Turkstra: Brownfields Cheaper but Harder to Finance

By Ryan McGreal
Published November 25, 2008

Such attention from the national media! An article in today's Globe and Mail chronicles Hamilton's crisis of identity over its future economic development, torn between unused and under-used industrial brownfields and freshly-minted employment lands around the airport.

The centre of the story's narrative is Carl Turkstra, CEO of Turkstra Lumber Co. and a long-time supporter of downtown revitalization. After buying a 16-acre lot in the north end that needs remediation to remove metals and PCBs from its land, Turkstra is experiencing firsthand the trials that developers must face if they want to invest in vacant industrial lots.

The city's renowned Environmental Remediation and Site Enhancement (ERASE) program provides grants to conduct environmental studies, and to perform demolitions and remediation, and offers property tax discounts as long as the assessed value of the land increases, as well as an opportunity to apply the cost of environmental remediation against development charges.

However, Turkstra points out a big missing link: banks won't finance brownfield redevelopment until after the remediation is complete, but the remediation itself is far more expensive than the ERASE program covers. As he put it, ERASE is "like buying one wheel of a car".

Turkstra is financing the remediation with his own money, but this option isn't available to many. He adds:

You're talking a lot of money here and most people would probably have trouble finding that much cash to buy the building and clean it up unless they can mortgage it. That's the huge flaw in the whole system that there's no government support for people who want to do this.

Turkstra argues that at the end of the day, he will be in possession of 3,000 square feet of space for only about 30 percent of what it would cost to build in a greenfield. However, the hassle of remediation and the difficulty at securing financing means most developers will opt for the more expensive but financially simpler greenfield option.

Mr. Turkstra says it's a shame that the difficulty of getting mortgages or other financing for the initial cost of brownfield development "puts it out of reach of anyone but an individual who has a lot of friends or is very well funded, or a very large corporation that probably doesn't want to be bothered with such a time-consuming process."

Meanwhile, the city's top priorities for economic development capital spending lie not in brownfield remediation but in creating a huge business park around Hamilton International Airport, the 4,000 acre Airport Employment Growth District (AEGD).

Unfortunately, when it comes to Hamilton's department of planning and economic development, the process seems to be tailored to producing the desired result. A study conducted by Hemson Consulting to assess the city's brownfields couldn't find any brownfields, a feat they achieved by ignoring under-used sites (which they claim are hard to quantify) and redefining most of the rest of the sites out of existence.

Out of over 7,000 acres of unused or under-used industrial land, the city's brownfield study narrowed the area that meets its stringent criteria to 91 sites totalling 377 acres.

At the same time, the city is embroiled in a debate with the Provincial Ministry of Municipal Affairs and Housing (MMAH) over the size of the proposed airport development. According to the provincial rules for establishing the need for employment lands, the development should be only a quarter the size that the city claims it needs.

The city has boosted the size of the airport employment lands through the following:

The province argues that its Places to Grow legislation already takes these additional land uses into account when determining how much employment land a city needs. City staff, of course, claim that Hamilton is somehow exceptional and needs different rules - rules that just happen to justify the city's urban boundary expansion plans.

Mayor Fred Eisenberger does not oppose the airport development, but agrees with the Province that the city's study area is too big.

"I think Carl is in part right that some of our staff see that our only future employment lands opportunity is around the airport," says Eisenberger. "I don't happen to agree."

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.

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By ADowntowner (anonymous) | Posted November 25, 2008 at 18:29:10

This is quite an interesting article. It's nice to see an article in a Regional/National daily paper that doesn't slam Hamilton and proves that the ERASE program is successful.

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