Cherrytree group slideshow final

Cherrytree Group Presents:

“Energizing Tax Credits: Turning Brownfields into

Brightfields”

www.cherrytree-group.com

Our Featured Panel of Guest Speakers

Kerry Bowie, Director of Brownfields and Environmental

Justice, Massachusetts Department of Environmental Protection

Richard Cote, P.E., LSP, Comprehensive Environmental, Inc.

Warren KirshenbaumPresident, Cherrytree Group, LLC


The Commonwealth of MassachusettsJune 2013

“Energizing Tax Credits: Turning Brownfields into Brightfields”

The Cherrytree Group Tax Credit ConferenceSheraton Boston Hotel, 39 Dalton Street, Boston MA

0219914 JUN 13


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


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


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


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


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


Massachusetts Contaminated Land Installations To DateSolar 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


USEPA RE-Powering America’s Land Initiative: Massachusetts

# SitesInstalled

Capacity (MW)1 NY 5 67.12 SC 1 20.03 WY 1 16.54 NJ 7 14.75 NV 1 14.26 CA 8 12.17 MA 9 11.48 IL 2 10.99 CO 4 5.410 PA 1 3.0

RoUS 17 4.856 180.1

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


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


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)


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


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)


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


Contact Information:Thomas Potter, Clean Energy Development CoordinatorBureau of Waste Site CleanupMassachusetts Department of Environmental Protection617-292-5628 (phone), [email protected]

Daniel Seferian, CounselRulings and Regulation BureauMassachusetts Department of Revenue(617) 626-3293 (phone), [email protected]

Kerry Bowie, Director of Brownfields & Environmental JusticeCommissioner’s OfficeMassachusetts Department of Environmental Protection617-556-1007 (phone), [email protected]

http://www.mass.gov/dep/cleanup/brownfie.htm

mailto:[email protected]



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 by the Board of Registration of Hazardous Waste Site Cleanup Professionals.

• The LSP program has allowed privatization of the cleanup of hazardous waste sites in MA.

• LSP’s have significantly reduced the amount of contaminated sites in MA, including redevelopment of Brownfields sites.

Cleaning Up Hazardous Waste Sites

• Cleanups are governed by the 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 potentially be held liable for a release.

• The 1998 Brownfields Act provides liability relief to the provisions of 21E, as well as financial incentives to eligible owners/operators to attract new resources for contaminated properties.

Grant Types To Help Your Client Finance a

Remediation1. An Assessment grant provides funding for planning, environmental assessments, and

community outreach.• $200,000/ property.• Limit of three properties per applicant.

2. Revolving Loan Fund (RLF) makes loans and issues grants to carry out cleanup activities at Brownfields.

• The RLF is a $1mm Fund.

3. Cleanup grants which provide direct funding for cleanup activities at specific sites. • This grant requires a 20 percent cost contribution by owner, which may be

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 by EPA and cannot include administrative costs).

4. Job Training grants which provide environmental training for residents of Brownfields communities.

These funds may be used to address sites contaminated by petroleum and hazardous substances, pollutants, or contaminants (including hazardous substances comingled with petroleum)

The performance period for these grants is up to three years.

Federal Targeted Brownfields AssessmentEPA Region 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 by a 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 directly incurred in remediating environmental contamination in situations where the contamination was not caused by the taxpayer.

• Taxpayer can use or transfer the tax credits, and there is a secondary marketplace for the trading of these tax credits.

Practical Examples Dedham, MA Junk Yard 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 Risk Assessment

Brownfield Tax Credit Remedial Costs

• Typical Costs: MCP Reporting, Equipment, Labor, Drilling, Disposal, Groundwater, Permitting, Laboratory, Professional Subcontracts (wetland, Risk), etc.

• Allowable: MCP Legal 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: Property Lines/Owners

• Tax Credits go to non-PRP: property “owners” and those that have “control” (i.e. a Lessee)

• Tax Credits are used and sold - RAO should pass an audit

• Department of Revenue keeps moving the goal posts

Brownfield Case Studies “Tax Credits, My Accountant Knows All That??”

Contact Information Richard C. Cote, P.E., LSP

Comprehensive Environmental Inc.Principal, Manager of Engineering

1-800-725-2550 x302225 Cedar Hill Street

Marlborough, MA [email protected]


"Energizing Tax Credits: Turning Brownfields into Brightfields"


Utilizing Tax Credits

WHAT IS THE MASSACHUSETTS

BROWNFIELDS TAX CREDIT?o The Massachusetts Brownfields Tax Credit (BTC), is a

tax credit used by Massachusetts taxpayers as a direct dollar-for-dollar offset for taxes owed to the Commonwealth.

o The BTC is earned following the remediation of an environmentally contaminated property (per MGL CH 21E and the MCP i.e. MCR 40.0890) that has “achieved” a permanent solution, evidenced by the filing of a Remediation Action Outcome (RAO) or Remedy Operation Status (ROS) with the MA Department of Environmental Protection (DEP)

SOME BTC SPECIFICSo The BTC amounts to 50% of the eligible costs of a qualified remediation when the

permanent solution does not contain an Activity and Use Limitation (AUL), and the BTC amounts to 25% of the eligible costs where a site is closed with an AUL;

o The BTC is personal to the taxpayer and does not transfer with a transfer of the property;

o The costs that are BTC eligible are those "direct" environmentally related costs, such as LSP costs, lab testing costs, 21E related legal expenses, soil removal and disposal, excavation, demolition, clean fill costs, transportation, and site preparation.

o BTC costs are reviewed and verified by the Department of Revenue (DOR).

o The BTC may be used by the taxpayer to offset up to 50% of taxes, and the unused balance may be carried to the next tax year for an additional 4 years, (i.e a total of 5 years)

o The BTC may be transferred to any MA taxpayer.

