PA 08-174—sHB 5873
Government Administration and Elections Committee
Finance, Revenue and Bonding Committee
AN ACT CONCERNING THE FACE OF CONNECTICUT STEERING COMMITTEE, THE PRESERVATION OF FARMLAND, A MUNICIPAL GRANT PROGRAM FOR DEVELOPMENT PROJECTS, LOANS FOR BROWNFIELD PURCHASERS AND TAX EXEMPTIONS FOR OPEN SPACE LAND HELD BY OR FOR CERTAIN CORPORATIONS
SUMMARY: This act establishes new programs and policies for preserving different types of land and cleaning up and redeveloping contaminated land (i. e. , brownfields). It establishes a separate, non-lapsing General Fund account for acquiring, restoring, and maintaining open space, urban parks, farmland, and historic resources. The account must contain any money the law appropriates to it plus any public and private contributions. To oversee how the funds in this account are used, the act creates a 15-member committee within the Department of Environmental Protection (DEP) for administrative purposes only.
The act allows the agriculture commissioner to acquire development rights to more types of farmland. Existing law limits his authority to do so under the Farmland Preservation Program to farmland meeting specified criteria. The act allows him to establish a separate program to acquire up to 100% of the rights to farmland that does not meet these criteria. He may purchase these rights jointly with a municipality.
But it also caps the amount the agriculture commissioner can spend to buy development rights under the existing program at $20,000 per acre. He must also adjust the regulatory payment schedule to reflect this change and consult with the Farmland Preservation Board when developing the program's regulations. The act makes other technical changes.
The act exempts a nonprofit organization from paying property taxes on open space land it holds and preserves for that purpose. A recent Superior Court decision found that a land trust must use the open space land for a charitable purpose to qualify for the statutory tax exemption (see BACKGROUND). The act specifies that it does not affect any stipulated judgment on the imposition of property taxes.
The act revamps the multipurpose brownfield clean-up and redevelopment program into separate grant and loan programs, each with its own eligibility criteria and administrative requirements. But it also retains most of the old program's criteria and application procedures. The Department of Economic and Community Development (DECD) remains the administering agency. The act allows the DECD commissioner to use up to 5% of grant and loan amounts to cover reasonable administrative expenses.
The act expands the circumstances under which a municipality can enter and investigate or assess contaminated property and specifies the extent to which it is immune from liability when it does so. It requires the municipality to notify the owner before entering the property, and sets narrow grounds under which the owner can appeal the municipality's intention to do so.
The act reestablishes the Brownfields Task Force and requires it to recommend additional Brownfield remediation options to the legislature by January 1, 2009.
EFFECTIVE DATE: Upon passage, except for the open space property tax exemption, which takes effect on or after the October 1, 2007 assessment year, and the per acre cap on development rights purchases, which takes effect October 1, 2008.
FACE OF CONNECTICUT STEERING COMMITTEE
The act creates the Face of Connecticut Account for acquiring, restoring, or managing specific types of property. The account can be used to fund these activities if doing so conserves open space, renovates or enhances urban parks, preserves active agricultural land, or restores historic assets. The steering committee determines how the DEP commissioner may spend the account's funds.
The committee consists of the DEP and agriculture commissioners, the DECD commissioner or her designee, the executive director of the Connecticut Commission on Culture and Tourism (CCCT), the Office of Policy and Management (OPM) secretary, and 10 other appointed members representing different organizations. Table 1 identifies these organizations and the appointing authorities.
Table 1: Appointed Face of Connecticut Members
Appointed Member Must Represent
a local historic preservation organization
the legislative Brownfields Task Force
Senate president pro tempore
a nonprofit farmland preservation organization
the environmental law section of the Connecticut Bar Association involved in brownfields remediation
House majority leader
a local or regional nonprofit open space preservation organization
Senate majority leader
a water company actively involved in land preservation
House minority leader
the agricultural industry
Senate minority leader
a state-wide nonprofit open space preservation organization
a state-wide nonprofit historic preservation organization
a community redevelopment organization
All the appointments must be made by September 1, 2008. Each member's term is coterminous with the term of the appointing authority or until a successor is chosen, whichever is later. The committee must meet quarterly, and the chairmanship must rotate every two years. The DEP commissioner serves as the first chairperson, followed by the agriculture commissioner, the CCCT executive director, and the DECD commissioner or her designee. Should one of these positions be vacant, the two other commissioners or the executive director must serve as chairperson until the vacancy is filled.
