Sit down to a hand of blackjack in Atlantic City, and odds are you’re sitting on a chair made by Infanti Chair Manufacturing Corp. For more than a decade, the company’s four-building site on Staten Island’s north shore built millions of dollars’ worth of furniture for the region’s thriving banquet and casino market. It was a sound company, a successful New York City manufacturer that drew heavily from local residents and paid good, blue-collar wages.
But Infanti is closing down this fall, done in by a bad next door neighbor and outdated state regulations. Toxic chemicals from a shipbuilding and repair operation formerly run by Bethlehem Steel may have leeched onto Infanti’s land. New York State environmental rules make investing in a company that has even a chance of being contaminated too risky.
“There were plenty of people who stepped forward with money to keep the company on Staten Island,” says Rich Ruggeri, Infanti’s controller. “But unfortunately, finding answers to all the environmental issues couldn’t come as quick as the investors’ money. Time just sort of ran out on us.”
Today, the buildings look like a manufacturing ghost town–littered with idle machines and half-finished stools–and the company’s 130 employees are looking for work. “I’m proud of what we tried to do here. We had people with us for ten or twelve years, making 15 bucks an hour,” says Joe Rancini, operations manager, watching a production worker dismantle a machine nearby. “Where are they going to find another job like that?”
Infanti’s workers are getting an unwelcome introduction to the blame, cost and fear that paralyzes economic development on “brownfields”–contaminated, often abandoned, industrial properties that range from old gas stations to former steel mills. Though not all unused commercial land is a brownfield, nearly 6,000 vacant industrial sites totaling more than 3,000 acres lie vacant in New York City, according to a mayoral taskforce. These figures don’t include sites like Infanti’s that are still occupied.
Other states, including many of New York’s neighbors, have made it easier for investors to clean up brownfields, finding a way to satisfy environmentalists without scaring off industrialists. Until New York joins them, many of the abandoned lots and shuttered factories in low-income neighborhoods will remain full of toxins and empty of jobs.
Infanti’s troubles began in 1988 when a competitor, Ohio’s Gasser Chair Company, sued for patent infringement. It took eight years, but Gasser won and was awarded $16 million in damages. The next month, Infanti filed for bankruptcy to pursue an appeal.
Even while trustees operated the company under Chapter 11, Infanti was a viable business. By law, the income from the sale of the company would be considered full payment to Gasser for the damages, leaving future owners free of the settlement debt. In May, with help from the nonprofit New York Industrial Retention Network, the trustees contacted Steven Etkind, a lawyer who had brokered similar deals. Constraints from the lawsuit gave Etkind only one month to unload the factory, but he quickly found interested local investors, financiers who own factories in California, Ohio and Chicago.
Then Etkind heard that a bank had discovered contaminated groundwater on the adjacent Bethlehem Steel site in 1992. He didn’t even know what was in the water–he didn’t have to know. “The problem was the liability,” Etkind explains. “Given the contaminants next door, it wasn’t too hard to guess that Infanti was sitting on top of contaminated groundwater too.”
That was bad news. Like most brownfields laws written when the issue came to the attention of lawmakers in the early 1980s, New York’s rules don’t simply place responsibility for a site’s environmental damage with whoever made the mess. As new owners, Infanti’s saviors could be held liable for any contaminant on their property as well. The chain of liability might even extend to the banks that financed the new owner. If a company defaults on a mortgage, the lender inherits the contamination and the responsibility.
Everyone involved was well aware that the purchase carried serious financial risks. They had all heard stories of developers who began remediation only to find months or years later that they had underestimated the extent–and the cost–of the problem. Such sites had to be fully cleaned or the risk of legal action remained.
The investors’ best hope lay in a Volunteer Clean-up Program begun in 1995 by the state Department of Environmental Conservation, which allows private companies to negotiate with the agency to clean sites in return for absolution from future liability. Etkind hoped DEC could use the program to help Infanti. But a requisite environmental assessment would cost as much as several hundred thousand dollars, money the financiers refused to pay without assurance that their investment was safe. As it stands, the state’s Volunteer Clean-up Program is designed to help current owners or buyers already invested in acquiring a particular piece of land. It does little to entice developers to brownfields when they have other options.
“It wasn’t any error on DEC’s part, they just weren’t able to act on this,” Etkind says. “But given the circumstances, it doesn’t make a lot of sense to let those jobs go.” By June, the investors had heard enough and the legal deadline had come. Infanti’s trustees sold the assets–minus land and factory–to Gasser and prepared to be liquidated. A few months later the bank foreclosed. The property now sits unused and unwanted.
