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HomeMy WebLinkAbout2001-04-03 - AGENDA REPORTS - BROWNFIELDS PHENOMENA (2)CITY OF SANTA CLARITA INTEROFFICE MEMORANDUM TO: Mayor Weste and City Councilmembe FROM: George Caravalho, City Manager BY: Jeffrey Lambert, AICP, Direct of 1 g and Building Services DATE: April 3, 2001 SUBJECT: THE BROWNFIELDS PHENOMENA AND ITS IMPLICATIONS FOR ADDRESSING THE CITY'S BROWNFIELD — THE PORTA BELLA SITE RECOMMENDED ACTION Receive staff presentation and provide direction to staff regarding the City's position and involvement with regard to the Porta Bella Remediation, Restoration and Development project. Purpose of Study Session Over the past several months, the City Council has received a number of presentations on various aspects of the Porta Bella Remediation, Restoration and Development Project. During that time, the City has been struggling with various issues and groups in an attempt to understand the project and how to best achieve the ultimate clean-up and restoration of the property. Staff feels at this time that it is important to back-up and frame the Porta Bella project in the broader context of brownfields remediation and redevelopment efforts ongoing across the United States. Brownfield restoration is inherently tied to those principles and objectives that guide a community's functions and future development. Brownfield -related issues touch all aspects of local government concerns: public health, housing, infrastructure, economic development, growth management, and aesthetics. The information presented in this study session will provide the foundation for further discussion and the Council's future public policy decisions regarding Porta Bella. The presentation covers the full range of topics related to brownfield restoration, from the environmental movement to the opportunities and threats facing our own community. In short, the presentation (summarized below) provides a number of compelling arguments as to why it is good public policy to clean-up brownfield sites and why local government needs to take a leadership role in mobilizing these efforts. At the end of the presentation, staff requests that the Council consider a number of decision points and provide staff with direction on how to proceed with the Porta Bella project. Agenda Item City Council Study Session Porta Bella Remediation, Restoration & Development Project April 3, 2001 Page 2 Presentation Topics Part I. Introduction The presentation will begin with a brief recap of the environmental movement and public policy at the federal and state levels, explaining how the brownfields phenomena came about, why local governments have taken the lead in making brownfield redevelopment a national effort, and highlighting some of the key benefits cities realize when sites are redeveloped. Part II. Making A Brownfields Deal Work The brownfield concept is gaining acceptance by regulators and policymakers at the federal, state and local levels. Greg Trimarche, the City's brownfields consultant, will provide an overview of how brownfield deals work, and the various elements that have contributed to their success. Mr. Trimarche encourages local governments to take advantage of increasing market acceptance of brownfield redevelopment by working with willing buyers. Other factors that have simplified and reduced "contaminated site fright" for local government and private investors include available brownfield financing, reliable methods for the valuation of contaminated property, and insurance products and "fixed fee" cleanup contracts. For the Porta Bella project, private resources are already in place to manage the remediation process. This places Santa Clarita in a favorable position over those jurisdictions still struggling to find willing private parties to both finance and manage the technical aspects of clean-up. Part III. Local Government Roles and Initiatives for Brownfield Redevelopment Brownfield clean-up has become a local issue across the nation due to the inability of state and federal programs to effectively address "by themselves" the problems posed by contaminated sites. For example, the federal Superfund program offers only a bureaucratic, drawn-out process where it could take decades before financing or remedial action is seen by the local community. The Porta Bella site would be forced to compete with thousands of other sites across the U.S. with greater health hazards and financial challenges. Environmental and economic threats often drive action at the local level; however, local government also enjoys a number of direct and indirect benefits that result from restoring a contaminated site to productive use. The second half of Part II is titled, "Understanding the City's Brownfield: Opportunities & Threats." In this portion of the presentation, staff will pose a number of questions specifically related to the Porta Bella site. These include: • How does the Porta Bella site fit into context of City as a whole? • How is site restoration vital to realization of City's long-term goals? Why should the City spend time and resources on this project now? • Why is the project better than 'no project'? • What happens if we do nothing? City Council Study Session Porta Bella Remediation, Restoration & Development Project April 3, 2001 Page 3 Porta Bella is at the geographic heart of the City, strategically located in terms of infrastructure and Valley -wide mobility. Site clean-up and restoration is critical to City's