Per Acre Cap on Development Rights Acquisition
Under the Farmland Preservation Program, the agriculture commissioner may acquire a farmer's right to develop his or her agricultural land if the farmer agrees to preserve that use. The commissioner secures that agreement by placing a permanent easement on the land prohibiting it from being developed for nonagricultural uses but allowing the owner to continue operating it as a farm.
The act places a $20,000 per acre cap on the amount the agriculture commissioner may pay to acquire those rights and requires him to incorporate that cap in the program's implementing regulations. It also requires him to correspondingly increase the regulatory schedule for determining the maximum amount he can pay when he and a municipality jointly purchase development rights.
Community Farms Program
The act allows the agriculture commissioner to create a new program to acquire the development rights to agricultural land that does not meet the Farmland Preservation Program's criteria but could still contribute to the local economy through agricultural production. He may do this subject to the appraisal and review requirements contained in regulations the act implicitly requires him to adopt.
If the commissioner chooses to establish the program, he must establish its criteria in consultation with the Farmland Preservation Advisory Board. The criteria must give preference to farms that produce food or fiber, and consider:
1. the probability that the land will be sold for nonagricultural purposes;
2. the current and future productivity of the land;
3. the suitability of the land for agricultural use, including soil classification; and
4. the level of community support for preserving the land.
The commissioner must consider means to encourage the continued availability and affordability of agricultural production on the land for future generations of farmers. These means include deed restrictions or stewardship requirements.
PROPERTY TAX EXEMPTION FOR LAND PRESERVED AS OPEN SPACE
The law exempts certain nonprofit corporations from paying property taxes on land they own or is held in trust for them. Under prior law, a corporation qualified for the exemption only if it was organized exclusively for a scientific, educational, literary, historical, or charitable purpose or any combination of these. Under the act, the corporation also qualifies if it preserves the land for open space to:
1. maintain and enhance conservation of natural and scenic resources;
2. protect natural streams or water supplies;
3. promote soil, wetlands, beach, or tidal marsh conservation;
4. enhance the public value of neighboring open spaces;
5. enhance public recreation opportunities;
6. preserve historic sites; or
7. promote orderly urban or suburban development.
BROWNFIELD REMEDIATION AND DEVELOPMENT PROGRAM
Generic Brownfield Program
The former generic brownfield remediation and development program offered a wide range of financial assistance to public, nonprofit, and private entities. The act divides this program into separate grant and loan programs each with its own criteria and administrative requirements. But the act also retains much of the former program's criteria and requirements. In some cases, these work in conjunction with the new programs' requirements; in others, they are superseded by the new requirements.
For example, the DECD commissioner must determine grant and loan amounts under the new programs based on the factors she had to consider when determining these amounts under the former generic program. These factors are:
1. the funds available;
2. the estimated assessment and cleanup costs, if known;
3. the town's relative economic condition;
4. the project's need for financing relative to that of other projects;
5. the extent to which the financing is needed to induce the applicant to undertake the project;
6. the project's environmental and public health benefits;
7. the project's relative economic benefit to the town, region, and the state;
8. when the site became contaminated;
9. the applicant's relationship to the party that contaminated the site; and
10. the other criteria the commissioner establishes, which must be consistent with the program's purposes.
The act specifies that the project's relative economic benefits include its contribution to the municipality's tax base. It also adds more factors the commissioner must consider. These are the length of time the property has been abandoned, the taxes owed on it, the revenue the developed property may restore to the community, and the types of financing the applicant may request.
Just as the act retains the factors the commissioner must consider when determining grant and loan amounts, it retains the types of financing the commissioner could have provided under the generic program. These are grants, loans, loan guarantees, credit extensions, participation interest in Connecticut Development Authority loans, or any combination of these types of assistance. But the provisions governing the loan program limit the commissioner to offering only low-interest loans.
The act also narrows the types of nonprofit organizations that can apply for grants or loans under the new programs. The former program was open to nonprofit organizations or entities; the new programs are opened to qualified nonprofit community and economic development corporations, but the act does not specify criteria for determining if a corporation qualifies for a grant or loan.
Remedial Action and Redevelopment Municipal Grant Program
Eligible Applicants. The act creates a separate grant program and allows only municipalities, local and regional economic development authorities, and qualified nonprofit community and economic development corporations to apply for the grants. Municipalities qualified for grants and loans under the former program, along with for profit and nonprofit organizations, local and regional economic development authorities acting on a municipality's behalf, and any combination of these organizations acting jointly.
Grant Amounts. Applicants qualify for up to $4 million grants, but the DECD commissioner may supplement them with funds from other state programs. She may do this if the project's eligible costs exceed that amount.
