The following case, Wichita Confronts Contamination, involves a vast polluted underground lake containing hazardous industrial waste. The site is located in the heart of the downtown, Wichita business district. The contamination was spreading about a foot a day and it was feared that water quality deterioration and serious health issues would result. The City Manager, Chris Cherches, is faced with the responsibility to draft a plan to resolve the crisis. The following details the process and the dynamics..
During the period of 1990, the down town business district of Wichita, Kansas was experiencing economical hardship due to the skyrocketing oil industry and the nationwide real estate slump. At the same time, the local leaders were in the process of developing strategies for urban renewal and new investments that would stimulate economic growth. They estimated $375 million would cover the entire revitalization project. In the wake of all this activity, they discovered hazardous chemical waste had been detected in some private and industrial wells in downtown Wichita.
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The Banking industry got wind of this and put a damper on granting loans for real estate. In June 1990, a local manufacturer, Coleman incorporated, approached the legal department about a contamination problem he discovered in the fall of 1988. Panic struck…. and it all hit the fan…. when the Kansas Dept. of Health and Environment, acting on behalf of the Environment Protection Agency, reported that Wichita was sitting on an underground polluted lake —-dubbed the Gilbert and Mosley site.. The site was four miles long and one-and one half miles wide.
The polluted aquifer was right beneath the “center” of the business district. The parcels affected had an estimated value of $86 million. This six-square mile area included major banks, hotels, homes and industrial headquarters. During the investigation, (KDHE) discovered a chemical degreaser used on metal was found at Coleman’s “headquarters” at the north end of the site. Question? Who is the responsible party? City Manager, Chris Cherches developed a comprehensive report that estimated to clean the aquifer could cost about $20 million and take as long as 20 years.
Chris Cherches presented his report to the (KDHE) and they had two recommendations: Either the companies responsible could clean up the area, or the state would rank the site for National Priority List, the first step toward activating “Superfund”. Initiated in 1980, a Superfund site is a toxic waste site that falls under the Environmental Protection Agency’s Superfund program. Superfund sites are areas contaminated with hazardous material left by corporate or government entities whose operations may have moved.
The federal government launched the landmark Superfund program to wipe out the problem. Under the Superfund law, passed by Congress, companies and other parties found responsible for polluting sites are required to clean up the areas or pay the costs for cleanup to the (EPA). The National Priorities List (NPL) is the EPA’s list of toxic waste sites that the agency has determined present a significant risk to human health or the environment. (2) In addition, KDHE’s report identified 508 other area businesses as Potentially Responsible Parties under Superfund law.
Even more threatening, if the financial institutions made real estate loans in the Gilbert-Mosley district, they too could incur Superfund liability. As a result, all lending activity was halted. A local developer, David Burk, lost investors because it suddenly became impossible to sell property in that area. As the threats of uncertain liability arose, and the lost of real estate sales, the county appraiser’s office was receiving request for property reduction. Devastation was all over the place…with property values going down, groundwater issues, there would be no need for urban redevelopment.
City Manager, Cherches had to quickly weigh his options and develop a plan as soon as possible. His first priority was to begin cleaning up the aquifer and second, convince the financial institution to resume lending in the Gilbert-Mosley area. He believed that as long as property values remained at their quota, then the community core could be salvaged. The next urgent order of business was to convince Coleman and others to take charge of the Gilbert-Mosley site because it was a business dilemma.
A “potentially responsible party” or PRP, is a company, organization or individual that the EPA determines possibly played a role in the contamination of a Superfund site. This includes parties involved in generation of the waste, and parties involved in transporting it to the site. PRPs can also include past and present owners of the land or facility, and past and present facility operators. In his research, City Manager, Cherches discovered that groundwater contamination had also occurred three years earlier at a smaller site known as 29th and Mead.
The same rhetoric occurred regarding this particular site…. banks stopped lending, property values lowered 40 percent , and the city came in agreement with Coleman to pay for the initial (EPA’s) Feasibility Study. However, during that period, negotiations were stalled and the state placed the site on the National Priorities List resulting in years of real estate entanglement. Cherches did not want to repeat “History” given this experience since time was the essence. There were more than 500 other PRP’s and Coleman was denouncing full responsibility for the over-all contamination.
Therefore, the city was in a horrific stance on agreeing who was responsible for what. If there were no agreement resolutions, then there could be no quick clean up action and the Banking industry would not resume lending until the contamination issue had been resolved. The next option and far less appealing was to allow EPA and the Superfund to become involved in the project. (3) If they became involved, the cost of cleaning up Gilbert-Mosley would be astronomical.
Cost not limited would include: oversight contractor cost to monitor the work flow of the regular contractor, polluters faced administrative cost of EPA itself and prolonged multi-party litigation cost. In as much, EPA was allowed to charge punitive charges as a means of replenishing their fund and the Superfund law called on EPA personnel to charge their time to the private firms. The Superfund is desperately short of money to clean up abandoned waste sites, which has created a backlog of sites that continue to menace the environment and, quite often, the health of nearby residents.
Initially, the program was funded by a tax on polluters, which fed the actual “Superfund”, a pool of money used to pay for the clean up sites whose polluters were unknown or unable to do the work. But the tax law expired in 1995, under a Republican-controlled Congress, and the $3. 8 billion that had accumulated in the fund at its peak ran day in 2003. As a result of the funding shortage, site clean up plans are stretched out over longer periods of time because there isn’t enough money to get them done quickly and still pay for other ongoing cleanups.
