav Canada]. Nav Canada supports the Board’s income-based approach.

Applying Nav Canada, the Court of Appeal allowed the assessor’s appeal and restored the Board’s decision. The Court applied the “highest and best use” principle of assessment, and found that a multi-tenant retail building was the “best use” for the purposes of assessment. The Court held: “that property has value to its current owner can be a sufficient basis on which to determine its value.” In Nav Canada, the BCCA had held that even where there was no other potential purchaser, “one must regard the owner as one of the possible purchasers.” The Court in this case agreed, and held that “when, for whatever reason, there is no market for a property that has value to its owner, that owner can serve as a proxy for a competitive market.”

Going forward, property owners should be aware that even though there are no purchasers lining up to bid for a brownfield, that property may still be assessed at a high value for taxation purposes.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

About the Authors

Luke Dineley is a partner in both our Insurance and Tort Liability Group and Environmental Law Group in Borden Ladner Gervais LLP‘s Vancouver office. Luke focuses his practice on civil litigation, with an emphasis on insurance and tort law, and environmental law.  In the area of environmental law, Luke’s experience includes representing and advising clients on a wide variety of contaminated site issues relating to both commercial and residential properties — including cost-recovery actions on behalf of plaintiffs and defendants. In addition, Luke has represented and advised major companies on environmental regulatory compliance, emergency spill responses, and environmental prosecutions. Luke is also an executive board member of the British Columbia Environmental Industry Association and frequently publishes and speaks in the area of environmental law.

 

Jacob Jerome Gehlen is an articling student at Borden Ladner Gervais LLP‘s Vancouver office. He has a Juris Doctor law degree from the University of Toronto and a Bachelor’s degree from McGill University.

Potential $9 million incentive to Developer for Clean-up and Develop Brownfield Site in Ottawa

As reported by the CBC, Ottawa city staff are proposing to offer a developer more than $9 million in incentives to build a multi-use building with three residential towers across from the future Bayview Station light rail station, approximately 2 kilometers (one mile) west of Parliament Hill.

TIP Albert GP Inc. owns the property at 900 Albert St. at the corner of Albert and City Centre Avenue, and is proposing a building that would have 1,632 residential units as well as retail and office space.

The site, a one-time rail yard and later a storage yard and snow disposal site, is eligible for the city’s brownfields rehabilitation grant program.  Under the program, developers can apply to have municipal development charges and soil remediation costs reduced, up to about half the expected cost of the cleanup.

City staff are recommending a grant not exceeding $8,255,397 over a maximum of 10 years, according to a report tabled in advance of next week’s finance and economic development committee meeting.

The property is also along the path of city sanitary and storm sewers, and for the development to go forward, the builder will have to move that infrastructure to an adjacent city property.

While the developer would pay for that work to be done, the city would have to release their eight easements on the property.

While normally the city would get market value from a developer for giving up those easements — an estimated $920,000 — city staff are proposing waiving that policy to make the project happen.

Somerset Ward Coun. Catherine McKenney, in a comment appended to the report, wrote that while she supported the brownfield grant, she couldn’t support waiving the encroachment fee, calling it “premature.”

“As this application is still under negotiation I believe it would be more prudent to measure the total monetary value to be waived against measurable features of the proposed development in its final form as ultimately presented to committee and council,” she wrote.

McKenney said such features would include affordable housing and contributions to active transportation networks like cycling and walking paths.

The development is not the only project being considered for a grant at next week’s committee meeting.

City staff are also proposing a grant of up to $2,320,420 over a maximum of 10 years to Colonnade Development Inc. to build a hotel near the Department of National Defence headquarters.

That grant, for the property at 300 Moodie Dr., would come from the Bells Corners Community Improvement Plan, which aims to encourage development in the area.

It would provide what would amount to a 75 per cent property tax break after the property is developed. If the development doesn’t happen, no grant would be paid.

Colonnade is proposing a restaurant with a drive-thru and a six-storey, 124-room hotel. Right now, the site is home to a Salvation Army thrift store, an automotive repair garage and auto parts distributor.

The finance and economic development committee will consider both proposals.

One Proposal for Development of 900 Albert Street, Ottawa