Builders clean up in brownfield program

By BRIAN NEARING, Staff writer

First published in the Albany Times Union on February 5, 2010

ALBANY -- A state program intended to clean and rebuild on polluted land has cost taxpayers more than $362 million during the past two years, with the vast majority of the money going to subsidize developers' buildings rather than cleanups.

The reports include only projects that claimed tax breaks prior to June 2008, when the state Legislature reformed rules to limit payouts out of concerns that the five-year-old program was a windfall for developers that fostered too few cleanups -- particularly in poor neighborhoods.

While 52 projects statewide got tax breaks, the lion's share of savings went to just a handful of big-ticket developments, with 10 projects accounting for 80 percent of the total.

Topping the list with $110 million in credits was a $550 million luxury Ritz-Carlton hotel, office and residential project by developer Louis Cappelli in White Plains, Westchester County.

Tax credits are as good as cash for five years. If a recipient's tax bill is less than the credit in a given year, a refund is issued from the state treasury.

Cappelli's project qualified because it is on the site of a former gas station where gasoline and oil had leaked. All his credits were for building costs -- the state report included no expenses for cleanup costs and reflected no credits for that purpose.

A major backer of Republican Jeanine Pirro's unsuccessful 2006 bid to become attorney general, Cappelli also had a no-bid state contract to provide charter jet flights for former Gov. George Pataki. More recently, Cappelli has been pursuing state approval for a casino in the Catskills.

Cappelli's project, along with nine others predominantly in the metropolitan New York City region, accounted for $289 million in tax credits, or about 80 percent of the total. Credits for six of these project were for building costs only, and reflected no cleanup expenses.

The largest projects included:

$47 million in building-only credits for a $235 million, 633-unit luxury Manhattan apartment building, with shops and theaters.

$24.4 million in credits for a $224 million 25-story apartment and luxury condominium building, where units can sell for $2 million, near the high-end Chelsea Market in Manhattan. Just 2 percent of the credits were for pollution cleanup.

$21 million in building-only credits for a new $140 million headquarters tower in Manhattan for media magnate Barry Diller, owner of Home Shopping Network, Ticketmaster and the online mortgage service Lending Tree. In 2006, Diller was the highest paid CEO in America, receiving $469 million, according to published reports,

In the Capital Region, the only project to get a credit was the a natural gas-fired power plant at the former BASF property in Rensselaer, where developer Empire Gen Holdings Inc. received an $84,000 credit toward a $700,000 cleanup of pollution left behind by the former dye factory.

State Environmental Conservation Commissioner Pete Grannis said the 2008 reforms ought to mean fewer big projects get massive state subsidies, so more and smaller projects can be done.

"With the new brownfields law, we hope to see change in three major ways: better cleanups, more participation from communities that have Brownfield Opportunity Areas, and more incentives to spread around to many projects -- as opposed to having them eaten up by a few sites," he said.

Brownfield Opportunity Areas are aimed at municipal and community organizations and, unlike private developments, require community notice and involvement in potential cleanups and redevelopment.

The way tax breaks were given out show that the state needed to fix the program, said Jody Kass, executive director of New Partners for Community Revitalization, a not-for-profit redevelopment group that had pushed for both the 2003 redevelopment programs and the 2008 reforms.

"Given the condition of the state, you have to ask whether giving such tax credits is an appropriate way of the state spending its money," Kass said. "Low-income communities have not been benefiting from a program that we thought was meant to help them."

The 2008 reform rules limit tax credits on buildings to three times what is spent on the cleanup or $35 million, whichever is less. The financial impact of the reform rules might not be clear until the state issues its 2010 annual report on the project in January 2011.

Kass is part of a 15-member brownfield advisory panel created in the reform to monitor the program and suggest improvements.

The 2008 reform law required the board to issue an advisory report on the progress of the changes. The deadline for that report came and went two months ago. DEC spokesman Yancey Roy said it was still pending because the state Legislature has not appointed all its representatives, and the board has been unable to hold its first meeting.

Appointments are still due from both Democratic and Republican leaders in the Senate, and from the Republican leader in the Assembly.

Brian Nearing can be reached at 454-5094 or at bnearing@timesunion.com.

Taxpayers subsidize buildings

A state tax break program intended to encourage cleaning up and rebuilding on polluted land cost state taxpayers more than $362 million from 2008 to 2009. And about 90 percent of that money -- or about $327 million -- went to subsidize buildings.

Projects: 52 statewide

Cleanup costs: $321.5 million

Cleanup tax credits paid by state: $36 million

Building costs: $2 billion

Building tax credits paid by state: $327 million

Source: 2008 and 2009 reports on Brownfield Tax Credit Program from state Department of Taxation and Finance