Dirt Diggers dig the dirty dirt

Brownfields offer emerging market for demo contractors

By Jennifer Pfaff

The city of Eau Claire’s dream of a downtown public retreat slept for years in the shells of abandoned industrial plants tucked along the Eau Claire and Chippewa rivers.

Although the city purchased a great deal of its intended site in 1981 from Phoenix Steel Corp. and, in 1993, began remediating the land under the direction of the state Department of Natural Resources, the property continued to sit idle.

Then, in 2000, a master plan for the site was drawn up, fueling hope that the land, along with parcels to the north and south, would become a premiere urban park.

But achieving that dream required buying and razing other industrial buildings as well as continuing the environmental cleanup. It was costly, and the project stalled again, said Brain Amundson, Eau Claire’s public works director.

A city of Eau Claire excavation project digs down 25 feet to remove contaminated material to prep the site for new construction. Photo courtesy of Eau Claire Public Works Department

And the project stayed stalled until the Royal Credit Union stepped forward with plans to build a 100,000-square-foot headquarters in the downtown area. But even with the promise of new development in the area, the city’s hope for a park faced an uphill battle.

“We were competing with a greenfield,” Amundson said.

The cost of building on a pristine site was vastly less than the cost of remediating the urban parcel, which consisted partly of the former Xcel property next to city-owned land. But with Royal Credit’s interest in the site, Eau Claire finally could begin turning the riverside location into a tax-incremental financing district, offering potential developers money upfront to cover the costs of preparing the site for new use.

Royal Credit seized the opportunity and chose the downtown location.

But there were still expenses, even before new foundations could be laid. The Xcel property functioned for more than four decades as a manufactured-gas plant. There was waste from purifier boxes, lead, cyanide and coal tar wells, and much of it was beneath the facility.

A $750,000 state Department of Commerce grant paid half of the building demolition and site remediation costs, bringing the total cost of building on the old brownfield into line with costs associated with other sites.

An aerial view of the Union Corners site in Madison shows the footprint of demolition as remediation gets under way. Photo courtesy of McGrath Associates Inc.

“The two things that made the project happen were the RCU building allowing the TIF to be created and the DOC grant,” Amundson said. “That was a critical component. They built a 100,000-square-foot, four-story building, and we built Phoenix Park.”

Phoenix Park stretches nine acres and boasts a sheltered farmers market, walking paths, a fishing wall, a plaza overlooking the rivers, a labyrinth and an amphitheater.

“Our whole goal was to create a unique public space to enhance the quality of life for people living and working downtown,” Amundson said. “We were fortunate in this case. [RCU] was willing to take the risk.

“You have to be able to put a financial package together that makes it a little less risky.”

Opportunities for similar brownfield redevelopment exist throughout Wisconsin. The DNR figures there are about 8,000 properties statewide that meet the definition of a brownfield: a commercial or industrial property — with real or perceived contamination — that is idle or underused, said Laurie Egre, outreach team leader for the DNR’s Remediation and Redevelopment Program.

These sites range from tiny corner gas stations to major industrial complexes. The one thing many have in common is that before cleanup crews can reach the contaminated soil or water, there are buildings that need to come down.

Construction crews sort through demolished building material for recycling at the Union Corners site in Madison. Photo courtesy of McGrath Associates Inc.

And that represents a gold mine for those in the demolition industry, but only if financial incentives are extended to developers who might otherwise look to greenfields for their projects, said Mike Taylor, executive director of the National Demolition Association.

Indeed, federal and state governments strengthened their redevelopment programs to reduce liability concerns of purchasing contaminated sites, and those governments are freeing up money, mostly for municipalities, to help cover remediation.

But federal Environmental Protection Agency brownfield grants don’t cover the cost of demolition, despite frequent need to remove buildings to reach contaminated soils and materials.

Wisconsin’s DOC, however, recognizes that need and offers its own grants that can be applied to demolition costs in such an instance.

The availability of that kind of money, in the end, can be the deciding factor in whether a site sits empty or is rejuvenated and returned to the tax rolls, Amundson said.

As federal and state incentives strengthen, so does the surge in redevelopment opportunities for Wisconsin’s demolition contractors, said Kevin Thompson, vice president of Walters Wrecking Inc., Brookfield.

Crews dig in for the demolition and remediation of the former Rayovac battery plant in Madison. Photo courtesy of McGrath Associates Inc.