Eligible Projects. The act expands the range of activities that qualify projects for grants. Under prior law, a project qualified if it planned to assess, clean up, and redevelop contaminated property. Under the act, the project also qualifies if it plans to foreclose on or investigates contaminated property.
The act allows the applicants to redevelop the property for a wide range of eligible uses. Those uses are manufacturing, retail, residential, municipal, educational, parks, community centers, and a mix of these.
Eligible Costs. The act explicitly allows applicants to use the grants to cover the same range of eligible costs prior law authorized. But it also expands this range to include the cost of:
2. soil, groundwater, and infrastructure investigation;
3. environmental land use restrictions; and
4. building and structural issues, including demolition, asbestos abatement, polychlorinated biphenyls removal, contaminated wood, paint removal, and other infrastructure remedial activities.
Lending Grant Funds. The act allows grant recipients to lend grant funds to redevelopers at low interest rates. A recipient may do so if
1. a “private party” is a coapplicant,
2. there is an agreement between the applicant and the redeveloper (presumably about how the property will be reused), and
3. the applicant knows the property's intended reuse.
The act does not define redeveloper. Consequently, it appears that any type of organization qualifies for loans from grant recipients. Nor does the act define private party or specify whether it must be a coapplicant on the recipient's grant application or the redeveloper's loan application. Presumably, the private party is the entity that will own or operate the cleaned up and redeveloped property.
When lending grant funds, the recipient must require the redeveloper to participate in DEP's voluntary program for investigating and remediating contaminated property. The recipient may secure the loan with a state or municipal lien on the property. It must keep 20% of the loan principal and interest payments and return the rest to the account the law established for the generic program.
Grant Award Process. The act requires the commissioner to award the grants based on a request for applications. She must request applications at least once annually, issuing the first request by October 1, 2008 and any subsequent requests by June 1. She must award the grants by the following January 1. The commissioner may do these things more frequently, depending on the number of applications and the amount of available funds.
Immunity from Liability. The act gives applicants the same degree of immunity from liability the law provides to municipalities participating in DECD's brownfields pilot program. Consequently, it designates applicants as innocent third parties and protects them from liability for clean-up costs. An applicant enjoys this protection if it did not cause, contribute to, or exacerbate the contamination and complies with DEP's reporting requirements for significant environmental hazards.
The immunity also applies when an applicant acquires interest in real property and subsequently conveys it to a purchaser. The applicant and the purchaser enjoy the immunity if the property was cleaned up under DEP's voluntary investigation and remediation program or under a DEP clean-up order. The purchaser qualifies for the immunity if it was not liable for the contamination. The cleanup must meet DEP standards or be verified by a licensed environmental professional (LEP) and affirmed by a subsequent DEP audit.
Property Resale. The act allows applicants to sell property after they develop it. But it also requires them to return the grant amount, minus 20%, which they may keep to cover oversight, administration, and development costs and, if applicable, lost tax revenue. The grant repayment must go into the special account the law established for the generic program.
Targeted Development Loan Program
Eligible Applicants. The act establishes a low-interest loan program for parties who currently own or plan to purchase contaminated property. Eligible applicants are those who qualify for financing under the former generic program: municipalities, for profit and nonprofit organizations, local and regional economic development corporations acting on a municipality's behalf, and combinations of these organizations acting jointly. Organizations that may purchase a contaminated property (i. e. , potential purchasers) qualify if they are not liable for the contamination. Organizations that own contaminated property (i. e. , existing owners) qualify if:
1. they are in “good standing” and comply with DEP's regulatory programs,
2. show that they do not have the funds to investigate and clean up the property, and
3. cannot keep or create new jobs because of the investigation and remediation costs.
Eligible Projects. Projects qualify for loans if they will retain or create jobs or develop housing for first-time homebuyers. They may involve manufacturing, retail, residential, or mixed-use developments, expansions, or reuses. Applicants applying for loans over $50,000 must submit a redevelopment plan that describes how the property will be used or reused and how it will stimulate new jobs and investment for the community.
The commissioner may lend funds for these purposes based on:
1. the project's merit and viability;
2. economic and community development opportunity;
3. municipal support;
4. contribution to the municipality's tax base;
5. the number of jobs involved; and
6. the applicant's past experience, compliance history, and ability to pay.
The act requires the commissioner to review and approve loan applications based on the same criteria she uses to approve grant applications.
Eligible Costs. Applicants may use the loan funds for any purpose, including several authorized under the generic and grant programs. They can use the loan proceeds to cover present and past costs of:
1. investigating, assessing, abating, and remediating property;
2. disposing of hazardous materials and waste;
3. long-term groundwater or natural attenuation monitoring;
4. environmental land use restrictions;
5. attorney fees;
6. planning, engineering, and environmental consulting costs; and
7. building and infrastructure issues, including demolition, asbestos abatement, polychlorinated biphenyls removal, contaminated wood or paint removal, and other infrastructure remedial activities.