long-term sustainability in terms of protecting the environment, securing the human health & safety of residents, maximizing use of existing infrastructure and services within the City's core, and improving the economic and social health of a blighted property. Because the clean-up and restoration of this property is critical to the realization of the City's long- term goals, Porta Bella is a community problem that must be embraced like other projects and external forces that have threatened the City's quality of life, such as the recent Transit Mixed Concrete project and Elsmere Canyon Landfill project. There are a number of reasons for the City to become involved now with the restoration of Porta Bella. The most compelling is that a private remediation team is already on board voluntarily with private funds and an enforceable agreement with DTSC to clean the soil and groundwater. The City, too, has a vested interest in acting now as the migration of contaminants through the Valley's groundwater has serious human health and water supply implications. Other infrastructure -related interests include the City's acquisition of the Metrolink station and continued commuter rail services, the completion and operation of Golden Valley Road, and the extension of Via Princessa extension to create a second cross -valley connector. A number of negative consequences are expected to result if the City chooses not to support the Porta Bella remediation effort. The obvious consequence relates to the environment and human health and safety. On-site contamination will not be cleaned in a timely manner and can be expected to migrate off-site via airborne or waterborne pathways. Groundwater will continue to be impacted by the release of percholorate. This could continue for decades due to the length of time required to complete the remedial action. It is important to note that the Whittaker Corporation, the previous owner and polluter of the site, has no financial or development interest in expediting the clean-up process and will clean the site only to industrial standards. Other consequences of City inaction relate to infrastructure and needed public facilities, economics, and social/public perception. Four critical General Plan roads that serve as cross -valley connectors would not be built, and traffic along existing roadways will reach gridlock conditions as peripheral growth continues. The City would also be required to purchase the Metrolink station instead of a developer dedication, requiring a large draw from the City's General Fund. Public facilities that would not be built include: a fire station, an elementary school, dedication of a City facility site, active parkland, and open space. Negative economic impacts and lost revenue potential would result as the site would remain unproductive and would not contribute to the City's tax base. The industrial and commercial uses approved for the site would not be developed, and private monies to fund major infrastructure projects would not be available, placing a financial burden on the City. Inaction would also foster the negative stigma of the Porta Bella site as an unsalvageable wasteland, having both a social and aesthetic impact. In terms of public perception, City inaction could send a message that Santa Clarita is not proactive in the protection and enhancement of the environment or the quality of life enjoyed by Valley residents. The worst-case scenario is that the City is left with a large part of its core as a minimally City Council Study Session Porta Bella Remediation, Restoration & Development Project April 3, 2001 Page 4 cleaned -up site that will be unusable for parks, open space, a school and tax -generating development. Implementation of the Porta Bella Specific Plan, approved in 1995, would result in a number of City benefits and amenities. In its original approval of the Porta Bella project, the City Council, in Resolution No. 95-42, found that the Porta Bella project is consistent with the goals and objectives of the Specific Plan zone as the project would "promote more economical and efficient use of land while providing a harmonious variety of choices, higher level of amenities, and preservation of natural and scenic qualities of open space." In Ordinance No. 96-4, the Council determined that the components of the Development Agreement provide for "clear and substantial public benefit to the City and its residents, along with a schedule for delivery of the benefit." To demonstrate the effectiveness of public-private partnerships in cleaning and developing contaminated sites, City staff has selected a handful of brownfield success stories to share with the Council from thousands of recorded case studies. These studies show how contaminated properties, including a former TNT manufacturing facility and an oil refinery site, were cleaned and restored for residential and commercial uses. These studies also illustrate how solutions occurred when the local government took a leadership role. In short, Santa Clarita, LLC, or any other private entity, requires City support to be successful, just like all other brownfield projects. No legitimate developer could proceed with the remediation and redevelopment of Porta Bella without public support. Part IV. Status Of The City Of Santa Clarita's Brownfield For months, City staff and the Council have been struggling with how to ensure that the clean-up and redevelopment of Porta Bella is in the best interest of the City. As a community, we