2010-02-25 17:10:39 -

The Clean Gowanus Now! Coalition has discovered that new federal regulations will block the construction, and possibly the renovation, of thousands of homes within 3,000 feet of Brooklyn’s Gowanus Canal if the Canal is designated a “Superfund” site by the U.S. Environmental Protection Agency (EPA). Additionally, a new survey of major lending institutions documents the looming cessation of mortgage availability in several Brooklyn neighborhoods, inevitably leading to the deterioration of the existing housing stock and severe financial setbacks for many area residents.

The survey of major lending institutions—including Wells Fargo, Bank of America, Citibank and HSBC—reveals that individuals or families applying for mortgages to purchase, refinance or renovate homes in much of Gowanus, Carroll Gardens, Brooklyn Heights, Boerum Hill and Park

Slope will find it nearly impossible to obtain approval on FHA-insured loans if the Gowanus is designated a Superfund site. This is a direct result of a new federal rule adopted by the FHA in June 2009 that sets forth a requirement that could preclude the FHA from insuring any mortgages on residential units within 3,000 feet of a Superfund site.
(See map below of the area within 3,000 feet of the Gowanus Canal.)

The survey refutes recent statements by EPA representatives that Superfund designation won’t impact lending to homeowners in the area (“EPA: Superfunded Gowanus won't discourage lending,” by Gary Buiso, Courier-Life Publications, January 28 th , 2010).

The survey’s findings are significant, given that the market for FHA-insured mortgages has skyrocketed in the wake of the mortgage crisis. According to a HUD report, FHA insured an average of 19.9% of all homeowner mortgages in 2008 and 20.4% of all homeowner mortgages in the first three quarters of 2009—representing a dramatic increase from the average market share for FHA-insured mortgages of 3.8% in 2005, 2006 and 2007. (The 2009 HUD report can be viewed online at: www.hud.gov/offices/hsg/comp/rpts/fhamktsh/fhamktq3_09.pdf : ).

On June 12 th , 2009 the FHA announced that it is implementing a new approval process to insure mortgages on individual units in condominium projects under Section 203(b) of the National Housing Act in accordance with the passage of the Housing and Economic Recovery Act (HERA) of 2008. The FHA states, in Item IV. General Requirements, D.

Environmental Review Requirements, that “the lender must avoid or mitigate the following conditions before completing its review process....The property is located within 3000 feet of a dump or landfill, or of a site on an EPA Superfund (NPL) list or equivalent state list, or a Phase I Environmental Site Assessment indicates the presence of a Recognized Environmental Condition or recommends further (Phase II) assessment for the presence of contaminants that could affect the site....”


The policy is described in detail in the attached HUD Mortgagee Letter, or can be reviewed via the following link: www.hud.gov/offices/adm/hudclips/letters/mortgagee/ : , Mortgagee Letter, Document No. 2009-19, “Condominium Approval Process."

A previous survey of major financial lending institutions this past July —including Citibank, Capital One, Hypo Real Estate, HSBC and iStar Financial—found that even without the new FHA rule they would avoid financing projects near a Superfund site due to the high degree of risk from factors outside the borrower’s control.

These lenders have financed projects that require a significant amount of environmental remediation in industrial neighborhoods like Williamsburg and Long Island City, but they uniformly responded that it would be nearly impossible to secure financing for a development project adjacent to the Gowanus if it is designated a Superfund site.

Both surveys were conducted by members of the Clean Gowanus Now! Coalition, a group of civic organizations, economic development and affordable housing advocates, and business and property owners based in Gowanus who want the Canal cleaned as quickly and comprehensively as possible, but who oppose the potential designation of the Gowanus as a Superfund site. The coalition’s members include the Brooklyn Chamber of Commerce; the Partnership for New York City; the Gowanus Canal Community Development Corporation; the Business Council of New York State; Africa-Israel, U.S.A.; Bayside Fuel Oil Depot Corporation; Brooklyn Bridge Realty, Ltd.; Friedknit Creations; Foro Marble, Inc.; The Jewish Press; Jobco, Inc.; L&M Development Partners; Magnifico Enterprises; Monadnock Construction, Inc.; Nevins Canal Corporation/Nevins Street Realty; Regal Home Collections; The Ribellino Family; Debbie & Buddy Scotto; Selectively Evolving Environments, Inc.; the Tinneny Family; Toll Brothers, Inc.; and Union Place, Inc.