Walters was founded 30 years ago, and, in the past decade, it saw a marked change in the way developers view brownfields. In the past, environmental contamination would make a location a bad investment. Now, those issues are less important, Thompson said.

“It’s a confluence of all the factors: a good economy, low interest rates, people looking for projects, government incentives and liability waivers,” he said.

That’s good news for the demolition industry.

“Any time there’s a redevelopment, we see potential for demolition contractors,” Thompson said.

The DNR has $1.7 million annually to give out in grant funds for brownfield redevelopment, Egre said. Each year, the department receives about twice as many applications than it can fund.

“It’s all over, and to us that’s encouraging,” she said. “The smaller rural areas are just as interested in fixing up their downtowns as the big cities.”

Still, a great deal of redevelopment is occurring in the big cities, where untouched land is nearly nonexistent, but desirable services are close at hand.

The city of Milwaukee has $1.6 million this year to grant or loan to private developers involved in brownfield redevelopment. Through a revolving loan process, $1 million can be lent annually at an interest rate more favorable than market.

“That can be the gap loan that makes a development happen,” said Dave Misky, development and environmental manager for the city of Milwaukee’s Department of City Development.

In Milwaukee alone, there are hundreds of brownfields, about 180 of which are on the city’s do-not-acquire list. Although these properties are tax delinquent, the city will not foreclose on them — the environmental cleanup costs would be too high, Misky said. While the number might seem high, it represents an improvement. Three years ago, there were 300 such properties on the list.

Developers, making use of government incentives in many cases, are seizing the opportunity to reuse this valuable urban property.

“It gives us the ability to compete with a Pabst Farms,” Misky said, referring to the large-scale development project in the Oconomowoc area being built on recently converted farmland.

Those incentives also can mean new life breathed into urban areas that might otherwise sit vacant.

McGrath Associates Inc., Madison, recently assembled 22 parcels in the city into a 15-acre site. The 400-plus condominium and apartment units it plans to mix with 110,000 square feet of commercial space in the Union Corners development will transform an area dominated by the former Rayovac battery plant, said Kevin O’Driscoll, McGrath Associates vice president. Eight acres of the site were contaminated, he said.

McGrath Associates wanted the land but not the risk, so it obtained a DOC grant to help pay for remediation and demolition work on the property, said Lance McGrath, president of McGrath Associates. Rayovac conducted the cleanup, and McGrath retained an option on the land, contingent on the DNR signing off on the remediation.

“To get where we need to get, the costs are huge,” O’Driscoll said. “If you’re redeveloping the site, you need to bring buildings down, run new roads in, just to do the remediation. That’s a big hurdle — how do you pay for some of this stuff?”

McGrath said the willingness to take on a bit of risk is essential in brownfield redevelopment, although the risks seem to be diminishing. Not only is the stigma of contamination lessening, he said, but economic factors are making the payoff worth the risk.

“Here’s an opportunity on 8 acres on a major transportation corridor,” he said of Union Corners. “That doesn’t happen in Madison. You have to be comfortable taking on more risk.”

The lack of money for demolition costs is a major concern, Misky said. Without the right financial aid, projects like the Milwaukee Harley-Davidson Museum could not go forward. That project was helped along with a city subsidy for demolition costs.

“There’s very little money for demolition,” Misky said. “You’re talking about disposal of hazardous materials — ballasts, light switches. You’re talking about asbestos.”

The rising need for demolition work and a desire among wrecking companies to seize on this area of the market have led some to broaden their scope of services.

“It’s been talked about a lot that there is a potential of [redevelopment] coming around, but I think it’s in its early stages,” said Ron Retzer Jr., vice president of Menomonee Falls-based SCS of Wisconsin Inc. and owner of Milwaukee-based TCS of Wisconsin LLC.

Retzer started TCS in recognition of the growing need for contractors able to dismantle and dispose of the hazardous materials found on so many brownfields.

“Demolition crews are offering a wider range of services now because a lot of developers want to deal with as few subcontractors as possible,” he said.

Knowing how to safely and legally handle surprises that pop up during demolition is a valued asset these days.

“In the past, if you were working and you hit contamination, you shut down,” Retzer said.

As demolition contractors adjust to the market, that issue is becoming less prevalent. It’s just one more factor that helps developers keep a project within budget and helps fuel new dreams for old spaces.