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Cherrytree group slideshow final Cherrytree group slideshow final Presentation Transcript

  • Cherrytree Group Presents: “Energizing Tax Credits: Turning Brownfields into Brightfields” www.cherrytree-group.com
  • Our Featured Panel of Guest Speakers KerryBowie, Director of Brownfields and Environmental Justice, Massachusetts Department of Environmental Protection Richard Cote, P.E., LSP, Comprehensive Environmental, Inc.  Warren Kirshenbaum President, Cherrytree Group, LLC www.cherrytree-group.com
  • The Commonwealth of Massachusetts June 2013 “Energizing Tax Credits: Turning Brownfields into Brightfields” The Cherrytree Group Tax Credit Conference Sheraton Boston Hotel, 39 Dalton Street, Boston MA 02199 14 JUN 13
  • The Commonwealth of Massachusetts June 2013 Massachusetts Brownfields Program • 1998 Brownfields Act enacted – Provided liability relief through 21E and Brownfields Covenant Not to Sue Program – Established the Brownfields Advisory Group – Solidified partnerships between MassDevelopment, Department of Environmental Protection, Executive Office of Housing and Economic Development, Department of Revenue, Business Development Corporation, and Attorney General’s Office – Created financial incentives including: • $30 million Brownfields Redevelopment Fund – Fund recapitalized in 2006 • Post-remediation Tax Credit Program – Enhanced in 2006 to allow the transfer of credits • Subsidized Environmental Insurance Program
  • The Commonwealth of Massachusetts June 2013 Celebrating over 10 Years of Success! • Program supported more than 1,300 projects • Continued collaboration among agencies • Introduction of the Brownfields Support Team Initiative in 2008 (BST1) • BST2 launched in 2010 – Transit-oriented Development (TOD) focus (MassDOT) • BST3 announced in 2012 – Sustainability/Clean Energy focus (DOER) Indian Orchard Business Park, Springfield (top), and Former Silicon Transistor Corporation, Chelmsford
  • The Commonwealth of Massachusetts June 2013 Brownfields Redevelopment Assistance • MassDevelopment – Brownfields Redevelopment Fund; Other Financing • MassDEP – Privatized Cleanup; Flexible Standards; Technical Assistance; Limited Funding • BDC New England – Subsidized Environmental Insurance • Department of Revenue (DOR) – Brownfields Tax Credits • Office of Attorney General – Covenants Not to Sue • EOHED/MOBD – MassWorks; 43D; Permitting Collaborative; Economic Development Incentive Program • MassDOT – Transportation and infrastructure support; ITC funding • Department of Energy Resources (DOER) – Clean energy support; renewable energy tax credits
  • The Commonwealth of Massachusetts June 2013 Clean Energy Results Program (CERP) Contaminated Land Development Goal • 50 MW Clean Energy by 2020 • Primarily Solar Photovoltaic's (PV) • Locations: – 21e Sites – Underused Brownfields – Superfund Sites – Closed Landfills* • Size: 0.5 to 2.0 MWs *MassDEP Bureau of Waste Prevention (BWP) Brockton Brightfields, 425 kW solar PV
  • The Commonwealth of Massachusetts June 2013 Why Brownfields? • Limited reuse options due to contamination • Leverage Existing Infrastructure • Protect Open Space • Gain Community Support • Sustainable Development • Anticipate Reduced Land Costs and Permitting Timelines USEPA’s RE-Powering America’s Land Initiative – Advantages Fact Sheet, July 2012
  • The Commonwealth of Massachusetts June 2013 Massachusetts Contaminated Land Installations To Date Solar array installed at former gas works Brockton Brightfields Fixed tilt system at landfill Pittsfield MSW Solar array installed at former foundry Indian Orchard Solar FacilityMMR Wind Turbines Two of three turbines powering remediation Everett Solar Project Solar array installed at former manufactured gas plant Haverhill Solar Project Solar array installed at former manufactured gas plant Source: Provided through the U.S. EPA's RE-Powering America's Land Initiative, 2012
  • The Commonwealth of Massachusetts June 2013 USEPA RE-Powering America’s Land Initiative: Massachusetts # Sites Installed Capacity (MW) 1 NY 5 67.1 2 SC 1 20.0 3 WY 1 16.5 4 NJ 7 14.7 5 NV 1 14.2 6 CA 8 12.1 7 MA 9 11.4 8 IL 2 10.9 9 CO 4 5.4 10 PA 1 3.0 RoUS 17 4.8 56 180.1 RE-Powering Installations on Contaminated Lands Source: Provided through the U.S. EPA's RE-Powering America's Land Initiative, 2012, http:/www.epa.gov/renewableenergyland
  • The Commonwealth of Massachusetts June 2013 Review “Favorable” Site Characteristics • “Good” Solar Resource – greater than 3.5 kWh/m2/day • “Usable acreage” – 2-5 Acres Optimal – 5 Acres = 1 Megawatt (MW) – “In My Backyard” (IMBY) NREL Solar Estimator (fixed tilt) – “PVWatts” NREL – more options • Project economics partially driven by overall size. – Larger size = more power, faster payback • Distance to Electrical Transmission Line and Graded Roads – Less than ½ mile optimal – Greater than adds cost – Favorable characteristic for urban Brownfields Baird & McGuire, Holbrook, 2006
