There’s a cul-de-sac in the middle of Bushwick. There are new streets, too. Lining them are well-appointed townhouses sold for bargain prices, to owners who have started to move in. Not bad for a former Rheingold brewery site, which sat vacant for years because no one knew whether it was safe to build anything there.

A new state law is supposed to jumpstart the rejuvenation of brownfields like this one. Under the Brownfield Cleanup Program, any piece of real estate where environmental contamination–or even the perception of contamination–may complicate development is eligible for tax credits worth at least 12 percent of the total cost of cleanup and development.

Not surprisingly, environmentally tainted real estate is now some of the hottest property in town. By the beginning of this year, the developers of 157 sites around New York State had applied, and 101 had been approved.

But the vision of a brownfields boom is now getting blurry. The state environmental agency has started to get picky about which projects it’s willing to support, and developers are crying foul. Take the construction site on the tip of Roosevelt Island, where a company called Becker & Becker is transforming the grounds of the Octagon asylum ruins–which the developer asserts contains mercury, lead and other pollutants–into a 500-apartment complex, including 100 middle-income units and a day care center.

Becker & Becker applied for the tax credit in late spring and expected to get approval from the Department of Environmental Conservation, the state agency that administers the program, within the 45 day review period set under the law. But instead DEC kept asking questions. “They’ll say, ‘Well, we’re really not sure that this is a brownfield,’” explains Lawrence Schnapf, the developers’ attorney and co-chair of the New York State Bar Association’s environmental committee. “‘We’re not sure how heavy the contamination is.’” The state still hasn’t given a green light for the tax credits.

Why would the environmental agency want to stop housing from going up on a wasteland, whether there was a little pollution or a lot? Greens and developers are concluding that he state is trying to avoid paying an exorbitant bill.

As City Limits reported last year [“The Green Lady,” September/October 2004], New York’s brownfield tax credits are the most generous in the U.S. Not only is virtually any commercial site eligible, there is no cap on the amount a developer can claim. The credit is poised to cost the state hundreds of millions of dollars.

Now DEC appears to be trying to close the floodgates. This fall, the agency issued draft guidelines establishing which projects are eligible for the tax credit–and gave its staff the power to exclude some. Most important, the DEC must “determine whether the public interest would be served by accepting the project.”

That test could help eliminate costly payouts where contamination is minimal. It would also promote the legislation’s objective: to steer investment to areas suffering from pollution-related underdevelopment. The state would look at questions like whether a site is abandoned; whether it is likely to spur the reuse of surrounding areas; and whether the site is unattractive for redevelopment because of the presence or perception of contamination.

The new criteria could exclude the new New York Times headquarters, which is rising on property where shops and small businesses thrived before the state evicted them. The Times filed last spring. It is still awaiting approval, for credits that could amount to $170 million.

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The state may be following smart environmental policy, but it’s not following the law, complain attorneys for developers. “Rather than fixing and restructuring the tax credits, someone has decided that DEC should be the spear carrier and bounce perfectly eligible projects out of the program,” says David Freeman, who represents a dozen clients who’ve applied for the program. All of them, he says, have experienced delays as they wait for DEC to decide whether to award the tax credits; one who filed in June is still awaiting an answer. Freeman says some intend to sue the state if they don’t get approved.

Delays and uncertainty are toxic for a complex development project. “Everyone in this business has budgets, schedules, stakeholders with expectations,” notes Freeman. The Octagon’s developers claim they were spending $100,000 a week while waiting for an answer from DEC. Finally, late this fall, they decided to proceed with construction before the bills for doing nothing got any higher.

“It’s a catch-22,” says Linda Shaw, a Rochester lawyer with real estate clients throughout the state. “How do you solve the problem of abuse? Do you make it more difficult for everyone to use, or do you target abuse?” In the future, warn attorneys, investors may be reluctant to touch industrial sites.

Dale Desnoyers, the head of Environmental Remediation for DEC, asserts that everything his agency is doing is consistent with the law. He also says that the expense of the credits has not been a consideration. The goal of the guidelines, Desnoyers explains, is “to really fulfill the legislative goal of creating the program in the first place: to promote brownfields cleanup and development. The legislature set broad criteria for the program, and our goal was to explain some of that.” The law, he notes, requires the state to consider whether brownfield projects serve the public interest.

Freeman’s not satisfied. He wants to see the legislature rewrite its law to deal with what he sees as its core flaw: “overcompensating certain kinds of development that would have happened anyway.” The state could, for example, support only projects where environmental cleanup represents a substantial portion of the cost of redevelopment, or restrict eligibility to cases where the industrial history of a site unquestionably compromises future construction. With that level of clarity, a developer could know ahead of time whether to count on the state dollars.

But after taking seven years to get a brownfields law, the legislature isn’t planning to move quickly. “I think it’s a little early to make any judgment that [DEC] is being too stringent a gatekeeper,” says Assemblymember Thomas DiNapoli, who was the lead sponsor as chair of the Committee on Environmental Conservation. “From the beginning, the governor and the department have had a great deal invested in making this succeed, and I’m confident that they want to make this work.”

There may also be good reason to hesitate. Environmentalists are nervous that if the legislature reopens the law, it could cut out New York City, which accounts for roughly half of the state’s applications and the bulk of its projected cost. It was only with support from Republicans eager to bring investment to upstate cities that the law got passed in the first place.

There’s consensus on just one thing: Something has to be done. “The success of the program will be the death of it,” says Tim Sweeney, Regulatory Watch project director for the group Environmental Advocates. His group wrote DEC in support of its guidelines–if, that is, the legislature incorporates spending limits into the law itself. “The state,” says Sweeney, “can’t afford to pay out this kind of money.”