Notes from the special meeting held on Friday, March 30, 2001

5^th Floor Planning Department Conference Room

Edwin L. Crawford County Office Building, Binghamton, NY

Present: Stacy Merola, Ron Brink, Ken Kamlet (Chair), Chip McElwee, Frank Evangelisti, Julie Sweet (Planning Commissioner). Absent with excuse: Paul Thompson, Cindy Westerman, Joe Graney Michael Clugston, and Chris Engler. Guest Experts: Tom Suozzo (NYS DEC), Joe Moody (Town of Union), Dee Golazeski (Johnson City), Frank Kelly (Partnership 2000 and PAB).

1. The meeting convened at 4:00 p.m.

2. This special meeting was convened to receive a presentation on the City of Rochester’s Brownfields Program by Mark Gregor, Manager, Division of Environmental Quality (716-428-5978).

Mr. Gregor, noting some similarities and differences between the City of Rochester and the Binghamton area, made the point that having a County-driven program in Broome County “puts us ahead” of Rochester. He pointed out that City and County politics have often “not meshed too well” in the Rochester area.

The Rochester program is organized as a “team approach,” utilizing resources and expertise from a number of agencies and entities, including: Economic Development, Community Development (Planning, Zoning, Real Estate & Housing), Environmental Quality, Engineering, Law, and private developers. Representatives of these entities address, as appropriate, issues relating to community involvement, acquisition, environmental, funding, liability, and development.

The Division of Environmental Quality has a brownfield operating budget of approximately $225K-which supports 2.5 full-time staff positions (0.5 of these is funded by an allocation from the City’s annual Community Development Block Grant), annual laboratory testing requirements, and equipment, supplies and training. This is supplemented by an annual capital budget consisting of a flexible pot of $200K in cash and $1 to $2 million each year in bonding authority for specific projects. The $200K provides pay-as-you-go capital financing for investigations, small cleanups, feasibility studies, etc. Bonding authority pays for larger-scale investigation and cleanup projects.

These internal budget resources are bolstered by several outside funding sources, including $200K from an EPA Brownfield Assessment Pilot grant, DEC Bond Act funding ($4.86 million from the 1986 Environmental Quality Bond Act and $2.1 million from the 1996 Clean Water Clean Air Bond Act), land acquisition funds (from the Real Estate & Housing Department), and development project funds. The City often tries to persuade property owners to reduce their selling price by an amount equal to the estimated costs of environmental cleanup after the City completes pre-acquisition investigations. Funding under the 1986 Bond Act was used for 3 sites. Money for a fourth site was given back to the State. The Bond Act Program “is not a bad program if you have a Superfund timeframe” (i.e., it is very time-consuming).

The City also received $500K from EPA under the Brownfield Cleanup Revolving Loan Fund (BCRLF), but wound up returning this money because they “were not able to use it.” (This is the same program that Broome County has submitted a proposal on.) Mr. Gregor explained that problems had to do with the program’s being limited to sites under cleanup orders, and being unavailable for petroleum and asbestos contamination problems. Ninety percent of Rochester’s “brownfields” sites involve petroleum contamination. (Mr. Gregor acknowledged that “mixed waste” sites-involving a combination of petroleum and hazardous substance contamination-are eligible for EPA funding.) The other major hurdle with the BCRLF is the prohibition against lending to responsible parties.

Public involvement for brownfields projects taps into the City’s extensive community involvement infrastructure. A Neighbors Building Neighborhood Program had previously been established by the City to address citizen quality of life issues. 37 neighborhood groups were organized into 10 “planning sectors.” Each of these planning sectors developed its own Sector Plan (basically, a comprehensive plan for the sector). The individual Sector Plans were then incorporated into the City’s overall Comprehensive Plan (the Rochester “2010 Plan”). The Planning Sectors are supported by “Neighborhood Empowerment Teams,” which include 6 NET offices and Code Enforcement and Police personnel.