CURRENT REQUIREMENTS TO RECEIVE THE BTC:

oThe taxpayer cannot have been the cause of the contamination.

oThe taxpayer must be the owner or lessee of the contaminated site during the cleanup period.

oThe site must be closed out with a permanent solution (RAO or ROS).

oThe money spent on the remediation must amount to at least 15% of the site's assessed value at the time the remediation began.

oThe site must be in an Economically Distressed Area.

oThe site must be used for business purposes.

oThe remediation expenses must be incurred by an entity, trust, not-for profit corp. (i.e. not a government, state, municipal entity)

oThe RAO or ROS must be filed with DEP before August 5, 2013 (unless the statue is extended).

RENEWABLE ENERGY TAX CREDITS

o There are two separate tax credits applicable to renewable energy:

• Investment tax credit (ITC): this credit is earned by investing in renewable energy infrastructure or equipment.

• Production tax credit (PTC): this credit is based on a unit measure of renewable energy produced, and is granted for each kilowatt hour of renewable energy produced.

o The ITC amounts to 30% of the investment made in renewable energy and the PTC differs for different types of renewable energy (i.e. solar, biomass, wind, etc.)

o On the Federal side, you can only claim either the ITC or the PTC. There are also State PTC's available for renewable energy production, and, therefore, project developers usually choose a combination of the Federal ITC and a State PTC to finance the costs of building the project and producing the energy.

ADAPTABILITY BETWEEN BROWNFIELDS AND

RENEWABLESo Brownfields have become an attractive option for Renewable

Energy projects such as solar and wind, because purchasing or leasing land is a significant cost, and contaminated sites can be acquired for less money.

o Converting Brownfields sites to commercial use, either with a renewable add-on (solar panels on rooftops) or as the commercial use itself (a solar farm/array or a biomass conversion site) is becoming more feasible. Conceptually, Brownfields sites can be converted into a commercial use that includes as an add-on the production of renewable energy, either in addition to the property's primary use, or as the new commercial use itself.

o As the BTC is only received post remediation, and the ITC can be structured as an investor pay-in prior to construction, the coupling of these tax credits can lead to a significant upfront capital infusion.

A BROWNFIELDS TO BRIGHTFIELDS EXAMPLE

In 2006, Solon, a German-based company, built a 425-kilowatt solar array in Brockton, Mass., on a site that had formerly been used to make methane-gas street lamps. Solon, and the site owner, Bay State Gas Co., prepared the site for its current use by covering the waste coal tar and ash with 6,000 cubic yards of crushed concrete and clean soil. The solar array depicted in the adjacent picture was then installed. As there was no sub-surface installation, there was no risk of impacting the environmental solution.

http://online.wsj.com/article/SB10001424052

702303828304575180132815079418.html

http://online.wsj.com/article/SB10001424052702303828304575180132815079418.html

http://online.wsj.com/article/SB10001424052702303828304575180132815079418.html

FINANCIAL ILLUSTRATION OF THE

TAX CREDIT BENEFITSBy way of example, assume that the site on the previous page had $600,000 in eligible BTC costs; a $1,000,000 cost for the solar system; and had other development costs as detailed hereunder. The project's development pro-forma would be as follows:

Site Acquisition and Remediation

Land acquisition costs $ 750,000Remediation Expenses $ 600,000

TOTAL $ 1,350,000Less: Owner Equity Required ( $ 270,000)

Acquisition Loan Amount $ 1,080,000

Renewable Energy Installation

Solar System $ 1,000,000

Feasibility, Due Diligence, Other $ 35,000 Fees / Costs $ 60,000

---------------TOTAL COSTS ( Funded by a Construction Loan) $ 1,095,000

Tax Credit Equity

BTC ($600,000 x 0.50x 0.75 ) $ 225,000ITC ( $1,000,000 x 0.30 x 0.75) $ 225,000

Depreciation ( $1,000,000 x $0.12) $ 120,000 ---------------

Total $ 570,000

Acquisition Loan $1,080,000 Equity Required (20%) $705,000Construction Loan $1,095,000 Equity Contributed (39 %) $840,000 Net Permanent Loan $1,605,000 (61% LTV)Permanent Loan $2,175,000

Net Owner Equity Contribution $270,000

SERVICES THE CHERRYTREE GROUP PROVIDESo Consulting

• Analyze the project’s eligibility for the tax credits;• Prepare and file the tax credit application;• Work with relevant State or Federal Department(s) to obtain the tax credit approval:

and• Use in-house legal and accounting services to support the tax credit application.

o Brokerage/Syndication

• Secure a Buyer for the tax credit or purchase the tax credits ourselves, giving you a guarantee of funding.

o Back-Office Support/Capability

• Assist in structuring and closing on the tax credit purchase (includes accounting, legal, consulting);

o Post-transaction

• Perform post transaction tax consulting to institute a tax beneficial structure (as tax credit proceeds are taxable).*

*Additional fees apply for this service.

Contact Information

233 Needham StreetSuite 402

Newton, MA 02464 Tel: (617) 431-2266

Fax: (617) 431-2270E-Mail:

[email protected]



http://www.cherrytree-group.com/

Cherrytree group slideshow final

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