Tribune & Georgian
November 9, 2006
Renee M. Liss
With the cost of cleanup far more than anticipated, developer LandMar is looking for some help paying the bill, or the developer may not close the sale on the Durango-Georgia Paper Mill site.
Project manager Ed Blakely specified the costs are as much as four times the original estimate of $4 million, and the Environmental Protection Division (EPD) estimates them at $15 million to $25 million.
“We’re still not sure of the total costs,” said LandMar’s attorney, Charlie Smith Jr.
Because LandMar is a subsidiary of a much larger company, Morgan Stanley, the developer has to convince a board of directors in New York City that the cost of cleanup is worth the profit that will be made on the site.
To that end, LandMar and Smith are looking to establish the site as a tax allocation district (TAD).
A TAD is “a tool used to pay for infrastructure and other improvements in underdeveloped or blighted areas so that the property becomes productive and enhances the surrounding neighborhoods,” says a written explanation by McKenna, Long & Aldridge, LLP, provided by Smith.
The first step toward this designation will take place Monday night at the St. Marys City Council meeting when LandMar asks the council to request legislation at the state level.
If the council approves, a ballot referendum will appear sometime next year after approval by the state legislature and a signature from the governor. Smith said the governor generally waits until the end of a session to sign legislation, so the referendum could appear as early as March 2007 or as late as June, since they can only be voted on quarterly.
Smith expects a March Special Local Option Sales Tax referendum. The TAD legislation could be voted on at the same time if everything comes together.
If a TAD is approved — and the city will determine the boundaries of the district — the property assessment as far as taxes collected by the city, county and school system would freeze at the property’s current value, although as it is developed, properties will be taxed at the improved value. The balance of the improved value will be put into a fund to repay the cost of cleanup, which could be in the form of an up-to-25-year bond or direct reimbursement to LandMar.
Local governments will not be liable for the bond if tax revenue is insufficient. Smith said he does not anticipate it will take that long to pay off.
The city will have to establish a redevelopment authority, or the council can serve as the authority. LandMar would report cleanup plans to the authority for approval throughout the project. The authority could remain in place even after the mill project is completed in case another issue comes up in the future where the authority is needed.
Smith concedes that the mill development will cost the city in road upkeep and stress on current and to-be-built infrastructure, and could impact the school system significantly depending on how many children move into the new homes in the early part of the project.
“LandMar’s alternative is to walk away,” Smith said.
But LandMar has already spent significant funds on engineering plans and other studies, and would prefer to work out a deal.
“Everything that was great about the project is still there,” Blakely said. “It’s the financial obligations that are unacceptable.”
Smith added that LandMar will cover a lot of the infrastructure costs in the beginning through tap fees, and the developer will spend the money up front to build a sewer system on the property.
Because of a deal with the bankruptcy court, the trustees will not have to pay taxes on the property until 2010 unless it is sold, so currently, it is bringing zero tax revenue to the city, county and school system.
If the TAD goes through, the earliest date everything will be finished is Dec. 31, 2007, which is one of the variables LandMar is weighing regarding whether the project is worth the money.
Blakely said it is the nature of the business to discover what one has once one is on the inside, and so the due diligence performed before the December 2005 auction in Savannah did not entirely reveal the scope of the contamination on the site.
Blakely did say the original $5 million estimate for demolition was reduced to $4 million because the company can sell the scrap metal from the site and scrap steel prices are high. The demolition costs are in addition to the cleanup costs.
“We’ve committed ourselves to the highest level of cleanup,” Blakely said. “That’s the law.”
One alternative to the TAD is Brownfields legislation through the Georgia EPD. Brownfields works with developers who build residential and business property on top of former industrial sites.
Brownfields would entitle the developer to a tax assessment freeze on the site for 10 years or until the tax breaks reached the cost of cleanup.
“Brownfields is too complicated for homeowners and doesn’t really pay back LandMar,” Smith said.
Blakely said about 60 percent of the cleanup cost will be cleaning up the sludge ponds on the property, with 25 percent getting rid of contaminated soil and the remainder taking care of the approximately 1,000 vats of “something” that were left when the mill went bankrupt and shut down in November 2002, leaving about 900 people out of work.
Many of the workers were owed money for unused vacation time and other reasons, and are still waiting. Some were owed thousands from Durango-Georgia and are first on the long list of creditors to be paid back if LandMar’s $36.6 million sale goes through.
Originally, LandMar was supposed to close at the end of April, and again Oct. 27. The closing was delayed until Dec. 15, and Ward Stone, attorney for the trustees, said it has now been pushed to Dec. 28.
If LandMar does not close by the end of the year, the deal will be off and a new buyer will have to be found.
“It sure would be nice right here at Christmas for something good to happen,” said Larry Brooker, who represents the mill workers. “Everybody’s pretty much given up.”
LandMar plans to build single-family homes, a town center, condominiums, a hotel and convention center, a marina, parks and other amenities on the 750-acre site.
Blakely said if the TAD passes, LandMar foresees a three-year clean-up, however, the developer will ask the EPD if it can clean up and build in zones, so the first construction could begin before clean-up is complete. No construction would be able to begin until 2008.