During the period 1995-2000, the City has managed 18 brownfield cleanup projects totaling 95 acres in size (average = 5.3 acres per site). The cost of these sites has ranged from $25K - $170K per acre for residential sites, and from $7.5K to $76K per acre for commercial and industrial sites. (This is not surprising given the more complete cleanups required for residential projects.) The City’s Fire Academy site, which was cleaned up under the New York State Superfund program, costs about $320K per acre. The City did the work under a consent order and Title 3 of the 1986 Environmental Quality Bond Act grant funding. Another City Superfund site, a former municipal landfill (Class 3 site) has been addressed for about $5K per acre under an independent City program as a voluntary action.

In two phases, prior to 1985 and after 1995, the City was able to redevelop the landfill as an industrial park. Of the original 230 acres listed on the Registry of Inactive Hazardous Waste Sites, approximately 190 acres have been developed. After performing remedial investigations, the City has twice petitioned the DEC remove the majority of the site from the registry in the early 1990's. DEC has largely concurred and has de-listed all but 20 acres of this former landfill. The City was “worried” that it might ultimately have to spend as much as $40 million on this site. (The actual cost was closer to $1 million.)

Mr. Gregor then talked about the types of Brownfield sites that have been addressed by the City of Rochester. Most sites are less than 10 acres in size. Half (50%) of their sites have been redeveloped for residential uses; 30% for commercial and industrial, and 20% for institutional (governmental/public) uses. The City has learned that Residential redevelopment can be very important (i.e. promoting economic revitalization).

The City has taken a number of different project approaches. The City can (a) acquire a site and build and operate its own facility (e.g., 911 Center); (b) assemble the site and provide a ground lease to the developer (e.g., Bauch & Lomb); or (c) acquire the site, do some cleanup, and then resell the site to a developer (e.g., Hallman Chevrolet site).

Where the City acquires brownfields property, it faces several recurring issues: gaining access to the site; acquiring ownership; and funding the acquisition. Ownership may be acquired in one of four ways: (a) purchase; (b) condemnation; (c) foreclosure; and (d) donations.

The City addresses liability concerns in the following ways: (a) granting indemnification to the purchaser/developer; (b) placing in escrow funds for potential cleanup costs; (c) negotiating purchase price reductions; (d) requiring parties who receive Section 108 loans from the City to secure environmental insurance (Pollution Legal Liability coverage); and (e) retaining ownership of the site and providing a ground lease to the developer. An example of the latter was the former 10-acre GE facility.

Mr. Gregor then presented a detailed case study of the Hallman Chevrolet Site. The “project team” consisted of the City Division of Environmental Quality, the City Community Development Department, Home Properties, Inc. (a real estate investment trust), and Day Environmental, Inc. (a small environmental consulting firm, which worked for both the City and the developer). The site was originally to be converted to a mix of commercial, residential, and parking facilities. The developer wanted to develop everything as residential-except for the former showroom area. It also wanted to put a parking garage beneath the building. This complicated negotiations with DEC and made addressing environmental issues more costly (open air soil vapor venting was incorporated into the plan, for example)-but the success of the project required it to be commercially viable, so the City modified the project to conform to the developer’s requirements.

Among the environmental issues that had to be dealt with were: demolition debris, petroleum contamination, underground storage tanks, rumors of a buried railroad tank car, a former gas station, and 20 hydraulic lifts and pits. There were also historic preservation issues. (The historically significant Hallman Chevrolet Art Deco showroom was ultimately renovated and redeveloped as a coffee house and restaurant called the Spot Cafe.)

An attempted voluntary cleanup agreement “didn’t work out.” The City decided to proceed on the basis of a DEC-approved work plan, but without a formal DEC signoff. The second phase of remediation was performed under a joint “Stipulated Agreement” (between the City and the developer) with DEC

The site was originally owned by a real estate holding company. The City acquired it after negotiating a $300K reduction in the purchase price to cover anticipated cleanup costs.

The project, known as Chevy Place, was a clear success. It was the first new downtown apartment complex in 20 years. (Apartment rents are as much as $1,100/month). The overall project cost was $10.6 million, of which the City’s share was only $2.6 million. It yielded 77 occupied townhouses and apartment units in downtown Rochester. The Spot Café-a very successful restaurant and nightclub-opened on the site in August 2000. It has been a catalyst for other investments in the East End of Rochester. The apartment complex is located near the Little Theatre and restaurants and has extended the vibrancy of Rochester’s east side closer to the downtown area. In short, residential redevelopment has had a lot of benefits.

