Super Fight Over Gowanus Superfund! Bloomberg Sides With Developer; Whole Foods Bows Out

On a recent sunny afternoon, a young woman stood on the 9th Street bridge that passes over the Gowanus Canal near Smith Street, sketchpad and pencil in hand, studying the body of water before her.

“I like trying to find beauty in industrial places,” she said. “You just sort of have to appreciate what’s around you, you know?”

At first sight it’s obvious that the Gowanus Canal is filthy.  Yet, residents continue to congregate around it, canoe across it, build vessels to tour it, and wonder if its beauty will ever again surpass its usefulness as an industrial center.  Efforts to revitalize expansive industrial lots in the area have advanced, with bars, restaurants and music venues opening along Second and Third Avenues.  Artists work in nearby studios, and the BKLYN Yard, a venue alongside the canal, draws young people from all over the city to afternoon dance parties, barbeques and swap meets on summer weekends.

At least one investor in the area, however, has bowed out.  Whole Foods, who had planned to open a 68,000-square-foot store at 3rd Avenue and 3rd Street, tells Brooklyn The Borough, “at this juncture we do not have immediate plans to open a new store in Brooklyn but do hope to be there someday soon.”

An oil terminal and coal yard used to operate on the site in the first half of the 20th century.

Over 150 years of heavy industrial activity combined with sewage and storm water run-off, and its proximity to factories and gas refineries have made the canal a site of controversy since the Environmental Protection Agency announced in April that the waterway is a candidate for the Superfund National Priorities List.  The last day of public comment on the matter is today, July 8.

The nomination has entangled the city, the Environmental Protection Agency, prospective canal developer Toll Brothers, and a handful of community organizations in an intensely heated struggle over who will supervise and pay for the canal’s rehabilitation.

Since 1980, over 700 hazardously polluted sites have been placed on the National Priorities List.  Under the American Recovery and Reinvestment Act of 2009, the Superfund Program was recently allocated an extra $600 million (on top of its $320 million annual operating budget) to facilitate waste site cleanup. The Environmental Protection Agency estimates that Gowanus Canal sediment removal alone could cost $400 million.

Toll Brothers, self-proclaimed as “the nation’s leading builder of luxury homes,” purchased land around the canal prior to its rezoning, still plans to build 447 residential units, 2,000 square feet of commercial space, and two parking garages between 2nd Street and Carroll Street along the waterfront.  Arguing that a cleanup headed by the Environmental Protection Agency would be incomplete and postpone its development plans, the developer has come out in opposition to the Superfund designation. David Von Spreckelsen, a Senior Vice President at Toll Brothers, recently outlined his company’s opposition to the Superfund designation in an op-ed in the Gotham Gazette.

Those who oppose the designation, including Mayor Michael Bloomberg and the City of New York, say that it will create a stigma about the neighborhood, decrease property values and begin years-long litigation over who is responsible for the cost of the cleanup.

Long-term litigation is something with which Toll Brothers is familiar.

In 2007, the City of Hialeah Employees’ Retirement System and Laborers Pension Trust Funds for Northern California filed a class action complaint in Federal Court alleging that Toll Brothers “made misleading statements between December 2004 and November 2005 regarding the current and future conditions of Toll Brothers and failed to disclose adverse developments that were negatively impacting the business.”

In September 2008, Judge James T. Giles of the U.S. District Court for the Eastern District of Pennsylvania denied Toll Brothers’ motion to dismiss the suit, ruling that the plaintiff’s complaint met with the requirements of the Private Securities Litigation Reform Act of 1995.

In March, the New York Times reported that the developer’s “revenue declined 51 percent, to $409 million, from $842.3 million” the previous year.  A month later, they reported that, “City officials said that the [Superfund] listing could jeopardize more than $500 million committed to the waterfront for two private projects involving more than 1,200 housing units.”

If Toll Brothers were to lose this battle, and have its development delayed by the cleanup, the company might also lose its shirt.  The developer has threatened to walk away from its plans to build on the site should the designation occur.

“While the economic development of this artery is crucial to the future of New York City,” wrote Senator Montgomery, “sustainable, healthy development is only possible in a sustainable, healthy environment.”

Meanwhile Toll Brothers is arguing that should the Environmental Protection Agency invest the time to publicly acknowledge the pollution, find the responsible parties, and cleanup the canal, banks and insurance companies would be unwilling to make loans for future development.

In his public testimony on the designation last month, Mr. Von Spreckelsen stated, “I have spoken with banks and insurance companies regarding the prospects of getting loans and insurance policies that would enable development along the canal were it to be placed on the National Priorities List. Their answers have varied from it being very difficult to impossible to obtain what would be necessary to move a development project forward.”

State Senator Velmanette Montgomery represents the district where the majority of the canal is located and in May wrote a letter to Dennis Munhall, regional coordinator of the National Priorities List urging him to support the Superfund designation. “While the economic development of this artery is crucial to the future of New York City,” she wrote, “sustainable, healthy development is only possible in a sustainable, healthy environment.”

Community organizations like Friends and Residents Of Greater Gowanus (FROGG) and Carroll Gardens Coalition for Respectful Development (CG CORD) have sprung up in favor of the designation.  Both groups argue that making the Gowanus Canal a Superfund site – noting the reliability, funding, and resources of the Environmental Protection Agency – is the best option for a comprehensive cleanup of the canal.

The New York State Department of Environmental Conservation has expressed support for the Superfund designation and is also reviewing the city’s clean-up proposal.

If the Gowanus Canal were designated under the Superfund program, the EPA would initiate and manage a cleanup operation in consultation with stakeholders—including local residents and property owners, community groups, prospective developers, and state and local government. Their procedure would address both the contaminants within the canal and onshore sources of pollution. Through litigation they would obtain funding from Potentially Responsible Parties with the Superfund trust covering what these parties are not able to pay.

Toll Brothers argue, however, that it would take years of litigation to find the responsible parties liable and even then prove difficult to collect enough to cover the extraordinary cost of cleaning up the site.

Arguing that the designation would delay the City’s efforts to modernize the sewage system, preventing further pollution, Mr. Von Spreckelsen writes in his op-ed, “Upgrading and modernizing the flushing tunnel and pumping station, as well as selective dredging and capping of exposed sediments, can begin under the city’s plan this fall; the city has allocated at least $175 million to accomplish this urgent goal.”

However, according to the New York Times, Environmental Protection Agency officials worried that a “voluntary approach could allow polluters to evade their obligations.  Walter Mugdan, director of the Superfund Division for the New York region, said, he did not expect it to interfere with the city’s current plans.”

Additional reporting by Lauren Raheja

(Photo by emptysquare via Flickr)

UPDATE: The Brooklyn Paper learns that Whole Foods, in a reversal, is “actively working on plans” for a Gowanus location, but have not provided details on a timeline for the store.

SECOND UPDATE: The Brooklyn Paper reports again in November 2010, that though Whole Foods has finalized its plans to open, they have still not provided a timeline for opening their Gowanus location.

THIRD UPDATE: The canal was deemed a superfund site by the EPA in 2010 and the Toll Brothers abandoned their plans for their lot. It was later taken over by The Lightstone Group, which plans to build 770 rental units. Whole Foods building plans were approved in February 2012 after an eight year saga.

Nicole Brydson Written by:

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