want to be well -protected while working toward a solution to the problem. In February 2001, Santa Clarita LLC signed an Enforceable Agreement with the DTSC, which will act as a roadmap for the entire clean-up process. The elements in the Enforceable Agreement provide the built-in mechanisms for public health, safety & general welfare that the City has been searching for to ensure compliance and provide a comfort level. This portion of the presentation will highlight the Agreement requirements, DTSC's role and authorization, regulatory safeguards, public participation opportunities, the remediation schedule, and penalties and financial responsibilities placed on Santa Clarita LLC. Santa Clarita LLC's phasing proposal for the clean-up and development of Porta Bella has been captured in a digital exhibit that shows the timing and layering of activities that will occur on-site from the initial remedial investigation to vertical development and occupancy. This exhibit will be displayed to demonstrate Santa Clarita LLC's desired plan for property restoration by Operable Unit. City Council Study Session Porta Bella Remediation, Restoration & Development Project April 3, 2001 Page 5 Part V. Policy Direction: How do we proceed from here? This presentation not only provides a brownfields overview to frame the issues surrounding Porta Bella, but also includes a number of compelling arguments for proactive City involvement. This is the starting point for how the City proceeds from here. The Council must take leadership role and assume control of this process as the City has a significant and vital interest in the clean-up of Porta Bella. To address the problem properly and quickly, the Council will need to allocate resources, giving staff direction and focus to making this happen. Successful brownfield remediation requires strong local government leadership. Staff is seeking direction from Council regarding City's position and involvement with regard to the Porta Bella project. Staff is requesting that Council consider the following decision points: 1. City Council to direct staff to develop citywide brownfields strategy which includes proactive approach from the City. 2. City Council to authorize staff to develop strategies and work with various stakeholders to restore the Porta Bella site to productive use. This will include amending the development agreement, developing financing strategies for infrastructure, and coordination with multiple agencies. 3. City Council to direct staff to schedule a joint City Council -Planning Commission workshop to provide an opportunity for more in-depth discussion and strategizing, and a forum to hear from other community representatives and regulatory officials that have participated in brownfield projects nationwide. 4. Resolve issues in Memorandum of Understanding with SCLLC, which includes the Council's commitment to supporting the phased clean-up and development of the site. FISCAL IMPACT City Council policy direction resulting from this study session could have both short- and long-term fiscal impacts related to the ultimate development of Porta Bella and associated Central City infrastructure. More specifically, the discussion will guide upcoming negotiations between the City and Santa Clarita, LLC as to whether the City will continue to lease the Metrolink station site from SCLLC or purchase it in accordance with the Development Agreement. ATTACHMENTS 1. Presentation Outline: The Brownfields Phenomena and It's Implications for Addressing the City's Brownfield — The Porta Bella Site 2. Brownfields 101: A Primer on Brownfields Redevelopment, Gregory Trimarche, April 3, 2001 GAC:JJL:Imh s: \ pbs \ advance \ ptabla \ april3ssmemo. doc CITY COUNCIL STUDY SESSION APRIL 3, 2001 CENTURY ROOM 5:30-7:30 PM THE BROWNFIELDS PHENOMENA AND ITS IMPLICATIONS FOR ADDRESSING THE CITY'S BROWNFIELD — THE PORTA BELLA SITE PART I. INTRODUCTION A. Purpose of Meeting B. Historical and Public Policy Perspective C. The Brownfields Phenomena: What are they and why do we care? PART II. MAKING A BROWNFIELDS DEAL WORK A. Risk-based clean-up standards & land use controls B. . Prospective purchaser agreements & other government programs C. Taking advantage of increasing market acceptance D. Rights to Recover Clean-up Costs E. Growing Political Acceptance QUESTION & ANSWER PART III. LOCAL GOVERNMENT ROLES AND INITIATIVES FOR BROWNFILED REDEVELOPMENT A. Why is brownfleld clean-up a local issue? B. Understanding the City's Brownfield: Opportunities & Threats ■ How does the Porta Bella site fit into context of City as a whole? ■ How is site restoration vital to realization of City's long-term goals? Why should the City spend time and resources on this project now? • Why is the project better than 'no project'? • What happens if we do nothing? C. Brownfield Success Stories and Testimonials QUESTION & ANSWER PART IV. STATUS OF THE CITY OF SANTA CLARITA'S BROWNFIELD A. Overview of DTSC-Santa Clarita LLC Enforceable Agreement B. Phased Clean-up & Development Proposal PART V. POLICY DIRECTION: HOW DO WE PROCEED FROM HERE? A. Presentation Recap & Summary Comments B. Decision Points QUESTION & ANSWER LMH s:�pbMadvance\ptabla\4301 ssagenda.doc Brownfields 101: A Primer on Brownfields Redevelopment City of Santa Clarita Study Session April 3, 2001 Prepared by: Gregory D. Trimarche Greenberg Traurig, LLp 2450 Colorado Avenue, Suite 400E Santa Monica, CA 90404 (310) 586-7728 0 Gregory D. Trimarche, 2001. Introduction: What are Brownfields and why do we care? 1. Regulators and responsible parties have been wrestling with contaminated property liability issues since the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or "Superfund") passed in 1980. 