  • The Commonwealth of Massachusetts June 2013 Contaminated Lands Profile List • To identify potential RE development opportunities • ~ 800 MassDEP “Brownfield” Sites – “Underutilized” – “Abandoned” – “For Sale/”Lease” • EPA “Superfund” Sites in MA (~30)
  • The Commonwealth of Massachusetts June 2013 Contaminated Lands Profile List • 35% are 4 Acres or greater • Sites up to 700+ Acres • 30% located within 1 mile or less of utility line • 85% located within an investor-owned utility region
  • The Commonwealth of Massachusetts June 2013 Commercial Scale PV Incentives • Federal Investment Tax Credit (ITC) – Up to 30% of eligible system costs – Hard cost of equipment – Taken and applied against federal tax obligation of a “for-profit entity” – Expires 12/31/16 • Federal Modified Accelerated Cost-recovery System (MACRS) – Recover costs through depreciation reductions – 5-year accelerated depreciation – Expires by 12/31/16 – Bonus 50% if placed in service by end of 2012! • MA Solar Renewable Energy Certificates (SRECs) – 1 SREC = 1 MWh – Retail electrical providers required to buy – Minimum value $285/MWh – Ceiling value up to $550/MWh • Net Metering – Customers located in investor-owned utilities (National Grid, NSTAR, Western Massachusetts Electric Company, and Unitil) have the option of selling net excess electricity generation from a qualifying solar project via net metering. • Third-Party Power Purchase Agreement (PPA)
  • The Commonwealth of Massachusetts June 2013 N.I.M.B.Y. Q&A Ground-Mounted Solar PV Addresses: • Health risks associated with chemicals in panels • Decommissioning • “Heat Island” effects • Electric & Magnetic Fields (EMF) • Property Values • Public Safety (including fires) • Historic Preservation • Noise • Water Related Impacts – Discourages use of significant tree cutting
  • The Commonwealth of Massachusetts June 2013 Contact Information: Thomas Potter, Clean Energy Development Coordinator Bureau of Waste Site Cleanup Massachusetts Department of Environmental Protection 617-292-5628 (phone), thomas.potter@state.ma.us Daniel Seferian, Counsel Rulings and Regulation Bureau Massachusetts Department of Revenue (617) 626-3293 (phone), seferian@dor.state.ma.us Kerry Bowie, Director of Brownfields & Environmental Justice Commissioner’s Office Massachusetts Department of Environmental Protection 617-556-1007 (phone), kerry.bowie@state.ma.us http://www.mass.gov/dep/cleanup/brownfie.htm
  • "Energizing Tax Credits: Turning Brownfields into Brightfields" Brownfields and Funding From an LSP Perspective
  • What is an LSP? • Engineers authorized to oversee assessment and cleanup of contamination releases. • Governed bythe Board of Registration of Hazardous Waste Site Cleanup Professionals. • The LSPprogramhas allowed privatization of the cleanup of hazardous waste sites in MA. • LSP’s have significantlyreduced the amount of contaminated sites in MA, including redevelopment of Brownfields sites.
  • Cleaning Up Hazardous Waste Sites • Cleanups are governed bythe Massachusetts Contingency Plan (MCP) which outlines the schedule and procedures to be followed in implementing response actions at disposal sites. • Massachusetts General Laws Chapter 21E (21E) states that all past and present owners/operators could potentiallybe held liable for a release. • The 1998 BrownfieldsAct provides liabilityrelief to the provisions of 21E, as well as financial incentives to eligible owners/operators to attract newresources for contaminated properties.
  • Grant Types To HelpYour Client Finance a Remediation 1. An Assessment grant provides funding for planning, environmental assessments, and communityoutreach. • $200,000/ property. • Limit of three properties per applicant. 1. Revolving Loan Fund (RLF) makes loans and issues grants to carryout cleanup activities at Brownfields. • The RLF is a $1mm Fund. 1. Cleanup grants which provide direct funding for cleanup activities at specific sites. • This grant requires a 20 percent cost contribution byowner, which maybe in the form of a contribution of money, labor, material, or services, and must be for eligible and allowable costs (the match must equal 20 percent of the amount of funding provided byEPAand cannot include administrative costs). 1. Job Training grants which provide environmental training for residents of Brownfields communities. These funds maybe used to address sites contaminated bypetroleumand hazardous substances, pollutants, or contaminants (including hazardous substances comingled with petroleum) The performance period for these grants is up to three years. Federal Targeted BrownfieldsAssessment EPARegion 1 Uses contractors <$75,000 Grant of Service
  • State Brownfields Programs • Assessment Loans (MassDevelopment) of up to $100,000 is available for environmental testing to be conducted bya LSP. • Cleanup Loans (MassDevelopment) of up to $500,000 are also available for environmental clean-up required for redevelopment.
