Source: http://www.lexology.com, May 19, 2014
By: Paul D. Meosky, Hodgson Russ LLP
As school populations shift, it may become necessary for school districts to consider closing and attempting to sell or lease school buildings and grounds. Amid all of the political, financial, and community issues involved with decisions to close and sell or lease former schools or other facilities such as former bus garages, it is easy to overlook environmental procedures and issues that arise.
Many of you are likely familiar with the State Environmental Quality Review Act (SEQRA) process in the context of capital improvements projects. Prior to a school district’s decision to undertake, approve, or fund certain actions such as capital projects, it must assess whether a proposed action will have significant adverse impacts on the environment, broadly defined. Fortunately, a decision to close a school is specifically identified in the New York State Department of Environmental Conservation’s SEQRA regulations as being a “Type II” action, which is not subject to SEQRA review. However, similar to capital projects, the sale or lease of a former school property must be assessed under SEQRA prior to a final decision to sell or lease. This means that SEQRA is completed prior to board approval of the sales contract or lease.
A key point to remember is that the SEQRA review of a contemplated sale or lease must include an evaluation of the redevelopment and reuse, which may be proposed by a potential purchaser. As mentioned above, “environment” is broadly defined, and although environmental resources such as water, land, and air that come readily to mind are part of the evaluation, reviews often involve issues such as change in the intensity of use, traffic/parking, and community/neighborhood character. If a school building is listed on the National or State Register of Historic Places, or if a proposed redevelopment and reuse exceeds certain thresholds specified in the SEQRA regulations, the action is a “Type I” action subject to more in-depth review. This includes the completion of a Full Environmental Assessment Form (EAF) and required coordination with “involved agencies” that also have discretionary decisions to make regarding the matter. In this type of action, involved agencies typically include a municipality, which may have site plan or zoning approvals over the prospective purchaser’s redevelopment and reuse.
At times, obtaining information on the redevelopment and reuse contemplated by a purchaser is challenging as its plans may not yet be fully fleshed out, and, consequently, assessing impacts can be made more difficult. Gathering facts and assessing impacts may involve several rounds of communications with a prospective purchaser and its team of attorneys, architects, and engineers. Even if the sale and reuse is not a “Type I” action, but is classified as an “unlisted” action, a short EAF and assessment of impacts must be completed, although coordination with other involved agencies is not required. Nonetheless, it still may be a good idea to coordinate voluntarily with other involved agencies, particularly since those agencies such as the local municipality may be in a good position to help evaluate impacts of future property uses in their roles reviewing site plan, zoning, or other approval applications.
Finally, in preparing a schedule for a transaction, please keep in mind that a purchaser may desire to undertake an environmental due diligence investigation prior to purchase and may be compelled to do so in order to obtain financing or other approval. Environmental due diligence typically involves a Phase I Environmental Site Assessment (ESA) with a site visit and sometimes may involve an intrusive Phase II ESA, where samples of soil or groundwater may be taken. Questions regarding asbestos or other building materials may also be posed. Phase I and Phase II work by a purchaser and its consultants gives rise to access and insurance issues, which typically are addressed in a contract for sale or in a stand-alone access agreement. Also, depending on the circumstances and for a variety of reasons, a district may not wish to allow sampling in its buildings or on its grounds, and, with or without sampling, environmental issues may be included in contract negotiations.
In sum, environmental SEQRA, due diligence, and contractual issues should be reviewed early in the process when considering selling or leasing a former school facility, and time to work through these issues should be kept in mind and built into the schedule for the transaction.