Since 1999, the city’s “third party transfer” program has prevailed in a difficult task: Taking run down, tax-delinquent apartment buildings and conveying them to responsible owners. Usually, when property owners default on their taxes, the city sells the liens to a private company for collection. But buildings in especially bad financial and physical shape are exempted, and steered to responsible new owners for special care.
Now the City Council wants to repeat that success to tackle another real estate blight: former industrial sites that remain undeveloped because they’re doubly burdened by huge tax debts and possible environmental contamination. Intro. 582, sponsored by council members David Yassky and James Genarro, would exempt certain brownfields from the city tax lien sales program and, through third party transfer, have the city Department of Environmental Protection, working with an advisory committee, hand them over to community-based organizations to develop affordable housing, schools or industrial facilities.
The legislation, debated at a Council hearing last week, would target vacant commercial and industrial property in high-poverty and high-unemployment areas where a tax lien represents 15 percent or more of the property’s value and reuse “may be complicated by the presence or potential presence of contamination.”
It’s unclear how many properties could be affected by the proposal. Last year, the city Department of Finance recorded 4,680 parcels of vacant land zoned for manufacturing. The City Council has identified 241 industrial sites with liens amounting to 15 percent or more of value that were sold in 2003.
Sale of liens on contaminated property is a serious impediment to getting derelict sites back into productive use, testified Larry Schnapf, cochair of the New York State Bar Association’s Brownfield Task Force. According to Schnapf, the Oil Spill Fund at the state Comptroller’s office, which pays for emergency cleanup of contaminated sites, has repeatedly offered to lower the amount it would charge a buyer of the property for the work but was rebuffed by JE Robert, the company that collects on the debts, which “has continued to demand the full amount of the tax lien, interest and penalties.” (Neither JER nor the comptroller’s office responded to requests for an interview.)
The Bloomberg administration paints a very different picture, and it came out against the legislation. “The current tax lien program is working well in restoring moderately contaminated sites to productive use and placing them back on the tax rolls,” testified Robert Kulikowski, director of the city Office of Environmental Coordination, citing JER’s figures finding that it has collected owed taxes and fees on 2,282 sites that it had determined to be environmentally polluted. That said, he added, “the administration recognizes that a relative handful of tax delinquent sites are seriously contaminated. The administration is working to identify those sites and address this issue.”
Asked in a subsequent interview what he meant by “productive use,” Kulikowski explained: “Putting it back on the tax rolls. From the city’s perspective, that’s a productive use. Whether it’s McDonald’s or a community center, we’re getting taxes back on the properties.” Tax lien sales have reaped $1.7 billion for the city since 1996.
Council members objected to that reasoning. “The purpose of the sponsors is to make sure properties get into people’s hands to deal with environmental circumstances, and to advance goals of affordable housing and industrial development,” said Bronx Councilmember Oliver Koppell, who sits on the Environmental Protection committee.
Real estate experts say they understand why the city would object to exempting brownfields from the lien sales. “I think the administration’s concern is that it will create more bureaucratic structures and just slow everything down, and nothing will happen,” said Barry Hersh, associate director of the Steven L. Newman Real Estate Institute at Baruch College. “I don’t think it’s ill founded.”