  • Brownfields Tax Credit • Eligible developments to receive a tax credit of up to 50% of costs directlyincurred in remediating environmental contamination in situations where the contamination was not caused bythe taxpayer. • Taxpayer can use or transfer the tax credits, and there is a secondarymarketplace for the trading of these tax credits.
  • Practical Examples Dedham, MAJunkYard 40-year old oil release •Three properties • Four separate owners •Four RTNs dating back to 1996 •One Innocent Owner •12-years, 5 LSPs, 6 attorneys Remedial Program •Wetland Restoration •Groundwater Remediation •Soil Removal •Institute Chemical Treatment •Method 3 RiskAssessment
  • Brownfield Tax Credit Remedial Costs • Typical Costs: MCPReporting, Equipment, Labor, Drilling, Disposal, Groundwater, Permitting, Laboratory, Professional Subcontracts (wetland, Risk), etc. • Allowable: MCPLegal Review, Land Value, Survey, Deed Filings associated with cleanup, In-kind Services with Receipts. • Disallowed: Site Development Costs, Real-Estate Acquisition Cost, Other Legal Costs, interest and financing expenses.
  • Lessons for LSPs • Detailed Records: itemized invoices, canceled checks and other backup • Cleanup that conforms to the MCP • “Site” – MCP: Site Boundaries defined by contamination – BT: PropertyLines/Owners • Tax Credits go to non-PRP: property“owners” and those that have “control” (i.e. a Lessee) • Tax Credits are used and sold - RAOshould pass an audit • Department of Revenue keeps moving the goal posts Brownfield Case Studies “Tax Credits, MyAccountant KnowsAll That??”
  • Contact Information Richard C. Cote, P.E., LSP Comprehensive Environmental Inc. Principal, Manager of Engineering 1-800-725-2550 x302 225 Cedar Hill Street Marlborough, MA01752 rcote@ceiengineers.com
  • "Energizing Tax Credits: Turning Brownfields into Brightfields" www.cherrytree-group.com Utilizing Tax Credits
  • WHATIS THEMASSACHUSETTS BROWNFIELDS TAX CREDIT? o TheMassachusettsBrownfieldsTax Credit (BTC), isatax credit used by Massachusettstaxpayersasadirect dollar-for-dollar offset for taxesowed to theCommonwealth. o TheBTC isearned following theremediation of an environmentally contaminated property (per MGL CH 21E and theMCPi.e. MCR 40.0890) that has“achieved” apermanent solution, evidenced by the filing of aRemediationAction Outcome(RAO) or Remedy Operation Status(ROS) with theMA Department of Environmental Protection (DEP)
  • SOMEBTC SPECIFICS o TheBTC amountsto 50% o f the eligible co sts of aqualified remediation when thepermanent solution does not contain an Activity and UseLimitation (AUL), and theBTC amountsto 25% of theeligiblecostswhere asiteisclosed with an AUL; o TheBTC ispersonal to thetaxpayer and doesnot transfer with atransfer of theproperty; o Thecoststhat areBTC eligiblearethose"direct" environmentally related costs, such asLSPcosts, lab testing costs, 21E related legal expenses, soil removal and disposal, excavation, demolition, clean fill costs, transportation, and sitepreparation. o BTC costsarereviewed and verified by theDepartment of Revenue(DOR). o TheBTC may beused by thetaxpayer to offset up to 50% of taxes, and theunused balancemay becarried to thenext tax year for an additional 4 years, (i.eatotal of 5 years) o TheBTC may betransferred to any MA taxpayer.
  • CURRENTREQUIREMENTS TO RECEIVETHEBTC: oThetaxpayer cannot havebeen thecauseof thecontamination. oThetaxpayer must betheowner or lesseeof thecontaminated siteduring thecleanup period. oThesitemust beclosed out with apermanent solution (RAO or ROS). oThemoney spent on theremediation must amount to at least 15% of thesite'sassessed valueat thetimetheremediation began.   oThesitemust bein an Econo mically Distressed Area. oThesitemust beused for businesspurposes. oTheremediation expensesmust beincurred by an entity, trust, not-for profit corp. (i.e. not agovernment, state, municipal entity) oTheRAO or ROSmust befiled with DEPbeforeAugust 5, 2013 (unlessthestatueisextended).