Infanti was caught in a common trap. “Most financiers who come to the table are not comfortable dealing with environmental sites and environmental programs,” says Mathy Stanislaus, co-chair of the nonprofit Minority Environmental Lawyers Association. “You need to make them more comfortable. The way to do that is to put boundaries around their liability and give them financial incentives.”
Currently, DEC officials are looking to reduce liability for so-called “innocent purchasers” who buy land contaminated by former owners. But the agency is less open to offering tax breaks or grants for clean-up, bonusesthat some other states offer to entice investment. “The [incentive] is release from liability for companies and financial institutions–financial institutions especially won’t go near a site where there’s contamination,” explains Sam Thernstrom, DEC’s deputy press officer. “The program works really well the way it is now.”
Cleaning up New York brownfields is a nebulous process, however, because the program conceived and executed by DEC is not written into law. Developers say they can’t be sure of how long the negotiation and clean-up will last, or even exactly what clean-up rules are. It’s a “somewhat subjective and very time-consuming” process that leaves clean-up costs unclear and investors still open to liability afterward, explains Larry Schnapf of Schnapf and Associates, a law firm which counsels brownfields buyers and owners.
To put investors more at ease, many for-profit and nonprofit developers suggest creating a law that links the amount of clean-up needed to the land’s intended use. For example, Robert Stang, head of brownfields developer Renewal Realty LLC, says it’s ridiculous that contaminated groundwater must be made drinkable. Stang points out that no one has drunk city groundwater in 100 years.
Statutes in more than 30 states have created voluntary clean-up with such changes. Industrial developers can leave more contaminants on site, provided the chemicals are capped and the health threat is mitigated. They know what clean-up is involved, what it will cost and what the legal shielding will be. It has become a quantifiable risk.
“Most of us who deal with brownfields stay away from New York and just look elsewhere,” says Bruce-Sean Reshin, the head of MGP Environmental Partners, a leading brownfields redevelopment firm. “I’d rather go to Pennsylvania, New Jersey, Connecticut and Massachusetts–states that have offices and programs which are incredibly helpful.”
The result: investors are returning to many long-abandoned and polluted sites outside New York. For example, Pennsylvania’s 3-year-old Land Recycling Program gives financial assistance to developers, helps sellers find new buyers and lays out clear standards for investors. The program cleaned up a record 161 brownfields statewide this year, a number that spokesman Jim Spontak says has grown “exponentially” since the law.
In January, New Jersey passed a brownfields law that protects innocent purchasers from liability if they start clean-up immediately, and spells out procedures that developers can follow without getting prior approval. Both provisions would have helped Infanti. These and other law changes got buyers interested in the Arkansas Chemical site in Newark, which had sat unused in city hands for more than a decade.
Don’t expect these changes to come to New York soon. Among state environmentalists and DEC observers, the agency is known for rejecting serious change and outside influences. Worse, major policy shifts require business interests and environmentalists to forget deeply entrenched mutual distrust.
Many green advocates, with an eye toward possible future commercial or residential uses for brownfields, want tougher standards, not lighter ones. “You never know what’s going to be on a piece of land 50 years from now,” says Anne Rabe, director of the Citizens Environmental Coalition, a statewide group representing communities near brownfields. “SoHo, after all, used to be factories, until artists moved there.”
Investors counter that it’s the image of big bad business that may be preventing needed development. “Too many politicians think we’re shilling for the big polluters, so they don’t really tackle this issue,” Stang offers. “Our laws have to move from punishing the bad boys to getting sites cleaned up.”
That’s the idea behind a new bill written by Queens Democrat Assemblyman Jeff Aubry of the state legislature’s business council. If passed, the law would establish standards and timetables for clean-up of brownfields and more hazardous Superfund sites. Environmentalists, moderate and radical, have for the most part rejected the measure, saying the standards are too loose.
The bill is now in the Assembly’s environmental committee, chaired by Richard Brodsky, an upstate Democrat who says he is determined to kill it. “It’s the business council’s attempt to let businesses off the hook,” he says.
The latest attempt to get opposing sides to the table is the Superfund working group of environmentalists, developers and state officials, that Governor Pataki established in August. Although its main mission concerns hazardous wastes sites, the taskforce will discuss improvements in the Voluntary Clean-up Program, including financial incentives. Pataki has given them until New Year’s Day to share recommendations.
Solutions can’t come fast enough for the thousands of unwanted brownfields citywide, which now include the Infanti site. But these solutions, when they come, will be too late for the company’s 130 former employees. Says operations manager Rancini: “I feel like we were let down.”
Matthew Ulterino is a planning consultant on economic development projects.