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CLIENT: MACTEC, Inc.
January 2005: Builder
From his office tower in the Atlanta Financial Center, Gerald Pouncey can see potential in every abandoned building and former industrial site through the Atlanta haze. As an attorney with Morris, Manning & Martin's Atlanta office, he has become a well-known figure in the battle to turn sites that had been written off into viable projects-even communities. He notes that his firm's "failure rate" with regard to making brownfield projects happen is about 5 percent. "Others are about 30 percent to 40 percent," he says.
The key tenet of Pouncey's approach: convincing regulators, especially state agencies, that former industrial sites don't have to be made 100 percent chemical-free to be suitable for new construction.
"You can get rid of the first 90 percent of contamination relatively easily and keep a project feasible," he says. "It's the last 10 percent that can be the death knell for multimillion-dollar projects. It's just far more costly to remove those last molecules."
Companies such as MACTEC, a national engineering and remediation firm, bring engineering and site remediation to the table. The Atlanta office has teamed with Pouncey to produce some highly respected projects. The jewel in their crowns: the Atlantic Station project now under construction in midtown Atlanta, which combines residential and commercial design on the site of a former steel factory. The 138-acre site endured heavy, dirty use for about 100 years and became thoroughly polluted with petroleum constituents, lead, cadmium, chromium, arsenic, and other chemicals, along with about a million cubic yards of slag steel.
Nonetheless, thanks to using a method of remediation described as "risk-based," MACTEC was able to appease both the EPA and city regulators while at the same time being allowed to work on a fast-track schedule. This kept costs down, allowing the developers to ultimately turn a profit on the project.
Chuck Ferry, a senior engineer with MACTEC, worked on Atlantic Station. He notes that the success of the site depended on dividing it up based on the level of remediation needed.
"There were 29 areas to be cleaned up," Ferry recalls. "The rest consisted of low-level contaminates that we could address with containment."
By containment, he means permanently capping off certain areas of the site. "Regulations require that you have to have either 2 feet of clean topsoil or a hard cover," he explains. Sometimes, Ferry notes, it makes more economic sense to use a hard cover to lock in contaminants because removing and replacing topsoil is very pricey. On Atlantic Station, the company spent $2 million to bring in 250,000 tons of soil.
Making brownfield development work, of course, requires a new set of estimating skills. First, Pouncey says, the project has to start with a good location-whether that value comes from proximity to jobs, a great view, or the accessibility of mass transit. Dan Grogan, project manager at MACTEC in Atlanta, notes that the higher initial cost of remediating a site can often be offset by the availability of nearby or existing infrastructure-an advantage over greenfield development in the suburbs.
Traditionally, the biggest risk in brown-field development has been liability for unexpected cleanup costs. Some of those are now addressed by the Federal Brownfield Act (see "New Rules," above). But equally important for builders, Pouncey says, is changing the way they think about brownfields.
"You have to get in a totally different mind-set and that is that environmental problems with a site are treatable, not fatal," notes Pouncey. "The cost of cleanup [for] these sites is significantly overestimated. A lot of it has to do with planning. You need to integrate the cleanup process into your business."
Pouncey adds that even with the best planning, many brownfield sites should be left alone because of lousy location or inflexible variables such as inadequate roads and infrastructure. "Of the 1,000 sites in Atlanta, for example, about 700 might not be desirable."
"Builders are seeing that there's a real demand for this sort of development," he continues. "The bottleneck is in dealing with the regulators."
Know your Poisons
Not all contaminants are created equal. That's a fact often overlooked when assessing a brownfield for development.
As part of the environmental assessment, your engineer should be looking at the details. They make all the difference in the costs of remediation. "If the contaminant discovered is lighter than water, such as gasoline," Pouncey notes, "and thus floats on top of the underground water table, it may allow for easier and less-expensive remediation." On the other hand, he points out, "contaminants that are heavier than water, such as industrial or dry-cleaning solvents, tend to sink through the water table, toward the bedrock, making cleanup more difficult."
Another consideration is whether the contamination is coming from on site or an adjacent site. If your site has the potential to leak contaminants that could spill into another site, you will have inherent higher liability-and higher insurance bills.