  • RENEWABLEENERGY TAX CREDITS o Therearetwo separatetax creditsapplicableto renewableenergy: • Investment tax credit (ITC): thiscredit isearned by investing in renewableenergy infrastructureor equipment. • Pro ductio n tax credit (PTC): thiscredit isbased on a unit measureof renewableenergy produced, and is granted for each kilowatt hour of renewableenergy produced. o TheITC amountsto 30% of theinvestment made in renewableenergy and thePTC differsfor different typesof renewableenergy (i.e. solar, biomass, wind, etc.) o On theFederal side, you can only claim either the ITC or thePTC. Therearealso StatePTC's availablefor renewableenergy production, and, therefore, project developersusually choosea combination of theFederal ITC and aStatePTC to financethecostsof building theproject and producing theenergy.
  • ADAPTABILITY BETWEEN BROWNFIELDS ANDRENEWABLES o Brownfieldshavebecomean attractiveoption for RenewableEnergy projectssuch assolar and wind, becausepurchasing or leasing land isasignificant cost, and contaminated sitescan beacquired for lessmoney. o Converting Brownfieldssitesto commercial use, either with arenewableadd-on (solar panelson rooftops) or asthecommercial useitself (asolar farm/array or a biomassconversion site) isbecoming morefeasible. Conceptually, Brownfields sitescan beconverted into acommercial usethat includesasan add-on the production of renewableenergy, either in addition to theproperty'sprimary use, or asthenew commercial useitself. o AstheBTC isonly received post remediation, and theITC can bestructured asan investor pay-in prior to construction, thecoupling of thesetax creditscan lead to a significant upfront capital infusion.
  • A BROWNFIELDS TO BRIGHTFIELDS EXAMPLE In 2006, Solon, aGerman-based company, built a425-kilowatt solar array in Brockton, Mass., on asitethat had formerly been used to make methane-gasstreet lamps. Solon, and thesiteowner, Bay StateGasCo., prepared thesitefor itscurrent useby covering thewastecoal tar and ash with 6,000 cubic yardsof crushed concreteand clean soil. Thesolar array depicted in the adjacent picturewas then installed. Astherewasno sub- surfaceinstallation, therewasno risk of impacting theenvironmental solution. http://online.wsj.com/article/SB10001424052702303828304575180132815079418.html
  • FINANCIALILLUSTRATION OFTHE TAX CREDITBENEFITS By way of example, assume that the site on the previous page had $600,000 in eligible BTC costs; a $1,000,000 cost forthe solar system; and had otherdevelopment costs as detailed hereunder. The project's development pro-forma would be as follows: Site Acquisition and Remediation   Land acquisition costs $ 7 50,000 Remediation Expenses $ 600,000 TOTAL $ 1,350,000 Less: OwnerEquity Required ( $ 27 0,000) Acquisition Loan Amount $ 1 ,08 0,000   Renewable Energy Installation   SolarSystem $ 1 ,000,000 Feasibility, Due Diligence, Other $ 35,000 Fees /Costs $ 60,000 --------------- TOTALCOSTS ( Funded by a Construction Loan) $ 1,095,000 Tax Credit Equity   BTC ($600,000 x 0.50x 0.75 ) $ 225,000 ITC ( $1,000,000 x 0.30 x 0.75) $ 225,000 Depreciation ( $1,000,000 x $0.12) $ 1 20,000 --------------- Total $ 57 0,000 Acquisition Loan $1 ,08 0,000 Equity Required (20%) $7 05,000 Construction Loan $1 ,095,000 Equity Contributed (39 %) $8 40,000 Net Permanent Loan $1 ,605,000 (61% LTV) Permanent Loan $2,1 7 5,000 Net OwnerEquity Contribution $270,000
  • SERVICES THECHERRYTREE GROUPPROVIDESo Consulting • Analyzetheproject’seligibility for thetax credits; • Prepareand filethetax credit application; • Work with relevant Stateor Federal Department(s) to obtain thetax credit approval: and • Usein-houselegal and accounting servicesto support thetax credit application. o Brokerage/Syndication • SecureaBuyer for thetax credit or purchasethetax creditsourselves, giving you aguaranteeof funding. o Back-Office Support/Capability • Assist in structuring and closing on thetax credit purchase(includesaccounting, legal, consulting); o Post-transaction • Perform post transaction tax consulting to instituteatax beneficial structure(astax credit proceeds aretaxable).* *Additional feesapply for thisservice.
  • Contact Information 233 NeedhamStreet Suite 402 Newton, MA02464 Tel: (617) 431-2266 Fax: (617) 431-2270 E-Mail: info@cherrytree-group.com www.cherrytree-group.com