Currently, fund-led cleanups are paid for with taxpayer money and any money recovered form PRPs. Accordingly, a number of construction completions have been delayed on purpose. City Manager, Cherches knew that involving the Superfund would be a massive undertaking of funding and lost of momentum. Steps to a typical Superfund cleanup could take up to 10 years of which seven years are spent on study assessment, legal proceedings and creating a remedy before the actual cleanup begins. Mayor Knight consulted with other mayors about his contamination problem and they warned him to avoid Superfund.
Manager, Cherches decided to reject both options presented by the (KHDE) and to develop a platform for the city of Wichita to take full responsibility for the Gilbert-Mosley cleanup. Wichita began to develop strategies and create various mechanisms to encourage the banks to start lending in the contaminated area again. The key was to find a way to “finance” their massive clean up problem. Cherches had to prove to the state and the EPA that he could dead lock funds to support what could be a 20 year project. He knew that Coleman would pay as much as possible, but recouping clean up cost from the other polluters was uncertain.
Therefore, Cherches developed a powerful alternative to impose a statewide tax that would spread the burden to the broadest number of constituents. (4) Wichita City Council was not in favor of committing tax dollars for such an arduous task. Before the city of Wichita could undertake this project; they had to be determined to make this work long before a commitment from Coleman and other major contributors was settled. No one knew of any city stepping in to accept liability for a contamination problem it had not caused.
The central business district in Wichita could not afford to wait any longer. The success of the plane would depend on “Intergovernmental Relations” meaning cooperation from …. the city manager’s office, the city council, the county commission, the school board, lenders, constituents, Coleman, KDHE, the state legislature, the governor and the EPA. KDHE had warned the city that if a cleanup plan had not taken shape, the state would recommend that EPA take over. If Wichita was unable to solve it, then the inevitability of “Superfund” was pending.
City Manager, Chris Cherches quickly set up a tax increment finance plan that would raise funds for the redevelopment district. Once the improvements were in place, the difference between the old and the new property assessments would create a higher value increment that would be used to pay for the revitalization program. This program is defined as a “decrement plan”. They would “devalue” all the property in the Gilbert-Mosley area by 40 percent and then immediately raise values back up to their pre-contamination level believing that the city would restore lost value.
The difference would be set aside to finance the cleanup. Cherches round table negotiations with the Kansas Dept. of Health and Environment, city council, the public and the EPA were all in favor of his concept. The next order of business was to convince bankers to resume lending. The bankers soon became allies with Cherches because they too would have been held liable for the cleanup as well as losing the value of their Gilbert-Mosley investments. The catch, bankers were reluctant to resume lending until they had some legal protection in place from cleanup liability.
The city devised a document called, “Certificate and Release for Environmental Conditions” to protect and release property owners, businesses, banks and residents from any Superfund cleanup liability. All anyone had to do was just apply to the city for this document. The banking industry embraced the idea of the certificate, but they wanted the city to receive firm assurance from the (EPA) that they wound not take over the Gilbert-Mosley site and override the agreements with KDHE and Coleman or push through to make changes in state law used for long-term projects. (5)
With all minds in agreement, EPA agreed and the city followed all requirements, but with (KDHE) acting as the primary oversight agency. All the city had to do was report to regularly to the EPA on its progress. Although no written documents were signed, Morris Kay, Director of the Environmental Protection Agency, guaranteed that as long as the city was operating according to agency requirement, Superfund would not intervene. At the last minute, the city learned that a Kansas state law called “Cash Basis-Budget” designed to ensure fiscal responsibility would not allow local government to commit operating revenues beyond one year.
The city needed an exception and an amendment to TIF law because they had to be able to commit funds raised over a long term period. The Gilbert-Mosley project was a 20 year effort and they needed those funds to contract with (KDHE). To get approval, the decision would be in the hands of the city legislatures who met only from January through April. Noted from previous settings, the legislatures were very antagonistic and hard to convince. Matters didn’t get any better when both the county assessor and the state property director declared the city’s tax increment proposal as unworkable”.
In its place, three County Legislators who reviewed the city TIF bill, enacted an amendment that allowed municipalities to earmark 20 percent of a specially created TIF annual property tax for environmental cleanups. It functions like the decrement plan. Each year 20 percent of property tax revenues would go toward ground water clean up for the next 20 years. On March 26, Wichita signed a decree with (KDHE) outlining the oversight responsibility and explaining how the Certificate of Release would come into play.
On April 23, Coleman signed an agreement to pay $1 million for the Remedial Investigation/Feasibility study and to pay all cleanup cost for the area where he was the main polluter. In addition, he agreed to split cost with the city in a second area where he was a contributor to the contamination. Coleman acted in good faith because if he Gilbert-Mosley site became a Superfund, he would have been subject to higher cost and endless third party litigations. Surprisingly, one week after Coleman signed his contract, the Kansas Legislators approved the city TIF bill.
Finally, on May 14, several banks came in agreement to lend on the security of real properties within Gilbert-Mosley as long as they had obtained a Certificate and Release for Environmental Conditions. One year after the Certificate and Release program began, the business district in the Gilbert-Mosley area returned to normal. (6) In conclusion, the sharing of responsibility and power between Kansas and the government is an example of check and balances.
It would be difficult for any one system to make rational decisions to benefit activities or to design any coherent changes in the system itself……it requires Interdependence, Complexity and Intergovernmental Bargaining. Power is shared. Instead of one branch controlling decisions about policy, it must be mutual and accommodating. The style of decision making is one of bargaining under conditions of conflict among the participants. The participants in government have different interest to serve and objectives to seek: yet one cannot succeed by acting unilaterally.