2. CERCLA was hastily passed in the waning days of the Carter administration, in response to a series of highly publicized environmental disasters (e.g., Times Beach, Love Canal, etc.). It was aimed at making the "polluter" pay for hazardous waste site cleanups. Unfortunately, it was drafted very broadly and ambiguously (and, some would say, carelessly). 3. No one anticipated that CERCLA would be applied at virtually every contaminated property in the country, and that states would pass their own "copy- cat" state law versions of CERCLA. More important, no one foresaw that the threat of environmental liability would seriously burden real property transactions and leave a trail of abandoned contaminated sites across the urban landscape. 4. One key problem is that there are now so many environmental laws, and the laws are so broad, that virtually anyone who ever owned or operated contaminated property is potentially liable for the cleanup costs. Moreover, the present owner and operator of the contaminated property are almost always the first target of any cleanup action. As a result, buyers have been afraid to buy, developers have been afraid to develop, and lenders have been afraid to lend on contaminated property. 5. The "Brownfields" phenomenon is an effort to resolve contamination problems in a streamlined manner and otherwise overcome fears and hurdles to allow properties with contamination histories to be placed back into the market. 6. The term 'Brownfields" originally referred to contaminated abandoned or under- utilized commercial and industrial properties in urban centers, and came to prominence primarily in industrialized cities in the northeast and steel belt. 7. The Brownfields concept has evolved so that it now refers to any effort to sell or redevelop environmcntally-impaired property, typically through the use of a risk- based approach to cleanup (i.e., evaluation of risks in light of the planned future use of the property) and creative financing and liability release mechanisms. 8. The Brownfield concept is gaining acceptance by regulators and policy -makers at the federal, state and local levels. 9. Investors and developers now aggressively pursue Brownfields opportunities, and the surging real estate market and shortage of available space for new development has added to this investor and developer interest in California. 0 Gregory D. Trimarche, 2001. Makine a Brownfields Deal Work 1. Risk -Based Cleanup Standards and Land Use Controls In the past, the lack of uniformity in cleanup standards and the difficulty in predicting the cost of meeting those standards were instrumental in scaring off buyers, developers, and lenders. Today, changing regulatory attitudes and the development of more effective and efficient cleanup technologies allow sites to be closed more quickly and less expensively than ever before. In most situations, regulatory oversight agencies now will allow cleanup requirements to be set according to site-specific health risk assessments based on the intended use of the property. That is, the remediation standards will be determined by examining the types and concentrations of contaminants present at the site and the "exposure pathways" presented by the planned use for the site. For obvious reasons, a commercial or industrial use (e.g., an office building, warehouse, or factory) typically will involve less direct "exposure pathways" and less sensitive "receptors" than residential uses (i.e., office or factory workers at a facility on a paved site do not present the same exposures and sensitivities as would children playing in their backyard). However, where less stringent cleanup standards are based on a commercial or industrial land use, a deed restriction and/or other form of land use control may be necessary or appropriate to ensure that a future redevelopment or otherwise changed land use does not create unforeseen exposure pathways and sensitive receptors. California is one of the few states that has laws expressly providing for deed restrictions and other forms of recorded instruments (easements, covenants, and servitudes) that relate specifically to hazardous wastes and other such environmental conditions. See Civil Code section 1471, and Health and Safety Code sections 25229 et seq. 2. Prospective Purchaser Aereements and other Government Proerams Oversight agencies have aggressively adopted policies and programs to foster Brownfields projects by streamlining the cleanup process (voluntary cleanup agreements, expedited remedial action, etc.). Other government programs create a "safe -harbor" for prospective buyers and lenders (EPA and DTSC prospective purchaser agreements). Still other programs provide subsidies or other financial assistance (EPA Brownfields Grants, HUD Economic Development Initiative Grants, Section 108 Loan Guarantees, Community Development Block Grants). There also are new tax breaks to encourage Brownfields redevelopment (e.g., by allowing deduction of cleanup costs in the year incurred). 0 Gregory D. Ttimarche, 2001. Unfortunately, the government programs generally do not go far enough -- the marketplace must fill the gaps.... . 