The coalition’s members greatly prefer the plan developed by the Bloomberg Administration to clean up the Canal. Importantly, backing away from the impending Superfund designation and allowing the City to proceed with its alternative plan bears zero risk from an environmental perspective. The alternative plan commits the City to cleaning up the Canal to Superfund standards and actively involves the EPA as well as the New York State Department of Environmental Conservation in the cleanup. At any time that the EPA concludes that the City is not adhering to the appropriate benchmarks in its cleanup plan (which would have been approved by the EPA in the first place), the EPA can literally step in the next day and impose a Superfund designation. Therefore, letting the City proceed with its cleanup effort is literally a zero-risk scenario from the point of view of anyone who is skeptical that the City can handle this mission.

This commitment by the Bloomberg Administration to a collaborative approach – to which the State would legally bind the City – should provide a sufficient comfort level for the Governor and the New York State Department of Environmental Conservation to withdraw its request to the EPA to designate the Gowanus Canal as a Superfund site.

The City Planning Commission lists 68 projects in its pipeline that have asked for a rezoning of the Gowanus Canal so they can build residential and commercial projects; these developments collectively will generate billions of dollars in economic activity. Tragically, it is now clear that a Superfund designation will kill any and all development along the Canal, which will cause the loss of thousands of construction and permanent jobs, billions in economic activity and thousands of units of affordable housing (the Hudson Companies, developers of the site formerly known as Public Place and now called Gowanus Green, recently announced that they would not move forward with Gowanus Green if a Superfund designation is imposed, costing the community 770 units of affordable housing; Toll Brothers, which has spent millions to go through ULURP and design their residential project, similarly announced that they would eat their losses and abandon their Gowanus Canal project if a Superfund designation is made, with a concomitant loss of approximately 150 units of affordable housing).

Further, the EPA/Superfund scope of work does not tackle the combined sewer overflows (CSOs) that today are the number one source of pollution of the Gowanus Canal. The EPA has stated that their cleanup of the Gowanus will consist of dredging sediments at the bottom of the Canal, but at 300 million gallons of raw sewage annually (NYC DEP's statistic), CSOs are the main current contributor to pollution in the Canal (and the pollution that is most visible, smelly and disturbing to area residents). CSOs will be alleviated only through the City’s planned infrastructure upgrades and, critically, the construction of new storm sewers, sponge parks and green esplanades that private parties would be mandated to build as they develop their properties along the Canal.

These new sewers and catch basins would not only ensure that development does not add to CSOs, but actually will divert a considerable amount of storm water that presently causes CSOs by capturing it in the newly-built sewers and catch basins. The cost of this work – in the hundreds of millions of dollars – would be underwritten entirely by the private sector and would relieve the City budget of this burden. But with a Superfund designation that will immediately halt all private investment, new storm sewers will not be constructed to alleviate the flow of raw sewage into the Canal.

Finally, contrary to the misimpressions of some advocates of Superfund designation for the Gowanus, such designation would bring not one penny in federal funding; rather, the EPA's approach is to sue local property owners to fund the cleanup. This is why Superfund sites take up to several decades to commence any cleanup – Superfund status triggers litigation hell, wherein the local parties sued by EPA in turn sue each other and litigation drags on for many years. Witness the Hudson and Passaic Rivers in the New York metropolitan area – both were designated Superfund sites in 1984, and neither commenced any cleanup until 2009 due to litigation.

In contrast, the City already has obtained a commitment from National Grid, a likely Superfund target, to work with the City to fully fund Phase I of the cleanup, which is estimated to cost between $10 and $20 million. National Grid has indicated that it is prepared – under a City-led effort – to voluntarily put up tens of millions more as its share of the cleanup. The City estimates that the entire cleanup could be accomplished under the City's "Superfund Alternative Plan" in approximately 9.5 years, as opposed to Superfund cleanups of not only the Hudson and Passaic Rivers but dozens of waterways across the country that were listed for 10-25 years before any remediation began.

Photos/Multimedia Gallery Available: www.businesswire.com/cgi-bin/mmg.cgi?eid=6193121&lang=en :



For Clean Gowanus Now!Ethan Geto, 212-686-4551 egeto@getodemilly.com : mailto:egeto@getodemilly.com