There are ongoing operation and maintenance requirements for all of these kinds of projects. The City addresses these through a qualified environmental technician on staff and through outside environmental consultants. The City is comfortable proceeding on these projects without receiving formal signoffs from DEC. (Tom Suozzo echoed the importance of having the flexibility to proceed in this way.)

In connection with the Hallman site, a blasted bedrock groundwater recovery system installed by the City during the first phase of cleanup needs to be restarted primarily to control the offsite migration of contaminated groundwater. To supplement the contaminated soil removal effort Home Properties also had to design a vapor barrier/passive vapor extraction system (to limit buildups of volatile organic compounds). The City is paying for O&M associated with groundwater. The owner/developer is paying for ongoing vapor system requirements.

The key was the negotiation by the City of an approved Work Plan with DEC for the second phase of the cleanup. This satisfied the outside lenders financing Home Properties development. It is also helpful that the City is willing to indemnify purchaser/developers. (The Small Business Administration, however, doesn’t accept the City’s indemnification.) In response to a request by Tom Suozzo, Mr. Gregor agreed to provide the Subcommittee a copy of the indemnification language used by the City.

The City has recently initiated a Brownfields Assistance Program, using $125K in funding from an EPA Pilot Assessment Grant, to assist owners and buyers in putting together a viable redevelopment plan for eligible brownfield sites. The program is open to real estate owners, buyers or redevelopers who need an environmental assessment or environmental engineering study to assess the viability of site redevelopment. City consultants will conduct the environmental site assessment. If the site is not redeveloped, the private entity need pay nothing. If the participating party redevelops the property, it must reimburse the City 33% of the assessment costs. (This is more in the nature of a “fee” than a “matching share.”) The City does its work under a Voluntary Agreement with the State (DEC). This is “a little bit troublesome.”

Susan Cummins questioned the willingness of site owners to have the City carry out environmental assessments where the extent of environmental contamination is not known, because the results of such assessments cannot be “shelved,” but must be reported to DEC. One would expect most owners to be reluctant to subject themselves to unknown, but potentially significant liability. Mr. Gregor responded by indicating that the City has made a standing request to DEC for referral to them of Rochester sites where DEC is “already involved”-so potential DEC involvement would not be a deterrent to owner involvement.

Another way the City uses to identify cooperative owner/developers-and to ensure that potentially contaminated/partially remediated properties are not developed without appropriate environmental safeguards-is the City’s “Permit Flagging” program. This program applies to City-managed cleanup projects. Particular parcels are “flagged” in the City’s property tax account-based building information computer system, so that when building permits are sought for these parcels, the developer is referred to Mark Gregor’s office, which provides guidance and available information (“post-cleanup development guidance plans”). People appreciate this and “don’t get mad at the City.” The City finds that this form of “institutional control” works better than deed restrictions.

Mr. Gregor’s office also does an environmental review of tax delinquent commercial and industrial properties before the City acquires them through foreclosure. It provides an “environmental risk ranking” and recommendations. Special auctions are sometimes held for tax-delinquent brownfield sites. The City has also secured court-ordered access for environmental investigations of parcels of interest, so that a database of information can be generated without having to first foreclose on the property and assume potential environmental liabilities. (The information thus acquired may make it easier to ultimately resell the property.)

Lessons learned: (a) Brownfields redevelopment projects have to be approached fundamentally as real estate projects, for which “location” is critical. A brownfield redevelopment cannot be forced based on environmental considerations if the site doesn’t meet the basic business needs of the prospective redeveloper. (b) Responsibilities (e.g., will the City, town, or village take the lead?) must be defined early and clearly. (c) Environmental expertise-technical and procedural-is vital (the City’s in-house environmental specialist plays a key role). (d) You need to know and prepare for your “deal killers” ahead of time. And (e) you need to be creative and flexible. (The twists and turns taken by the Hallman project illustrate the latter two points.)

Mr. Gregor was thanked for an excellent presentation and Stacy Merola presented him with an EMC mug.

3. The meeting adjourned at 5:05 p.m.

Recorder, Ken Kamlet

4/2/01