3. Taking Advantage of Increasing Market Acceptance A. Willing buyers Many real estate investors, developers, and end users are no longer afraid of contaminated properties. There also has been a proliferation of Brownfields companies made up of environmental, legal, lending and insurance professionals who are in the market specifically looking for Brownfields properties. Nevertheless, any of these buyers will still "screen" or "pre -qualify" Brownfields in much the same way as other real estate deals. Obviously, the size, location, potential end use, and other factors affecting demand and market value are the issues of greatest concern. And, much like they do for other real estate deals, a potential purchaser of a Brownfields site will compare the overall value of the deal to the likely transaction costs and the potential risks presented by the particular property. In the Brownfields context, virtually all contaminated properties present substantial transactional costs and liability risks related to the environmental conditions. The value of the deal must justify those costs and risks. In addition, a potential buyer must look at whether conventional financing is available for the project. Generally, banks and other traditional lenders will not lend unless the environmental conditions are fully characterized, and a remediation plan has been approved. B. Obtaining Financing for Brownfields Projects Banks and other lenders are starting to develop expertise in contamination problems, which allows them to quantify environmental risks much as they do for other risks. Key environmental risks to lenders include: the extent to which environmental liabilities impair a borrower's ability to make timely payment on the loan the extent to which environmental conditions impair the value of Property as collateral for the loan if the borrower defaults the exposure to direct cleanup cost liability upon foreclosure 0 Gregory D. Trimarche. 2001. To obtain financing on a contaminated property, a borrower must demonstrate that: the environmental costs can be quantified; the environmental costs are insignificant in relation to the loan amount, the borrower's ability to repay the loan, and/or the value of the property as collateral for the loan; and as mentioned above, the environmental conditions are fully characterized and the oversight agency has approved a remedial action plan for the site (which, among other things, allows the lender to quantify cleanup costs, compare to loan value, etc.) C. Reliable methods for valuation of contaminated property Valuation requires more than simply subtracting cleanup costs from a property's value in its uncontaminated state. Such an oversimplified approach would ignore: tangible direct costs, such as lost or impaired use during cleanup and attorney fees, and intangible or indirect costs resulting from market perception (or misperception), often referred to as "stigma." D. Insurance products and "fixed fee" cleanup contracts Large insurers (e.g., Zurich and AIG) now offer insurance policies to protect buyers, lenders, and other interested parties from environmental risks, in effect "capping" worst-case scenario risks. "Stop loss" or "cost cap" policies provide coverage against cleanup cost overruns, allowing the insureds to quantify and control cleanup costs. Other pollution risk insurance policies can protect buyers, sellers, lenders, and other parties from a wide range of environmental risks, including third party claims for damage to adjacent properties, personal injury, etc. Many environmental contractors now offer "fixed -fee" or "not to exceed" contracts, by which the contractor guarantees that a site will be remediated for a sum certain. This provides similar protection as that offered by the commercial "stop loss" and "cost cap" insurance policies, but with a different cost and risk structure. 0 Gregory D. Trim=he, 2001. 4. Rights to Recover Cleanup Costs Recovering Cleanuo Costs from Responsible Parties Present owners of contaminated property have rights to recover cleanup costs and other relief from past owners and operators and other parties responsible for causing contamination. 2. Recovering Cleanup Costs from Insurers Sometimes cleanup funds may be available under old comprehensive general liability ("CGL") insurance policies. These funds can bridge the gap between cleanup costs and the underlying value of property to enable redevelopment of a site that otherwise might remain contaminated and under-utilized, but insurance companies have vigorously resisted paying claims for environmental cleanups under old CGL insurance policies. S. Growing Political Acceptance 1. Project proponents must gain the support of regulatory staff responsible for setting cleanup standards and granting permits and entitlements. One key is to coordinate regulatory staff at all involved agencies, at all levels, to ensure project success. 2. It also is critical to obtain the support of the local community, including homeowners and business owners in the area of a proposed project, by including them in the process. Developers must clearly and completely explain the environmental risks posed at a site, and how those risks will be addressed; allow the community to communicate their concerns early in the process; and focus attention upon and maximize the benefits to all. Benefits that may inure to the community include the following: Cleaner environment and mitigation of health risks Rehabilitation of blighted urban areas Preservation of pristine green -belt areas Revitalized real estate market Job creation in inner cities Improved tax base for cities N