Loan Amounts. The act caps loan amounts at $2 million per year for two years, subject to DECD's underwriting and performance requirements. If a project requires additional funds, the commissioner may recommend bond funding from the State Bond Commission.
Environmental Assurances. Potential purchasers and existing owners must comply with certain environmental clean-up assurances. Potential purchasers must comply with the Transfer Act or participate in DEP's voluntary investigation and remediation program if the loan amount is over $30,000 or the applicant intends to perform a Phase II environmental site assessment. (Phase II assessment uses chemical analyses to identify hazardous substances or petroleum hydrocarbons. ) Existing property owners must participate in the voluntary program.
Loan Terms and Conditions. The act authorizes the DECD commissioner to determine the terms and conditions for the loans, but specifies that they must include performance requirements and job retention or creation goals. The loan repayment terms must coincide with the property's restoration to a productive use or the completion of its expansion. The loan term cannot exceed 20 years. The applicant must repay the loan with interest if he or she sells it before the repayment period, unless the commissioner waives this requirement. The commissioner may carry the loan forward as an encumbrance on the purchaser with the same terms and conditions imposed on the original loan.
Applicants receiving loans for residential developments must agree to address the housing needs of first-time homebuyers or recent college graduates who want to stay in Connecticut. They must also agree to retire the loan when they sell units for homeownership. Those receiving loans for business uses must agree to retain or add jobs during the loan's term, unless DECD, the Connecticut Development Authority, and the Brownfield Redevelopment Authority agree otherwise.
MUNICIPAL INSPECTION POWERS
The act expands the circumstances under which a municipality may, without liability, enter and investigate contaminated or potentially contaminated property or assess its environmental status. Prior law allowed it to do so only by hiring or retaining an LEP to perform these tasks. It also protected the LEP from liability when acting on the municipality's behalf.
The act allows the municipality to enter and investigate or assess the property without hiring an LEP and do so with limited liability. The municipality is not liable for any preexisting contamination or pollution on the property But it is liable if it causes the contamination or pollution to spread by negligently and recklessly investigating the property. This could happen, for example, if the municipality removes the contaminated soil without securing it and that soil subsequently washes into a river or stream. In any case, the municipality or its LEP are always liable to the DEP commissioner.
The act adds more conditions under which the municipality or an LEP working on its behalf may enter and inspect or assess contaminated property. Prior law allowed the municipality to hire an LEP for this purpose only if it could not find the property's owner, placed a lien on the property, or filed a notice of eminent domain. The act also allows it or the LEP to enter and investigate or assess the property if:
1. the municipality's legislative body finds the public interest would be served by determining if the property is underutilized or should be included in a redevelopment or remediation project; or
2. any municipal official reasonably determines that these steps are necessary to determine if the property poses an environmental or public health, safety, or welfare risk.
The act requires the municipality to notify the owner before it or the LEP can enter the property. It must do so by sending notice by certified mail to the owner's last known address at least 45 days before entering the property.
The act allows the owner to appeal the municipality's decision to Superior Court, but only if the owner represents that it is diligently investigating the property in a timely manner and will fully pay any delinquent property taxes. The owner may bring the appeal by filing an action in Superior Court within 35 days after receiving the municipality's notice.
BROWNFIELD TASK FORCE
The act reestablishes the Brownfields Task Force and requires it to prepare and submit more recommendations to the legislature on how to clean up contaminated property. The report is due January 1, 2009. The task force terminates on that date or the date when it submits the report, whichever is later (this provision appears to keep the task force operating if it misses the January 1 reporting deadline).
Farmland Preservation Advisory Board
PA 07-162 created a 12-member board to help the agriculture department with its purchase of development rights program and other efforts to preserve agricultural lands. The board is within DOAG for administrative purposes only. The board must provide comments and recommendations on the purchase of development rights. The board may also submit recommendations on preservation programs for legislative action.
Recent Superior Court Decision Concerning Land Trusts
On March 3, 2008, the Bridgeport Superior Court ruled that a land trust was liable for property taxes for the 2005 tax year on certain land it owns because it did not conduct any charitable activities with respect to the property during that year. The court found that land preservation can be considered a tax-exempt charitable use of property only if it is “coupled with some minimal educational or other charitable activity on or near the location” (Aspetuck Land Trust, Inc. v. City of Bridgeport, No. CV 06 4016847S).
OLR Tracking: JR: GC: PF: dw