Finally, Pouncey adds that effective cleanup of some toxins is better done slowly. If regulators can be convinced that toxins don't need to be removed all at once in a short time period, the developer can greatly reduce his overall cleanup costs. Often, making this point requires negotiation with regulators to get them to allow a different timetable for cleanup. For example, they may allow you to move ahead with construction on some parts of a site while the remediation process is still under way.
So what's the best combined strategy for a successful brownfield project? At right is a general chronology for developing a large-scale, seriously compromised site, using the Atlantic Station project as our case study.
"You also need to become aware of incentives early," says Pouncey, "and whether a project qualifies for them." Those incentives may include deferred taxes from the city, faster permitting, density bonuses, etc. "What you end up doing is looking at your overall land cost and determining what your minimum density has to be," he adds.
The Federal Brownfield Act of 2002 (formally known as the Small Business Liability Relief and Brownfields Revitalization Act) includes a number of new provisions. Several, including the windfall lien, protect the government by allowing it to recoup (from private developers) some cleanup costs on land it has cleaned up at great expense-on which a developer makes a killing at resale. Most, however, make development of brownfield properties less risky for you. These include:
Source: Gerald Pouncey, Morris Manning & Martin
Locate And Connect
Like all other types of real estate, brownfield sites have to have something to offer that will make them desirable places to live and work. That could be views, public transportation, closeness to a park or commercial area, or proximity to an urban hub. Atlantic Station's designers greatly increased the perceived value of the site by adding a modern "multimodal" bridge over the interstate highway (I-75/85), connecting the site to midtown Atlanta
Reuse Solid Fill
When mapping out the parcel for site preparation, areas should be specifically earmarked for different types/levels of soil and construction debris. These staging areas allow reusable materials to be kept separate from contaminated stuff. For example, Atlantic Station recovered 132,000 cubic yards of concrete by crushing and saving old foundations. The developers also crushed 164,000 cubic yards of bedrock. All of this material was used as backfill for the new structures.
Discover The History
Often, the need for multiple soil tests and excavations can be greatly reduced by reviewing public records about the site. Where was the smelting furnace located? Was there a designated dumping area? Was any of the site used for barracks or kitchens, and, therefore, less likely to contain heavy contaminants?
Cool The Hot Spots
Many brownfields have certain areas where pollution is most severe. To reduce liability and protect construction workers who will be climbing all over the site in months to come, the bad areas need to be neutralized first. This may entail capping or fencing off the worst areas or expert removal of the more dangerous contaminants.
A key concern with any brownfield is water runoff and seepage into local aquifers. MACTEC addressed this problem economically at Atlantic Station by sloping the site so that all water runs into a series of wells in a conservation easement before passing into the city sewer system. But all runoff gets tested for contamination before it gets a free pass. If toxins are found, the runoff is automatically cycled through a water-treatment facility on site before entering the city sewer pipes. Because this treatment center is a backup, not a full-time system, it can be small and economical.
Think Double Duty
Even badly contaminated soils can sometimes be addressed to regulator satisfaction by capping them with concrete or pavement. Keep this in mind when laying out your master plan and pouring foundations. A few more feet of concrete in a basement floor may adequately encapsulate bad soils and save thousands on what you might have spent capping all of the trouble areas without regard to building layout.
Learn The Ropes
City planners like well-planned brownfields and are willing to work with developers, especially by fast-tracking permitting. You should also look into programs that offset property taxes. You might get a deal that allows you (as developer/builder) to pay the same amount of taxes (for up to 10 years) on a developed brownfield as you did before it was developed.
Hailed by the city of Atlanta and regulators as a "town inside a metropolis," the Atlantic Station brownfield project has some impressive credentials. When completed, it will include 3,000 to 5,000 residential units, 1.4 million square feet of retail and entertainment space, and 6 million square feet of office space. The Station will contribute $30 million a year in property taxes and about $500 million in sales tax from retail establishments on the property. Thanks to its proximity to mass transit, the new bridge, and strong support from the city, the Station is already attracting eager homebuyers. People are moving in, and units are selling briskly.
Return to: 2005 Feature Stories